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Interactions between competition authorities and sector regulators – CAVE – December 2022 OECD discussion

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Interactions between competition authorities and sector regulators – CAVE – December 2022 OECD discussion

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This presentation by Martin Cave (Chair, UK GEMA) was made during a discussion on the Interactions between competition authorities and sector regulators at the 21st meeting of the OECD Global Forum on Competition on 2 December 2022. More papers and presentations on the topic can be found out at https://oe.cd/icar.
This presentation was uploaded with the author’s consent.

This presentation by Martin Cave (Chair, UK GEMA) was made during a discussion on the Interactions between competition authorities and sector regulators at the 21st meeting of the OECD Global Forum on Competition on 2 December 2022. More papers and presentations on the topic can be found out at https://oe.cd/icar.
This presentation was uploaded with the author’s consent.

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Interactions between competition authorities and sector regulators – CAVE – December 2022 OECD discussion

  1. 1. OECD Interaction Between Competition Authorities and Sector Regulators Martin Cave Ofgem, Great Britain OECD Paris 1-2 December 2022
  2. 2. OECD Interaction Between Competition Authorities and Sector Regulators Martin Cave Ofgem, Great Britain OECD Paris 1-2 December 2022
  3. 3. Why do competition authorities exist? (A UK view) To provide a generic protection from certain kinds of market failures, by means of merger approval, prosecution of cartels, action to penalise abuses of market power (such as predation, excessive prices, etc.) Other ancillary tasks as well Process is usually proscriptive: it states what is forbidden, and everything else is lawful Remedies include fines, prohibitions of mergers, in some cases divestments Goal is usually to promote the competitive process
  4. 4. 4 Why do economic regulators exist? (A UK view) Created to deal with sectors facing particular problems (often network- related), such as ‘natural monopoly’ (where economies of scale and scope preclude competition) Regulators may have an obligation of various strengths to promote competition (as well as protect the interests of consumers) Regulators often prescribe/order what the firm has to do They also often have other duties related to protection of vulnerable customers of essential services
  5. 5. 5 Competition law vs regulation 1 Property of competition law Not good if.... • Lengthy requirement to prove abuse • Restricted ability to set prices • Limited resources to monitor • Large, irreparable damages • Access to bottlenecks • Economies of scale and scope • Persistent monopoly in access or end user markets • High and constant information and monitoring requirements
  6. 6. 6 Competition law vs regulation 2 Property of regulation Advantage of regulation Ex ante remedies Immediacy, dependability precision Specialised industry - specific agency Specialised knowledge (but risk of capture) Prescriptive intervention, affirmative duties re price and quality Heavy impacts (which may reduce freedom to compete and innovate)
  7. 7. 7 Differences between competition and energy regulatory agencies Competitive Regulatory Goals/duties Promote competition Consumer welfare, (vulnerability) Individual firm contacts Episodic Continuous Staffing Generalist Technical/specialist Discourse & culture Legal? Economistic?
  8. 8. 8 Institutional arrangements considered below An A general competition authority and a separate sectoral regulator A sectoral regulator with exclusive competition powers in its sector Some form of power-sharing (concurrency) with respect to competition powers in the relevant sector
  9. 9. 9 Who does what where? Concurrency in competition enforcement Exploits agency comparative advantages Requires a shared emphasis on competition Needs clear rules May lead to stifling of differences in approach
  10. 10. 10 Who does what where? Mergers Most relevant in the case of ‘natural’ oligopolies Decision normally by competition authority; in some cases by a sectoral regulator Example: mobile mergers – 4 to 3 and 3 to 2 These trade-off standard price effects and more case-specific network investment effects; co-operation extremely helpful
  11. 11. 11 Who does what where? Market Studies (MS) and Market Investigations (MI) These permit sequential action by separate authorities with different skills Thus: a UK competition authority MI (following an earlier MS) led to a radical demerger of airports The airport regulator could then deregulate many airport prices Other UK examples exhibiting this sequence include energy retail prices and emergency mobile communications services
  12. 12. 12 Conclusion Co-operative working by regulators and forms of concurrency exploit comparative advantage and appear to offer significant benefits for consumers No clear design rules for division of tasks; all are vulnerable to human frailty; several approaches may work [Witness the range of options currently contemplated for digital platform regulation]
  13. 13. www.ofgem.gov.uk Ofgem is the Office of Gas and Electricity Markets. We are a non-ministerial government department and an independent National Regulatory Authority, recognised by EU Directives. Our role is to protect consumers now and in the future by working to deliver a greener, fairer energy system. We do this by: • working with Government, industry and consumer groups to deliver a net zero economy at the lowest cost to consumers. • stamping out sharp and bad practice, ensuring fair treatment for all consumers, especially the vulnerable. • enabling competition and innovation, which drives down prices and results in new products and services for consumers.

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