1 The Role of Competition Policy in Regulatory Reform - Chinese Taipei’s Experience Li-ming Chiang Fair Trade Commission, Chinese Taipei The 6 th Seoul International Competition Forum September 15, 2010 Seoul, Korea

2 Outline  Introduction  Legislation and Enforcement of Competition Law Competition Law  Advocacy of Competition  Case: The Telecommunications Market  Conclusions

3 Interrelationship Between Competition Policy and Regulation  Regulatory reform has emerged as a crucial policy area in APEC and OECD countries.  Key drivers for regulatory reform  Regulatory policy  Regulatory policy  Competition policy  Competition policy  Market openness policy  Market openness policy

4 Interrelationship Between Competition Policy and Regulation Reform  Competition policy is a distinctly important element of regulatory reform  Competition policy is a distinctly important element of regulatory reform  Competition principles and analysis provide a benchmark for assessing the quality of regulations.  Competition principles and analysis provide a benchmark for assessing the quality of regulations.  Advocacy of competition policy: promoting competitive principles into regulatory processes.  Advocacy of competition policy: promoting competitive principles into regulatory processes.  Enforcement of competition policy: tackling anti- competitive behaviors and preventing the abuse of dominance in regulated sectors.  Enforcement of competition policy: tackling anti- competitive behaviors and preventing the abuse of dominance in regulated sectors.

5 Ways to Integrate Competition Principles Into Regulatory Reform Programs (1)  Introducing competition rules in the restructuring of national monopolies.  Introducing competition rules in the restructuring of national monopolies.  Monitoring access to the networks by establishing rules that will ensure non- discriminatory access to essential infrastructure and will prevent abuses of dominant positions by existing network operators.  Monitoring access to the networks by establishing rules that will ensure non- discriminatory access to essential infrastructure and will prevent abuses of dominant positions by existing network operators.

6 Ways to Integrate Competition Principles Into Regulatory Reform Programs (2)  Adopting laws and regulations that will facilitate the creation of firms and lower the cost of conducting business.  Promoting a culture of competition.  Finding ways to curb abuses of administrative power by administrative monopolies and government agencies.

7 The Role of the Competition Authority in Regulatory Reform  A competent competition authority should play the following roles:  An enforcer of competition law, and  An enforcer of competition law, and  An advocator of competition, for promoting the culture of competition, participating in legislative and regulatory procedures, and consulting on competition policy.  An advocator of competition, for promoting the culture of competition, participating in legislative and regulatory procedures, and consulting on competition policy.  The FTC of Chinese Taipei has combined advocacy with enforcement to reform the market for regulated sectors.

8 Legislation and Enforcement of Competition Law  The Fair Trade Commission  The Fair Trade Act  The Relationship Between the Fair Trade Act and Sector Regulations and Sector Regulations  Enforcement

9 The Fair Trade Commission  The Fair Trade Commission (hereinafter “the FTC”) was established in 1992 under the Fair Trade Act, and the FTC is a ministerial level independent agency  Key Aspects of the Work of the FTC  Formulating competition policy, laws and regulations  Formulating competition policy, laws and regulations  Enforcing the Fair Trade Act - Handling Cases  Enforcing the Fair Trade Act - Handling Cases  Advocating the Concept of Competition  Advocating the Concept of Competition  Participating in regulatory reform  Participating in regulatory reform

10 The Content of the Fair Trade Act  Anti-competitive practices  Abuse of a dominant position;  Abuse of a dominant position;  Merger control; and  Merger control; and  Concerted actions and other restrictive agreements.  Concerted actions and other restrictive agreements.  Unfair competition  Counterfeiting;  Counterfeiting;  False or misleading advertising;  False or misleading advertising;  Damage to business reputation;  Damage to business reputation;  Deceptive trade practices;  Deceptive trade practices;  Illegal multi-level sales.  Illegal multi-level sales.

11 The Coverage of the Fair Trade Act  The Fair Trade Act covers all sectors of the economy.  Other laws governing competitive activities of enterprises will take precedence over the Fair Trade Act only insofar as such laws do not contradict the Fair Trade Act’s legislative purposes.

12 The Relationship Between the Fair Trade Act and Sector-specific Regulations  Article 46 of the Fair Trade Act refers to the relationship between the Fair Trade Act and sector-specific regulations.  The Fair Trade Act has adopted a smoother approach to regulatory reform.

13 5-year Grace Period for Specific State-owned Enterprises  Paragraph 2, Article 46 of the Fair Trade Act provided a five-year grace period for specific state-owned enterprises activities.  Since the expiry of the transition period on Feb. 4, 1996, the state-owned enterprises in question have been subject to the Fair Trade Act and are on an equal footing with private firms.

14 The Fair Trade Act has become the Fundamental Economic Law  Before the 1999 amendment, Paragraph 1, Article 46 of the Fair Trade Act originally read, “The provisions of this Law shall not apply to any act performed by an enterprise in accordance with other laws.”  Since its revision, Article 46 now states, “Where there is any other law governing the conducts of enterprises in respect of competition, such other law shall govern; provided that it does not conflict with the legislative purposes of this Act.”  The change gives the Fair Trade Act the status of a fundamental economic law, which serves as the basis for harmonizing competition and industrial policies.

15 Formulating Competition Policy, Laws and Regulations  Since its foundation in 1992, the FTC has gradually built up a strong competition regime by:  Amending the Fair Trade Law  Amending the Fair Trade Law  Establishing guidelines to handle cases  Establishing guidelines to handle cases  Establishing Transparent Enforcement Procedures  Establishing Transparent Enforcement Procedures

16 Advocacy of Competition  Effective competition advocacy includes:  Promoting sound regulation in each sector of the economy;  Promoting sound regulation in each sector of the economy;  Recommending the structural separation of the natural  Recommending the structural separation of the natural monopoly component from the potentially competitive monopoly component from the potentially competitive sectors; and sectors; and  Giving the competition authority the opportunity and power to review and comment on existing and proposed laws and regulations.  Giving the competition authority the opportunity and power to review and comment on existing and proposed laws and regulations.

17 Advocating the Concept of Competition  Advocacy has been among the FTC’s most important functions, particularly during its first 10 years of operation.  The mandate to advocate  Article 9 of the Fair Trade Act :  Article 9 of the Fair Trade Act : For any matter provided for this Law that concerns the authorities of any other ministries or commissions, the Fair Trade Commission, Executive Yuan may consult with such other ministries or commissions to deal therewith. For any matter provided for this Law that concerns the authorities of any other ministries or commissions, the Fair Trade Commission, Executive Yuan may consult with such other ministries or commissions to deal therewith.

18 Advocating the Concept of Competition  Undertaking Advocacy Activities The Fair Trade Commission has devoted numerous resources in pursing competition advocacy work: The Fair Trade Commission has devoted numerous resources in pursing competition advocacy work:  Arranging regular programs, seminars, and activities with various groups;  Arranging regular programs, seminars, and activities with various groups;  Devising a framework for self-compliance for businesses to follow;  Devising a framework for self-compliance for businesses to follow;  Establishing communications and coordination channels;  Establishing communications and coordination channels;  Setting up service centers, etc.  Setting up service centers, etc.

19 Advocating the Concept of Competition  Launching Projects to Review Sector Regulations The FTC launched several projects to comprehensively review each of the regulated sectors of the economy, and the results were reported to the Cabinet. Among these were the: The FTC launched several projects to comprehensively review each of the regulated sectors of the economy, and the results were reported to the Cabinet. Among these were the:  Project for the Promotion of Regulation Liberalization (1994)  Project for the Promotion of Regulation Liberalization (1994)  Project for the Deregulation and Promotion of Market  Project for the Deregulation and Promotion of Market Competition (1996) Competition (1996)  Project for the Review of the Enforcement of the Green Silicon Island Vision and Promotion Strategy Regulations (2001)  Project for the Review of the Enforcement of the Green Silicon Island Vision and Promotion Strategy Regulations (2001)

20 Participating in Regulatory Reform  Providing regulatory agencies with the most current advice during the liberalization process of particular monopolized sectors;  Drafting of laws and regulations to prevent an incumbent from abusing its dominant position by cross-subsidizing or engaging in undue pricing after restructuring.  After a given market is liberalized, the responsibility for maintaining a competitive market environment mainly falls upon the enforcement of the Fair Trade Law.

21 Participating in Legislative and Regulatory Procedures  The FTC has actively been involved in the drafting of and formulation of amendments to individual laws that regulate specific sectors. These include the: – Telecommunications Act; – Telecommunications Act; – Petroleum Administrative Act; – Petroleum Administrative Act; – Energy Management Act; – Energy Management Act; – Cable Radio and Television Act; – Cable Radio and Television Act; – Satellite Broadcasting Act; – Satellite Broadcasting Act; – Banking Act; – Banking Act; – Merger Act for Financial Institutions; and the – Merger Act for Financial Institutions; and the – Financial Holding Company Act. – Financial Holding Company Act.

22 Case: The Telecommunications Market The most visible regulatory reforms to promote competition have been in telecoms. Chinese Taipei has made marked progress in opening telecommunications services to competition, and the FTC has been participating in establishing a post- opening market competition mechanism. The most visible regulatory reforms to promote competition have been in telecoms. Chinese Taipei has made marked progress in opening telecommunications services to competition, and the FTC has been participating in establishing a post- opening market competition mechanism. The FTC has participated in drafting or formulating amendments to the Telecommunications Act. As a result, provisions governing anti-competitive acts were added to the Telecommunications Act of The FTC has participated in drafting or formulating amendments to the Telecommunications Act. As a result, provisions governing anti-competitive acts were added to the Telecommunications Act of The Telecommunication Act of 1996, amended in 2005, has promoted liberalization of the telecoms market while trying to curb abuse of dominance. The Telecommunication Act of 1996, amended in 2005, has promoted liberalization of the telecoms market while trying to curb abuse of dominance.

23 Case: The Telecommunications Market In 1996, the Directorate General of Telecommunications (DGT) was separated into two entities: In 1996, the Directorate General of Telecommunications (DGT) was separated into two entities: - the new DGT remains the telecommunications regulator - the new DGT remains the telecommunications regulator - the newly-created Chunghwa Telecom Co. (CHT) runs telecommunications businesses - the newly-created Chunghwa Telecom Co. (CHT) runs telecommunications businesses In 2005, CHT was privatized. In 2010, there are 4 private fixed network telecoms companies. In 2005, CHT was privatized. In 2010, there are 4 private fixed network telecoms companies. An independent regulator -The National Communications Commission (NCC) was established on February 22, An independent regulator -The National Communications Commission (NCC) was established on February 22, 2006.

24 Case: The Telecommunications Market Since 1997, various telecommunications services that remained monopolized have been liberalized one after another. Since 1997, various telecommunications services that remained monopolized have been liberalized one after another. - The mobile phone, paging, and mobile data communications service markets were opened up (1997). - The mobile phone, paging, and mobile data communications service markets were opened up (1997). - The respective markets for satellite communications service (1998), fixed network communications service (1999), and 3rd generation mobile communications service (3G)(2001) were opened up. - The respective markets for satellite communications service (1998), fixed network communications service (1999), and 3rd generation mobile communications service (3G)(2001) were opened up.

25 Case: The Telecommunications Market The FTC has functioned as: The FTC has functioned as: An advocator for building and nurturing a stronger culture of competition An advocator for building and nurturing a stronger culture of competition The FTC asked Chunghwa Telecom Co. to take the initiative in establishing self-compliance mechanisms in order to prevent violations of the Fair Trade Law, and to fortify a culture of market competition. The FTC asked Chunghwa Telecom Co. to take the initiative in establishing self-compliance mechanisms in order to prevent violations of the Fair Trade Law, and to fortify a culture of market competition. A consultant on competition policy A consultant on competition policy The FTC has openly shared its opinions and work experience in competition policy and law with the regulator for the sake of providing it with insights into liberalizing the telecommunications market. The FTC has openly shared its opinions and work experience in competition policy and law with the regulator for the sake of providing it with insights into liberalizing the telecommunications market.

26 Case: The Telecommunications Market A participant in legislative and regulatory procedures A participant in legislative and regulatory procedures The FTC has participated in the drafting and formulation of amendments to the Telecommunications Act. As a result, provisions governing anti-competitive acts have been added to the Telecommunications Act of The FTC has participated in the drafting and formulation of amendments to the Telecommunications Act. As a result, provisions governing anti-competitive acts have been added to the Telecommunications Act of An enforcer of competition law An enforcer of competition law Should any illegal conduct take place, the FTC enforces the Fair Trade Law and makes necessary dispositions. Should any illegal conduct take place, the FTC enforces the Fair Trade Law and makes necessary dispositions.

27 Case: The Telecommunications Market Under the monitoring of the FTC and the telecommunications regulatory body, the opening up of the telecoms market has unquestionably made consumers better off. Under the monitoring of the FTC and the telecommunications regulatory body, the opening up of the telecoms market has unquestionably made consumers better off.

28 Conclusions (1) Regulatory policy should be consistent with the concept and purpose of competition policy. Regulatory policy should be consistent with the concept and purpose of competition policy. Co-ordination between sector regulators and the competition authority is a precondition for the proper functioning of markets. Co-ordination between sector regulators and the competition authority is a precondition for the proper functioning of markets.

29 Conclusions (2) As the competition authority, the FTC has consistently aimed at promoting competition by remedying market failures, and has attached a high level of importance to both the APEC and OECD principles on competition policy and regulatory reform. As the competition authority, the FTC has consistently aimed at promoting competition by remedying market failures, and has attached a high level of importance to both the APEC and OECD principles on competition policy and regulatory reform. The FTC has been relentlessly involved in the regulatory reform of various sectors and in the drafting and formulation of amendments to individual laws that regulate specific sectors. The FTC has been relentlessly involved in the regulatory reform of various sectors and in the drafting and formulation of amendments to individual laws that regulate specific sectors.

30 Conclusions (3) Regulatory reform is a long-term process, which must involve achieving a change of culture within regulatory agencies, and there is still much to be done. Regulatory reform is a long-term process, which must involve achieving a change of culture within regulatory agencies, and there is still much to be done. The FTC will continuously make efforts to combine advocacy with enforcement to reform the market for regulated sectors. The FTC will continuously make efforts to combine advocacy with enforcement to reform the market for regulated sectors.

31 Thank You