1 Evidence-Based Competition Advocacy: Markey Analysis Seboong KWAG Director General, Competition Policy Bureau, Korea Fair Trade Commission

2 The KFTC System for Advocacy Activities Prior Consultation on Anti-competitive Regulation - When a government agency intends to enact or reinforce law that have potential to restrain market competition, it shall have prior consultation with the KFTC - An institutional tool to eliminate anti-competitive regulations Competition Impact Assessment(CIA) - The KFTC conducts CIA on bills under the legislative process pursuant to the Framework Act on Administrative Regulations - A tool to block any anti-competitive regulations from being enacted from the outset

3 Why advocacy based on evidence? - Generally, administrative regulations have trade-off effects: some parties gain from the regulations while others to lose - So, regulatory reform usually faces harsh opposition from vested interests, especially those with monopolistic profits - Recognizing such difficulties, the KFTC has strived to carry out ex-ante and ex-post competition advocacy activities as objective as possible to minimize oppositions Advocacy Based on Evidence

4 Competition Impact Assessment in the KFTC - The KFTC conducts competition impact assessment on any new government regulation or amendment to identify those that may unnecessarily impede competition and aid in their redesign if they are deemed to unduly inhibit competition - The KFTC’s competition impact assessment system is similar to that of OECD Competition Assessment Toolkit - In 2014, the KFTC conducted competition impact assessment on 614 bills and 15 of them were under in-depth review Ex-Ante Instrument : Competition Impact Assessment

5 1 st Step : Preliminary Assessment use a set of threshold questions (“checklist”) to analyze possible impacts of new regulations on competition enter into the 2 nd Phase if reductions in competition are likely 2 nd Step : In-depth Review involves five phases : Understanding specific contents and purpose of the regulation → Defining relevant market → Figuring out the current status of the relevant market → Competition Impact Assessment → Proposing alternatives Ex-Ante Instrument : Competition Impact Assessment(Cont.)

6 Ex-Post Competition Advocacy Activities Procedures of Ex-post Advocacy Activities - Identifying existing regulations in need of reform → Reviewing such regulations by experts → Soliciting opinions from relevant ministries and interested parties → Finalizing reform measures - When identifying existing regulations in need of reform, the KFTC takes into account various sources including complaints from interested parties, experts’ advise, and market study

7 Ex-Post Competition Advocacy Activities(Cont.) Market Study - conducted based on the KFTC’s own market study manual, which is mostly in line with recommendation of the ICN’s 2012 Market Studies good practices handbook(chapter 4,5,6,7) - 2 or 3 market studies are published every year by the KFTC to analyze market structure, conduct, and performance - as of 2014, the KFTC has published market studies on 16 sectors * (i.e.) Internet Portal Service(2008), Movies, Pharmaceuticals(2009), Liquor Industry(2010), Cosmetics(2011), On-line Education(2012), Insurances(2013), Gas Industry(2014)

8 Ex-Post Competition Advocacy Activities(Cont.) Case Study : Market Study on Liquor Selection of Market - Selection of Market Liquor market by nature faces many market-hindering regulations Mapping out a plan for market study - Mapping out a plan for market study Market structure, competition status, distribution structure, and regulatory status of each type of liquor market were set to be analyzed Information collection and analysis - Information collection and analysis Manufacturing facility standards for the liquor industry were found to have limited market entry and two market players were found to have divided taxed cap market amongst themselves for 38 years Developing outcome - Developing outcome After soliciting opinions from stakeholder and experts on the draft report, the KFTC published final report with recommendations to the relevant ministries

9 Ex-Post Competition Advocacy Activities(Cont.) Review by experts - Seek advice from specialized institutions to guarantee objectiveness and necessity of reform on existing regulations Soliciting opinions from stakeholders Finalizing reform measures - Hold open discussions or stakeholder hearings to relieve concern of stakeholders and to secure support for the new measures

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