2 2 nd CUTS-CIRC International Conference REVIEWING THE GLOBAL EXPERIENCE ON ECONOMIC REGULATION – A forward looking perspective Session VII - Interface between Competition Law and Sector Regulation Professor Allan Fels, AO Dean, Australia and New Zealand School of Government (formerly Chairman of the Australian Competition and Consumer Commission) Wednesday, April 20, 2011 New Delhi, India

3 Introduction Competition policy and general regulation Competition policy and regulated industries Competition authorities and sectoral regulators Competition law in regulated industries Do competition and regulatory policies complement or conflict with one another?

The Broad Policy Approach to Regulated Industries Commercialisation, corporatisation, privatisation Removal of entry barriers imposed by governments Removal of interstate or international trade and investment restrictions Appropriate horizontal and vertical structural breakup Access laws to deal with vertically integrated businesses Price regulation of monopoly power 4

The Broad Policy Approach to Regulated Industries cont. Application of competition law Mergers Cartels Abuse of dominance Other procompetitive measures Competitive neutrality State aids 5

Limited Relevance of Competition Law to Monopolies No cartels No anticompetitive mergers No abuse of dominance 6

High Relevance of Competition Law to Deregulated Monopoly Cartels Mergers Abuse of dominance 7

Alternative Models Full integration One law One regulator Separation of competition and regulation Two laws Two regulators Coordination, cooperation? Conflict? Multilevel government issues National/state or provincial regulators 8

9 Integration Versus Separation Industry specific or general regulation? State/provincial or national regulation? Integration of regulation with competition law agency?

10 Technical Regulation Can it be separated from economic regulation? If separated, need for competition agency to have power to override or direct technical regulator Issues re technical competence of competition staff Issues re power of integrated and/or separate regulator

11 Access Laws Telecommunications – “the last mile is uncompetitive” It is difficult to compete without access by competitors to lines owned by monopolist “Essential Facilities” Criteria (in Australia) for access under the law: –Use of the facility is a necessary input in a production process –Would be uneconomic to duplicate or develop that facility, or more simply, that it is a natural monopoly –Would be in the public interest to give access (as it would promote competition and efficiency) Pricing access – balancing effects on competition and investment

12 Retail Price Control Rate of return regulation CPI - X

Competition authorities view the relationship as very challenging –Regulated sectors usually uncompetitive –Competition may be constrained by regulation –Overlapping work causes tensions –Problems largest in developing countries The problems not unique to government (“joined up government” etc.) 13 Competition Authorities and Sectoral Regulators

14 Ideal Relationships Little or no anticompetitive regulatory law Competition body has paramount decision making power on competition-related issues In theory, the regulators should be on same side: Procompetition regulation enhances growth Objectives similar In practice, they may not be

15 Importance of competition culture, and central government pressure for competition law Australia’s experience Achieving Ideal Relationships

16 Non ideal relationships exist in most countries Problems may be worse in developing countries The importance of acknowledging that arrangements are not ideal – and of making the best of the situation The Reality: Non Ideal Relationships

Differing Ways Agencies’ Interests can Intersect 17 Shared value Agency A Extra value for one, neutral for the other Agency A Agency B Conflicting value Agency A Agency B Dovetailing differences Agency A Agency B

18 Statutory powers of competition agency Concurrent powers Joint appointments, staff transfers and exchanges Advocacy power for competition agency Agreements to cooperate Information exchange Instruments of Cooperation

19 Common appeals route Procompetition regulatory impact assessment Competition authorities can intervene Consistency in Law

20 Shared culture and values Strong direction from centre, and from legislation Recognition, acceptance by agencies of need to cooperate Sound, ongoing cooperative relationships Careful management of political environment Managing Collaboration

21 Do competition and regulatory policies complement or conflict with one another? Conclusion (1)

Conclusion (2) Aim for the ideal Acknowledge cross-agency relationships may be imperfectly structured Make an inventory of problems Analyse and resolve them 22