Interface Between Competition Law - Competition Law - Lecture Slides, Slides of Competition Law and Policy

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Interface Between Competition Law and Sector Regulation Docsity.com 2 Introduction • A competition law establishes a competition authority, whose role is to ensure that firms do not resort to anticompetitive behaviour aimed at stifling competition. • In addition, governments also enact sector specific legislations, which establish sector specific regulators to regulate the sectors concerned. • Both competition and sector regulation are departures form reliance on market forces in fostering social welfare and are actually regulatory tools intended to regulate behaviour of economic players. • Interventions by both are aimed at broadening the scope for private markets to allocate resources thereby improving general economic efficiency. • Although the mandates of the two are different, there are areas of overlaps and potential conflicting areas that necessitate the need for proper regularisation of their operational framework. Docsity.com Some few examples of problems • In South Africa, it was stipulated that the Competition Act would not apply to ‘acts subject to or authorized by public regulation’. Firms used this provision to argue in the High Court that the Competition Act did not apply to agricultural and banking issues, as there are other acts regulating the practices of these sectors. The stipulation was later removed from the Act. • The Securities Exchange Commission (SEC) in Zambia also has overlapping responsibilities with the Zambia Competition Commission. As a result, the SEC decision and that of ZCC often clashed in share transfer cases. • In Tanzania, a case of conflict arose between competition authority and the Tanzania Communication Commission, concerning licensing issues. The competition authority filed a complaint against the communication authority for permitting dominance of two mobile phone operators (Mobile and Tritel) in the country by refusing to license other companies. • Source: CUTS (2003), “Pulling up our Socks”, A study of competition regimes of seven developing countries of Africa and Asia: The 7-UP project. 5 Docsity.com 6 General roles of the regulators • Generalisation of sector regulator roles is difficult: number and mandates differ across countries. • Interventions by regulators are generally aimed at such issues as market opening privatisation; liberalising restrictions on entry, prices and enforcing normal business practices; frameworks for consumer protection in the sector etc. • Regulatory authorities thus impose conditions which players should abide by, prescribe entry requirements standards and give operational guidelines to companies operating within the sector. • Competition authorities focus on identifying and helping to eradicate attainment and abuse of market power by some few players in the market. • Competition rules tell the agents in the market what they should not do, while sector regulation does the reverse and tells market agents what to do. • Attempts have been made to distinguish between the two mandates. Docsity.com 7 Ex Ante Versus Ex Post Regulation • Ex Ante regulation generally refers to regulation before players start operations. • It also refers to regulation based on a forward looking exercise, i.e what the situation is likely to be after some action. • Ex Post regulation refers to regulation based on the conduct already done. • This implies that the regulatory authority has to prove what has been done. • Sector regulatory roles are generally ex ante regulation while competition authorities (except merger regulation) generally perform ex post regulation. Docsity.com Possible approaches • Structural issues (ex-ante) to sector regulators and behavioural issues (ex post) to competition authorities – Structural issues require on-going monitoring and application of sector- specific expertise, which is difficult for a competition authority to perform, given its cross-sector cutting overall responsibility. – Structural issues also require more frequent intervention and continuous assessment of performance against set standards, requiring a continual flow of information from regulated entities which makes it more suitable for a sector specific authority to handle. – behavioural issues have cross sector implications, and may be best handled by competition authorities, which have competition mandates over all sectors. – Behavioural issues are largely to do with competition law violations 10 Docsity.com Possible Approaches (cont..) (a) Combining technical and economic regulation in a sector regulator and leave competition enforcement exclusively in the hands of the competition authority; (b) Combining technical and economic regulation in a sector regulator and give it some or all competition law enforcement functions; (c) Combining technical and economic regulation in a sector regulator and give it competition law enforcement functions which are to be performed in coordination with the competition authority; (d) Organizing technical regulation as a stand-alone function for the sector regulator and include economic regulation within the competition authority; (e) Relying solely on competition law enforced by the competition authority for all aspects of regulation. 11 Docsity.com Country experiences (UNCTAD 2006) Country Approach (from (a) to (e) in previous slide Australia (d) and (e) Brazil (a) Canada (b) and (c) France (b) and (c) Kenya (b) Malawi (c) New Zealand (e) Mauritius (b) Portugal (c) South Korea (a), (c) and (d) South Africa (c) 12 Docsity.com