An end-game for sector regulation?

This year’s CRA conference focused on the fascinating interaction between competition and sector regulators.

The competition side started modestly enough with two DG COMP officials citing research that sector specific regulators (in the US) had done a better job of imposing sufficiently strong pro-competitive remedies on errant market players. While anti-trust folk look for quick structural fixes because their job is to move on to the next case, the sectoral people expect to be there for the long game and can police more sophisticated interventions.

But the lead seemed to be lost quickly as focus turned to political economy of regulation. Are the sophisticated remedies all part of the uber plan to provide long term self-justification? Alex Chisholm – CEO of the new UK anti-trust body – was frank about the fact that some sector regulators don’t use their (concurrent) anti-trust powers because they don’t want to give the impression that their sector responsibilities are no longer needed. Chris Fonteijn of the Dutch competition + sectoral regulator positioned the changes in his country as a good way to transition powers (presumably while providing professional certainty to the bureaucrats affected).

Be careful about taking it too far though argued Paul Seabright and Howard Shelanski, as competition authorities take decisions more secretly than their sectoral brethren subject to better regulation requirements. Anti-trust should stick to specific issues, while sector-wide concerns deserve the more open processes of other regulators.

Theory turned to practise in the final panel about industrial policy, where the consensus among John van Reenen, Gert-Jan Koopmans and Eliana Garces Tolon was clearly that the European economy needs (much) more flexibility but that it can’t generally be the competition authorities that have to take the (highly political) decisions about such change, although that’s often the case at present when mergers come to them with a justification that the merged firm will be free of the (implicit) social commitments of the existing parties.

Europe underwent a wave of market liberalisation in the 1990s, resulting in the creation of sector regulators. At the time, success was always understood to mean regulators being wound up, but as the opportunity gets closer, finding the right exit strategy from regulation needs more attention and today was a great part in that.

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