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The Relationship Between Competition and Regulatory Authorities

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Both within and outside the OECD there has been a trend to introduce greater competition into regulated sectors. The introduction of such competition has required establishing new regulators or seriously rethinking what existing regulators are doing, bringing to the fore some important questions concerning the proper relationship between sector-specific regulators and economy-wide competition agencies. Institutional and historical differences have played an important part in determining how countries have decided to combine or divide competition and regulatory policy making and implementation. Despite that fact, there are several general points that should be borne in mind when determining the division of functions between sector-specific regulators and economy-wide competition agencies. First, competition agencies have a comparative advantage over regulators when it comes to ensuring that anti-competitive conduct and mergers do not undo the benefits expected to flow from introducing greater competition into regulated sectors. There should be a strong presumption in favour of leaving these functions in the hands of a competition agency. Second, sector-specific regulators have a comparative advantage in obtaining and analysing the cost data needed for economic regulation and for some aspects of access regulation. This favours leaving regulatory functions to sector-specific regulators. The assessment should also consider synergies and the ability to resist regulatory capture. In sectors expected to soon become competitive, transitory economic and access regulation might be better left to an economy-wide competition agency, i.e. the agency most likely to ensure the transition is actually made. At the same time, in sectors where there is likely to be a long term need for regulation, that task should probably be left to sector-specific regulators. Optimal solutions could certainly differ across countries and sectors, but competition agencies and sector-specific regulators must co-operate closely in executing their functions.

Page Count: 80
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Document Type: Review Article

Publication date: 1999-09-01

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