ROMANIA S EXPERIENCE ON THE RELATIONSHIP BETWEEN THE COMPETITION AUTHORITY AND THE SECTOR REGULATORS

Transcription

1 ROMANIA S EXPERIENCE ON THE RELATIONSHIP BETWEEN THE COMPETITION AUTHORITY AND THE SECTOR REGULATORS Contribution by Romania Submitted to UNCTAD's Seventh Session of the Intergovernmental Group of Experts on Competition Law and Policy, Geneva, 30 October to 2 November

2 Romania s experience on the relationship between the competition authority and the sector regulators Intergovernmental Group of Experts on Competition Law and Policy, Seventh Session 31 October to 02 November 2006, Ad-Hoc Expert Meeting on Competition Law and Policy 30 October 2006, Room XXVI, Palais des Nations, Geneva One of the main challenges at international level nowadays, is how to promote competition in the public utilities sector and infrastructure industries, or how to organize the relationship between competition agencies and regulatory agencies. It is one of the subjects of the intensive work undertook within the UNCTAD framework since 2001 as response to the paragraph 11 of the resolution adopted by the Fourth United Nations Conference to Review all aspects of the Set of Multilaterally Agreed Principles and Rules for the Control of Restrictive Business Practices. A large and growing number of economies are undertaking major reforms aimed in the area of economic regulation to achieve better regulatory outcomes in the public interest. Although there are significant differences across countries and industries, major regulatory reforms have generally envisaged: the privatization of former state owned companies, rethinking universal service obligations, liberalizing restrictions on entry, prices and business practices and taking measures to ensure consumers are properly informed and protected. Restoring the governance of competition and free prices in highly regulated sectors and protecting consumers against abusive prices, represent a difficult task, requiring a very broad range of expertise and experience. In this context, competition authorities all over the world have an important role to play. They have a vital role in ensuring that the regulatory structures put in place are not anti-competitive or create competitive distortions. I. General framework In Romania, the competition authority plays a dynamic role in favour of liberalising the markets of public interest services. One of the main objectives pursued by the Competition Council, as the single autonomous regulator in charge with the application of Competition Law in Romania is to create a procompetitive environment in the regulated markets which would increase transparency and encourage the participation of consumer associations during the decision making process where appropriate. 2

3 Competition stands at the basis of a viable economy. It assumes the free conduct of undertakings on the market, based on the interaction of the supply and the demand existing on the market. This should not mean that State s intervention is not ever justified. Thus, the existence of certain activities of general interest for the society such as water supply services, local public transportation, public illumination and others supposes State s intervention in a certain degree, aiming at ensuring the well - functioning of these markets. The legal regulations applying to all these activities of general interest call for the Competition Council s specific intervention in these markets. This intervention has a sanctioning character (ex-post) and takes place when the regulatory authorities have not the power to ensure that the competition rules are observed, or fail in their preventive intervention (ex-ante) or act in contradiction to the competition rules. Therefore, the Romanian competition law applies to all sectors of the economy, even when these are subject to specific regulation. That means that Competition Council is empowered to open investigations and to pronounce itself with regard to the anticompetitive practices and economic concentrations in all sectors of the economy, even in the regulated ones. II. Role of the Romanian competition authority in regulated sectors Complementarities of responsibilities Certainly there is not a unique model or best model of allocating responsibilities between the competition authority and the regulatory authorities. Being considered a significant and ongoing challenge in most countries, this issue has been intensively discussed and debated in international fora in recent years. Generally, cooperation and cooperative relationship between competition agencies and the sectoral authorities are more likely when they share similar goals. In Romania, sectoral regulation and competition law enforcement work cohesively and complement one another in order to achieve the economic efficiency goal. In principle, competition policy tries to ensure that markets are competitive while regulation attempts to control conduct when markets are not competitive. This difference in roles leads to differences in primary functions. Utility regulators generally address competitive issues ex ante, meaning that they act to prevent anticompetitive conduct. Thus, ex-ante regulations intervene when complex measures or frequent/prompt intervention are required on the relevant markets of the respective sectors. Regulation attempts mainly to control the conduct of firms with market power so that they cannot take 3

4 advantage of their market power to limit output, raise prices, or limit rivals abilities to compete. The regulatory authorities are provided with a larger set of instruments (but, exclusively on the market segment they operate on) envisaging distribution problems or the correction of certain market failures. Sometimes, these issues may encourage regulatory authorities to accept or even uphold an anticompetitive market on certain segments, when this is considered the only solution that could warrant them the fulfillment of the universal service obligation. As the experience acquired at both national and international level proved, the ex-ante regulations cannot succeed alone in ensuring an effective competition on the market. Competitive markets require efficient and effective allocation of enforcement responsibility between competition agencies and sectoral regulators. The regulatory authorities may not, for example, lead an investigation in the field of fixing prices or sharing markets - such an anticompetitive behavior can exclusively be treated by the competition authority. At the same time, the competition authority cannot grant licenses to market participants, to establish prices or guarantee universal service all these shall be treated exclusively by the specific regulatory authority. This is the reason why, in Romania, Competition Council ensures the implementation of Competition law, while the regulating authorities have as main responsibility the implementation of specific economic and technical regulations. Thus, the first function of the Competition rules is to prevent the anticompetitive conduct such as collusion and the abuse of dominant position. This function is generally ex post, meaning that the competition authority responds to activities that have already occurred. The second function is to ensure that industry mergers do not significantly decrease competition. Last but not the least, Competition Council has in view to guarantee for all companies the increase of efficiency as a result of competition, price decreasing in order to provide competitiveness and new jobs creation. To these, there are added the consumer benefits, achieved through decreasing costs of the concerned services. Moreover, even if the competition authority is not empowered to apply economic regulations such as control of prices or of quality standards, it has an important role in setting up and implementing sectoral regulation mechanisms. This role arises from the Competition Council s power to deliver binding opinions on the laws or regulations that may have an anticompetitive impact. The possibility of issuing binding opinions is an effective way of advocacy with regulated industries. Furthermore, Competition Council is empowered to propose the amendment of the normative acts in force that may adversely affects, through their effects, the competitive environment. 4

5 Therefore, the Competition Council must be consulted in respect to all drafts of normative acts that may raise competition concerns such as: the establishment of quantitative restrictions for exercising a profession or for the access on a certain market, the establishment of exclusive rights in certain areas or the imposition of uniform practices in the field of prices. III. Cooperation between the Competition Council and the sector regulators Enforcement and its effectiveness depend on the level of knowledge of competition laws by and amongst market players. In this context and being permanently aware of the Romanian economic reality and the international practice and mechanisms, the Competition Council had to lead an active and sometimes aggressive advocacy campaign. Thus, it made the Romanian society understand the rules of the game and ensured the necessary climate for setting up the mechanisms of a functional market economy. The competition promotion in public utilities sector and the way in which the coordination between the actions of the competition authority and the regulatory institutions in different sectors is established, represent real challenges at present. Competition Council has played an important role within the regulatory reform process, as part of a privatization programme, by its vocation to impose divestiture measures of breaking the existing monopolies, to control or prohibit economic concentrations that threaten the market structure. A strengthen cooperation with regulatory institutions was established in these cases in order to ensure the reforms efficiency. Forms of cooperation: The relationship between the Competition Council and the regulating authorities take either the form of cooperation agreements or of cooperation by means of participation in the Inter-ministerial Competition Working Group. Cooperation agreements With a view to improve the co-operation with the Regulatory Authorities, the Competition Council has concluded Collaboration Protocols with the following authorities: the National Regulatory Authority in the field of Communications, the National Regulatory Authority in the field of Energy, the National Regulatory Authority in the field of Natural Gas, the National Regulatory Authority for Public Municipal Services, the National Securities and Exchange Commission and the Insurance Supervisory Commission. 5

6 Inter-Ministerial Working Group Market globalization and EU integration require a continuous screening of the legal developments that take place at EU level so to ensure a prompt transposition of any new element of the acquis communautaire. As an action method in this matter, it was set up in 2004, at the initiative of Competition Council, the Inter-Ministerial Working Group on competition issues aiming at promoting competition in all sectors and ensuring the prevalence of the competition legislation over other normative acts. Within the Group, the institutions involved are represented at the level of Secretary of State. The Inter-Ministerial Working Group on competition issues is an unincorporated body, that works besides the Competition Council and whose permanent members are: Competition Council, Ministry of Economy and Commerce, Romanian Presidency, The Prime Minister, Ministry of Justice, Ministry of Public Finance, Ministry of Communications and Information Technology, Ministry of Transport, Constructions and Tourism, Ministry of Environment and Waters Management, Ministry of Health, Ministry of Education and Research, Ministry of European Integration, Ministry of Agriculture, Forests and Rural Development, Ministry of Administration and Internal Affairs. The meetings of the Inter-Ministerial Group are held on a monthly basis. Depending on the subject approached, representatives of other public administration authorities, organizations and non-governmental associations, representatives of entrepreneurs, manufacturers or other undertakings can participate as guests in its reunions. The main working instrument within the Inter-Ministerial group is the Regulatory Impact Analysis, which ensures that the decision-making process is based on clear and accurate information regarding the costs and benefits of the regulation, with a view to identify and prevent in due time any distortive consequences of the regulating process. Since February 2006, a representative of the Competition Council has access to the documents submitted for debates within the reunions of the Consultative Council of the National Regulatory Authority in the field of Natural Gas. The Competition Council s representative may participate and present the official Competition Council s point of view in the meetings where important matters from competition point of view are to be discussed. The participation in these meetings allows the permanent monitoring of the natural gas market; the foreseen impact of it is the prevention of adopting new regulations that could affect the normal competition environment on the Romanian market. 6

7 Follow up of the cooperation acknowledgement and comprehension of the competition rules by all actors in the market; a better understanding of those criteria that differentiate the scope of each institution s competences in order to avoid overlapping responsibilities by Competition Council and sector regulators; a better achievements of CC primary role of preventing and discouraging the anticompetitive practices on the regulated markets or on a substantial part of them; identification of the undertakings main concerns and deficiencies in certain regulated sectors mutual consultation on sensitive issues from competition point of view; raising undertakings awareness on the measures in case of infringement of Competition Law and of those specific to the regulated markets; adoption and development of legislative acts compliant with competition rules; IV. Competition Council s experience In the context of setting up a single energy market at European level and having in mind the close date of Romania accession to EU, the Competition Council started debates at national level on similar competition issues to those that the Internal Market on gas and electricity is facing. The doubts regarding the functioning of the internal market of natural gas and electric energy in terms of competition refer to the high prices, the restraint alternatives in choosing suppliers and the lack of transparency. The energy and transportation fields are included in the list of sectors identified by the Competition Council as essential for the Romanian economy from competition point of view. Therefore, the creation and maintenance of a normal competitive environment in these sectors are considered priorities for the Romania s development. Competition Council assessed the economic concentrations as a result of the privatizations carried out in both gas and energetic sector, pronouncing itself on the impact of such operations upon the competitive environment: natural gas the privatization of SC Distrigaz Sud SA and SC Distrigaz Nord SA authorization decision; electric energy the privatization of SC DFEE Electrica Banat SA, SC DFEE Electrica Dobrogea, SC DFEE Electrica Moldova SA, SC DFEE Electrica Oltenia SA authorization decision. 7

8 Cooperation in working out drafts of law that could unduly restrict competition and favor anti-competitive practices The main results of the CC s interventions described below were to promote procompetitive changes in the regulatory environment and to contribute to greater market access by new entrants: Intervention at the Ministry of Transport, Constructions and Tourism for the amendment of the Minister of Transport Order no. 290/2000 on setting up a single body entitled to certify the quality management systems for the railway suppliers of critical railway products (i.e. AFER Romanian Railway Authority. Following the Competition Council s intervention, the Order no. 290/2000 was amended, so that AFER s quality of unique authority empowered to certify the quality management systems for the railway suppliers of critical railway products might be eliminated. Within the Inter-ministerial Working Group, the anticompetitive nature of the provisions of G.D. no. 478/2001 on the transport by plane to/from Romania of the persons has been brought to the attention of the Competition Council. According the provisions of this normative act, the transport by plane to/from Romania which is financed through public funds shall be done exclusively with planes belonging to the Romanian airline companies, namely Tarom. At the recommendation made by Competition Council, the Ministry of Transport, Constructions and Tourism initiated procedures in order to remedy this situation. Consequently, G.D. no. 478/2001 was abrogated. A case of excessive market regulation assessed by the Competition Council covers the legislation on taxi, especially its provisions relating to: the administrative fixing of the maximum number of taxi authorizations; the fixing of the minimum and maximum level of the tariffs in the field by the local public authorities; the assistance of specific professional associations by the local public authorities for the establishment of the maximum number of taxi authorizations and of the tariffs level. With a view to solve these issues, the competition authority had several interventions aiming at the amendment of the existing legal framework. These interventions also shaped in consultations with the initiators of a new draft law with the aim at issuing a regulation compliant to the competition rules. Cooperation in enforcement of competition rules between the competition authority and the sectoral regulators Whenever the Competition Council investigates an alleged infringement of the Competition law by companies acting on a regulated market, it may ask detailed information from the respective sectoral regulator on market structure, market analysis, and analysis on potential effects of an anticompetitive practice on the respective relevant market. Also, whenever the behaviour of the companies acting on these markets has the characteristics of an anti-competitive practice 8

9 prohibited by the Competition law, the Romanian Competition Council can intervene and impose the sanctions provided for by the Competition law. In those instances where additional industry expertise is required, Competition Council can and do cooperate with sectoral regulators, but base its decisions, ultimately, on economic results, as proper antitrust analysis dictates. Thus, sector regulators share sector expertise with the competition authority when the competition authority is investigating anticompetitive conduct or a proposed merger. They are as well responsible for helping to establish conditions for effective competition in the regulated markets and cooperate with the Competition Council in order to ensure effective enforcement. Final Remarks Basically, both the competition authorities and the regulatory bodies are focused on defending the public interest against monopoly power, but their tools vary in scope and nature of intervention. The restraint of competition is seldom an efficient instrument in a functional economy and whereas it occurs, we have to make sure that it is indeed necessary in serving the consumer s general interest. This is not a task the competition authority can deal with by acting alone. Eventually, the warranting of best public interest services in terms of quality and price in order to meet the end users needs represents a common responsibility of the competition authority, the regulatory authorities, as well as of the providers of services. Far to be incompatible, the services of general interest and the principles of competition policy are complementary in reaching this objective. The final aim of the actions undertaken by Competition Council in order to establish a permanent framework for cooperation with the players acting in the regulated markets is to make possible the promotion of best solutions for the functioning of these sectors in terms of competition, transparency and efficiency. And of course, this can be achieved only through a consistent dialogue between the competition authority, the regulatory authorities, the undertakings and the consumers on these markets. 9