2011/SOM/WKSP/003 Reform Aspects Competition, Structural Adjustment and Regulation: Competition Policy

Transcription

1 2011/SOM/WKSP/003 Reform Aspects Competition, Structural Adjustment and Regulation: Competition Policy Submitted by: Australia and New Zealand School of Government (ANZSOG) Residential Training Workshop on Structural Reform Singapore August 2011

2 APEC Residential Training Workshop on Structural Reform Reform aspects competition, structural adjustment and regulation: Competition Policy By Professor Allan Fels, AO Dean, Australia and New Zealand School of Government (formerly Chairman of the Australian Competition and Consumer Commission) Wednesday, August 10, 2011 Singapore 2 1

3 Introduction Competition policy needs to be comprehensive Competition Law and Competition Policy Laws and machinery needed A culture of general public support is needed 3 Nature of Competition Law Prohibitions of: Cartels Abuse of Dominance: e.g. predatory behaviour Mergers In some economies, misleading and deceptive conduct, and consumer protection An independent, well resourced regulator Credible, adequate sanctions Private enforcement possible: individuals can take action themselves 4 2

4 Some Characteristics of Competition Law Applies to business behaviour Does not usually attack structure Monopoly itself is not unlawful: only abuse of monopoly Sometimes a fine line between competitive and anticompetitive behaviour e.g. price reductions Sometimes a trade off between competition and efficiency e.g. mergers Mostly, however, anticompetitive behaviour is clearly recognisable, harmful and not justified 5 Characteristics (cont.) Most often the direct beneficiaries of competition law are businesses Claims for exemption widely sought A considerable administrative and legal apparatus is needed: differs from much microeconomic i deregulation No global competition law or regulator 6 3

5 Characteristics (cont.) Law not of much relevance to monopoly utilities: they have no competitors Competition law does not apply to the many actions of governments that limit competition 7 Competition Law: Australian Experience Australian Industries Preservation Act 1906 High Court emasculation Trade Practices Act (TPA) 1974 big bang, then decline Reforms in 1990s Vigorous, high profile enforcement of Trade Practices Act (including consumer protection provisions) Higher penalties A stronger merger law Monopoly regulation Intellectual Property Formation of Australian Competition and Consumer Commission from Trade Practice Commission and the Prices Surveillance Authority A sharper focus on competition, less on price regulation Integration of competition law and economic regulation via ACCC regulation of telecommunications and energy. Connection of enforcement and public support for competition law and policy 8 4

6 Public Utility Monopolies: Best Practice Policy Permit entry by new players ( open entry ) The promotion of interstate competition Substantial restructuring of the industry, both horizontally and vertically If vertical integration remains then access laws are arguably necessary Competition law applied in full: very relevant after reform occurs Regulate monopoly price Other pro-competition measures Ownership reform and its relevance to competition 9 Government Restrictions on Competition Government can harm competition by means of anticompetitive legislation and actions 10 5

7 Competition Policy Principles No law that restricts competition should apply unless it can be demonstrated to be in the public interest If it is in the public interest, ways of achieving the public benefit in less anticompetitive manner should be considered 11 Elements of National Competition Policy A national competition policy has two main elements: 1. A competition or antitrust law to regulate anticompetitive behaviour by businesses 2. A comprehensive competition policy 12 6

8 Comprehensive Competition Policy Broader comprehensive competition policy including: A universally applicable competition law Promotion of interstate and international competition Reviews and removal of all national, state and local laws that inhibit competition unjustifiably. Reviews of structures of publicly owned industries. An access regime where necessary. Price regulation of monopoly. Other competition policy issues e.g. procurement, competitive tendering 13 Drivers of a Comprehensive National Approach in Australia Recognition that competition policy needed to be comprehensive, not just competition law Opening of economy created pressure for action on non traded goods sector which was largely exempt and required a competition policy approach Trade Practice Act focus was on the more competitive sectors and needed redirection to the less competitive sectors Privatisation, corporatisation, etc of public utilities raised competition issues 14 7

9 Drivers of a Comprehensive National Approach (2) Reform on a sector by sector basis, without a broader policy framework or process, seemed unsatisfactory A national market rather than separate regional markets But is a piecemeal approach better? Accompanying Trade Practices Act enforcement built community support Greater recognition of value of competition 15 National Competition Policy Principles of a National Competition Policy No anticompetitive conduct against the public interest; Universal and uniformly applied rules; Anticompetitive arrangements said to be in the public interest assessed independently, transparently; An open, integrated domestic market; 16 8

10 Australia s National Competition Policy Universal application of TPA Vigorous TPA enforcement Removal of anticompetitive laws Structural reform of public monopolies Access to essential facilities Monopoly pricing regulation Competitive neutrality 17 Australia s Competition Policy 1. UNIVERSAL APPLICATION OF COMPETITION LAW TO ALL BUSINESS Private and government-owned Large and small (e.g. professions) All sectors Rigorous exemption process Labour Intellectual property Exports Other 18 9

11 Competition Policy (cont.) 2. REMOVAL OF ANTICOMPETITIVE GOVERNMENT RESTRICTIONS ON BUSINESS Widespread restrictions Reviews of all laws and regulations restricting competition Public interest test Independent transparent review process Role of State Competition Policy Units Role of National Competition council Magnitude of review process Any restrictions on competition must be clearly demonstrated to be in the public interest Financial payments/competition to state governments 19 Competition Policy (cont.) 3. STRUCTURAL REFORM OF PUBLIC MONOPOLIES Promote interstate t t and international ti competition Separate regulatory and commercial functions of public monopolies Separate potentially competitive activities into smaller, independent business units i.e. horizontal and vertical separation Apply competition law Access law 20 10

12 Competition Policy (cont.) 4. ACCESS TO ESSENTIAL FACILITIES Necessary inputs into downstream or upstream production Monopoly facilities Declaration by ACCC or NCC Pricing and other disputes, determined by ACCC Investment and competition issues 21 Competition Policy (cont.) 5. MONOPOLY PRICING Prices for monopolies only CPI-x Cross subsidies 22 11

13 Competition Policy (cont.) 6. COMPETITIVE NEUTRALITY Government-owned businesses not to have artificial advantage over privately-owned businesses 23 Australia s National Competition Policy Experience illustrates prerequisites and challenges for major reform 24 Change the competition culture Enlist support of top political leaders Adoption of critical principles of competition policy A well thought out policy Establishment and resourcing of institutional machinery Transparent reviews of anticompetitive laws Financial rewards (for governments) Engagement of interest groups Reform fatigue Desirability of a comprehensive approach? Or piecemeal? 12

14 Factors In Reform A sense of crisis ( Banana republic ) Sequencing Reform reports A clear agenda for reform A committed, educated leadership Institutional arrangements Some lack of political understanding of implications of a competition policy 25 Paths To Reform Special drivers of competition reform: Quantify the cost of the status quo and potential benefits of reform Communicate these to stakeholders and public Appropriate transition arrangements Timing and sequencing important: international trade liberalisation creates pressure for behind the border reforms Technological change can also be important 26 13

15 Factors In Reform (cont.) Qualified Supporters Contradictions in competition policy attitudes Big business opposition to stronger Trade Practices Act but support for wider competition reforms aimed at public utilities, professions, small business etc. Small business and farmer support of some of agenda State governments fiscal incentives Unions ambivalent attitudes Bureaucratic support, especially central agencies 27 Limitations Poor Commonwealth performance e.g. Media sector Small business resistance Rural resistance Imperfect selling of competition case 28 14

16 Competition Advocacy Advocacy most effective when it is linked to effective enforcement Advocacy a second best policy approach Advocacy most effective when It relates to specific matters and behaviour that can be understood d The matters can be seen to affect the public 29 It involves a confrontation Competition Questions: Looking Ahead 30 Criminal sanctions Untouched sectors Education Health Public services Issues harder to conceptualise Intellectual property Planning laws Labour markets Reform fatigue? 15

17 Lessons For Other Reform Areas Crises Mandates Agendas Leadership Institutions Sustainability 31 16