strategies for competition advocacy

305 Pages·2014·5.53 MB·English

SESSION III:
STRATEGIES FOR COMPETITION
ADVOCACY
BACKGROUND NOTE
English Version
DAF/COMP/LACF(2010)4

LATIN AMERICAN COMPETITION FORUM

-- 8-9 September, San José (Costa Rica) --

Session III: Strategies for Competition Advocacy

Strategies for Competition Advocacy: Background Paper by the OECD Secretariat*

* . This background paper was prepared on behalf of the OECD Secretariat by Niamh Dunne, Corpus Christi
College, University of Cambridge under session III of the Latin American Competition Forum to be held
on 8-9 September 2010, Costa Rica. The author wished to acknowledge the support of Hélène Chadzynska,
John W. Clark and Hilary Jennings for their contribution to this report.
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TABLE OF CONTENTS

1. Introduction .......................................................................................................................................... 4
2. Intra-Governmental Advocacy ............................................................................................................. 6
2.1 The scope of intra-governmental advocacy ................................................................................. 6
2.2 The importance of intra-governmental advocacy ........................................................................ 6
2.3 Competition advocacy can help promote a competition environment ........................................ 8
2.4 Areas of government activity that may benefit from competition advocacy ............................... 9
2.5 Difficulties in conducting competition advocacy ...................................................................... 10
3. Strategies for Competition Advocacy ................................................................................................. 11
3.1 Educating government actors .................................................................................................... 12
3.2 Identifying anti-competitive restraints ....................................................................................... 13
3.2.1 Proposed or existing legislation ............................................................................................. 13
3.2.2 Methodologies for identifying unnecessary regulatory restraint: the
OECD’s Competition Assessment Toolkit ............................................................................ 15
3.3 The importance of relationship-building with government stakeholders .................................. 17
3.3.1 Sector regulators .................................................................................................................... 17
3.3.2 Government departments ....................................................................................................... 18
3.3.3 Regional or local authorities .................................................................................................. 18
3.3.4 Consumer authorities ............................................................................................................. 19
3.3.5 Establishing competition contact points within government bodies ..................................... 19
3.3.6 Staff exchanges ...................................................................................................................... 20
3.3.7 Institutional frameworks ........................................................................................................ 20
3.4 Providing advice and input to government bodies .................................................................... 21
3.5 Communications campaigns ...................................................................................................... 23
4. Advocacy and Enforcement ................................................................................................................ 23
4.1 Mutually-reinforcing relationship .............................................................................................. 23
4.1.1 Advocacy facilitates enforcement ......................................................................................... 24
4.1.2 Enforcement facilitates advocacy .......................................................................................... 24
4.2 Balancing advocacy and enforcement ....................................................................................... 24
4.3 Prioritisation of advocacy versus enforcement .......................................................................... 25
4.4 Market studies as an advocacy and enforcement tool ............................................................... 27
5. Concluding Remarks .......................................................................................................................... 30
Boxes
Box 1. Examples of Competition Culture Advocacy .................................................................................... 5
Box 2. Identifying advocacy opportunities: the approach of the United States Department of Justice ..... 15
Box 3. Competition assessment: the Mexican Experience ......................................................................... 16
Box 4. Regulatory reform in Korea ............................................................................................................ 21
Box 5. Advocacy in Finland: Working Groups and Opinions ................................................................... 22
Box 6. Market Studies in the United Kingdom ........................................................................................... 29
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STRATEGIES FOR COMPETITION ADVOCACY
Background Paper by the OECD Secretariat
1. Introduction
1. Competition advocacy involves a broad spectrum of activities undertaken by competition
authorities in order to promote and advance competition law and policy. A commonly-accepted definition
is the following:
Competition advocacy refers to those activities conducted by the competition authority related to
the promotion of a competitive environment for economic activities by means of non-enforcement
mechanisms, mainly through its relationships with other governmental entities and by increasing
public awareness of the benefits of competition.1
2. Thus conceived, competition advocacy is distinct from competition enforcement2 and
furthermore, comprises two aspects: advocacy efforts directed towards specific government entities, and
efforts directed more generally towards generating support for competitive markets and the building of
what is often referred to as a ―competition culture‖ in society.
3. The latter, competition culture advocacy, aims to increase the understanding within the wider
society about competition and its benefits, including among consumers, civil society, academia and the
business community. The objective is, thereby, to increase support for competitive markets and
compliance with competition law. Competition culture advocacy is a matter of educating members of
society about competitive markets and the role of competition law. In the main, this occurs through the
provision of information, using a variety of communication tools – for example, booklets, posters,
advertisements on television, radio or the internet or in magazine or newspapers, training seminars or
presentations – which are targeted at particular stakeholders or groups in society and designed to an
appropriate level accordingly.

1 International Competition Network, Advocacy and Competition Policy (2002), available online on the
ICN’s website, at http://www.internationalcompetitionnetwork.org/uploads/library/doc358.pdf, hereafter
―ICN Advocacy and Competition Policy‖.
2 The appropriateness of this dichotomy is explored in section 4 below.
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Box 1. Examples of Competition Culture Advocacy
In June 2010, in anticipation of public tenders relating to the 2014 World Cup and the 2016 Olympic Games to
be held in Brazil, the Brazilian competition law investigative body, the Secretaria de Direito Econômia (Secretariat of
Economic Law, or SDE), launched a multidimensional campaign against bid rigging.3 One element of the campaign
is aimed specifically at increasing competition awareness among the general public, and in particular the negative
effects of cartels on consumers; it involves anti-cartel advertisements placed in four of the country’s most prominent
weekly magazines.
Many competition authorities in Latin America organise annual competition or consumer days, which focus
public attention on these issues. The Fair Trade Commission of Jamaica holds an annual ―Consumer Day‖, during
which it disseminates information in public places by means of Q&A sessions with agency staff and hands out
bulletins.4 In Chile, the competition authority, the Fiscalía Nacional Económica, holds an annual ―Competition Day‖
geared towards competition law practitioners.5 In Brazil, the 8th October has been designated ―Anti-Cartel
Enforcement Day‖ by presidential Decree. During the first Day, held in 2008, an information campaign was
conducted in seven major Brazilian airports, where 450,000 brochures and other materials were distributed.6
Since the establishment of the Competition Superintendency of El Salvador in 2006, it has engaged in a wide
range of competition culture advocacy activities, considered to be particularly necessary in a country new to
competition policies. These include: the holding of public meetings and making presentations on competition issues
to, inter alia, business associations, individual firms, law firms, the academic community and other government
bodies; the production of a website containing information on competition and the work of the authority; and the
publication of a pamphlet explaining the agency and its work to the general public.7
4. Competition culture advocacy has a broad ambit and expansive aims, inasmuch as it attempts to
influence the views of the whole of society regarding competition matters. Nevertheless, it is relatively
straightforward to perform the task of competition culture advocacy, and as the examples above
demonstrate, it is performed by the vast majority of competition authorities, albeit with varying degrees of
success. By contrast, intra-governmental advocacy is typically more difficult to perform and it is arguably
more difficult again to achieve successful results. Accordingly, the remainder of this Background Paper
focuses primarily on intra-governmental advocacy.

3 See Ministério da Justiça, SDE Releases Campaign Against Bid Rigging, press release of 23 June 2010,
available online on the website of the Ministério da Justiça, at
http://portal.mj.gov.br/services/DocumentManagement/FileDownload.EZTSvc.asp?DocumentID={471FE7
80-6391-4227-A623-CBBF3CED756C}&ServiceInstUID={2E2554E0-F695-4B62-A40E-
4B56390F180A}.
4 United Nations Conference on Trade and Development, Voluntary Peer Review on Competition Policy:
Jamaica (2005), available online on UNCTAD’s website at
http://www.unctad.org/en/docs/ditcclp20055_en.pdf, p.13.
5 See the website of the Fiscalía Nacional Económica at http://www.fne.cl/?content=dia_competencia for
further information on competition days held since 2003.
6 OECD, Competition Law and Policy in Brazil – A Peer Review (2010), available online on the OECD’s
website, at http://oecd.org/dataoecd/4/42/45154362.pdf. hereafter ―Brazil Peer Review‖, p.22.
7 OECD, El Salvador - Peer Review of Competition Law and Policy (2008), available online on the OECD’s
website at http://oecd.org/dataoecd/8/49/41597078.pdf, hereafter ―El Salvador Peer Review‖, pp.37-38.
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2. Intra-Governmental Advocacy
2.1 The scope of intra-governmental advocacy
5. One description of intra-governmental advocacy is that it involves ―[a]dvising government on
how public policies and institutions interact with markets and on how to minimise the impact of
government interventions on competition.‖8 Government in this context refers to the three branches of
government, namely executive, legislature and judiciary. Advocacy encompasses assistance and advice
about competition matters provided to all three branches, although the degree to which a competition
authority can intervene in the activities of any branch is restricted by the fundamental constitutional
principles of a country, notably judicial independence, executive sovereignty and/or legislative supremacy.
In countries where there is a substantial distinction between the central or federal government level and the
regional, municipal or local government level, advocacy efforts must similarly address the activities of all
divisions of government. This is so as to avoid, for example, the re-imposition by local government of
restraints eliminated from central government regulation.
6. The scope for competition advocacy with regard to the judicial branch is quite limited. It is
essentially restricted to the provision of training to judges in competition law and economics, and the
submission of amicus curiae briefs in cases concerning significant competition issues. The heavily
political nature of the activities of the legislative branch in practice limits the scope for successful
competition advocacy interventions. At the very least, however, parliamentarians can also benefit from
training in competition matters that is pitched at an appropriate level and which takes into account their
requirements as politicians. The greatest scope for competition advocacy efforts is generally the executive,
which frequently has the greatest impact on the nuts and bolts of policy formulation at central government
level. This includes regulatory bodies exercising delegated law-making powers, such as sectoral regulators
for privatised utilities, as well as regional or other authorities which may impose large numbers of
regulations at a local level.
2.2 The importance of intra-governmental advocacy
7. Why do competition authorities engage in intra-governmental competition advocacy? Simply put,
addressing the anti-competitive activities of private economic actors through competition law enforcement
alone may be insufficient to make markets work and to secure the wider benefits resulting from
competition. Some competition problems stem, instead, from the anti-competitive impact of governmental
actions (or inaction) on the market.9
8. Government activity can have a substantial adverse effect on the efficiency of markets. This may
be the result of domestic legislation, regulatory or industrial policy, regulations imposed by a regional
authority, rules regulating international trade or other interactions between the state and the market.
Government failures in this regard are rarely self-correcting, such that, absent reform or further
intervention by the state, existing inefficiencies will persist and continue to impact negatively on
efficiency, growth and, ultimately, the economic development of a country. Moreover, competition law
enforcement may be legally impossible (for example, due to exemptions for regulated conduct or state
action, or where the competition problem discloses no anti-competitive conduct by an economic actor),
politically impractical or simply incapable of providing a remedy to the market problem.

8 Office of Fair Trading, Evaluation of OFT Competition Advocacy (OFT866), prepared by London Economics,
April 2010, available online on the OFT’s website at http://www.oft.gov.uk/shared_oft/reports/Evaluating-
OFTs-work/oft866.pdf, hereafter ―OFT Competition Advocacy‖.
9 See, for example, Eleanor M. Fox, ―An Anti-Monopoly Law for China—Scaling the Walls of Government
Restraints‖ 75 Antitrust Law Journal 173.
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A much-criticised proposed modification of competition law in Venezuela, for example, would see state
and public corporations excluded from the scope of substantive competition law.10 In such circumstances,
the market can be improved only by tackling the problem at its root, namely, the anti-competitive
legislation, regulation, policy or other governmental activity.
9. Government action may, unintentionally or otherwise, have an adverse effect on competition in a
variety of ways. The following is a non-exhaustive list of competition problems that can result from
government activities, and which accordingly may require a competition advocacy- rather than an
enforcement-based solution:
 Regulatory requirements can operate as a barrier to entry, thereby preventing or limiting new
competitors from entering a particular sector of the market.
 Unnecessary, excessively prescriptive or bureaucratic regulation acts as an impediment to doing
business, and thereby inhibits growth and economic development.11 Such regulations may be
imposed by central or local government; examples include ―red tape‖ and superfluous price or
quality regulation that serves mainly to suppress competition.
 Regulatory capture: where regulators act primarily in the interests of regulated entities, rather
than the general public, this can distort sectoral regulation and lead to inefficiency. This may be
a result of bribery, perverse incentives of regulators or simply excessively close relationships
between the regulator and the regulated.
 Domestic barriers to international trade, such as import tariffs or quotas, shrink markets, which
results in greater concentration and less competition.
 Prioritisation of industrial policy goals, such as rural development or reducing unemployment.
Although these may be legitimate policy objectives, they can lead to market inefficiency. For
example, when the state props up a failing but nationally-significant firm through the provision of
subsidies, which damages a more efficient but unsubsidised competitor firm.
 State-sponsored monopolies typically have fewer incentives to engage in efficient market
behaviour than firms operating in a competitive environment. A monopoly may result from
State-ownership of a particular industry, from the granting of exclusive rights to private sector
actors or from privatisation of formerly state-owned enterprises. Although effective regulation
can potentially counter the anti-competitive effects of monopoly, it is unlikely to secure an
efficient outcome where the regulatory regime is inadequate or where the regulator is captured
(see above).

10 See Section 7: ―Venezuela Overview‖, in Global Competition Review, The Antitrust Review of the
Americas 2010, available online at
http://www.globalcompetitionreview.com/reviews/20/sections/76/chapters/809/venezuela-overview/.
11 For further discussion of the role of competition policy in furthering economic development in Latin
America, see José Tavares de Araujo Jr, ―Schumpeterian Competition and Its Policy Implications: The
Latin American Case‖ 7 Law & Business Review of the Americas 153 (2001) ; Eleanor M. Fox, ―Economic
Development, Poverty and Antitrust: The Other Path‖ 13 Southwestern Journal of Law & Trade in the
Americas 211 (2006-7); R. Shyam Khemani & Ana Carrasco-Martin, ―The Investment Climate, Competition
Policy, and Economic Development in Latin America‖ 83 Chicago-Kent Law Review 67 (2008).
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10. Furthermore, in certain instances governments find themselves in the position of wishing to
improve the efficiency of the national market but without the necessary skills to identify and design the
means to do so. Particularly in countries that are newly transitioning to market economies where
competition was not previously a valued market tool, the government may be thinking about competition
for the first time and from a first principles perspective. For many countries in Latin America, state
ownership and centralised price regulation have been the norm historically. Even in more developed
market economies, liberalisation is not always easy to achieve, as numerous examples of unsuccessful
privatisations worldwide illustrate. Indeed, sometimes the cure can be as bad as the initial problem.
Instances of liberalisation provide useful opportunities for a competition authority to engage in advocacy
with government agencies. Intervention ex ante can avoid the need for further, more extensive intervention
to correct market failures resulting from inappropriate regulation in the future.
11. What the above list suggests is that, sometimes, restrictions of competition may stem from other
legitimate policy aims pursued by government, such as regional development or environmental protection.
So, for example, import tariffs may be used to protect domestic industries from overseas competition,
thereby protecting local employment. But, on the other hand, if the domestic industry requires protection
in the first place, it is likely to be considerably less efficient than its foreign competitor(s), and so
consumers in the country that imposes the tariff lose out, in terms of lower quality goods or higher prices.
Competition is not an absolute value in itself, and other policy goals may legitimately take priority – the
objective is to maximise the benefit to society.12 Nevertheless, intra-governmental competition advocacy
remains pivotal in such circumstances, as a means of highlighting the costs to society in deviating from the
competitive markets model. The balancing of these competing costs and benefits requires a political
decision that is generally beyond the remit of a competition authority.
2.3 Competition advocacy can help promote a competition environment
12. How can competition advocacy directed towards government departments and bodies alleviate
competition problems? More specifically, why is the competition authority best placed to pursue this role?
 Competition authorities are specialist agencies, staffed with experts on competition matters who
are attuned to identifying competition problems in a market. Accordingly, competition
authorities are likely to prove both more effective and more efficient at identifying competition
problems than other government officials whose expertise lie in other policy areas.
 In view of their specialist expertise, competition authorities may also be best placed to identify
and design solutions to existing competition problems, in conjunction with any sectoral regulator
where sector-specific knowledge is required. The most effective forms of intra-governmental
advocacy will not merely bring to the attention of government the existence of anti-competitive
restraints but will also indicate how the competition problems can be remedied.
 In many jurisdictions, the competition authority has a significant degree of independence from
central government. This independence allows the competition authority a rather more detached
perspective, so that it can step back and identify competition problems that frontline public
officials implementing a particular policy may be too close to catch. Being one step removed
means also that the competition authority may be less prone to regulatory capture, corruption or
simple policy indifference.
 On the other hand, the competition authority remains nevertheless a part of the state apparatus
and therefore its opinions may have a greater influence on government than comments advanced

12 See Maurice E. Stucke, ―Better Competition Advocacy‖ 82 St. John’s Law Review 951 (2008), pp.1006-7.
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by non-state agencies or actors. Additionally, the competition authority is better placed than non-
state actors to establish formal communication mechanisms with other government agencies,
which can enable it to perform its advocacy function in the most targeted and effective manner.
 As noted, the balancing of competition policy objectives against other policy aims – such as
industrial policy – is a task to be performed by the political branch rather than the competition
authority. Nevertheless, the competition authority can perform the invaluable task of ensuring
that the competitive impact of these alternative policies is included within the balancing equation,
and also highlight the costs of prioritising other national policies over competition. With due
consideration, moreover, in many circumstances it is possible to implement competition and
other policy agendas in a mutually reinforcing manner.13
 Competition problems which are susceptible to intra-governmental advocacy are, conversely,
generally outside the ambit of competition law enforcement powers. ―Sovereign‖ activities, such
as the law-making function and government policy decisions, for example whether to liberalise a
statutory monopoly market, cannot be scrutinised under competition law. Many competition law
regimes also contain express or implied exemptions for conduct already subject to sector-specific
regulation, and in some cases, for conduct applying in certain sectors or by certain companies.
There can be situations where enforcement is viable legally but simply impossible politically. Or
the competition problem may not disclose any market conduct by particular economic actors that
violates the competition rules as such, but nevertheless there remains a substantial market failure,
which can be traced back, in whole or part, to governmental action or inaction. In such
circumstances, where enforcement powers cannot have a role, usually the most feasible
alternative approach to addressing the competition problem is to seek to have it remedied at
source, i.e. to persuade the government to remove the state-imposed restraint.
 Finally, and paradoxically, the fact of establishing an independent competition authority within a
jurisdiction may force that agency to take up the role of competition advocacy. The existence of
a separate body to perform competition-related functions can lead to less direct interest in
competition among the executive branch, and less direct involvement by government in the day-
to-day administration of the competition system. Where there is less familiarity with competition
issues, there may be a risk of less advocacy of competition at government level, and so the
competition authority must take on this role.14
2.4 Areas of government activity that may benefit from competition advocacy
13. The necessity for advocacy interventions aimed at government departments or state agencies may
arise in a variety of fora and levels of government, which include:
 Privatisation of previously state-owned industries – both in the design of the ownership structure
and in designing the regulation;
 Reform of inadequate regulatory regimes;

13 Geraldine Emberger, ―How To Strengthen Competition Advocacy Through Competition Screening‖ (2006)
Competition Policy Newsletter No.1, p.28, hereafter ―Emberger‖, p.31.
14 See Competition Advocacy in Time of Recession: The UK Competition Commission’s Approach, speech by
Peter Freeman to the International Competition Forum, Warsaw, on 15 April 2009, available online on the
Competition Commission’s website, at http://www.competition-
commission.org.uk/our_role/speeches/pdf/freeman_warsaw_150409.pdf.
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