Integrating competition assessment into RIA can be particularly valuable in improving the dynamic component of the analysis. In rapidly changing economic and social contexts, the dynamic aspects of a regulation’s likely impact can easily constitute the key determinant of its overall effect, considered over the course of the entire effective life of the regulation.
An E O C D
B ro
L e c t ur e s e u le
l y
O n
a d
R e
This paper has identified a number of different institutional options for introducing competition assessment. Given that the legal and federal environment of OECD jurisdictions differ substantially, the most effective institutional structures will likely vary from one jurisdiction to another. But a few points stand out. Competition authorities are ideally suited for performing selective competition assessments, advising on assessments or providing training for competition assessment. Regulatory gatekeepers are also well-suited to performing or overseeing such assessments, particularly when competition assessments are implemented as one part of a RIA process.
Only a minority of potential regulations is likely to have substantial anti-competitive impacts. However, where competition assessment identifies significant potential for a weakening of competition in the affected industry or related industries, the key elements of the regulatory design should be reconsidered in a comparative context in which alternative means of achieving the regulatory objective that are less restrictive of competition are identified and assessed.
Where such alternatives cannot be identified, the benefits and costs of the anti- competitive regulation must be compared systematically. Only if the adoption of the anti- competitive regulatory approach would yield net benefits, taking into account the costs of the anti-competitive impact identified – should the analysis conclude that the regulation is justified.14
Conclusion
The use of RIA to assess the impacts of restrictions on competition, both when new regulation is being considered and to review existing regulation can have significant benefits for social welfare. Regulation which unnecessarily restricts competition imposes costs on society, and a competition analysis at the early stages of the design of a regulation can avoid these costs. This paper guides policy officials with responsibility for conducting RIA on how to identify policies that merit a competition assessment and how to conduct a competition assessment within an RIA on possible regulatory approaches. For a range of regulatory problems potential alternatives are available to policies that restrict competition and can achieve the same objectives at a lower cost to society. Significant public benefits can be obtained from even a relatively small investment of public sector resources in competition assessment processes if it is done systematically and integrated within the regulatory policy cycle.
Notes
1. This chapter synthesises material prepared for the Working Party No. 2 on Competition and Regulation of the Competition Committee, combining elements of two previous papers,
“Institutional Options for Competition Assessment” (Sean Ennis) and “Integrating Competition Assessment into Regulatory Impact Analysis” (Rex Deighton-Smith) that are part of the OECD Competition Assessment Toolkit (2007). For the complete Toolkit, please seewww.oecd.org/
competition/toolkit. Many delegations and outside observers have provided useful comments on this material, particularly the Working Party No. 2 Chair, Alberto Heimler. Within the Secretariat, Stéphane Jacobzone, Josef Konvitz and Bernard Phillips have provided particularly useful input.
2. In this paper of the term “regulation” is used generically to refer to all kinds of legislative instruments, including both primary and subordinate legislation.
3. Dynamic efficiency focuses on efficiency over time, with changes in efficiency resulting potentially from innovation, technological developments, the ability of firms to respond flexibly to new market conditions and of successful suppliers growing.
An E O C D
B ro
L e c t ur e s e u le
l y
O n
a d
R e
innovation relative to the levels that would prevail in a competitive market.
5. Infant industries are industries that may not be strong enough to survive open competition.
6. Predatory pricing occurs when a supplier temporarily sets prices that are substantially below its costs with an expectation that other suppliers will then exit or change their behaviour. The supplier would then later recoup its lost profits.
7. The 2006 OFT guidelines closely follow those of the OECD. See: www.oft.gov.uk/NR/rdonlyres/
BFD72799-03BD-428D-AB43-30408F794ACB/0/oft876.pdf.
8. For more details, seewww.ncc.gov.au/articleZone.asp?articleZoneID=136.
9. For more details on how to include competition assessment in RIA, see DAF/COMP/(2007)8/REV1
“Integrating competition assessment into regulatory impact analysis”, OECD, Paris.
10. See www.ncc.gov.au/articleZone.asp?articleZoneID=40.
11. For the figures, seewww.ncc.gov.au/articleZone.asp?articleZoneID=40.
12. Productivity Commission (2005), “Review of National Competition Policy Reforms”, Productivity Commission Enquiry Report No. 33, 28 February, available at www.pc.gov.au/inquiry/ncp/finalreport/
ncp.pdf. The review notes that direct causal links are difficult to establish empirically.
13. See OECD (2006), Economic Survey of Australia, Policy Brief. “Recent macroeconomic performance continues to be impressive: gross domestic product (GDP) growth since the turn of the millennium has averaged above 3% per annum and, including the terms-of-trade gains, growth in real gross domestic income has averaged over 4%, among the handful of OECD countries achieving such rapid growth; the unemployment rate has fallen to around 5%, its lowest level since the 1970s;
inflation has remained within the target range; and, following a long stretch of fiscal surpluses, Australia is now one of the few OECD countries where general government net debt has been eliminated. Living standards have steadily improved since the beginning of the 1990s and now surpass all G7 countries except the United States. Wide-ranging reforms, particularly to promote competition, were instrumental in this respect. They promoted productivity growth, most notably in the second half of the 1990s. The greater flexibility engendered by these reforms, together with the introduction of robust monetary and fiscal policy frameworks, has also bolstered the economy’s resilience to a series of major shocks over the last decade: the Asian crisis in the late 1990s, the global downturn at the turn of the millennium, followed by a major drought, the ending of a house price boom and currently, the commodity price boom.” (Emphasis added)
14. This approach is already explicitly in use in Australia. The “Guiding Legislative Principle”, adopted under the National Competition Policy agreements states that legislation that restricts competition should not be adopted unless it can be shown both that the benefits of the restriction to the community as a whole outweigh the costs and that the objectives of the regulation cannot be achieved by any other means that is less restrictive of competition. See Competition Principles Agreement, Clause 5 (1).
Bibliography
OECD (2006), Economic Survey of Australia, Policy Brief, OECD, Paris.
OECD (2002), Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance, OECD Publishing, Paris.
OECD (1997), Regulatory Impact Analysis: Best Practices in OECD Countries, OECD Publishing, Paris.
Productivity Commission (2005), “Review of National Competition Policy Reforms”, Productivity Commission Enquiry Report No. 33, 28 February.
An E O C D
B ro
L e c t ur e s e u le
l y
O n
a d
R e
© OECD 2009