Promoting a Competition Culture: Can it be Done ?

1. Promoting a Competition Culture: Can it be Done ? Frederic Jenny Professor of Economics, ESSEC Chair OECD Competition Committee Promoting Competition in Transition and Developing Countries: Towards a Sober Assessment IDRC Pre-ICN meeting on Competition and Development Moscow, May 29 2007

2. Issues to be covered • 1) Competition Advocacy and the Development of a Competition culture: Definitions • 2) The Goals of Competition Advocacy • 3) Why are Competition Advocacy and the Development of a Competition Culture Important? • 4) Is the Institutional Framework of Competition Advocacy Important ? • 5) Competition Advocacy and the Regulatory and Legislative Processes • 6) Communication a Useful Tool to Develop a Competition Culture? • 7) Resource Allocation for Competition Advocacy and the Development of a Competition Culture • 8) Conclusions

3. I) Competition Advocacy and the Development of a Competition Culture: Definitions

4. Competition Advocacy:Definition 1 For the purposes of this study, competition advocacy refers specifically to “the ability of the competition office to provide advice, influence and participate in government economic and regulatory policies in order to promote more competitive industry structure, firm behavior and market performance.” This definition is drawn from the World Bank website http://www1.worldbank.org/beext/faq/q16.htm.

5. Competition Advocacy: Definition 2 “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”. REPORT ON COMPETITION ADVOCACY, ICN ADVOCACY WORKING GROUP

6. What is a Competition Culture? « A competition culture (…) is perhaps best characterized by the attitudes of consumers and producers. A consumer attitude of easy surrender to monopolistic abuse of dominant positions and producers complacent with the status quo of their privileges are typical for a weak competition culture. On the other hand, consumers looking actively for better options and a producer attitude of working hard on providing more and cheaper options to the consumers are characteristic for a strong competition culture. Also the awareness of the economic agents about competition rules (…) reinforces competition culture ». ADVOCACY AND COMPETITION POLICY Report prepared by the Advocacy Working Group ICN’s Conference Naples, Italy, 2002 INTERNATIONAL COMPETITION NETWORK

7. 2) The Goals of Competition Advocacy

8. Developing a Competition Culture: Explaining the Law « The FTC believes that, to fully embody the purpose of the Fair Trade Law, i.e. to maintain trading order, protect consumer interests ensure fair competition, and promote economic stability and prosperity, the implementation of the Law itself is far from adequate. An atmosphere, one we refer to as a competition culture, has yet to be cultivated in the society as a whole, so that everyone realises what the Law is for, how the Law can be complied with, and why people need to do so. (…) The FTC has long known that there is always difficulty in communicating, not to mention persuading. Such experiences remind us that even though the Law has been in effect for a decade, the transformation of the mentality still takes time, no matter it is in the private or public sectors ». 1) Contribution of Chinese Taipei to the OECD Roundtable on Communication, 2002

9. Competition Advocacy to Foster « Systemic Competition » « Removal or reduction of tariffs, liberalizing ownership and investment controls and other such policies have a systemic impact—in the sense that altering such policies have a broad impact on sectors or the economy as a whole. It changes the ‘business environment’ in which all firms operate in the sector or the economy. Competition (antitrust) law is applied on a case by case basis and impacts on specific firm(s). It may have an industry or broader impact if the action by the competition authorities has a strong deterrent effect. Experience suggests this rarely takes place. Hence, the importance of competition advocacy by competition agencies which represents an important vehicle for fostering ‘systemic’ competition ». 1) R. Shyam Khemani,Some Perspectives on Competition Policy for Developing Economies, Second Annual Meeting of The International Competition Network, Merida, Mexico, June 23-25, 2003

10. Developing a Competition Culture: Demonstrating the Benefits of Competition Competition advocacy by agencies includes, as an important component, creating among economic agents and the public at large more familiarity with: − The benefits of competition; and − The role competition law and policy can play in promoting and protecting welfare enhancing competition, wherever possible. Vital to creating this “competition culture” is an effective communication strategy, which serves to make competition policy more transparent and understandable. 1) BIAC Contribution OECD Competition Committee Roundtable on Competition Advocacy

11. Delevoping a Competition Culture: Awareness of the Benefits of Competition « There is another important component to competition advocacy, which is not exclusively directed at public authorities and the legislative power but also at economic agents and the public at large. It comprises all efforts by competition authorities intended to make other government entities, the judicial system, economic agents and the public at large more familiar with the benefits of competition and with the role competition law and policy can play in promoting and protecting welfare enhancing competition wherever possible. This implies a variety of activities among which seminars for business representatives, lawyers, judges, academicians, etc. on specific competition issues, press releases about current enforcement cases, the publication of annual reports and guidelines setting out the criteria followed to resolve competition cases, economic studies of competition issues including the impact of regulation in markets and industries, are just a few examples ». 1) ADVOCACY AND COMPETITION POLICY Report prepared by the Advocacy Working Group ICN’s Conference,Naples, Italy, 2002

12. Developing a Competition Culture: Fighting the Enemies of Competition Authorities A (…) Canadian delegate stated that communication is important to anti-trust since a competition culture is not universally seen as a good thing. Competition makes mostly an indirect, somewhat unseen contribution to economic welfare. In contrast, the competition authorities’ opponents hire the most capable communicators to undermine the significance of competition policy. In this context, there are two reasons why communication is a vital and essential tool. First, a competition authority has to defend its very existence and has to demonstrate its indirect contribution to well being. Secondly, a competition authority must defend itself against people who seek to distort or interfere with the positivemessage it is trying to convey. 1) Canadian contribution to the Discussion , OECD Competition Committee Roundtable on Commmunication , 2002

13. Competition Advocacy: Making a Political Statement « Ultimately, as Karel Van Miert has said, “competition policy is not something neutral, it is politics.” And the public voice of inconvenient conscience is never welcome. This means that national competition agencies may need support from the ICN. (…) Effective advocacy does not require legislation. It also does not require government goodwill, and indeed can often be most unwelcome. It does, however, require support from some corner of the political landscape. Consumers are potential allies. (….)The one certainty is that no competition authority should concentrate exclusively on enforcement. Governments will only rarely be enthusiastic about an agency’s advocacy efforts, but the penalties for voicing ideas unwelcome to the government authorities are at least sometimes less severe today than for Archbishop Beckett in 1170 ». 1) ADVOCACY WORKING GROUP,Competition Advocacy: Voices in the Wilderness or Trusted Advisors? Ian S. Forrester, Second ICN Conference , Merida Mexico

14. III) Why are Competition Advocacy and the Development of a Competition Culture Important ?

15. Conventional Wisdom on Competition Advocacy by Competition Authorities (I) 1) The only admissible regulatory intervention is an intervention strictly designed to correct an economic market failure « Such regulatory intervention may be warranted in sectors featuring extensive economies of scale, externalities or other market failures but may go beyond the strictly necessary and may impede competition in those sectors ». ADVOCACY AND COMPETITION POLICY, Report prepared by the Advocacy Working Group ICN’s Conference, Naples, Italy, 2002

16. Conventional Wisdom on Competition Advocacy by Competition Authorities (II) 2) The political process is unreliable « Moreover, special interest groups may occasionally convince public authorities of the need to impose regulatory restrictions (e.g. legal entry barriers) even in markets where economies of scale, externalities and other market failures are not sufficiently strong to justify such intervention. Sectors frequently mentioned as examples of that situation are trucking, professional services, among others. This is particularly prone to happen in situations where the interest groups benefiting from the regulation are smaller, and thus easier to organize, than the groups negatively affected by it, usually the consumers. In such cases, there is a strong case for deregulation. For the above mentioned reasons, it is important to limit regulation to the strictly necessary ». ADVOCACY AND COMPETITION POLICY,Report prepared by the Advocacy Working Group ICN’s Conference,Naples, Italy, 2002

17. Conventional Wisdom on Competition Advocacy by Competition Authorities (III) 3) Sectoral regulators are likely to be captured or ignorant « Regulators, particularly when captured by specific interest groups, may be resistant to give up their fields of competence. Moreover, the rule making process necessary to achieve such changes is slow and subject to many influences from the political arena. « (…) Under regulation the regulator decides what the regulated company must do to the benefit of the society. To do that properly, the regulator must have information about what the regulated company is able to (cost structures, state of technology, etc.) and what society wants (consumer preferences). He seldom has all that information (nor an approximation of it) and largely depends on the regulated company to light his way. However, the profit-maximizing regulated company has incentives to provide biased information ». ADVOCACY AND COMPETITION POLICYReport prepared by the Advocacy Working Group ICN’s Conference Naples, Italy, 2002

18. Conventional Wisdom on Competition Advocacy by Competition Authorities (IV) 4) Five reasons whycompetition advocacy seems to be particularly important for developing countries 1) in developing and transition countries many of the pains of economic transition are easily blamed on competition, which is accused of being unfair, excessive, destructive, etc. 2) The transparency of procedures and the accountability of public authorities is usually lower than in developed countries. 3) privatization of state assets is relatively more frequentin developing and transition and hence shaping the privatization processes in a competition-friendly form seems to have a more important role to play. 4) Substantial trade and investment liberalization in developing countries has triggered the emergence of interest groups lobbying with public authorities for the introduction of selective measures in order to reinstall lost privileges. 5) In small developing countries, there are severe limitations upon the availability of the resources necessary to set up an efficient competition authority.

19. Uneasiness with Conventional Wisdom on Competition Advocacy in Some Developing Countries “We are not entirely comfortable with the concept of the ICN “…confronting national policies…” It has echoes of the WTO’s role and modus. Further, the anti-competitive policies highlighted are at the very core of the policy direction of a number of ICN members with old competition agencies; and it is unlikely that they would be thinking of changing in the foreseeable future”. 4TH INTERNATIONAL COMPETITION NETWORK (ICN) ANNUAL CONFERENCE BONN, GERMANY – JUNE 5-8, 2005, Barbara Lee “EXPECTATIONS OF AND CHALLENGES FOR YOUNGER COMPETITION AUTHORIRIES”

20. IV) Is The Institutional Framework of Competition Advocacy Important ?

21. Why are Courts not Expected to Engage in Advocacy Functions ? Are Courts expected to ( or allowed to) engage in advocacy on misappropriation of funds, public procurement , insider trading etc….? Do they have the duty to deliver talks to local officials and business executives to make them aware of the evils and the social cost of corruption ? Why not ? -Separation of powers between the three branches of government What s different about competition authorities?

22. Statutory Powers to Advocate: How Important ? Some competition authorities have specific statutory powers to propound the merits of competition in any market. Other enforcement bodies have no such powers. It is not the “legislative competence” attributed to a competition authority that counts but the utility and skill of that authority’s intervention. A competition agency, whatever its powers, may be an effective advocate notwithstanding its lack of explicitly ascribed duties. Ian S. Forrester, Competition Advocacy: Voices in the Wilderness or Trusted Advisors? INTERNATIONAL COMPETITION NETWORK,SECOND ANNUAL CONFERENCE Mérida, Yucatan,June 23-25, 2003

23. Does the Institutional Framework Matter ? « There is a wide variety of institutional frameworks in which competition authorities operate. Apparently, the institutional framework is mainly relevant for competition law enforcement and much less so for competition advocacy. Competition authorities see their participation in legislative and regulatory processes as the most important component of competition advocacy. (…) A certain degree of bindingness of the opinions issued to policy makers, enhances significantly the effectiveness of advocacy. (….)Mandatory consultation mechanisms regarding privatisation processes or when the regulator intends to create exemption regimes (cf. regulated conduct doctrine) were also deemed by several authorities to enhance the effectiveness of advocacy. This is particularly important in transition and developing countries, where many state-owned assets are privatised or licensed, and give rise to an intensive rule making process from specific regulators or others. Cooperation in these cases depends on the extent to which competition authorities have attained proficiency in technical and specific issues of sector specific regulation ». 1) « ICN Report on advocacy »

24. Statutory Advocacy Function: the US case General statutory authority for FTC advocacy efforts is found in section 6 of the Federal Trade Commission Act, 15 USC par 46 which empowers the Commission to gather information and issue reports. US Competition legislation authorizes DOJ and the Commission to participate in specified industry-specific regulatory proceedings in which the regulatory agency investigating conduct that might violate certain provisions of US Competition law. Various regulatory statutes also authorize or require the DoJ and the Commission to provide competition advice to the regulatory agencies.even where regulatory statutes do not specifically authorize DoJ and Commission participation, the regulatory agencies ’procedures are usually permissive enough to allow the agencies to intervene for the purpose of offering their views on competition issues. With respect to DoJ this competition advocacy in legislative matters stems from Congress’ practice of soliciting the views of the Executive branch and its components on matters related to their experience and expertise. OECD, US contribution on the Advocacy role of Competiton Authorities 1995

25. Lack of a Mandate to Advocate: the Case of Jamaica The FTC fully understands its advocacy mandate and allocates resources to it. Public-sector advocacy was certainly in the line of sight of Parliament when it passed the legislation. But unlike the laws in Canada, Italy or the Republic of Korea, the Jamaican law does not give the FTC a specific mandate to engage in competition advocacy. There is no comprehensive approach for dealing with the interface of competition law and other laws and regulations, which is a major flaw that needs fixing. Voluntary Peer Review Report on Competition Policy: Jamaica, 2005 ( UNCTAD/DITC/CLP/2005/5).

26. Advocacy through Voluntary Cooperation: the Case of Jamaica The relationships of the FTC with some regulatory bodies appear to be working well. The Intellectual Property Office does not hesitate to refer to the FTC complaints it receives that fall under the responsibility of the FTC. Similarly, the Office of Utilities Regulation, which deals with telecommunications, water and sewage, electricity and public transportation, refers competition matters to the FTC. Relationships with the FSC aim at resolving the interface between the FCA and the legislation under the authority of the FSC.Both agencies understand that finding a mutually agreeable coordination mechanism is preferable to waiting until a challenge is brought before the courts. Voluntary Peer Review Report on Competition Policy: Jamaica, 2005 (UNCTAD/DITC/CLP/2005/5).

27. Lack of Advocacy Mandate: the Case of Kenya To have an effective advocacy function, it is important that the enabling legislation, in this case the Kenya competition law, provides the Commission with a clear mandate to carry out advocacy. The current competition law of Kenya is silent on advocacy and competition awareness, and both topics are absent from the law’s objectives. In a situation where the Commission has no legal mandate to carry out advocacy functions, it becomes difficult for such an authority to justify its advocacy functions to the stakeholders. Further, the Competition Authority in Kenya as earlier stated, is a government department, and subject to government controls when it comes to press statements. (…) Consequently, all public affairs or publicity questions need to be channelled to the office of the government spokesman. This has not worked well for the Kenyan Competition Authority. The Commissioner is not formally permitted to issue press statements or call a press conference. 1) VOLUNTARY PEER REVIEW ON COMPETITION POLICY: KENYA, UNCTAD/DITC/CLP/2005/6 - , 26/10/05

28. The Lack of Statutory Advocacy Function: the Case of Germany • « The President of the Bundeskartellamt is often heard as an • expert by the German Bundestag in such cases. • So, in conclusion, we are not without influence. • Nonetheless, we could imagine that this influence would be • greater if our participation rights were more formalized and • more institutionalized » • German contribution to the OECD Competition Committee Roundtable on Communication, 2002

29. Restraint in Advocacy: The Example of the US FTC For formal advocacy in a particular proceeding at another agency or governement body, a critical criterion for the Commission is whether its staff or the Commission itself has received an invitation to offer its views. In those settings, the Commission is particularly concerned about respecting the delibrations and decisions of other branches of Governement and of state and local governments in our federal system. Thus, Commission staff does not appear in their proceedings unbidden, and advocacy comments try to avoid appearing to instruct them about what they should do. Of course, this policy does not rule out speeches and other public stateents or reports that state positions and conclusions about the general issue that may be involved. There are some sectors in which advocacy comments must be undertaken with particular sensitivity to policy concerns that are not the Commission’s principal responsibility. This can include products for which public health or safety concerns are very important such as alcoholic beverages. In health care, comments avoid taking positions on « quality of care » issues and try to respect legitimate institutions and tradition of self-regulation. 1) US answer to the Questionnaire on the Advocacy role of competition Authorities, OECD Roundtable on Communication , 1995

30. The Importance of a Formalized Competition Advocacy Function « Many respondents from both developed and developing countries valued a legalistic approach. Suggestions included the following: the introduction of formal rules governing the relationshipbetween the competition agency and the sector regulators, e.g. provisions (de jure) in the law to ensure that the recommendations and opinions made by the competition agency are provided at the early stagesof regulated sector reform; establishment of a code of conductwith regulatory bodies to improve the adversarial relationship among some players in the regulated sectors; the authority to examine and render opinion over licenses before they are issued; provisions that increase transparencyby requiring the competition agency to publish its opinions; and a requirement that policy-makers publicly state their reasons against incorporating the competition agency’s opinion; and provisions regarding the exchange of confidential information ». 1) OECD Competition Committee Roundtable on Communication, 2002

31. V) Competition Advocacy and the Regulatory and Legislative Processes

32. Cooperation Between Competition Agencies and Other Government Agencies “80% of the Competition Authorities responding to the questionnaire are engaged in formal and/or informal co-operation with other government agencies within the jurisdiction. Those with most extensive co-operation quote more than 20 authorities with whom they liaise, but in general the number of agencies involved in co-operation with the Competition Authority stays within the interval 4 to 6. Formal co-operation is slightly more common than informal co-operation. Close to 40% of the Authorities engaged in co-operation have both kinds. Agencies in the telecommunications and energy areas are most often mentioned as co-operation partners, followed by consumer policy agencies, financial sector supervisors, sector regulators in different transport sectors, and privatisation agencies. 1) OPTIMAL DESIGN OF A COMPETITION AGENCY, Note by the Secretariat, OECD Global Forum on Competition, February 2003

33. Competition Authorities Influence on the Legislative Process “With rare exceptions, most Competition Authorities are in a position to influence current or proposed legislation through more or less formalised consultations, participation in the law-shaping process, or the right to submit proposals and objections. Influence on legislation is obviously most important relating to competition law, but many Competition Authorities advocate for pro-competitive legislation also in other policy areas when such laws may have an impact on competition.”. • OPTIMAL DESIGN OF A COMPETITION AGENCY, Note by the Secretariat, • OECD Global Forum on Competition, February 2003

34. The Influence of Competition Advocacy in the Regulatory and Legislative Processes More than half the number of Competition Authorities that have replied to the questionnaire feel that they havemedium influence on the Government, Parliament, and other bodies of public administration through advocacy initiatives. The proportion assessing that they have high influence slightly exceeds 20%, the same number of respondents see their influence as low and one reply states no influence. 1) OPTIMAL DESIGN OF A COMPETITION AGENCY, Note by the Secretariat, OECD Global Forum on Competition, February 2003

35. VI) Communication a Useful Tool to Develop a Competition Culture?

36. Communication as a Tool to Develop a Competition Culture: the Case of Brazil In 1994 a new competition law was enacted and, with that, theseed for a new competition culture was planted. The price control system that lasted in Brazil for so many years was responsible for the strong belief shared by Brazilian society, that controlled prices were fair prices and, thus, better than those that result from a competitive environment. This relative unawareness of the competition “question” is also true regarding other government bodies and branches (the Legislative and the Judiciary) and regarding the business community. A great deal of mobilisation was and still is necessary to change these views and substantial competition advocacy work is necessary to strengthen the “competition culture” among consumers, business people, government officials, congressmen and judges. To accomplish this task and, as a consequence, to increase the level of compliance to the competition law provisions, communications play a key role. 1) Brazilian contribution, OECD Roundtable on competition advocacy

37. Developing a Competition Culture: A Slow Process « After only eight years of competition policy, a competition culture is still a work in progress. It may be too early to say it is already a value widely cherished by Brazilian society. For this reason, the communications strategy is perceived by the Brazilian antitrust agencies as a very important tool playing a major role both in spreading the vary basic notions of competition throughout the society and also in increasing compliance ». 1) Brazilian contribution to the Discussion, OECD Competition Committee Roundtable on Communication , 2002

38. Is Communication an Effective Tool to Develop a Competition Culture: the Case of Finland ? In the spring of 2000, a detailed questionnaire was addressed to companies, law firms, representatives of the media and political decision-makers. Representatives of law firms attached the most positive images to the office. The FCA staff was estimated to have a good knowledge of competition legislation and to apply it impartially. The FCA’s operations were generally considered reliable. In the negative comments, the FCA was even found to distort competition and to prevent the natural workings of the market economy. The assessments of the media of the office were almost equally positive as those of law firms. The FCA’s expertise is valued, as is its reliability and impartiality. However, the investigation clearly showed that the basic premises of competition policy, competition legislation and the activities of competition authorities appeared obscure and not very well known in general. 1) Finnish contribution to the OECD Competition Committee Roundtable on Communication

39. The Limits of Competition Advocacy: the Case of Peru (I) Indecopi opened its doors in March 1993. President Fujimori supported the agency’s mission, respected its autonomy, and pushed the entire government to pursued market reform. During the 1990s, Indecopi’s competition-related activities consisted primarily of education, advocacy, and both voluntary and quasi-judicial resolution of disputes between firms or between one or more consumers and a firm. By the end of the 1990s, Indecopi had developed into an institution that was respected both in Peru and internationally for its transparency, integrity, and competence with respect to core competition matters. To some extent, Indecopi’s preference for promotion over coercive action (except in striking down anticompetitive government regulations) manifested the generally accepted approach to introducing competition law and policy, but it also reflected what may sometimes have been excessive reliance on “Chicago School” theories, and some experts argued for a more proactive, law enforcement approach. 1) COMPETITION LAW AND POLICY IN PERU: A PEER REVIEW, OECD 2004

40. The Limits of Competition Advocacy: the Case of Peru (II) After the fall of Fujimori, successive governments have in principle continued to seek market reform, but they have been unable or unwilling to explain and successfully push for market reform agenda in the face of growing opposition. For example, electricity privatisation has brought widespread benefits, increasing the availability of electricity and thereby improving standards of living. However, the government in July 2002 found it necessary to call off two electricity privatisations because it was unable to persuade the local populace concerning these benefits and to address substantive objections, such as a lack of transparency in awarding concessions and allegedly improper tariff regulation. COMPETITION LAW AND POLICY IN PERU: A PEER REVIEW, OECD 2004

41. The Limits of Competition Advocacy: the Case of Peru (III) According to the Individual Action Plan (IAP) Peru recently submitted to APEC: “Competition and market oriented policies in Peru and the Andean Region are facing opposition from the majority of the impoverished population who do not have a clear perception of the benefits of a market economy.... The increasing opposition has stopped any attempt to implement necessary reforms and improve competition environment.” COMPETITION LAW AND POLICY IN PERU: A PEER REVIEW, OECD 2004

42. The Disenchantment of Latin Americans with Privatizations

43. The Limits of Competition Advocacy in Developing Countries « One of the difficulties we have as a new agency and one of only two in the Caribbean region, is that we are hard-pressed for concrete studies which demonstrate the value of having competition policy and competition law. Accordingly, making the case for competition as a vehicle for development is difficult. Perhaps the ICN could spearhead economic studies which could address this gap » 1) Barbara Lee “EXPECTATIONS OF AND CHALLENGES FOR YOUNGER COMPETITION AUTHORITIES”, 4TH INTERNATIONAL COMPETITION NETWORK (ICN)ANNUAL CONFERENCE BONN, GERMANY – JUNE 5-8, 2005,

44. « The United Potato Growers of America, a fledgling group of regional farming cooperatives aspires to be to potatoes what OPEC is to oil by carefully managing supply to keep demand high and constant, resulting in a more stable return for farmers. United Potato says it has recruited farmers and regional cooperatives who till more than 60% of the potato acreage in the U.S. Some Canadian growers have also enlisted. Wall Street Journal September 26 2006

45. VII) Resource Allocationfor Competition Advocacy and the Development of a Competition Culture

46. Competition Advocacy: an Important Function of Competition Authorities The competition office, therefore… “… [M]ust also participate more broadly in the formulation of its country’s economic policies, which may adversely affect competitive market structure, business conduct, and economic performance. It must assume the role of competition advocate, acting proactively to bring about government policies that lower barriers to entry, promote deregulation and trade liberalization, and otherwise minimize unnecessary government intervention in the marketplace”. The World Bank, OECD: A Framework for the Design and Implementation of Competition Law and Policy, Chapter 6, at 93, 1998.

47. Competition Advocacy: A Function of Utmost Importance « The first rationale for prioritizing advocacy is particularly important in regulated sectors. As countries move from state-owned monopolies towards a more competitive market structure, temporary regulation is often introduced to facilitate the transition, with the intention that the regulation be removed as markets mature. Often, however, the regulation that was supposed to be temporary becomes permanent and artificial market conditions hinder the competitive process. In this sense, competition advocacy is of utmost importance since advocacy can help regulators, legislators and the general public understand that competitive market forces are the most effective at enhancing the quality of services at the lowest price ». 1) REPORT ON COMPETITION ADVOCACY, ICN ADVOCACY WORKING GROUP

48. Selection of Advocacy Projects « Administrative and regulatory matters often take a long time, and can consume vast amounts of resources. And, as in enforcement matters, an agency may in the end be unsuccessful in a given advocacy effort. The agency must, therefore, select its advocacy projects with care, with an eye toward the importance of a matter to the country’s economy, the resources that participation will require and the likelihood of success ». 1) REPORT ON COMPETITION ADVOCACY, ICN ADVOCACY WORKING GROUP

49. How Much Should Competition Agencies Devote to Competition Advocacy ? A successful competition advocacy effort, for example in regulatory reform, may bring about economic benefits far in excess of a single successful enforcement action, or even more than one. If that is so, then it is logical that an agency should focus significant resources on competition advocacy. Based on the responses to the 2002 ICN advocacy survey, of those countries (both developed and developing) that could identify the proportion of their resources spent on advocacy, most (62%) spent less than 20% on that activity. The remainder spent between 20% and 30%. There are various reasons for this apparent disparity. Agencies, especially in developing countries, lack the technical expertise necessary for meaningful participation in many proceedings. 1) REPORT ON COMPETITION ADVOCACY, ICN ADVOCACY WORKING GROUP

50. Restraints in Advocacy: The US Example When DOJ and the Commission have decided not to engage in competition advocacy on a specific issue, the decision has been based on an informal cost/benefit analysis in which the likelihood of success was estimated compared to the cost of the necessary undertaking. These decisions did not represent an abandonment of our goal of promoting competition in the industry in question. Rather, they reflected ad hoc or strategic judgments that the domestic or international climate, at that particular point in time, was such as to make it unlikely that our competition advocacy would be successful. In each case our goal have remained constant; the effort we have deployed to attain these goals, however has varied over time based on such strategic judgments. 1) US answer to the Questionnaire on the Advocacy role of competition Authorities, OECD Roundtable on Competition Advocacy , 1995