2011 CUTS Conference on Reviewing Global
Experiences of Economic Regulation, Delhi
April 18-20, 2011
The Relationship between
Regulation and Competition
Institutions in the E.U.
Dr François SOUTY
Professor, University of La Rochelle, France
Deputy Interministerial Director for the Protection of the
Populations, Tours, France
Rev2
Overview
Introduction: Regulation is not a new issue…
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
About Competition & Regulation Objectives
The 3 basic functions of “classical” Regulation
In the EU Regulation derives from a supplementary
constitutional objective
Regulated industries in the EU: network industries,
SGEI, ESR
US & EU differences: Essential facilities and
«Services of General Economic Interest»`
SGEI & Liberalization
Types of A/C behaviours of SGIE/ESR Firms
Divis° of labour between RAs & CA s
Subsidiarity (Federalism) and Regulation
Three models of relationships between NCAs and
RAs
Introduction: Regulation of indivisible industries
and ownership issues are not new …

« To begin, it is now universally recognised that there is a great
increase in the number and importance of a class of industries, which
are often called monopolies, but which are perhaps better described as
indivisible industries. Such are the industries that supply gas or water
in any given area, for only one such company in any district can be
given leave to pull up the streets. Almost on the same footing are
railways, tramways, electricity supply companies, and many others...
Without therefore expressing any opinion as to the advantages of the
public management of indivisible undertakings on the Continent, the
greater part of younger English and American economists are, I think,
inclined to oppose it for England and America. We are not sure that
we could exchange our own industrial virtues for those of the
Continent if we wished to, and we are not sure that we do wish it. »
Alfred Marshall, Some Aspects of Competition, Leeds, 1890
= What may be new is the imprint of Competition Policy in the analysis
and reasoning.
1. About competition and regulation
objectives…


Competition law and regulation aim at defending the
public interest against anticompetitive behaviors,
namely cartels and abuse of market power.
Both provide tools to fulfill this objective, but vary in
scope intervention. They are not identical and can
interact in 4 ways:
- regulation can contradict competition policy.
- regulation can replace competition policy.
- regulation can reproduce competition law and
policy.
- regulation can use competition institutions
methods.
2. Classical regulation: 3 basic functions
1 Sectoral regulation is a framework which determines conditions of
entry in a sector, rules on provisions of a universal service (in
France linked to « status » of operators): Parliament &
government
2 Regulation is the administrative & technical management of a sector:
selection of candidates to ESR (« DSP » or concessions), ressources
allocation (when activity performed with Ess. facilities),
verification of operators’ compliance with obligations determining
entry: sectoral regulators
3 Regulation is about Markets surveillance : Surveillance may deal
with operators (see above); it may also concern the market
process: A/C behaviors monitoring and prosecution: Competition
authorities (in the EU, several institutional levels: the
« Community »,the « Member States », and emerging
« Provinces »)
3. In the EU, regulation derives from a
supplementary constitutional objective aiming at
EU Market integration: harmonization,
liberalization, competition
Regul° is a product of a teleological” reasoning in the EU
Treaty:
1/ Free circulation of goods and services (Directives of
harmonization or market integration following TFUE art.
37 & art. 56-62 including on Water, Energy, Telecom,
Public procurement + Regulations on Transports)
2/ Competition Law can be used against practices or
behaviors that run against EU market integrat°
3/ Liberalization is vested in enforcement of Art. 106 namely
through decisions by the EU Commission AND
Competition Authorities in Member States
= a major issue to understand: connexion between art. 37,
56-62 and 106 (de facto including art 101-102)

4. What are the regulated industries in the EU?
Enterprises supplying a Service of General Economic
Interest, enjoying Exclusive or Special rights and
regulated professions


EU Competit° authorities (DG Comp PLUS NCAs) have
developed an important Case Law in sectors operating with
network industries operating from particular resources called
«essential
facilities»
(e.g.
Tele-communications
and
Communication Industries, Airports platforms, railways tracks
and stations; Harbor facilities, Energy generation, Gas or Oil
stocking infrastructures, electricity or water distribution
networks, waste collection networks and treatment, urban heating,
banking etc.).
However, regulated sectors also concern a wide range of services
activities that are not depending on essential facilities (medical
professions, legal professions, taxis etc.)
5. Differences between US principles and EU principles :
Essential facilities and «Services of General Economic
Interest»
US= EFD = «owner (s) of an «essential» or «bottleneck» facility has long
been mandated to provide access to that facility at a «reasonable price»;
changes over the last decades with contestability theory develpmt
 EU Law = SGEI = Dominant firms have a broad duty to deal or supply on
a non discriminatory basis, i.e. they may have to justify any refusal of
supply or discrimination
 EU Law extends not only to private behaviors but also to public entities
enjoying ESR when
- they cannot justify that they perform a SGEI (which justifies Monopoly
rights) or that they present the character of a tax monopoly
- they perform specific services (added value service) which are commonly
subject to competition

6. Services of General Economic Interest and
liberalization under EU Law




Art. 102 EC: a prohibition for enterprises enjoying a dominant
position to abuse their position
Art 106-1 prohibits Member States to take any measure contrary
to provisions of art. 81 and 82 with regard to public enterprises
and/or enterprises enjoying exclusive or special rights.
Art 106-2 para. 2 submits to competition rules and namely to
article 82 enterprises (public or private) which supply a Service of
General Economic Interest or which present the character of a tax
monopoly in so fars as these Competition rules do not compromise
the mission granted to these enterprises (de jure or de facto).
Liberalization is vested in the enforcement
- of Art. 106 namely through decisions by the EU Commission
AND Competition Authorities in Member States pursuant to art.
101-102
- of Directives of approximation pursuant to Art. 37 & Art. 56-62
on Free circulation of goods and services namely on Water,
Energy, Telecom, Public procurement, Regulations on Transports)
7. Types of A/C behaviors by SGEI/ESR Firms
What are the main types of A/C behaviors?: 4
+1
matters dealing with network access: abuses
 problems resulting of the Dominant Position of the
incumbent firm («opérateur historique» or former
holder of the ESR): abuses
 problems requiring interim measures from NCA
where there are risks of market foreclosure:cease
and desist orders and undertakings/commitment
 special surveillance of take-overs by incumbent
firms (merger control)
 « + 1 »: cartels in telecommunications industries

8. Division of Labor between Regulatory and Comp°
agencies in the EU may differ from State to State but EU
Commission is the single regulator at the EU level




Structural aspects of regulation (i.e. technical regulation,
entry, mergers): sectoral regulators
Behavioral aspects of regulation (market operat°):
competit° authorities (in France since 2009 investigation
by Autorité de la concurrence; in the UK: concurring
powers by sectoral agencies and competition agencies)
On issues neighboring structural and behavioral aspects:
compulsory cross-consultation mechanisms between
sectoral and competition regulators (i.e. France)
NB: at the EU level, the EU Commission is the main regulator both on sectoral (liberalizat°, harmonizat° of legislation°) and behavioral issues affecting Trade between
MS
9. Subsidiarity (Federalism) and Regulation in the EU:
the actual design of Regulatory Agencies and Competition
Agencies

-
-
-
The EU experience shows that there may be three
levels of regulation:
A Federal-type level: presently only one
institution , the EU Commission is performing the
regulatory and competition functions
A National level: it combines systems where
regulatory agencies and NCAs can enjoy a mixed
distribution of powers to exercise technical,
structural and behavioral controls
A Local level: PPP-run services of general
interest where the local government mostly
performs only sectoral regulation (i.e. technical)
functions
10. Three models of organization of relationships between
Regulatory and Competition Agencies in the EU

-
-
-
In the EU, there are three mains groups of countries with
regard to the organization of relationships between
Regulatory and Competition Agencies:
a group where competition regulation is institutionaly
embodied in the enforcement of sectoral regulation:
Sectoral Agencies concurrently enforce competition law
with NCAs without capacity of the Executive (Ministers)
to intervene such as Finland, Italy, the Netherlands,
Sweden, the United Kingdom
A group where competition regulation is not embodied in
sectoral regulation: Sectoral Agencies enforce structural
regulation and NCAs enforce competition law with
capacities of the Executive to overule decisions such as
Danemark, Germany, France, Hungary (exceptional)
A group with Local Government Sectoral & Comp°
Regulation (Germany, Spain and - to a lesser extent - UK)
Perspectives: no Monopoly over regulation,
Agencies networks, independance

Collegiality and concurring powers of regulatory and competition
authorities are major ways to overcome regulatory capture. One
should resist the concentration of powers in one single agency

Competition Network: Within the EU National Competition authorities
independance has been strengthened by the European Competition
Network compelling the NCA to enforce the EU competition Law in a
consistant and coherent manner

Regulatory Agencies Networks are in the making for Regulatory
Agencies (i.e. telecoms). Sectoral Studies conducted by the EU
Commission may speed up that process of « networkization »

Appeals of NCAs and Regulatory Agencies’ decisions are introduced
before the same specialized Appeal court
THANK YOU!