Delegation to independent regulatory agencies:
Mapping the provisions for mandatory accountability
Christel Koop – King’s College London
ECPR Joint Sessions 2014, Salamanca
Introduction
Over the past three decades, regulatory agencies have become increasingly important
actors in the policy process. While the role of government in the provision of goods and
services has reduced in most established democracies, the number of regulatory
activities has increased, which has led scholars to coin such terms as ‘the regulatory
state’ (Majone 1994b) and ‘regulatory capitalism’ (Levi-Faur 2005). Yet, rather than
relying on ministerial departments for the development and implementation of
regulatory policies, governments and parliaments have tended to delegate these
responsibilities to agencies which operate at arm’s length from ministerial hierarchies
and the political process (Gilardi 2005, 2008; Jordana et al. 2011). These independent
agencies are not only involved in policy-making at the national level, but they also
participate in international policy networks, particularly at the European level (Coen
and Thatcher 2008; Maggetti and Gilardi 2011). Hence, they are ‘the main institutional
characteristic of the regulatory state’ (Gilardi 2008: 21; cf. Levi-Faur and Gilad 2004).
Yet, while the political insulation of regulatory agencies is considered to enhance the
credibility of regulatory policies and the expertise incorporated into regulatory
decisions (e.g., Majone 1996; Vibert 2007), it has raised questions of accountability. As
independent agencies are exempted from political involvement in the decision-making
process, and from the control mechanisms inherent in the ministerial hierarchy, they
have more policy discretion as well as more opportunities to shirk and use their political
power arbitrarily than do ministerial departments. To deal with these issues, politicians
can incorporate provisions for accountability into the statutes of the organisations. As
these statutory provisions are imposed on the agencies, this paper refers to them as
1
forms of mandatory accountability. Mandatory accountability is defined as the degree to
which an actor – in our case, a regulatory agency – is required to offer information on,
and explanation of, his or her conduct to another actor, and may be sanctioned for this
conduct (cf. Koop 2011; 2014). Regulatory agencies may be obliged to render account
for their finances, their performance and the fairness of their activities, and such
mandatory accountability may be upwards, horizontal or downwards by nature.
This paper aims to provide an empirical contribution to the debate on accountability
in regulatory governance by assessing the mandatory accountability of competition
authorities and financial market regulators in 21 established democracies – the fifteen
‘old’ European Union member states and Australia, Canada, Iceland, New Zealand,
Norway and Switzerland. Building on the literature on accountability, a framework for
the assessment of mandatory accountability is developed, based on the aspect of their
conduct for which agencies render account, and the actors to which they render account.
This framework is used to address two related questions: (i) What provisions for
accountability do governments and parliaments incorporate into the statutes of
competition authorities and financial market regulators? (ii) What variation in the
mandatory accountability of these regulators do we observe? As competition policy and
financial market regulation are the areas of regulation which are most dominated by
regulatory agencies (see Jordana et al. 2011), assessing the mandatory accountability of
agencies in these areas allows us to compare accountability provisions across a
significant number of established democracies.1
The paper is organised as follows. In the next section, the question why we want
regulatory agencies to be accountable is addressed in more detail. Subsequently, a
framework for the assessment of mandatory accountability is presented, followed by an
analysis of the accountability provisions that are incorporated into the statutes of the
two types of regulators, and an analysis of the variation in mandatory accountability.
The final section discusses the implications of the findings, including the implications for
the question of the democratic legitimacy of regulators.
In their study of the establishment of regulatory agencies in 48 countries, Jordana and his colleagues find
that financial market regulation and competition policy are nowadays the responsibility of independent
agencies in, respectively, 94 and 88 percent of the countries (2011: 1346).
1
2
Independence and accountability in regulatory governance
The model of the regulatory agency has become the main institutional model in the area
of regulatory governance. Like other types of independent agencies, regulatory agencies
exercise public authority, but are not hierarchically subordinate to directly or indirectly
elected politicians (cf. Thatcher and Stone Sweet 2002: 2). The delegation of
competences to such organisations is believed to have a number of advantages from the
perspective of policy efficiency and effectiveness. First, their independence would allow
agencies to develop higher levels of specialisation and expertise, which would result in
policy decisions which are better informed and more evidence-based (cf. Bawn 1995;
Vibert 2007). This is particularly important in highly complex and technical policy areas
such as regulatory policy. Second, as independent agencies are exempted from electoral
pressures, they would be better able to credibly commit themselves to consistent, longterm policies. This is particularly important in policy areas in which electorallyattractive short-term options conflict with long-term policy consistency, a feature which
characterises areas such as monetary and regulatory policy (Levy and Spiller 1996;
Majone 1996).
The insulation of regulatory agencies comes at a price though. In particular, it has led
observers to raise questions about the democratic legitimacy of the organisations and
the decisions they make (see Weir 1995; Skelcher 1998; Flinders and Smith 1999;
Maggetti 2010). As Majone puts it, ‘democratically accountable principals can transfer
policy-making powers to [independent agencies], but they cannot transfer their own
legitimacy’ (1999: 7). In other words, while the political decisions made by, or under the
auspices of, democratically elected officials derive their legitimacy from the electoral
process, the decision-making process of independent agencies is deliberately insulated
from electoral dynamics, and can therefore not build on the legitimacy which is
associated with elections in representative democracies.
The problem is aggravated by the fact that the electoral insulation and operational
independence of the organisations implies not only an exemption from political
involvement in the decision-making process, but also an exemption from the
accountability mechanisms inherent in the ministerial hierarchy. As a consequence,
independent agencies face, ceteris paribus, more opportunities to shirk and misuse or
abuse their political power than do units within ministerial departments. These
opportunities are enhanced by the high level of expertise and specialisation of the
3
organisations, which reinforces the information asymmetry between agencies and their
political principals (Binderkrantz and Christensen 2009). Hence, as Majone sets out,
‘[h]ow to reconcile independence with accountability is the central problem of such
institutions’ (1994a: 2).
While politicians will not be able to solve the problem of the democratic deficit
without overthrowing the independence of agencies, they can introduce alternative
accountability mechanisms to deal with the potential for shirking and misuse or abuse of
power (cf. Majone 1999; Thatcher 2002). Even though the agencies are not part of the
ministerial hierarchy, they may be made subject to alternative provisions for
accountability to government and parliament. Furthermore, they can be made subject to
provisions for accountability to supervisory bodies and stakeholders in society.
The introduction of alternatives to the accountability mechanism inherent in the
ministerial hierarchy is essential from a constitutional point of view. Constitutional (or
Madisonian) perspectives emphasise the importance of the protection of citizens from
the arbitrary exercise of political power (see Dahl 1956; Sartori 1995). Introduced in
Europe during the period of Enlightenment, constitutionalism was further developed by
the Founding Fathers, and incorporated into the Constitution of the United States of
America. Central principles are limited government, checks and balances, the separation
of powers, and judicial review (e.g., Mény and Surel 2002; Bartolini 2008). From a
constitutional point of view, the insulation of agencies is problematic as it implies a
weakening of the checks and balances in the political system, which increases the
potential for misuse of public funds, for neglecting the rights and freedoms of citizens,
and for corruption and patronage. Accountability provisions may prevent agencies from
engaging in such undesirable activities.
A framework for the assessment of mandatory accountability
To analyse how and to what extent regulatory agencies are required to render account, a
framework for the assessment of mandatory accountability will be developed. Two
questions are central here: (i) What qualifies as mandatory accountability? (ii) What
types of mandatory accountability can regulatory agencies potentially be subject to? Let
us first have a look at the meaning of the concept of accountability and the subcategory
of mandatory accountability.
4
In this study, accountability is defined as the degree to which an actor A is obliged to
offer or committed to offering information on, and explanation of, his or her conduct to
another actor B, and may be sanctioned for this conduct. This definition resembles the
often-used definition by Bovens, who portrays accountability as ‘a relationship between
an actor and a forum, in which the actor has an obligation to explain and to justify his or
her conduct, the forum can pose questions and pass judgement, and the actor may face
consequences’ (2007: 450). In line with this definition, the possibility of sanctions – but
not the actual imposition of sanctions – is regarded as a constitutive element of the
concept. Thus, a full accountability arrangement is not only characterised by the
obligation to inform and explain – which can in principle be non-committal – but also by
the possibility of seeing certain conduct being sanctioned (see Bovens 2007: 451).
Furthermore, the concept consists of two constitutive elements: an element of
answerability – actor A needs to explain and justify its conduct – and an element of
enforceability – actor B can evaluate and/or sanction this conduct.
The definition departs from Bovens’ definition in its emphasis on the ordinal nature
of the concept. Various scholars, including Bovens, conceive of accountability as
dichotomous, with actors being either accountable or not (cf. Schedler 1999; Philp
2009). When such definitions are used to determine whether instruments are referents
of the concept, some instruments are dismissed for their lack of one of the components.
For instance, the use of definitions which incorporate the component of potential
sanctions results in the exclusion of legal instruments which require an organisation to
explain its (financial) conduct to an audit office if the latter does not have the possibility
to sanction the conduct. As accountability is regarded as one of the many social
phenomena which are a matter of degree rather than absent or present, it is defined as
an ordinal concept in this study. Hence, actors can be accountable to various degrees,
ranging from not accountable at all to highly accountable.
Though this study focuses exclusively on mandatory accountability, accountability
can be mandatory as well as voluntary by nature. While mandatory accountability refers
to accountability provisions which are imposed on an actor by another actor, voluntary
accountability is self-imposed, referring to those accountability practices which go
beyond those required by law and other binding instruments (see Koop 2014). Because
of its coercive nature, mandatory accountability is, from a democratic point of view, the
more important of the two subcategories. Mandatory accountability leaves actors with
5
less discretion over the choice to render account and the type of conduct for which
account is rendered. Hence, it offers a more adequate means to prevent and detect
shirking and misuse of public authority.
The mandatory accountability of regulatory agencies may come in different forms. To
start with, agencies can be required to render account for various aspects of their
conduct. Three aspects for which agencies may have to render account are often
distinguished: (i) finances, (ii) performance, and (iii) fairness (Behn 2001: 6-10; Bovens
2007: 459-460). First, accountability for finances, or financial accountability, has the
strongest connection to the roots of the concept of accountability (Bovens 2007: 448449). Like the words ‘account’ and ‘accounting’, accountability can be traced back –
through Old English and Old French – to the Latin word compŭtāre, which is closely
related to the verbs ‘to count’ and ’to reckon’ (Behn 2001: 6-7). Thus, accountability for
finances refers to bookkeeping, and to actors explaining how they have spent the money
with which they were entrusted. In the public sector, this type of accountability typically
encompasses a justification of the way in which taxpayers’ money is spent. The central
question is ‘whether the organization and its officials have been wise stewards of the
resources with which they were entrusted’ (Behn 2001: 7).
Second, agencies and other public organisations may have to render account for their
performance. The main question is, as Behn (2001: 10) puts it, ‘[a]re the policies,
programs, and activities of government producing the results that they were designed to
produce?’ For accountability for performance to take place, there need to be objectives
or benchmarks which the actors in question aim to achieve, followed by information on,
and evaluation of, the actual performance of the actors.
Third, agencies may not only be required to render account for the consequences of
their actions, but also for the way in which they act. In other words, they may have to
render account for acting fairly and for not acting arbitrarily. As Behn formulates it:
‘We want government to be fair to its employees and to its contractors. We want
government to be fair to all of the clients of its various programs. We want government to
be fair when it provides services to citizens, when it taxes citizens, when it accuses citizens
of violating the law. We want government to be fair – exceptionally fair’ (2001: 8).
6
However, fairness is an elusive concept which can be interpreted in many ways.
Therefore, accountability for fairness mainly refers to actors rendering account for
following the rules, procedures and standards which have been established to ensure
fairness and to avoid arbitrariness in the exercise of public authority.
The three types of accountability can be directed at different actors. First, three
directions of accountability are typically distinguished in the literature: (i) upwards, (ii)
horizontal, and (iii) downwards. While upwards accountability is directed towards the
political principal, horizontal accountability refers to accountability to bodies with a
similar status in the public administration – audit offices, ombudsmen, courts and other
oversight bodies – and downwards accountability is focused on non-governmental
stakeholders such as users, regulatees and society at large (cf. Scott 2000; Bovens 2007:
460). Table 1 includes the different types of accountability that can be distinguished
based on the aspect of the conduct for which account is rendered and the direction of
the accountability relationship. For each type, the provisions which can be found in the
statutes of regulatory agencies are listed, based on previous studies on the
accountability of independent agencies.
First of all, accountability for finances may be upwards, horizontal or downwards by
nature. In the case of upwards accountability for finances, agencies have to render
account to governments and parliament. Agencies may be required to submit annual
itemised budgets and annual financial reports, and politicians may have the possibility
to disapprove these documents (Koop 2011). Accountability for finances may also take
the form of horizontal accountability, with agencies being required to submit their
financial report to an audit office which examines the probity, legality, efficiency and
effectiveness of the agency’s spending, and then reports on its assessment to politicians
and the public at large (Pollitt and Summa 1997; Scott 2000; Bovens 2007: 456). Finally,
financial accountability may be directed downwards, towards the regulated sector and
other non-governmental stakeholders, with provisions for the publication of the annual
itemised budget and the annual financial report. These provisions are primarily related
to the answerability element of accountability as non-governmental stakeholders do not
normally have formal powers to sanction agencies for their financial conduct.
7
Table 1: Regulatory agencies, types of accountability and statutory provisions
Direction of the accountability relationship
Upwards
Finances
Aspect of
conduct
Performance




Itemised budget to government
Itemised budget to parliament
Financial report to government
Financial report to parliament





Activity plan to government
Activity plan to parliament
Activity report to government
Activity report to parliament
Parliamentary hearing of the
agency head

Fairness


Possibility to dismiss the agency
head in case of misconduct
Possibility to dismiss the board
members in case of misconduct
Approval rules of procedure
needed
Horizontal

Financial report to account office
Downwards


Publication of itemised budget
Publication of financial report



Publication of the activity plan
Publication of the annual report
Publication of the regulatory
decisions
Publication of the minutes of
the board meetings
Consultation procedures




Judicial review
Ombudsman procedure
8


Publication of the rules of
procedure
Publication of register of
interests
Second, accountability for performance normally takes an upwards or downwards
direction. Agencies may be required to submit their annual activity plan and annual
activity report to government and parliament, and politicians may have the possibility
to disapprove these documents (Koop 2011). The statutes may also require the
organisations to publish these activity plans and reports, which enhances the
downwards accountability (cf. Bovens 2007: 457). Furthermore, agencies may be
required to publish their decisions and the minutes of the board meetings, and they may
have to set up consultation procedures, thus allowing stakeholders to give feedback on
the policies and activities of the organisation (cf. Majone 1999: 14).
Third, accountability for fairness may be upwards, horizontal or downwards.
Politicians may have the possibility to disapprove the rules of procedure which an
agency drafts, and they may also have the possibility to dismiss the agency head and the
board members in case of misconduct (see Koop 2011). Judicial review of regulatory
decisions is an important provision for horizontal accountability for fairness (Majone
1999: 14; Shapiro 2002; Bovens 2007: 456). Other horizontal provisions relate to the
possibility for an ombudsman to investigate the fairness of the conduct of agencies
(Scott 2000; Bovens 2007: 456). Finally, downwards accountability for fairness may
take the form of provisions for the publication of the rules of procedure and the
publication of a register of the interests of the board members.
Assessing the provisions for accountability
Many of the provisions for accountability which were discussed in the previous section
can be found in the statutes of the competition authorities and financial regulators
which are taken into consideration in this study. However, as this section will
demonstrate, there is also quite a lot of variation in their presence. The provisions are
incorporated into the statutes of regulatory agencies by governments and parliaments.
Like the provisions which stipulate the competences of the organisations, they are
usually laid down in primary legislation, as a consequence of which ministers cannot
introduce provisions for accountability without parliamentary approval.
9
The data collection took place in the summer and autumn of 2013, and data were
collected for 25 competition authorities and 21 financial market regulators.2 Table A in
the Appendix lists the organisations. To code the presence of the provisions, two main
types of documents were assessed: (i) the statutes which set out the design of the
agencies, and (ii) more general legislation on administrative procedures in the country.
Let us now have a closer look at the presence of the provisions.
Accountability for finances
Provisions related to annual itemised budgets and annual financial reports are imposed
on a minority of the regulatory agencies in the dataset. As Table 2 shows, 28 percent of
the competition authorities and 43 percent of the financial regulators need to submit an
itemised budget to government, with governments having the possibility to disapprove
the budget in, respectively, 20 and 29 percent of the cases. Provisions for budget
documents are slightly less often submitted to parliament (Table 3). This may be due to
the fact that the minister is often still responsible for the budget of regulatory agencies,
and thus has an interest in keeping an eye on the finances of the organisations. The
itemised budget indicates how the organisation is planning to spent the money with
which it is entrusted – for instance, what amount of money will be spent on the costs of
the organisation itself, and what amount will be spent on the policy programmes.
Table 2: Annual itemised budget to government
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
No provisions
Submitting only
Approval needed
18
2
5
72
8
20
12
3
6
57.1
14.3
28.6
Total
25
100
21
100
Independent agencies with responsibilities in the area of competition policy are present in all 21
countries which this study focuses on, with some countries (Canada, Denmark, Finland and the United
Kingdom) having two competition authorities. Independent financial market regulators are only present
in 19 of the countries. In Ireland, financial market regulation is the responsibility of the central bank. In
Denmark, the financial market regulator (Finanstilsynet) is part of the hierarchy of the Ministry of
Business and Growth, and is therefore not regarded as an independent agency. Australia and Canada have
two financial market regulators.
2
10
Table 3: Annual itemised budget to parliament
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
No provisions
Submitting only
Approval needed
19
3
3
76
12
12
17
3
1
81.0
14.3
4.8
Total
25
100
21
100
The statutes of regulatory agencies also include obligations to submit an annual
financial report to government and/or parliament. While annual budgets are the
prospective part of financial information, annual financial reports are the retrospective
part. Financial reports normally describe how an organisation has spent the money with
which it was entrusted. Furthermore, in the case of differences between the receipts
and expenditure of an organisation, the report justifies such discrepancies. As we can
see in Table 4, 44 percent of the competition authorities and 38 percent of the financial
regulators are required to submit an annual financial report to government or an
individual minister. In 8 and 19 percent of the cases, the report also needs the approval
of government. Table 5 shows that slightly fewer regulators – 44 and 29 percent – are
required to submit an annual financial report to parliament, with the possibility for
disapproval being present in 20 and 19 percent of the cases.
Table 4: Annual financial report to government
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
No provisions
Submitting only
Approval needed
14
9
2
56
36
8
13
4
4
61.9
19.1
19.1
Total
25
100
21
100
Table 5: Annual financial report to parliament
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
No provisions
Submitting only
Approval needed
14
6
5
56
24
20
15
2
4
71.4
9.5
19.1
Total
25
100
21
100
11
Accountability for finances also takes a horizontal form. That is, regulators may have to
submit their financial report to a national account office, which then examines the
spending, and reports on its findings to politicians and the public at large. Provisions for
accountability to audit offices are present in almost all cases (Table 6). The only
organisation for which such a provision was not found is a competition authority which
takes decisions as a judicial body, without having any investigative powers.
Table 6: Annual financial report to account office
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
1
24
4
96
0
21
0
100
Total
25
100
21
100
As indicated in the previous section, downwards mandatory accountability typically
takes the form of requirements to publish information and justifications, without the
audience having the formal power to sanction the conduct. In the case of financial
accountability, this takes the form of requirements to publish the annual budget and the
annual financial report. The former requirement is imposed on, respectively, 20 and 14
percent of the competition authorities and financial regulators, while the latter
requirement is more common and imposed on agencies in 28 and 29 percent of the
cases (see Tables 7 and 8).
Table 7: Publication annual itemised budget
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
20
5
80
20
18
3
85.7
14.3
Total
25
100
21
100
Table 8: Publication annual financial report
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
18
7
72
28
15
6
71.4
28.6
Total
25
100
21
100
12
Accountability for performance
The first provisions for accountability for performance which can be found in the
statutes of independent regulatory agencies are requirements to submit the annual
activity plan and the annual activity report to governments and parliaments. These are
provisions for upwards accountability. Although the statutes do not typically include a
specification of the contents of the annual or multi-annual plan, we know from assessing
the documents that are publicly available that these include information on the strategy
of the organisation, the activities which it is planning to undertake, and the results
which it hopes to achieve. As we can see in Table 9, a large minority of the competition
authorities (38 percent), and a majority of the financial regulators (52 percent), are
subject to a requirement to submit an annual plan to government. In 20 and 48 percent
of the cases, government can disapprove the plan. Annual plans may also need to be
submitted to parliament. As Table 10 shows, such provisions are not as common as the
requirement to submit an annual plan to the minister: they can be found in the statutes
of 32 and 19 percent of the agencies. In 16 and 5 percent of the cases, the annual plan
needs parliamentary approval.
Table 9: Annual activity plan to government
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
No provisions
Submitting only
Approval needed
18
2
5
72
8
20
10
1
10
47.6
4.7
47.6
Total
25
100
21
100
Table 10: Annual activity plan to parliament
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
No provisions
Submitting only
Approval needed
17
4
4
68
16
16
17
3
1
81.0
14.3
4.8
Total
25
100
21
100
Second, most of the agencies are required to produce an annual activity report which
needs to be submitted to government, parliament, or both. While annual plans describe
13
what activities the organisation is planning to set up, annual activity reports give a
retrospective overview of the activities which the agency has been involved in. Annual
reports describe and justify the activities and decisions of the agency, and the results
that it has achieved in the previous year. The documents often also offer information on
the structure of the organisation, the changes which have been implemented in the
previous year, and the staff members. In some cases, annual reports also offer
information on the organisation’s procedures – for instance, on how the organisation
has dealt with complaints.
The requirement to submit an annual report to the minister is one of the most
common provision for upwards accountability. As we can see in Table 11, 76 percent of
the competition authorities and 86 percent of the financial regulators are subject to the
requirement to submit an annual report. In 28 and 24 percent of the cases, the annual
report needs to be approved. Many of the agencies (also) have to submit an annual
report to parliament – sometimes directly and sometimes via the minister, where the
minister is required to forward the annual report which s/he receives to parliament. As
Table 12 shows, 72 and 71 percent of the agencies are subject to such a requirement,
with approval being needed in 24 and 19 percent of the cases.
Table 11: Annual activity report to government
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
No provisions
Submitting only
Approval needed
6
12
7
24
48
28
3
13
5
14.3
61.9
23.8
Total
25
100
21
100
Table 12: Annual activity report to parliament
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
No provisions
Submitting only
Approval needed
7
12
6
28
48
24
6
11
4
28.6
52.4
19.1
Total
25
100
21
100
14
Although it is typically ministers and state secretaries who are responsible for the
implementation of regulatory policy, some parliaments have both the power to question
these elected officials and the power to hear the head of the agency. In the presence of
such provisions, the head of the agency can be asked to answer questions in the plenary
or a meeting of the parliamentary committee which deals with the specific policy area.
Parliamentarians may use the provision to ask about the finances and fairness of an
agency, but hearings are mainly used as tools of accountability for performance.
Provisions allowing parliaments or specific parliamentary committees to hear the
agency head can be found in the statutes of 36 and 43 percent of the competition
authorities and financial regulators in the dataset (Table 13).
Table 13: Parliamentary hearing
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
16
9
64
36
12
9
57.1
42.9
Total
25
100
21
100
Though horizontal provisions for accountability for performance have not been found,
the statutes of the regulators do include provisions for downwards accountability. The
agencies may be required to publish their annual plan and annual report, with
provisions for publication of the annual report being more common. That is, while only
20 and 10 percent of the agencies have to publish an annual plan, an annual report
needs to be published in 52 and 43 percent of the cases (Tables 14 and 15).
Table 14: Publication annual activity plan
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
20
5
80
20
19
2
90.5
9.5
Total
25
100
21
100
15
Table 15: Publication annual activity report
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
12
13
48
52
12
9
57.1
42.9
Total
25
100
21
100
Requirements to publish the regulatory decisions that are made are even more
common: they are present in the statutes of 84 percent of the competition authorities
and 95 percent of the financial market regulators (Table 16). Provisions for the
publication of the minutes of the board meetings are only found in the statutes of a
single competition authority (not reported in a table), Moreover, some of the statutes
explicitly indicate that the agency shall not publish its minutes. Finally, requirements to
organise consultation procedures are rather common, and present in the statutes of 40
and 52 percent of the agencies. Agencies are normally required to set up consultation
procedures when they develop policy rules or binding regulations. In line with this, it
should be emphasised that those agencies which are not subject to such provisions are
usually the agencies which do not have any rule-making powers.
Table 16: Publication regulatory decisions
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
4
21
16
84
1
20
4.8
95.2
Total
25
100
21
100
Table 17: Consultation procedures
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
15
10
60
40
10
11
47.6
52.4
Total
25
100
21
100
16
Accountability for fairness
Accountability for fairness can take upwards, horizontal and downwards forms. Political
actors may, first of all, have the possibility to dismiss the agency head and the board
members of the agency in the case of misconduct. These provisions are most clearly
linked to the element of enforceability. As regulatory agencies are not hierarchically
subordinate to a minister, the head and the board members are the officials who carry
the final responsibility for the decisions made by the organisation, and they are,
therefore, the key decision-makers. Thus, the possibility to dismiss these individuals
constitutes a severe sanctioning instrument. Typically, a dismissal procedure may only
be started in the case of misconduct by (one of) the officials, and not for policy reasons.
As Table 18 demonstrates, 76 percent of the heads of competition authorities and 95
percent of the heads of financial regulators can be dismissed by politicians – usually by
the government or a member of the government. Of the regulatory agencies that have a
board, the members can be dismissed by a political actor in 72 and 94 percent of the
cases (Table 19).
Table 18: Dismissal head of agency
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
6
19
24
76
1
20
4.8
95.2
Total
25
100
21
100
Table 19: Dismissal board members
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
5
13
27.8
72.2
1
17
5.6
94.4
Total
18
100
18
100
Many regulatory agencies are allowed to draft their own rules of procedure. Upwards
accountability for fairness also comes in the form of provisions for the approval of these
procedures by politicians. As Table 20 shows, not all competition authorities and
financial regulators are allowed to draft their own rules of procedure: six of the 25
competition authorities, and thirteen of the 21 financial regulators, cannot draft such
17
rules. Yet, of the agencies that have these powers, 42 percent and 39 percent need to
seek political approval of these rules.
Table 20: Approval rules of procedure
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
11
8
57.9
42.1
8
5
61.5
38.5
Total
19
100
13
100
Accountability for fairness can also be horizontal by nature. First, as Table 21 shows,
almost all of the agencies are subject to provisions for judicial review. There is only one
competition authority for which such provisions are not in place: for that agency, the
minister is the sole appeal body. It should be noted, though, that provisions for appeals
to the minister (rather than to a court) are also present in the statutes of two other
agencies. Yet, in those cases, judicial review is the standard, while appealing to the
minister is only possible in exceptional cases.
Table 21: Judicial review
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
1
24
4
96
0
21
0
100
Total
25
100
21
100
Complaint procedures where affected parties can turn to a national ombudsman are
also common. As Table 22 demonstrates, such procedures are found in the case of,
respectively, 80 and 81 percent of the cases.
Table 22: Ombudsman procedure
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
5
20
20
80
4
17
19.1
81.0
Total
25
100
21
100
18
Finally, two types of provisions for downwards accountability for fairness can be found
in the statutes of the agencies: the requirement to publish the rules of procedure and
the requirement to publish a register of interests of the head and the board members.
First, in cases where organisations are allowed to draft their own rules of procedure,
these rules need to be published in 42 and 15 percent of the cases (Table 23).
Requirements to publish a register of interests are much less common, and are only
found in the statutes of three competition authorities (Table 24).
Table 23: Publication rules of procedure
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
11
8
57.9
42.1
11
2
84.6
15.4
Total
19
100
13
100
Table 24: Publication register of interests
Competition authorities
Number
Percentage
Financial market regulators
Number
Percentage
Provision absent
Provision present
22
3
88
12
21
0
100
0
Total
25
100
21
0
Let us now have a look at the variation in the degree to which accountability provisions
can be found in the statutes of the independent regulators. To assess the variation in
mandatory accountability, a number of accountability indices have been created. These
indices cannot give us insight into the question whether the provisions or items are
reliable indicators of a latent trait (or multiple traits), but they are created to provide
information on the number of provisions which are imposed on the agencies. Let us first
have a look at the general index of mandatory accountability, which is created by
calculating the average score of the agencies on the whole set of accountability items. As
the items are all dichotomous – with provisions being present or absent – the index
ranges from 0 to 1. The distribution of the scores is presented in Figure 1. The mean
score of the agencies on the index is 0.42, with a standard deviation of 0.17. The lowest
score is 0.06, while the highest score is 0.84, indicating that none of the agencies are
subject to all the provisions we looked at, and that there is a lot of variation in terms of
the number of provisions which are imposed on agencies.
19
Figure 1: Additive accountability index
Looking at the variation across sectors, we can see that the average accountability
scores of competition authorities and financial market regulators hardly differ (Table
25). However, as Table 26 indicates, there is considerable variation across countries,
with the average scores in countries such as Portugal, New Zealand and Spain being
considerably higher than those in countries such as Denmark, Finland, Iceland and
Switzerland. These figures at least suggest that country differences are more
importance than sectoral differences, though it should be emphasised that the country
scores are based on only few scores per country.
Table 25: Accountability scores per sector
Policy area
Average score
Competition policy
Financial regulation
0.41
0.43
Table 26: Accountability scores per country
Country
Average score
Country
Average score
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
0.51
0.36
0.32
0.39
0.18
0.21
0.34
0.39
0.51
0.24
0.62
Italy
Luxembourg
Netherlands
New Zealand
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
0.37
0.39
0.50
0.66
0.42
0.77
0.60
0.47
0.29
0.45
20
Let us finally have a look at the different types of accountability. Indices are created for
accountability for finances, performance and fairness, and for upwards, horizontal and
downwards accountability. It should be noted that given that the number of provisions
per type of accountability varies considerably, comparing the average scores on the
different indices is problematic. We will therefore focus on the variation across sectors
and across countries. As Table 27 demonstrates, we can again observe that there are
hardly any differences between competition authorities and financial market regulators.
At the same time, looking at Table 28, considerable variation across countries can be
observed. Except in the case of horizontal accountability, where accountability scores
are high and lacking considerable variation, the country patterns which we saw before
can be seen again. Nonetheless, we shall again emphasise that the country scores shall
be interpreted carefully as they are based on very few scores per country.
Table 27: Scores per type of accountability and sector
Policy area
Competition policy
Financial regulation
Finances
Performance
Fairness
0.31
0.31
0.41
0.42
0.61
0.65
Upwards Horizontal Downwards
0.35
0.39
0.91
0.94
0.37
0.33
Table 28: Scores per type of accountability and country
Country
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
Italy
Luxembourg
Netherlands
New Zealand
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
Finances
Performance
Fairness
Upwards
Horizontal
Downwards
0.36
0.23
0.09
0.27
0.09
0.15
0.09
0.18
0.50
0.14
0.64
0.27
0.32
0.41
0.73
0.32
0.86
0.54
0.27
0.14
0.24
0.51
0.31
0.35
0.44
0.08
0.15
0.42
0.38
0.38
0.15
0.62
0.46
0.42
0.38
0.65
0.42
0.73
0.62
0.54
0.35
0.54
0.77
0.69
0.64
0.55
0.68
0.44
0.57
0.77
0.83
0.61
0.60
0.36
0.43
0.86
0.57
0.65
0.71
0.64
0.78
0.43
0.62
0.50
0.31
0.25
0.37
0.05
0.18
0.23
0.33
0.43
0.16
0.68
0.33
0.35
0.40
0.60
0.38
0.78
0.65
0.46
0.20
0.35
1.00
1.00
1.00
0.67
1.00
0.78
1.00
1.00
1.00
1.00
1.00
0.67
1.00
1.00
1.00
0.83
1.00
1.00
1.00
0.67
1.00
0.32
0.25
0.25
0.33
0.14
0.08
0.38
0.31
0.51
0.13
0.29
0.38
0.25
0.56
0.69
0.36
0.69
0.31
0.29
0.38
0.50
21
Conclusions and discussion
This study on the mandatory accountability of competition authorities and financial
market regulators has been conducted against the backdrop of the debate on
accountability in regulatory governance. Many observers have expressed concerns
about the lack of accountability of the organisations, and even more have emphasised
the importance of introducing statutory provisions for accountability. It is argued that if
the organisations are insulated from the accountability mechanisms associated with the
ministerial hierarchy and the electoral process, it is essential that alternative
accountability instruments are introduced. This study has aimed to contribute to the
debate by mapping and assessing the accountability provisions which can actually be
found in the statutes of regulatory agencies.
Looking at the lists of instruments of mandatory accountability which are applied to
independent regulatory agencies, we can see that the organisations can be made subject
to a wide range of provisions for accountability – provisions which are related to
different aspects of their conduct and which are directed towards different audiences.
However, assessing the mandatory accountability of competition authorities and
financial market regulators in 21 established democracies, we have observed that there
is a lot of variation in the degree to which these agencies are required to render account.
Some of the organisations are subject to almost the whole range of accountability
provisions, but others are almost exempted from such provisions. This does not mean
that the latter do not render account at all: regulatory agencies may also commit
themselves to voluntary accountability practices, and audiences may keep an eye on
agencies even in the absence of provisions for accountability. At the same time, the
presence of provisions for accountability does not guarantee the actual existence of
accountability. Nonetheless, if we accept that the coerciveness associated with
mandatory accountability is essential from a constitutional point of view, the findings
on the low degree of mandatory accountability of some agencies may not be reassuring.
This paper has only focused on the mandatory accountability of competition
authorities and financial market regulators. Though there are no reasons to expect
these organisations to be different from other types of regulatory agencies in terms of
accountability, we shall be careful with generalisations. Finally, the findings on the
variation – and the variation across countries in particular – raise the question of the
determinants of such variation. This is a question future research will need to address.
22
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Appendix
Table A: List of organisations
Country
Competition authority
Financial market regulator
Australia
Australian Competition and Consumer
Authority
Austria
Belgium
Federal Competition Authority
Belgian Competition Authority
Canada
Competition Bureau
Australian Prudential Regulation
Authority
Australian Securities and
Investments Commission
Financial Market Authority
Financial Services and Markets
Authority
Office of the Superintendent of
Financial Institutions
Financial Consumer Agency of
Canada
Competition Tribunal
Denmark
Finland
France
Germany
Greece
Iceland
Ireland
Italy
Danish Competition and Consumer
Authority
Danish Competition Council
Finnish Competition and Consumer
Authority
Finnish Market Court
French Competition Authority
Federal Cartel Office
Luxembourg
Hellenic Competition Commission
Icelandic Competition Authority
The Competition Authority
Authority for Competition and the
Market
Luxembourg Competition Council
Netherlands
New Zealand
Norway
Netherlands Competition Authority
Commerce Commission
Norwegian Competition Authority
Portugal
Portuguese Competition Authority
Spain
National Commission of Competition
Sweden
Swedish Competition Authority
Switzerland
Swiss Competition Commission
United
Kingdom
Competition Commission
Office of Fair Trading
25
Finnish Financial Supervisory
Authority
French Financial Market Authority
Federal Financial Supervisory
Authority
Hellenic Capital Market Commission
Financial Supervisory Authority
National Commission for Enterprises
and the Stock Exchange
Luxembourg Financial Sector
Supervisory Commission
Authority for the Financial Markets
Financial Markets Authority
Financial Supervisory Authority of
Norway
Portuguese Securities Market
Commission
National Securities Market
Commission
Swedish Financial Supervisory
Authority
Swiss Financial Market Supervisory
Authority
Financial Services Authority