ICN 2017 - CUTS' Bulletin n°2: Focus on Competition Advocacy, Mergers and Digital Economy

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May 11, 2017, 7:39:27 PM5/11/17
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Bulletin n°2 | Thursday, May 11, 2017
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About this bulletin
This week, the global competition community meets in Porto, Portugal, on the occasion of the 16th Annual Conference of the International Competition Network (ICN). The ICN provides a platform for international cooperation, exchange of experience and development of common ground for competition authorities around the world. With this bulletin, CUTS is keeping you posted on the proceedings.

@cutsccier #ICNPorto
MERGERS

Non-price Effects in Merger Review


This session moderated by John Pecman, Commissioner, Canadian Competition Bureau, debated the extent to which an agency can evaluate non-price effects of a merger. It was recalled that price is just one competitive tool in most markets, where firms usually compete in multiple dimensions such as product quality, services, product range etc. The question is how and to what extent these should be taken into account in a merger review, based on reasonable presumptions.

The panel identified several challenges related to measuring non-price effects, including: (i) lack of data; (ii) need for firms’ behavioural commitments, which are not easy to monitor; (iii) required investment in human resources for evaluating non-price effects, which is very time consuming; and (iv) legitimacy issues, as an agency may be perceived as impinging on the sectoral regulator’s prerogatives.

The French authority shared about a case where a Belgian press group obtained a number of local French newspapers, which would have resulted in a regional monopoly. To maintain diversity of the press, the French authority went to the extent of imposing that the same editorial policy remains within each newspaper. Besides this, it was also noted that the Issue of privacy protection has become important, as exemplified by the Facebook/WhatsApp merger.

The question of quantification of non-price effects was also raised. It was indicated that, in some cases, agencies may be able to achieve some level of quantification. This was exemplified by a merger in France, where the authority surveyed 20’000 consumers to examine several facts which could inform its decision, including non-price effects.

On the panel were Isabelle de Silva, President, Autorité de la Concurrence, France ; Maureen Ohlhausen, Acting Chairman, United States Federal Trade Commission (FTC); Lars Sørgard, Director-General, Norwegian Competition Authority; Cristina Caffarra, Vice President, Charles River Associates, United Kingdom; Gesner Oliveira, Partner, GO Associados, Brazil.
NEW MARKETS

Market Studies in Innovation-based and Novel Markets: Issues and perspectives


This session explored the specific challenges posed to competition authorities when undertaking market studies in innovation-based and novel markets, and the methods employed by authorities. Discussions focused on service areas which are undergoing innovation due to technological advances, particularly in the telecom, transport and financial services sectors.

In terms of disruption, participants felt it was beneficial that prices have gone done and quality has one up, mentioning Uber among other examples. Secondly, it was stressed that competition agencies should engage vigorously with other agencies as well as stakeholders to create a better understanding.

With regard to financial services, it was recommended that competition authorities should study the disruption taking place so as to generate better understanding. In the area of telecom services, it was agreed that competition authorities should only intervene in the case of a market failure, so as to avoid slowing down the process of innovation. It was also agreed that, in this area subject to overlap arrangements, competition authorities should engage in ex-post examinations. On the other hand, in the case of technical and service standards, regulation has to be done ex-ante by sector regulators.

On the panel were Johan Hedelin, Director, Advocacy Department, Swedish Competition Authority; Marcio Bueno, Partner, TozziniFreire Advogados, Brazil; Ruben Maximiano, Senior Competition Expert, OECD; Vian Quitaz, Legal Adviser, Policy and International, UK Competition and Markets Authority; Alden Abbot, Deputy Director and Senior Legal Fellow, The Heritage Foundation.
ADVOCACY

Innovative Tools to Advocate and Promote Competition


Moderated by Michiel Denkers, Director, Competition Department, Authority for Consumers and Markets, Netherlands, this session aimed to foster experience-sharing among ICN members with regards to novel methods or mechanisms that agencies use in order to reach different audiences as part of their efforts to promote competition. After remarks from the panel, participants took part in table discussions in smaller groups to foster interaction.

Convincing advocacy can only be done on the basis of evidence that has been collected. The goal of advocacy is to build up a culture of competition and, for that, work should be done on strategic issues for the greatest impact. It was also stressed that this requires combining different tools, as well as sequencing, planning and continuous monitoring and evaluation. Most importantly, and independently from the tools, it is the content that matters.

Considering the political economy constraints in many jurisdictions, it was stressed that competition agencies need to create a wider public buy-in. Towards this end, they would have to communicate the evidence to consumers in a simple, reader-friendly manner. The agencies must also think of various innovative methods to reach out their message to the market, e.g. by creating awards, designing video games for children or Apps which can help consumers understand the role and importance of competition enforcement.

It was noted that strong results can be achieved through advocacy in a short time and in a very efficient manner. Example was given of Mexico’s efforts in the fuel market, where firm’s compliance to government guidelines was obtained in only four months.

On the panel were Fernando Carreño, Partner, Von Wobeser y Sierra, S.C, Mexico; Anne Riley, Associate General Counsel Antitrust, Shell International; Vicente Bagnoli, Partner Vincente Bagnoli Advogados and Professor of Law at Mackenzie University, Brazil; Ivonne Santillán, Director of Legal Affairs and Internatoinal Cooperation, International Affairs Division, Comisión Federal de Competencia Económica (COFECE), Mexico; Martha Martinez Licetti, Lead Economist and Global Lead, Competition Policy, Trade and Competitiveness, World Bank Group.
MERGERS

Public Interest Considerations in Merger Review


This session explored whether there should be more to merger review than competitive effects and consumer welfare. Indeed, some countries have included public interest considerations in merger review, as exemplified by Canada which can consider employment considerations. Some however noted the potential “chilling effect” of adding public interest considerations for countries attempting to attract investors, e.g. into newly liberalised sectors.

A panellist pointed out that public interest is not a very well-defined concept, and can include a wide range of economic, political and social issues. Some elements can include national interest, defence, food security, environment etc. The question is whether competition authorities are the right agency to deal with public interest, given that they may often be ill-equipped to deal with such a wide range of issues. According to him, this could eventually damage the reputation and credibility of the competition agency.

It was recalled that in some countries, competition laws provide for public interest tests. In addition, some are now proposing to add national economic “Net Benefit Tests”, which reflects the current renewed interest on the benefits of globalisation for the public.

On the panel were Sheldon Mills, Senior Director, Mergers, Competition and Markets Authority, United Kingdom; Cal Goldman, Partner, Goodmans LLP, Canada; Gerardo Calderon-Villegas, Associate, Baker McKenzie, Mexico; Magdeline Gabaraane, Director, Mergers and Monopolies Department, Botswana Competition Authority; Vinod Dhall, Executive Chairman, Dhall Chamber, India; Chia-Lin Yen, Head of International Affairs, Taiwan Fair Trade Commission.
YOUNG AGENCIES

By Younger Agencies for Younger Agencies


This session aimed to foster dialogue on identifying key criteria regarding the monitoring and evaluation processes of agencies in their early years of competition enforcement. Discussions explored what young agencies should do, may do, and can do.

It was emphasised that new agencies need to be conscious of their operating capability, based on their resources and entrusted powers. A panellist encouraged them to define priorities between enforcement and advocacy, cautioning that agencies which only do advocacy have a low credibility. Therefore, they need to take at least some cases, starting with low hanging fruits.

Strategic thinking is key in the selection of cases, which should serve as examples that educate businesses. Indeed, the overarching goal should be to get all businesses to comply with the law. It was also noted that young agencies should not overlook mergers, since some targeted cartels may decide to form a merger to perpetuate their anti-competitive practices.

On the panel were Arsenio M. Balisacan, Chairman, Philippine Competition Commission; Allan Fels, Professor, University of Melbourne, Australia; Bevan Narinesingh, Executive Director, Fair Trading Commission, Trinidad and Tobago.
NGAs

NGA Engagement


The main purpose of this session was to see how the relationship of competition authorities with Non-Governmental Advisors (NGAs) can be institutionalised. The majority of NGAs are competition lawyers, although a few NGOs like CUTS and the American Antitrust Institute are also engaged in competition issues. Other than this, the third category are academics like Eleanor Fox and retired regulators like Frederic Jenny and Allan Fels.

A lawyer did express that competition agencies tend to be a bit weary of competition lawyers because of the adversarial relationship. However, there is an imperative to work together for the greater cause. In a survey of the 130 members of the ICN – of which only 75 responded -, 25 countries had no NGA.  

On the panel were Dina Kallay, Head of Competition, Ericsson, Sweden; Clara Ingen-Housz, Partner, Linklaters, Hong Kong; Huy Do, Partner, Fasken Martineau DuMoulin, Canada.
NEW MARKETS

Advocacy Strategy in Traditional and New Markets: Which Differences?


Moderated by Diana Moss, Chair, American Antitrust Institute, United States, this session addressed challenges faced by competition authorities in planning and implementing advocacy strategies in new markets vs. more traditional markets.

While in the latter, agencies are used to the industry features, players and competition issues, new markets such as the digital economy and e-commerce take authorities to unknown territories. Agencies may struggle to understand these emerging and fast evolving business models, as well as their impacts on competition.

A key question is whether these new markets require new strategies, and call for revisiting established advocacy methods. In fact, these have sometimes changed even the notion of market, and rendered some existing regulations obsolete. While a panellist was enthusiastic about the revolution brought about by Uber in the so far highly regulated taxi sector, another considered it exploited a breach in regulation which should rather be addressed through more regulation to make the playing field even again.

While some pleaded for a laissez-faire approach where the consumer is benefitting, others pleaded for adopting a hard and quick look at the regulatory implications so as to avoid being perceived as favouring digital platforms to the detriment of their traditional competitors. It was emphasised that competition authorities need to work closely with sectoral regulators and consult widely.

Some of the new sectors raising the most far-reaching regulatory questions included big data and e-commerce. It was for instance noted that big data can sometimes be disruptive when it creates barriers to entry. Finally, e-commerce is dependent on postal services which are traditionally a highly regulated sector and are often inadapted to large parcel delivery given the small size of mailboxes.

On the panel were Rod Sims, Chairman, Australian Consumer and Competition Commission; Nuno Rocha de Carvalho, Member of the Board, Portuguese Competition Authority; Gabriella Muscolo, Commissioner, Italian Competition Authority; Han Li Toh, Chief Executive, Competition Commission of Singapore; Francis Kariuki, Director General, Kenya Competition Authority.
AWARDS

ICN/World Bank Advocacy Contest Awards Ceremony


In his introducing remarks, Andreas Mundt, President of the Bundeskartellamt, Germany, and Chairman of the ICN Steering Committee, thanked the Italian competition authority for promoting and organising this Advocacy Contest Award. The contest aims to highlight the key role competition agencies play in promoting competition by showcasing their advocacy success stories. Several competition authorities received awards under four themes:
  • “Levelling the playing field through competitive neutrality or by elevating competition policy to the economic policy agenda.” Winners: Australia and Zambia. Honourable mentions: Canada and the Republic of Latvia.
  • “Engaging through results: Successful experience in planning, implementing and monitoring advocacy strategies.” Winners: Hong Kong and Ukraine. Honourable mentions: The Netherlands and Portugal.
  • “Reaping digital dividends: Advocacy in e-Trade”. Winners: Argentina and Spain.
  • “Implementing advocacy strategies at multiple levels“. Winners: Mexico and Poland. Honourable mention: Serbia.
AGENCY EFFECTIVENESS

An Outside View on Key Factors for Effective Agencies


In this session, panellists discussed their perceptions of what makes an agency effective, what is the relevant knowledge and know how in the field, and how to capture it. Discussions were moderated by Wililam Kovacic, Global Competition Professor of Law and Policy, George Washington University, United States.

Speakers acknowledged that the changed brought about by globalization required competition authorities to do more to show their effectiveness to the society. They also need to engage more with a wide range of stakeholders, e.g. lawyers, experts, businesses, consumers, to explain their role. There is a need to “humanise” the agency, who should use simple tools to engage with its surroundings. A good practice examples given today was Mexico’s engagement of artists in outreach.

While institutional design and real independence are key, equally important are the diversity of the agency’s staff as well as outstanding leadership. The agency head should be a good communicator able to steer, choose the right staff, choose the right cases etc. There was also consensus that an effective agency is one that is able to learn from the others, and to share with others. Importantly, communications need carefully crafted content and become multi-stakeholder by extending beyond the government to include consumers, the media etc.

It was also recalled that young competition agencies in developing countries face specific challenges which institutions like UNCTAD try to address though capacity building programmes. These have included benchmarking institutional structures, efforts to develop a competition culture, suggestions for modernising laws and developing soft laws, and evaluating the impact of decisions including through peer reviews.  

On the panel were Annetje Ottow, Professor, University of Utrecht, Netherlands; Andreas Mundt, President, Bundeskartellamt, Germany; Teresa Moreira, Head of Competition and Consumer Policies Branch, UNCTAD; Tembinkosi Bonakele, Commissioner, Competition Commission, South Africa; António Gomes, Head of Competition Division, OECD; Gilvandro Araújo, Acting President, Administrative Council for Economic Defence, CADE Brazil.
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