The leading authority for enforcement of competition law in the UK is the Office of Fair Trading (OFT). However, its powers to enforce both EU and UK competition law are shared with other sectoral regulators. The term ‘concurrent powers’ refers to the powers to apply competition law in particular sectors, exercisable by either the relevant sectoral regulator or the Office of Fair Trading (OFT). The sectoral regulators which have concurrent powers with the OFT are the Office of Communications (Ofcom), the Office of Gas and Electricity Markets (Ofgem), the Northern Ireland Authority for Energy Regulation (NIAER), the Director General of Water Services (Ofwat), the Office of Rail Regulation (ORR) and the Civil Aviation Authority (CAA).
The right to enforce competition law have been available to the sectoral regulators since March 2000. However, it was not until November 2006 that the first competition infringement decision was taken by a sectoral regulator. The decision by the Office of Rail Regulation (ORR) that English Welsh and Scottish Railways Limited (EWS) had breached Chapter II of the Competition Act of 1998 (abuse of a dominant position) and its EU equivalent, Article 82 of the EC Treaty, in relation to the market for coal haulage by rail. The ORR has imposed a penalty of £4.1 million on EWS. In calculating the level of penalty, the ORR has had regard to the OFT's Guidance as to the appropriate amount of penalty and the requirement that a penalty must reflect the seriousness of the conduct involved and serve to deter future infringement of the Act.
The policy intent informing this arrangement was to take advantage of the sectoral regulators’ considerable specialist knowledge of their particular sectors and to assist in coordinating the use of sector specific regulation and the exercise of general competition law functions. Sectoral regulation prescribes in detail the framework within which the market participants may operate, and creates standards and processes that define the behaviour of companies, as the emphasis is on the prevention of market abuse before it happens. The prohibitions in the Competition Act of 1998, and Article 81 and 82 of the EC Treaty also operate ex ante in that they seek to deter breaches of the prohibitions. On the other hand the existence of general competition law principles provides a framework that can and should be used by companies to guide their compliance even in the absence of clearly defined case law. However, they operate ex post in that they are only enforceable ex post in particular areas.
The interaction between sector-specific powers and competition powers raises a number of important policy questions. Any assessment of current practice needs to be placed in the context of the strategic objectives for sectoral regulation and the operation and enforcement of competition law in the economy generally. Sectoral regulation is to some extent required to ensure that objectives other than those related to the efficient functioning of the market (e.g. safety standards) are secured. With respect to market behaviour, application of general competition law is the norm, and that is reflected in the absence of any provisions to exempt markets that are subject to specific sectoral regulation from the operation of general competition law. Specific sectoral regulatory regimes in relation to competition primarily reflect the need to actively inject and promote effective competition into the sector. A distinctive feature of the concurrency regime is that it allows the regulators to use both sector-specific regulatory powers and general competition powers to regulate markets, as a result they have played a key role in opening up markets and stimulating market development, removing barriers to entry, regulating dominant players and in ensuring fair, transparent pricing.
The concurrent scheme of distribution of powers between the OFT and the sectoral regulators include the powers to make market investigation references under Section 131 of the Enterprise Act 2002 where sectoral markets appear to be displaying anti-competitive features are contained in the relevant sectoral legislation. Prior to the enactment of the Enterprise Act, sectoral legislation had given sectoral regulators similar powers to make monopoly references to the Competition Commission (CC) in respect of their particular regulated sector under the Fair Trading Act 1973. Regulators are invested with the powers to investigate infringements of the prohibitions in Chapter 1 and 2 of the Competition Act and Articles 81(1) and 82 of the EC Treaty in the UK. Section 54 and Schedule 10 of the Competition Act give sectoral regulators the same powers in relation to breaches of these provisions in individual cases by undertakings trading in the sectors they regulate, as the OFT has in all cases.
Regulators are empowered to investigate breaches by undertakings who they suspect to have breached these prohibitions. They also permit them to accept commitments from such undertakings, impose interim remedies, take decisions as to whether the prohibitions have been breached, and require infringements to be brought to an end and to impose financial penalties in relation to infringements where appropriate. The OFT has general powers to carry out such studies in relation to any market, and the sectoral regulators in effect have similar powers in the sectors they regulate, to conduct market studies as part of their general regulatory powers. Sectoral regulators have all the powers of the OFT to deal with individual cases under the Competition Act; but not certain general powers to issue general guidance on the application of the prohibitions and on penalties and to make and amend the Procedural Rules that set out the procedures to be followed when implementing the provisions of the Competition Act. The OFT alone has these powers, although it is required to consult with the sectoral regulators when undertaking these duties.
In India, the relationship between competition authorities and sectoral regulators has with alarming regularity involved disagreements over regulatory approaches. A recent instance of the same may be seen in the matter of Belaire Owner’s Association v. DLF Limited dated August 12, 2011. On the one hand, regulators have sometimes acted more in the interests of the firms they regulate than in the interests of consumers or with the objective of promoting competition. On the other hand, competition authorities have at times adopted a microcosmic approach which ignores broader social objectives and lacks technological expertise. This disturbing trend is also highlighted in the recent controversy regarding the conflict of jurisdiction between Competition Commission of India and another sectoral regulator, the Reserve Bank of India. By adopting a simplistic yet short-sighted response if the government experiments with and truncates the powers of the competition commission, it would be a serious setback to an institution which has the power to bring the true benefits of market economy to consumers in India.
The approach best-suited suited to the Indian competition climate, therefore, is one which involves meaningful co-operation and efficient co-ordination between sector regulators and competition authorities. A model under which both sets of laws governing sectoral regulators and competition authorities mandate, the need for the two agencies to confer with each other, while leaving behavioural issues to the competition agency and structural issues to the sector regulator, ensures joint resolution of jurisdictional disputes . To enhance growth and develop an economy that is better able to resist economic shocks, the ideal relationship between competition authorities and regulators is driven by a central government that promotes a broad review of existing regulations with a pro-competitive lens, leading to the emergence of ‘competition culture’ which encompasses the unique expertise of both sectoral regulators and competition authorities.
It is imperative that necessary amendment be introduced to the Competition Act and other sector-specific legislations so that a culture of regulatory consultation rather than conflict is fostered. The Competition Act, 2002 under Sections 21 and 21A envisages formal statutory framework for such interaction. Section 21 read with Section 19 and 20 provide that a statutory authority or regulator may make a reference to the commission and it may seek opinion of the commission, but other than this the Act does not provide for cooperation between the commission and the sectoral regulators. Therefore such provisions of the Competition Act, 2002, should be reviewed with a view to defining a workable division of labour between the regulator and the competition authority as also for eliminating the possibilities of forum shopping.
[This post has been authored by Madhulika Kanaujia & Parth Gokhale, students, B.A./B.Sc. LL.B., WBNUJS]
The right to enforce competition law have been available to the sectoral regulators since March 2000. However, it was not until November 2006 that the first competition infringement decision was taken by a sectoral regulator. The decision by the Office of Rail Regulation (ORR) that English Welsh and Scottish Railways Limited (EWS) had breached Chapter II of the Competition Act of 1998 (abuse of a dominant position) and its EU equivalent, Article 82 of the EC Treaty, in relation to the market for coal haulage by rail. The ORR has imposed a penalty of £4.1 million on EWS. In calculating the level of penalty, the ORR has had regard to the OFT's Guidance as to the appropriate amount of penalty and the requirement that a penalty must reflect the seriousness of the conduct involved and serve to deter future infringement of the Act.
The policy intent informing this arrangement was to take advantage of the sectoral regulators’ considerable specialist knowledge of their particular sectors and to assist in coordinating the use of sector specific regulation and the exercise of general competition law functions. Sectoral regulation prescribes in detail the framework within which the market participants may operate, and creates standards and processes that define the behaviour of companies, as the emphasis is on the prevention of market abuse before it happens. The prohibitions in the Competition Act of 1998, and Article 81 and 82 of the EC Treaty also operate ex ante in that they seek to deter breaches of the prohibitions. On the other hand the existence of general competition law principles provides a framework that can and should be used by companies to guide their compliance even in the absence of clearly defined case law. However, they operate ex post in that they are only enforceable ex post in particular areas.
The interaction between sector-specific powers and competition powers raises a number of important policy questions. Any assessment of current practice needs to be placed in the context of the strategic objectives for sectoral regulation and the operation and enforcement of competition law in the economy generally. Sectoral regulation is to some extent required to ensure that objectives other than those related to the efficient functioning of the market (e.g. safety standards) are secured. With respect to market behaviour, application of general competition law is the norm, and that is reflected in the absence of any provisions to exempt markets that are subject to specific sectoral regulation from the operation of general competition law. Specific sectoral regulatory regimes in relation to competition primarily reflect the need to actively inject and promote effective competition into the sector. A distinctive feature of the concurrency regime is that it allows the regulators to use both sector-specific regulatory powers and general competition powers to regulate markets, as a result they have played a key role in opening up markets and stimulating market development, removing barriers to entry, regulating dominant players and in ensuring fair, transparent pricing.
The concurrent scheme of distribution of powers between the OFT and the sectoral regulators include the powers to make market investigation references under Section 131 of the Enterprise Act 2002 where sectoral markets appear to be displaying anti-competitive features are contained in the relevant sectoral legislation. Prior to the enactment of the Enterprise Act, sectoral legislation had given sectoral regulators similar powers to make monopoly references to the Competition Commission (CC) in respect of their particular regulated sector under the Fair Trading Act 1973. Regulators are invested with the powers to investigate infringements of the prohibitions in Chapter 1 and 2 of the Competition Act and Articles 81(1) and 82 of the EC Treaty in the UK. Section 54 and Schedule 10 of the Competition Act give sectoral regulators the same powers in relation to breaches of these provisions in individual cases by undertakings trading in the sectors they regulate, as the OFT has in all cases.
Regulators are empowered to investigate breaches by undertakings who they suspect to have breached these prohibitions. They also permit them to accept commitments from such undertakings, impose interim remedies, take decisions as to whether the prohibitions have been breached, and require infringements to be brought to an end and to impose financial penalties in relation to infringements where appropriate. The OFT has general powers to carry out such studies in relation to any market, and the sectoral regulators in effect have similar powers in the sectors they regulate, to conduct market studies as part of their general regulatory powers. Sectoral regulators have all the powers of the OFT to deal with individual cases under the Competition Act; but not certain general powers to issue general guidance on the application of the prohibitions and on penalties and to make and amend the Procedural Rules that set out the procedures to be followed when implementing the provisions of the Competition Act. The OFT alone has these powers, although it is required to consult with the sectoral regulators when undertaking these duties.
In India, the relationship between competition authorities and sectoral regulators has with alarming regularity involved disagreements over regulatory approaches. A recent instance of the same may be seen in the matter of Belaire Owner’s Association v. DLF Limited dated August 12, 2011. On the one hand, regulators have sometimes acted more in the interests of the firms they regulate than in the interests of consumers or with the objective of promoting competition. On the other hand, competition authorities have at times adopted a microcosmic approach which ignores broader social objectives and lacks technological expertise. This disturbing trend is also highlighted in the recent controversy regarding the conflict of jurisdiction between Competition Commission of India and another sectoral regulator, the Reserve Bank of India. By adopting a simplistic yet short-sighted response if the government experiments with and truncates the powers of the competition commission, it would be a serious setback to an institution which has the power to bring the true benefits of market economy to consumers in India.
The approach best-suited suited to the Indian competition climate, therefore, is one which involves meaningful co-operation and efficient co-ordination between sector regulators and competition authorities. A model under which both sets of laws governing sectoral regulators and competition authorities mandate, the need for the two agencies to confer with each other, while leaving behavioural issues to the competition agency and structural issues to the sector regulator, ensures joint resolution of jurisdictional disputes . To enhance growth and develop an economy that is better able to resist economic shocks, the ideal relationship between competition authorities and regulators is driven by a central government that promotes a broad review of existing regulations with a pro-competitive lens, leading to the emergence of ‘competition culture’ which encompasses the unique expertise of both sectoral regulators and competition authorities.
It is imperative that necessary amendment be introduced to the Competition Act and other sector-specific legislations so that a culture of regulatory consultation rather than conflict is fostered. The Competition Act, 2002 under Sections 21 and 21A envisages formal statutory framework for such interaction. Section 21 read with Section 19 and 20 provide that a statutory authority or regulator may make a reference to the commission and it may seek opinion of the commission, but other than this the Act does not provide for cooperation between the commission and the sectoral regulators. Therefore such provisions of the Competition Act, 2002, should be reviewed with a view to defining a workable division of labour between the regulator and the competition authority as also for eliminating the possibilities of forum shopping.
[This post has been authored by Madhulika Kanaujia & Parth Gokhale, students, B.A./B.Sc. LL.B., WBNUJS]
