Institutional design of agencies

Pros and Cons: single vs two tier systems

Workshop ENTRANCE22 April 2016

Prof. Annetje Ottow

Good Agency principles

LITER good agency principles

• (L) Legality: legal mandate

• (I) Independence: from politicis and market parties

• (T) Transparency: accountability and open communication

• (E) Effectiveness: coordination with other agencies; effective enforcement

• (R) Responsibility: shared responsibility agency/companies; compliance, self-regulation

Personal experience

• OPTA: single regulatory body (post and telecommunications) (NL)

• ACM: competition, regulator and consumer authority (NL)

• CMA: competition and consumer authority

New trend?

In many countries restructuring of competition agencies: from single agencies to multiple agencies (e.g. UK, Spain, The Netherlands, Finland…)

New portfolio’s:

- What is the optimal design? - How to ensure integration and cross fertilization?- Preventing silo’s and rivalty between departments?

Putting agencies under one roof does not mean integration

Examples of recent mergers

• Finland (1 January 2013): merger of the Competition Authority and the Consumer Agency into the Finnish Competition and Consumer Authority (KKV)

• The Netherlands (1 April 2013)

• Spain (7 October 2013): merger of the Competition Authority and six sector regulators into the National Commission on Markets and Competition (CNMC)

• The UK (1 April 2014): merger of Office of Fair Trading (OFT) with the Competition Commission (CC) into the Competition and Markets Authority (CMA)

Types of multiple agencies

• Multisector regulation: communications, transport, energy, infrastructure sectors (e.g. Bundesnetzagentur in Germany; ILR in Luxembourg )

• Competition and consumer protection: e.g. FTC in the US; new CMA in the UK; KFST in Denmark; KKV in Finland

• Competition and (multi)sector regulation: e.g. old Dutch cartel authority combining competition, energy & transport (NMa); new Spanish CNMC which is a merger of the competition authority with six sector regulators.

• Competition, consumer protection and multisector regulation: (e.g. new Dutch ACM; Australian ACCC)

Country: Agency: Functions:Brazil CADE Single function (competition)

Chile FNE Single function (competition)

China NDRC Single function (competition)

India CCI Single function (competition)

Japan JFTC Single function (competition)

Germany BNetzA Multisector regulation

Luxembourg ILR Multisector regulation

Denmark KFST Competition & consumer protection

Finland KKV Competition & consumer protection

France DGCCRF Competition & consumer protection

US FTC Competition & consumer protection

UK CMA Competition & consumer protection

New Zealand NZCC Competition & consumer protection

Spain CNMC Competition & multisector regulation

The Netherlands NMa Competition & multisector regulation

The Netherlands ACM Competition, consumer protection & regulation

Australia ACCC Competition, consumer protection & regulation

Different design models

• Coordination or integration model:

is rivalry between agencies a good or a bad thing?

• Combination of ex ante and ex post regimes:

can competition and regulation go together in one hand?

Why does it matter?

• Synergy effects? Better outcome?

• Cost reduction

• Influence of institutional design on the application regulation and enforcement

• Relation between design and principles of good supervision

Design and principles

• Inside and outside perspective:

* governance of the agency (institutional legitimacy)

* internal design

• The way agency is designed may influence independence (avoidance of regulatory capture)

• Structure may influence effectiveness and therefore outcomes

Advantages of multiple agencies

• More inter-sectoral consistency

• Integration of competition law and consumer law/regulation

• Exchange of practices (cross border learning), cross fertilisation

• Combination of enforcement instruments/toolkit

• Less coordination costs

• Lower risk of regulatory capture? Diversification

• Impuls for cultural changes (need major institutional disruption)

Disadvantages of multiple agencies

• Loss of focus, policy objectives differ

• Diluted identity

• Choosing easy files

• Creation of new silo’s/rivalry between departments

• Lack of regulatory competition (to get things done)

• Too much focus on uniformity, less room for differentiation

Key issues of design (1)

Hyman & Kovacic identified seven key factors of success

• Policy coherence• Credibility/branding• Capacity and capability• Resilience• Cohesion• Collateral effects on the regulatory ecosystem• Political support

Key issues of design (2)

• Complementary tasks? Otherwise remain silo’s• Clear mission and strategy? Branding• Setting priorities (making the right choices)• Capacity and capability? Expertise is key for credibility

and reputation (professionalism)• Positive political context?• Open to cultural change? ‘disruptive change’• Leadership of the board and taking responsibility

External perspective

• Digital revolution: internet

• Fading borders, shifting roles

• Convergence of areas:

- Data protection- Media- Consumer protection- Financial services- Competition

• Convergence of the institutional silos is necessary

Design and the LITER principles

• Legality: new legal mandates are necessary (convergence)

• Independence: multiple agencies less sentitive to capture

• Transparency: single purpose agencies more transparent

• Effectiveness: more cross fertilisation and combined expertise with one tier agencies