Presentation on theme: "John Schmidt Scottish Competition Law Forum 2014 5 June 2014 Does ex-ante regulation work?"— Presentation transcript:
John Schmidt Scottish Competition Law Forum June 2014 Does ex-ante regulation work?
What am I not talking about? 1 Lloyds – TSB split up and monitoring role RBS spin-off Post-mortem on individual cases and where the OFT/FSA/CMA/FCA got it wrong or got it right
What will I focus on? 2 Outline of where we are in terms of ex-ante vs ex-post Reflections on past issues in sectoral regulation Views on future challenges
Conclusion 3 It is good to have both ex-ante regulation and ex-post enforcement. BUT there is an upside if separating those two functions into different authorities. “Competition in enforcement” should provide: incentive for ex-ante regulators to get it right incentive to intervene/ change tack when something is not working as well as it could safety valve if the ex-ante regulator does not intervene We have the tools, possibly even too many tools. Effectiveness depends not on the quantity of tools or quantity of authorities but on the authorities’ willingness to act appropriately.
What have we got? General Competition Law Regime Ex-ante Ex-post Merger control State aid Article 101/Ch I ( ) Article 102/Ch II Market study/market reference/Sector Enqiury ( ) 4
What have we got? SectorRegulatory PowersCompetition Powers (ex-post) Ex-ante Ex-post Water OFWAT and CMA Concurrent ex-post enforcement in England WICS in Scotland has no competition enforcement powers. Gas and Electricity OFGEM/CMA concurrent Telecoms OFCOM/CMA concurrent Post CMA for competition enforcement Rail ORR and CMA concurrent Aviation CAA and CMA concurrent 5
Is it working? 6 dti/Treasury Report on concurrent competition powers (2006) “Where a regulated company is in breach of one of its existing licence conditions, the regulator will enforce the condition or consider whether it should be revoked – competition powers are generally only used where there are gaps in existing sectoral powers. […] this approach may just leave competition powers are a ‘backstop’.” para 4.5 “Sectoral regulation has played a key role in opening up markets and stimulating market development, removing barriers to entry and in ensuring fair, transparent pricing. HOWEVER (my emphasis) greater use of competition law has potential benefits. It appears where regulators have a choice, they usually choose to use their regulatory powers and do not use their concurrent competition powers.” para. 6.4
Where are we 8 years on? 7 On the whole, sectoral regulators still tend to rely on sectoral powers. On the whole, the OFT have not championed the use or filled the lacuna. What will the CMA do?
Intervention toolbox in the financial services sector Regime Regulation Powers (ex-ante) Regulation Powers (ex-post) Competition Powers FCA PSR (2015) PRA[ ] CMA 8
Past cases 9 YearEnforcement? PPI2006Reference/remedies PCA Market Study and updates 2007/2010/2011/2013 UTCCR (PCA) Test Case2007[ ] Retail banking review2010 Loans information exchange2010Fines/Settlement Private motor insurance2011Commitments LIBOR/Forex2011DGComp/FSA OTC/CDS2011DGComp PCA2012No reference Payment systems review2013 SME Market Study2013Transferred to CMA CMA taken on SME study and PCA review Ongoing
What are the challenges in the financial services sector? 10 Choosing the right cases. Not being hostage to keeping cases open at all cost: Closing cases Accepting undertakings early Not over-relying on market studies/MIRs. No ‘market allocation’ between the authorities on who should investigate. We have the tools, possibly even too many tools. Effectiveness depends not on the quantity of tools or quantity of authorities but on the authorities’ willingness to act appropriately.