Competition in Regulated Industries

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Presentation transcript:

Competition in Regulated Industries Brian Telpner Deputy Assistant Director Mergers III Division Bureau of Competition US Federal Trade Commission Note: To create a Small Caps Effect in the title, Decrease the font size of all but the first letter of every word by 4 points. 6th Competition Forum of Ukraine March 2-3, 2017 The opinions expressed are those of the speaker and not the FTC or any individual Commissioner

Why Regulate? Competition leads to the best overall outcomes for consumers In very few “natural monopoly” markets, competition can lead to inefficient outcomes Natural monopolies are regulated to curb potential abuses of market power Examples Water supply Natural gas distribution

Nature & Scope of Regulation Most government regulation has little effect on competition Key types of regulations that affect competition Price controls Entry restrictions or other rules protecting incumbency advantage Rules that authorize or encourage otherwise prohibited conduct

Deregulating the Railroads Sector regulator granted broad regulatory powers (1887) Price Control over entry, exit, and mergers Innovation restricted Highly stagnant industry ill-equipped to compete with other modes of transportation Deregulation in late 1970s Led to better terms and prices for customers Led to greater innovation in shipping services

Competition in Regulated Industries Competition law remains in force, unless State clearly articulates a policy goal to limit competition, and State actively supervises regulatory scheme Merger example: ETE/Williams (2016) Merger of regulated natural gas pipelines serving Florida Unregulated aspects of business raised competitive concerns Discounts off full tariff rate Decisions to expand