Sectoral Regulation of Public Services and Competition (2 of 2)

23 de abril 2012, Sto. Dgo., R.D., Año III, volumen L

  

By: A. Noboa anoboa@npa.com.do

According to UNCTAD's[1] approach, all economic and administrative regulation by executive authorities, especially regarding sectors where the infrastructure industry operates, should be subject to a transparent review process by the competition defense agencies.

This perspective corresponds to the text of Article 20 of Law No. 42-08, on Competition Defense, which provides a mechanism for mandatory consultation, by sector regulators to PRO- COMPETENCIA, whose opinion is non-binding.

However, this provision is limited to the referral of legislative acts (and decisions of disciplinary procedures) when they are "related with the object of the law." Said object[2], defined by Article 1 of that legal piece, is very general and broad. The interpretation of the scope of mandatory referral might cause confusion.

Therefore, when drafting its implementing regulations, it is important for PRO- COMPETENCIA to take into account the settings set out by UNCTAD to organize more clearly the scenario of its intervention in sectoral issues. The UNCTAD suggests the referral of draft regulations if it:

1. Limits the independence and freedom of action of economic agents. 
2. Creates discriminatory conditions.
3. Creates favorable conditions for the activity of certain public and private companies.
4. May result in a restriction of competition.
5. Undermines the interests of companies or citizens.

All these settings fall under the scope of the legally protected rights, set out in Art 1.

Additionally, the UNCTAD also suggests substantial limitations in certain scenarios. PRO-COMPETENCIA's implementing regulation, could take these into account when organizing their supervisory role:

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1. When sectoral regulation is in conflict with the law and competition policy. Regulatory measures may have encouraged or even required, conduct or conditions that would otherwise constitute a violation of competition law, such as the territorial market allocation of distribution of electrical energy of legal origin.

 2.      Regulation can replace competition law and policy. In natural monopolies, regulation may try to control dominant positions directly, through pricing caps and control of entry and access. The evolution of technology may lead to reconsideration of the premises of a particular regulatory policy of prices or access conditions more effectively than the ex-post rules on competition defense, for example, in the energy transmission service.

  

 3      Regulation can duplicate competition law and policy. Coordination is of the essence. For example, sectoral regulatory measures may establish rules of fair competition or tendering rules to ensure ex-ante the competitive nature of tenders. In the telecommunications sector, for example, a joint review of existing regulations might be more effective, instead of a case by case referral of all tender files.

Angélica Noboa Pagán

April 12, 2012.

 

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[1] United Nations Conference on Trade and Development. Model Law: The relationships between a competition authority and regulatory bodies, including sectoral regulators. Trade and Development Board. Intergovernmental Group of Experts on Competition Law and Policy, July 2001 Sessions, Geneva, Switzerland.

[2] Object: This law is intended, as a matter of public interest, to promote and protect effective competition in order to increase economic efficiency in the markets of goods and services, to generate profit and value for consumers and users of these services in the country.