Effective Legal Framework for Market Studies An OECD perspective - - PowerPoint PPT Presentation

Effective Legal Framework for Market Studies

An OECD perspective

Antonio Capobianco Acting Head, OECD Competition Division antonio.capobianco@oecd.org

2019 ACCC/AER Regulatory Conference Brisbane, 1 August 2019

Outline

What are market studies? Challenges in conducting market studies Legal powers for conducting market studies Market study outcomes OECD resources on market studies

Outline

What are market studies? Challenges in conducting market studies Legal powers for conducting market studies Market study outcomes OECD resources on market studies

• Studies of specific markets or economic sectors (e.g. Chile,

South Africa, Estonia, El Salvador);

• Studies of the competitive conditions in a market (e.g. Australia,

Canada, Finland, Mexico, Sweden, Turkey, Zambia, Singapore, Hong Kong, Argentina and Serbia);

• Fact-finding surveys (Japan);
• Inquiries to assess signs of distortion or restriction of

competition (EU, Czech Republic, Hungary, Malta, Slovenia);

• Industry survey, and economic analysis (Chinese Taipei);
• Examinations into causes of why particular markets may not be

working well, taking an overview of regulatory and other economic drivers and patterns of consumer and business behaviour (UK)

What are market studies?

• A source of information and the possibility of a deeper insight

into the functioning of concrete market and is as such, if an unlawful conduct is detected, the basis for the initiation of proceedings (Croatia);

• An in-depth analysis conducted by the Competition Authority on

Spanish markets with the objective to gain a thorough understanding of how sectors, markets, or market practices are working”(Spain);

• Any studies into a market that relate to the functions pursued

by the competition authority (Ireland, U.S. FTC and the Netherlands)

What are market studies?

“Market studies are research projects conducted to gain an in-depth understanding of how sectors, markets, or market practices are working.” (ICN Market Studies Handbook)

When are market studies used?

When there are potential competition problems in a sector but a formal investigation may not be appropriate, including when an agency wants to: Prepare for potential enforcement action Analyse a market-wide practice or behaviour that is causing concern Improve its knowledge of a sector Address public concerns about conduct in a sector Clarify the application of certain competition law concepts in a sector Develop analysis of current or proposed regulation Develop the link between consumer and competition policy Prepare for competition advocacy efforts

Competition authorities shared their primary motivations to conduct market studies…

Source: OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Reasons to conduct a market study…

• A sector is not working well for consumers but

no suspicion of a violation: 72%

• A market

/ sector is not working well for consumers but more investigation is needed to deciding whether to initiate an enforcement action: 70%

• These

two main different reasons are not mutually exclusive.

Source: OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Market studies

VS

• Focus on specific firm(s) and either a

specific transaction or behaviour

• Subject to mandatory deadlines (for

mergers) or limitation periods (for anticompetitive conduct)

• Powers to require parties to produce

information

• Need to define specific markets and

reach definite outcome

• Broad focus on markets, sectors or a

common type of behaviour

• Not always subject to mandatory

deadlines (unless responding to government request)

• Information collection often voluntary

(but not always)

• No need to define markets, may not

involve definite action by the authority

Enforcement actions

Credits Getty Images

Outline

What are market studies? Challenges in conducting market studies Legal powers for conducting market studies Market study outcomes OECD resources on market studies

Common challenges

• How to balance with investigative priorities?
• Is it better to have a dedicated team, or draw

from case workers?

Resources

• How broad or narrow should you go?
• Which sectors are most pressing?

Selection and scoping

• Balance between effective results and

concerns of a “fishing expedition”

• Encourage proactive identification of

remedies?

Market participation co-operation

• Powers to conduct studies
• Powers to obtain information
• Legal requirements to prepare studies at the

request of government

Lack of clear legal powers

Drivers for success

• Well-defined purposes and goals for market

studies maximize the use of resources and

• Lower the costs for both the authorities and

stakeholders

Well-defined purposes and goals

• A high degree of involvement by stakeholders

facilitate access to information and

• Increases chances of implementation of

recommendations

Active cooperation by stakeholders

• Clear and concise recommendations increase

the probability of their implementation

Clear & concise recommendations

• Clear legal powers increase certainty and

predictability

Explicit Legal powers

Outline

What are market studies? Challenges in conducting market studies Legal powers for conducting market studies Market study outcomes OECD resources on market studies

Legal powers to carry out market studies

• 68%
• f

surveyed competition authorities that conduct market studies enjoy specific powers for that purpose.

• 26% perform market studies under their general

powers to protect and foster competition, which they interpret as including powers to conduct market studies.

• 3% do not have powers to perform market studies.

Source: OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Legal powers to carry out market studies

• 68%
• f

surveyed competition authorities that conduct market studies enjoy specific powers for that purpose.

• 26% perform market studies under their general

powers to protect and foster competition, which they interpret as including powers to conduct market studies.

• 3% do not have powers to perform market studies.

Source: OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Information gathering powers are key

No powers 3% Can request information held by other governmental bodies only 2% Can request information held by private entities

• nly

10% Can request information held by governmental bodies and private entities 63% No express legal powers; can request information through general information gathering powers 20% Source: OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Powers to impose sanctions for non compliance to RFI

63% powers to impose sanctions directly

17% resort to courts to compel 8% lack powers to impose any sanctions 10% did not reply

Source: OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Confidential information is protected by a majority

Confidential Information Non-confidential Information Protection of information 57 authorities (98%) 26 authorities (43%) Same protection for information whether obtained for market studies or enforcement actions 46 authorities out of 59 (77%) Possibility of using information obtained on market studies for subsequent enforcement actions 38 authorities: ▪ always: 30 (50%) ▪ under conditions: 8 (13%) 43 authorities: ▪ always: 37 (62%) ▪ under conditions: 6 (10%)

Source: OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Due process protections in case of use in enforcement actions

Yes always 92% No 8%

Source: OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Outline

What are market studies? Challenges in conducting market studies Legal powers for conducting market studies Market study outcomes OECD resources on market studies

Market studies

No Remedies Common tool Lower due process rights than in enforcement cases

Market investigations

Enforceable remedies Rare tool (UK, Mexico, Iceland) Similar due process rights than in enforcement cases

Market studies vs market investigations

VS

The market study process

I. Initial selection

• f industries/

sectors II. Scoping and project planning III. Preliminary information collection IV. Methodology selection V. Additional information collection VI. Analysis VII. Selecting remedies, reporting and

• utreach

VIII. Potential ex-post assessment

Follow-up studies

Market studies and their potential

• utcomes

Source: OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Market study findings categorised based

• n the type of problem identified

Enforcement matters Legislative, regulatory or policy matters Consumer protection matters No problems detected

Enforcement matters arise when a market study…

• Identifies features of the market that

increase the risk of anticompetitive conduct

• Uncovers clear evidence of

anticompetitive conduct

• Recognises a lack of clarity

regarding whether some conduct is permitted

• Finds signs of competition problems

requiring follow-up market studies or investigations

Key outcome Potential remedy

Key outcomes for market studies identifying enforcement problems

Enforcement action Improved market participant and case handler awareness

Initiate investigation into anticompetitive conduct Clarify authority views on conduct that may have a differing interpretation by market participants Follow-up market studies

Enforcement problems identified

Legislative, regulatory or policy matters arise when…

• Existing legislation distorts competition
• Proposed regulations or legislation

may distort competition

• Market failures may require a

regulatory response

• The decisions of regulators or public

procurement officers distort competition

• The authority wishes to promote a

competition mind-set among sector regulators

Key outcome Potential remedy

Key outcomes for market studies focusing on legislation or policy

Policy advocacy and legislative change

Develop recommendations regarding existing legislative, regulatory or policy proposals Develop new proposals for legislative, regulatory or policy changes Promote competition awareness among sector regulators or policymakers

Legislative, regulatory or policy matters identified

Consumer protection matters arise when…

• There is evidence of

consumer protection law violations

• Markets exhibit

substantial information asymmetries

• Consumers exhibit a low

tendency to switch, even if it is in their interests

Key outcome Potential remedy

Key outcomes for market studies focusing on consumer issues

Improved consumer and market participant awareness

Refer matter to consumer protection body or initiate consumer protection investigation Conduct advocacy activities and produce materials to improve consumer awareness Conduct outreach to inform firms of the type of conduct that violates consumer protection laws

Consumer issues identified

What if a market study finds no competition problems?

• Market studies can be used to explain the

functioning of a market and dispel misconceptions

• These studies are more rare (often

authorities have an idea of problems before embarking on studies), but can be important when:

– Responding to public/political concerns – Meeting obligations under legislation

• Need to balance resource expenditure with

benefits of competition promotion

Outline

What are market studies? Challenges in conducting market studies Legal powers for conducting market studies Market study outcomes OECD resources on market studies

OECD Resources

To access: oe.cd/ms4

Thank you!

Effective Legal Framework for Market Studies

An OECD perspective

Antonio Capobianco Acting Head, OECD Competition Division antonio.capobianco@oecd.org

2019 ACCC/AER Regulatory Conference Brisbane, 21 July 2019