Competition regulation - in smaller economies and new challenges in times of crisis

1. KONKURRENCERAADGIVNING.dk Competition adviser Niels Rytter Competition regulation - in smaller economies and new challenges in times of crisis Aarhus Shool of business, University of AarhusDecember 7th 2009

2. Competition regulation the common global track • Prohibition against abuse of dominant position (EU, US and most OECD - countries) • Prohibition against restrictive business practices (EU, US and most OECD - countries) • Merger control (EU and US) www.konkurrenceraadgivning.dk

3. Competition regulationThe Danish sidetrack • General exception for agreements etc. restricting competition if turnover is less tha 150 mio. DKK (§ 7, stk. 2) • General exception for agreements restricting competition if turnover is less than 1 billion DKK + market share is less than 10% (§ 7, stk.1). • Individual exemptions aforehand for restrictive business practices enchancing efficiency on application (§ 8, stk. 1) • Order dominant firms to forward general commercial conditions (and to prepare such conditions if they do not exist) for a period of 2 years (§ 10 a) • Prohibition against state aid distorting competition (§ 11 a) • Calculation regulation of public tariffs relating to public services under the regime of free consumer choice • Special regulation on binding promises to avoid intervention (§ 16 a) • Competition Council with representatives from trade organizations www.konkurrenceraadgivning.dk

4. Competition cases 2004-09 www.konkurrenceraadgivning.dk

5. Challenges for competition regulation in smaller economies • High concentration ratios/high import ratios • Many oligopolies and cross-ownerships • High barriers to entry (e.g. small scale,high costs of transportation, language and culture) • High risk for collective dominance and tacit collusion. High risk for exclusive behaviour, exchange of information between competitors and insufficient transparency • Risk for regulatory captureand low public procurement ratio www.konkurrenceraadgivning.dk

6. Good competition regulation Good competition regulation has to be: • Necessary • Sufficient • EU-conform • Transparent, understandable and predictable • Easy to administer • Non discriminatory • Able to meet long term challenges (solid, dynamic and durable) www.konkurrenceraadgivning.dk

7. Regulatory reformAll in one • National competition regulation (the Danisk sidetrack) not complying with EU competition regulation shall be abolished, e.g. national de minimis regulation and indvidual exemptions and exceptions. The organizational set ups (with, e.g. councils and board of directors) shall be reconsidered. • Prohibitions without EU dimension on abuse of dominant position and restrictive business practices and merger regulation without EU dimension (the common global track) should be extended to better correspond with EU law and EU practices. • Mergers should be examined in the same way regardless of whether the Danish Competition Act or the competition rules of the EU is applied. • National thresholds in merger cases without EU-dimension are still needed. • Subjectpublic business activities to more competition by publishing analyses on the state of competition, efficiency and what to be done • Assess restrictions of competition caused by public regulations by publishing analyses on how to de- or reregulate them with regard to public concerns www.konkurrenceraadgivning.dk

8. Administrative reform • Plan for simplicity (keep it simple), more transparency and increased administrative efficiency. • Focus much more on information of firms and consumers on competition rules in order to prevent breaches of competition law (compliance manuals) • Competence and professional experience among case handlers are decisive for the administrative efficiency. The number of case handlers is less important • Change of competition culture takes time. • Clear and practical information on the content of the competition rules and on the benefits of competition must be communicated to businesses and consumers alike in a coherent manner (issues letters). www.konkurrenceraadgivning.dk

9. Good administrative practices (1) • Clear unproblematic mergers without investigation and without having to publish reasons. More simple procedures and less obligatory information especially in simple merger cases • Investigate abuse before delineating the market and before an in depth analysis of individual and collective dominance is undertaken • Issues letter in merger cases • More competition guidelines and advocacy www.konkurrenceraadgivning.dk

10. Good administrative practices (2) • Effect based versus form based decisions • Analytical based decisions versus intuitive assesments • More competency and experience among casehandlers • More freedom for the authority to prioritize • Under certain conditions, the Danish Competition Authority itself can be entitled to decide on financial penalties for infringement of the act according to an objective and fixed scale. • Enforcement and sanctions (If no reaction from the authorities for a period of 3 months the case shall be closed) www.konkurrenceraadgivning.dk

11. Conclusion • Effective competition and efficient competition regulation are vital especially for smaller economies • Reform of competition regulation is needed • Not more but less regulation • Keep it simple: Adopt EU Competition Law without cross border effects. Make competition regulation compatible with EU and harmonize • Reform of competition administration is needed - More advocacy, guidelines and freedom to prioritize • Competition regulation is as strong as its sanctions www.konkurrenceraadgivning.dk

12. KONKURRENCERAADGIVNING.dk Competition adviser Niels Rytter A bit on competition regulation in times of crisis Aarhus School of Business, University of AarhusDecember 7th 2009

13. Challenges during times of an economic crisis In a deep economic crisis competition regulation faces challenges in the form of: • more selective state aid • more mergers and increasing concentration • more state intervention and public ownership • Calls for crisis cartels www.konkurrenceraadgivning.dk

14. How do we meet these challenges? • Permanent and temporary EU state aid regulation is very flexible (e.g. special regulation of the financial sector) • Failing firm defense becomes more relevant • Flexible application of SGEI-regulation (services of general economic interest) may be needed • The regulatory framework, within which the prohibitions against restrictive business practices and abuse of dominant position are set, allows us to address the challenges constructively – i.e. if the competiton authorities are flexible and do understand how to balance between competitiveness in the short as well as in the long run www.konkurrenceraadgivning.dk

15. Conclusion • The fundamental problem is to reestablish healthy and vital businesses cases in both the short and the long run • Under special circumstances this can be done by: • More state aid • More mergers • Failing firm defense, crisis cartels • More state intervention • And this can be done inside the framework of current competition regulation and inside the EU-framework of permanent and temporary state aid regulation www.konkurrenceraadgivning.dk