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

2019 ACCC/AER Regulatory Conference Brisbane, 1 August 2019 Effective Legal Framework for Market Studies An OECD perspective Antonio Capobianco Acting Head, OECD Competition Division antonio.capobianco@oecd.org

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

What are 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)

“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: Analyse a market-wide practice or Improve its knowledge of a sector behaviour that is causing concern Clarify the application of certain Address public concerns about competition law concepts in a sector conduct in a sector Develop analysis of current or Develop the link between consumer and competition policy proposed regulation Prepare for potential enforcement Prepare for competition advocacy efforts action

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

Enforcement actions Market studies • Focus on specific firm(s) and either a • Broad focus on markets, sectors or a VS specific transaction or behaviour common type of behaviour • Subject to mandatory deadlines (for • Not always subject to mandatory mergers) or limitation periods (for deadlines (unless responding to anticompetitive conduct) government request) • Powers to require parties to produce • Information collection often voluntary information (but not always) • Need to define specific markets and • No need to define markets, may not reach definite outcome involve definite action by the authority 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? Resources • Is it better to have a dedicated team, or draw from case workers? • How broad or narrow should you go? Selection and scoping • Which sectors are most pressing? • Balance between effective results and Market participation concerns of a “fishing expedition” co-operation • Encourage proactive identification of remedies? • Powers to conduct studies Lack of clear legal • Powers to obtain information powers • Legal requirements to prepare studies at the request of government

Drivers for success • Well-defined purposes and goals for market Well-defined purposes studies maximize the use of resources and and goals • Lower the costs for both the authorities and stakeholders • A high degree of involvement by stakeholders Active cooperation by facilitate access to information and stakeholders • Increases chances of implementation of recommendations Clear & concise • Clear and concise recommendations increase recommendations the probability of their implementation • Clear legal powers increase certainty and Explicit Legal powers predictability

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% of 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% of 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 express legal powers; can request information through general Can request information information held gathering powers by governmental No powers 20% bodies and 3% private entities 63% Can request Can request information held information held by other by private entities governmental only bodies only 10% 2% Source : OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Powers to impose sanctions for non compliance to RFI 10% did not reply 8% lack powers to impose any sanctions 63% powers to impose 17% resort sanctions to courts directly to compel Source : OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Confidential information is protected by a majority Confidential Non-confidential Information Information Protection of information 57 authorities (98%) 26 authorities (43%) Same protection for information whether obtained 46 authorities out of 59 for market studies or (77%) enforcement actions Possibility of using 38 authorities: 43 authorities: information obtained on ▪ always: 30 (50%) ▪ always: 37 (62%) market studies for ▪ under conditions: 8 ▪ under conditions: 6 subsequent enforcement (13%) (10%) actions Source : OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Due process protections in case of use in enforcement actions No 8% Yes always 92% 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 vs market investigations Market Market studies investigations No Remedies Enforceable remedies VS Rare tool Common tool (UK, Mexico, Iceland) Lower due process Similar due process rights than in rights than in enforcement cases enforcement cases

The market study process I. II. III. Initial selection Scoping and Preliminary of industries/ project IV. information sectors planning Methodology collection selection Follow-up studies V. Additional information VII. VIII. collection Selecting VI. Potential Analysis remedies, ex-post reporting and assessment outreach

Market studies and their potential outcomes Source : OECD (2016), Survey replies from 62 national authorities, 59 jurisdictions

Market study findings categorised based on 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