Competition policy: getting independence just right

By David Donaldson

January 31, 2019

For many agencies that require independence, managing your relationship with the government of the day is a lot like finding your spot in space.

“The position you want to occupy in the solar system of regulation is very much like the earth’s,” says competition expert Professor William Kovacic.

“You want to be far enough away from the sun that you’re not burned to a crisp, but close enough that you’re not frozen out either.”

Agencies inevitably have to consider the political context in which they operate, he tells Professor Caron Beaton Wells on the most recent episode of her podcast, Competition Lore.

“That awareness is not a formula for timidity, but it is a bit of a caution for the agency in that it has to ask, ‘how many politically charged fights do we want to engage in at one time?'” says Kovacic, who is a former US trade commissioner.

“And if we’re going to do things that will arouse the wrath and opposition of significant commercial interests, how do we develop coalitions that will protect us as we do that?”

Penalties for breaching rules

Kovacic also criticised the tendency to fixate on the size of fines given to companies for breaching competition rules.

“The question we should ask persistently is what is being done to change behaviour, structure, in a way that produces better economic performance? And we get into a lot of trouble if fines are the proxy for whether or not we’re solving problems.”

But he is glad to see a greater emerging focus on getting implementation right, rather than simply drafting the perfect legislation.

“Elegant physics without excellent engineering is a formula for policy failure,” he argues.

Listen to the podcast:

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