Research note. Competition Policy Enforcement in EU Member States: What is Independence for?

Research note by Mattia Guidi

This book is about how competition policy is enforced in the member states of the European Union, and it is a book focused on a particular feature of competition policy enforcers: Independence. As we know, the EU competition regime is characterized by a centralization of policy-making (at EU level) and by a decentralization of policy-enforcement (exercised jointly by the European Commission and by national competition authorities). The book seeks to explain why politicians in national political systems delegate policy enforcement to bodies on which they have little control, what are their expectations and incentives for doing so, and who gains and who loses from independence. With this aim in mind, the book also critically asks if independence is the right solution in this field, assessing its benefits and costs. The bottom line of the approach followed here is that every time we delegate power to independent agencies we must consider if this makes us, our societies, better off. This has implications for competition policy enforcement, of course, but also for an assessment of the increasing “agencification” that advanced and developing economies have undergone.

This approach reconnects the study of Independent regulatory agencies with an assessment of their democratic legitimacy. As Majone and other scholars have pointed out, the delegation of policy-making powers to bodies that are not accountable to governments, parliaments and voters is intrinsically problematic, unless one can argue that the policy delegated to independent regulatory agencies does not redistribute costs and benefits among social actors, but rather seeks to improve the conditions of everyone in a society. The first question to ask, therefore, is to what extent competition policy aims at economic efficiency and to what extent it carries out an implicit, but significant, redistribution of resources. Although in theory competition policy is about maximizing the general welfare, in practice it entails a substantial redistribution of wealth (in the form of reduction of price distortion, opening up of markets, increased innovation) from some economic actors to others. Therefore, this book does not study competition policy as something uncontested (an efficiency-seeking policy that only experts can deal with), but as a policy on which economic actors mobilize with different preferences, and on which politicians have mixed incentives. An empirical analysis of the causes of independence leads to conclude that regulatory autonomy is indeed more used by those countries that are perceived as less economically efficient.

There is then another aspect of the relationship between independence and democratic legitimacy that this book explores. Independence is extensively used in the regulation of competition policy under the assumption that having a regulator not subject to the electoral incentives that politicians face all the time is beneficial to enforcement. However, this widespread consensus on regulatory independence is in striking contradiction with the limited, partial, mixed evidence in support of it. This book seeks to make this contradiction explicit, and ask if there is a relationship between independence and performance of national competition agencies. The answer to this question, as far as this book is concerned, is negative: no empirical indicator (either indicators of economic performance or experts’ ratings) appears to be significantly affected by the agencies’ formal independence.

Thus, this book suggests that the consequences and the impact of independence should be constantly considered. No institutional arrangement is set in stone, and the main benchmark in assessing democratic institutions is how they serve the purpose they are made for. In this respect, national competition authorities seem to fall short of the target when it comes to justifying their institutional autonomy from political bodies. Yet, the results of this book must also be read as an invitation not to overestimate the role that institutional independence can play. National competition authorities are small bodies in complex systems, and their impact is not as crucial as the literature has assumed. We should also avoid underestimating the role of national parliaments and governments. Although national governments and parliaments rarely intervene in competition legislation, the competitiveness of a country is shaped by many political acts and decisions that do not fall within the scope of competition policy in its strict sense. Do the results of this book imply that we should re-politicize enforcement this policy field? Not necessarily. But there is little doubt that policy-makers interested in fostering competition policy enforcement must focus on other aspects (competences, procedures, agencies’ budgets) rather than on institutional independence alone.