Fingleton: An authority with few bullets must aim carefully

Global Competition Review, November 21, 2013

Competition authorities with scarce human and budgetary resources have to select their cases particularly carefully to avoid undermining enforcement efforts, says the former head of the UK’s Office of Fair Trading. Katy Oglethorpe in New Delhi

Speaking at the 3rd BRICS International Competition Conference in New Delhi today, John Fingleton, of Fingleton Associates in London, was part of a panel discussing issues and challenges in developing an effective agency for competition enforcement.

“If you have very little resources you have very few bullets in your gun – you can’t afford to be firing randomly,” said Fingleton. “If you arrive at lots of false positives the legitimacy of the whole system goes down. You need to put systems in place that ensure you hit the correct target.”

Fellow panellist Frederic Jenny, chairman of the Organisation for Economic Cooperation & Development’s (OECD) competition law and policy committee, agreed that the choice of cases is also “very important” for new authorities in developing countries.

New agencies need to ensure they target areas based on their “social and political prominence”, as has been seen in Chile’s pharmaceutical, South Africa’s bread and India’s steel cartel cases. Agencies should also target cases where it is possible to move quickly.

“[An agency] has to choose cases that have a serious impact on the economy,” he said.

Jenny said the first challenge faced by new authorities is that their country has no culture or practice of competition when they start. “They have not only to enforce but to convince sceptical stakeholders that what they do is good for the economy,” he said.

This is challenging, said Jenny, as there is relatively little economic research that conclusively demonstrates the link between competition enforcement and macro-economic growth.

But Jenny said newer authorities were “lucky” compared to older institutions, in having access to an “enormous amount of material” and the experience of more established jurisdictions. Technical know-how was “more difficult to transmit”, he said, advocating the adoption of secondments and staff exchanges to facilitate practical learning.

Fingleton said good leadership was particularly important – as the head of a competition authority, if you fail to “make the link between the drudgery of going through a file and the positive impact on consumers […], you’re not engaged in leadership even if you have excellent people and excellent systems in place”.

The toughest aspect of leadership, said Fingleton, was publically representing the agency.

“Most of us find leadership inside the agency to be easy compared to leadership outside the agency,” he said.

Fingleton said there had been a rise in the political independence of competition authorities – with both older agencies such as the UK and France establishing their independence from government, and new agencies acting as independent bodies from the offset. But one shouldn’t confuse independence with disinterest, he said: “It is essential for the leaders of competition authorites to be engaged politically”.

Chairing the panel, William Kovacic, professor at George Washington University Law School, said while the design of a competition law and regime is often a “sexy” topic, implementation attracts less attention. But to ignore the implementation, he said, is at an authority’s “great peril”.

Ambitious policy initiatives tend to collapse, said Kovacic, unless authorities can implement its rules effectively. When these policies do collapse the authority pays a price in terms of a great increase in public cynicism and a creeping lack of institutional legitimacy.

The conference concludes today.

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