Mainstreaming of Competition Advocacy: the United States

Experience

Russell W. Damtoft Associate Director, Office of International Affairs

U.S. Federal Trade Commission

OECD Latin America Competition Forum

Montevideo, Uruguay, September 17, 2014 The views expressed herein are those of the speaker and do not necessarily

represent the views of the Federal Trade Commission or any individual

Commissioner.

Moving from Theory to Practice

• Last year in Lima, FTC

Chairwoman Ramirez

spoke about the

importance of

addressing

anticompetitive

governmental policies.

• This year, we turn to the

practical question of

turning theory into

practice.

2

Making our Case

• How do we get competition on the

legislative and regulatory agenda?

– The theory behind advocating for pro-

competitive governmental policy is well

understood.

– But legislators and regulators must be

responsive to many stakeholders.

– Stakeholders promoting competition can

be few and far between.

3

Where do we start?

• Three steps to facilitate successful

advocacy:

– FIRST: Identify issues that are important

to consumers

– SECOND: Establish relationships with

regulators that focus on alignment of

interests with competition agencies

– THIRD: Work with regulators to identify

ways to harmonize competition with

regulatory goals 4

Step 1: Pick the Right Issues

• Cases with consumer appeal are more likely

to gain support among policymakers.

• Identify competition issues with direct and

easily understandable impacts on consumers:

price effects or diminished access to goods

and services.

• Successful advocacy in such cases can also

pave the way for advocacy in sectors where

the impact is less direct.

5

Example: Dental Therapists

• Dental therapists can offer

some dental services that

dentists provide, perhaps at

lower cost.

• A non-government body that

sets dental education

accreditation standards

considered proposals that

could restrict the ability of

therapists to practice

independently.

6

• Effects would include:

– Reduced competition

– Limited access to dental

services

– Discouraged innovative

educational programs.

Example: Primary Health Care

• Advanced practice nurses can provide many basic health care services.

• Physician groups sought regulations to require nurses to affiliate with doctors.

• Effects would include: – Possible higher costs

– Limited access to services

– Particular harm to underserved populations

– Inhibit innovative methods of service delivery.

7

Example: Urban Transportation Services

• “Digital dispatch” services allow consumers to arrange and pay for transportation by smartphone application

• Taxi operators asked regulators to restrict the use of these “apps.”

• Effects would include: – reduce price competition;

– eliminate an innovative new technology.

8

Example: Real Estate Services

• Most homes sold through brokers.

• Brokers are paid a percentage of the

price (usually 6%).

• Discount brokers and Internet sites

challenge traditional brokers.

• Traditional brokers sought

requirements that would:

– Limit fee-for-service providers, or

– Require brokers to provide a full

range of service.

• Effects would include:

– Preventing brokers from unbundling

services;

– Restricting innovative forms of delivery;

– Increasing costs

9

Step 2: Build Relationships of Trust

• Regulators and competition

agencies have a common interest:

protecting the consumer.

– Regulators protect against particular

types of harm (health, safety, fraud)

– Competition promotes lower prices,

increased quality, service, and

innovation

• In principle, there is no conflict

between these goals.

– Competition agencies can help

the regulator recognize how

their interests align 10

Alignment of Interests

• The challenge is to:

– build alliances with regulators, and

– develop a shared view that competition is

consistent with regulators’ own goals, and can even

help further those goals.

• Alignment of regulator and competition agency

interests is a “win-win” outcome for consumer

welfare: benefits of competition and regulation

11

Example: Dental Therapists

12

• Dental regulators ensure

that treatment is performed

only by trained, competent

individuals.

• Competition by qualified

dental therapists can

reduce costs and make

basic dental care available

to more consumers.

• With interests aligned,

regulatory solutions can

protect consumers and

allow competition to flourish

Example: Advance Practice Nurses

13

• Regulators protect patients

from incompetent care,

unsanitary conditions,

unsafe procedures and

medicines.

• Competition from qualified

health nurses can reduce

costs and create new health

care options for consumers.

• With interests aligned,

patients received the

protection of regulatory

solutions and the benefits of

competition

Example: Urban Transportation

• Regulators are charged

with ensuring vehicle

safety, insurance, and

prevention of deceptive

practices.

• Permitting entry by firms

that offer safe but more

flexible and affordable

urban transportation

options should be

consistent with taxi

regulators’ goals.

14

Building Relationships

• Our goal is to build a culture of shared problem-

solving where the competition agency’s expertise

can complement the regulator’s sectoral

expertise:

– Start at the staff level

– Become a resource

– Attend conferences, establish liaison arrangements,

detail of staff between agencies, etc.

– Share expertise and analysis in a constructive and

mutually beneficial way fashion.

• This requires interpersonal skills as much as

competition expertise.

15

Nurture the Relationship

• Show regulators your interest in maintaining a

relationship over time and that you want to

learn about developments in the regulatory

scheme that may impact competition.

• Consider how and when to intervene: the

goal is not to publicly embarrass or

undermine support for the regulators.

– Informal (behind the scenes) versus formal

(public)

– Experience suggests greater receptivity and

success when the comment is invited.

16

Regulatory Capture

• Sometimes, regulators’ views become so closely aligned with the regulated sector that the regulator does not distinguish between industry and consumer interests.

• Alignment of interests strategy may not always work in such cases.

• In a few instances, U.S. Agencies have taken law enforcement action against regulators.

17

Step 3: Balancing Competition & Regulation

• Once suitable topics for intervention

have been identified and alliances have

been established, help the regulator to:

– Develop a framework for understanding the

impact of an anticompetitive regulation;

and

– Identify options that impose less or no

restrictions on competition while achieving

other legitimate policy goals

18

Analytical Tools

• “Because I said so” doesn’t work!

• Tools to harmonize the regulatory goal and

objectives of competition may include:

– Studies quantifying the cost of regulation;

– An analytical framework to explain the likely

effect on price and quality;

– Experience of other jurisdictions that illustrate

the potential for consumer harm; and

– Options for avoiding a negative impact while

achieving regulatory goals.

19

Example: Dental Therapy

• In the dental therapy

case, FTC staff

pointed to Australia,

where dental

therapists have

been providing

services

autonomously and

safely for years.

20

Example: Advance Practice Nursing

• FTC gathered statistics

on the harms of limited

access to healthcare in

West Virginia and

identified potentially

hidden costs of

regulation

• Cited evidence of safe

practice by advanced

practice nurses

21

Examples: Urban Transportation

• FTC staff submitted

formal comments to

regulators that:

• identified the types of

consumer harm that

might result, and

• Highlighted less

restrictive alternatives to

achieve legitimate public

interest goals

22

Example: Real Estate Services

• DOJ letter to

Montana regulators

explained how other

states had allowed

competition without

bad results

• Making cost of

regulation

transparent through

website.

23

Further resources

• OECD – Competition Assessment Toolkit

(contains tools to assist governments in evaluating new and existing draft laws)

• The International Competition Network – Recommended Practice on Competition

Assessment

– Advocacy Working Group Toolkits

– The Curriculum Project Advocacy Module

• The Inter American Competition Alliance – The Alliance has held several calls to

discuss advocacy experiences of member agencies.

24

Conclusion

• Bringing competition policy into the

mainstream of public policy is a necessary

complement to a competition advocacy

strategy.

• A significant body of work has gone into

creating such tools.

• While challenges exist, success can be

achieved when a carefully crafted and

thoughtful strategy is employed.

25