1.1 Competition Policy and National Competition Authorities in the EU
Competition policy is more present in our everyday lives than we realize. The variety of choices we have as consumers, the prices we pay for products we purchase in the market and the degree of innovation our societies benefit from—all these things ultimately depend on the way competition policy is enforced. Far from being the embodiment of the relentless force of the market, competition policy is meant to shield the least powerful economic actors from the abuse of market power. Thus, it is a policy that is mainly aimed at making consumers, small and medium enterprises, and outsiders better off compared to big, established, powerful and rent-seeking firms.
Competition policy can virtually regulate every aspect of our economic life, because there are arrangements, agreements or practices everywhere that, by reducing fair competition, seek to reduce the power and the freedom of other economic actors. Yet, we rarely pay attention to the enforcement of competition policy. In most cases, we only follow competition-related news when some big transnational enterprise (Microsoft, Google) is put under investigation by the European Commission or by national agencies.
Beyond these big cases, many competition infringements (and investigations on them) occur. Who deals with them? Enforcement of competition policy, as we may know, is normally delegated to bodies that enjoy some form of independence from politics—the so-called national competition authorities (NCAs). On top of them, in the EU, we have the European Commission and its powerful Directorate-General for Competition (DG COMP). The rules that these bodies enforce do not originate from our national political systems, or do so only to a small extent. Thus, we have a policy decided mostly outside national borders, and enforced by institutional bodies that our politicians cannot fully control. Why have we ended up with this structure? How can we explain it? And, above all, is this structure efficient?
This is a book about how competition policy is enforced in the member states of the EU and is focused on independence. It seeks to explain why politicians delegate policy enforcement to bodies that they cannot 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 not only for competition policy enforcement, of course, but also for an assessment of the increasing “agencification” that advanced and developing economies have undergone.
1.2 Contribution to the Literature
This book contributes to the literature on EU competition policy, to the literature on regulatory agencies and to the literature on “varieties of capitalism”. The first, despite being characterized by a growing interest of scholars, especially in the last 20 years, can still be considered an under-researched field compared to other EU policies (Karagiannis 2010b). Because the policy was highly centralized from its creation, and the DG COMP of the European Commission played a major role in its development and expansion (see Warlouzet and Witschke 2012), scholars have mostly focused on how the policy was managed in Brussels (see McGowan and Wilks 1995; McGowan and Cini 1999; Damro 2006; Wigger and Nölke 2007; Buch-Hansen and Wigger 2010; Akman and Kassim 2010), while less attention has been paid to the interplay between the Commission and national agencies, and to the effects of the decentralization carried out in 2003 (exceptions are Budzinski and Christiansen 2005; McGowan 2005; Wilks 2005; Kassim and Wright 2009). This book aims at filling two gaps: on the one hand, it seeks to extend the study of this policy combining the traditional qualitative approach used in this field with quantitative evidence; on the other, it explicitly focuses on the interaction between EU level and national enforcement bodies and their independence.
Regarding this second aspect in particular, it must be acknowledged that the way competition enforcement takes place at member states’ level within the EU policy’s common framework has not been explored in sufficient detail. We have some contributions that give a very useful overview of day-to-day policy-making in the network composed of DG COMP and NCAs, but they are either mainly case studies and exploratory qualitative analyses (see Wilks and Bartle 2002; Harker 2007; Clough and Slater 2007; Wilks 2007) or they adopt a legal perspective (Cseres et al. 2006). In this book, the consequences of enforcement decentralization are analysed using a more comprehensive and general approach, using data on all EU member states and explicitly including NCA independence in the explanatory framework. Studies on national competition enforcers, in fact, have normally avoided focusing on differences in formal autonomy from politics. They have further avoided using independence to explain different regulatory strategies or performances. This book aims to integrate the literature on European competition policy in this respect.
This study also wants to contribute to the broader literature on independent regulatory agencies (IRAs). The establishment of IRAs in advanced economies as well as in developing countries has received considerable attention since the 2000s (see, e.g., Gilardi 2008; Levi-Faur 2005; Jordana et al. 2011; Maggetti 2012; Hanretty and Koop 2013; Guardiancich and Guidi 2015). Their creation, both at national (Elgie and McMenamin 2005; Gilardi 2002, 2005, 2008) and at EU level (Wonka and Rittberger 2010; Christensen and Nielsen 2010), has been interpreted as a consequence of the new “regulatory state” (Majone 1997; Vogel 1996; Thatcher 2002), and their independence from politics has been explained by the politicians’ need to “lock-in” policies, in order to enhance their credibility. However, the peculiarities of delegation to IRAs in specific sectors have not been explored in all policy fields, as if the rationale for establishing agencies at arm’s length from politicians were the same across policy fields. 1 By showing that a lot can be investigated by theorizing more carefully about the specific features of regulatory sectors, this book wants to contribute to reviving the literature on independent agencies and encourage similar endeavours in other regulatory policy fields. Moreover, while most literature on IRAs has concentrated on explaining why agencies are created independent, this study wants to link an account for the causes of independence to an assessment on its consequences.
Finally, this book seeks to develop an explanatory framework for NCA’s independence that, while relying extensively on the “classic” literature on delegation (see Sects. 3.3 and 3.4), integrates it with insights from political economy studies. The “varieties of capitalism” (VoC) framework (Hall and Soskice 2001b; Hancké et al. 2007) provides a powerful analytic lens through which we can hypothesize the existence of distinct “varieties of regulatory capitalism” (Levi-Faur 2006). As different models of capitalism rely on particular institutions to pursue their goals, realizing what Hall and Soskice call “institutional complementarities” (Hall and Soskice 2001a, 2003), we cannot ignore that regulatory agencies are the institutions that more than any other characterize the relationship between state and market. There is a remarkable gap in the VoC literature, which has so far ignored the growth of regulatory agencies, both in liberal and in coordinated market economies. At first sight, this seems to be a field in which such literature is not interested, as it represents a process of convergence across different countries. However, such conviction is based on the assumption that delegation to regulatory agencies takes the same form everywhere. The most important contribution of this book, in this respect, is to show that different economies react to the same systemic pressure in different ways.
1.3 The Argument
One of the main contributions of this book is to empirically test both why competition agencies in the EU are created independent and how their independence affects their performance. This approach reconnects the study of regulatory agencies, among which NCAs are the most important and long-established in most political systems, with an assessment of their democratic legitimacy. As Majone (1996, 1999) clearly 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 IRAs does not redistribute costs and benefits among social actors, but rather seeks to improve “the conditions of all, or almost all, individuals and groups in society” (Majone 1996: 5). Competition policy is so extensively delegated to autonomous agencies that Wilks and Bartle (2002: 150) argue that “delegation [is] a feature of competition policy”. The first question to ask, therefore, is to what extent this policy aims at economic efficiency and to what extent it carries out an implicit, but significant, redistribution of resources. An observation of reality leads us to conclude that, 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 (see Sect. 2.2.1). 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 (see also Buch-Hansen and Wigger 2011: 6).
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. I called this an assumption because it is rarely questioned in the public discourse, and there seems to be widespread consensus on the benefits of independence, in this and other fields. However, this widespread consensus on regulatory independence is in striking contradiction with the limited, partial, mixed evidence in support of it (see Sect. 5.2.1). This book seeks to make this contradiction explicit, and ask if there is a relationship be...