Adam Jasser, President of the Office of Competition and Consumer Protection (UOKiK) delivered a speech on Independence and interplay with accountability; conflicts of interests and incompatibilities at the 10^th Global Competition Law Centre Annual Conference, which is being held in Brussels on 6-7 November.

The GCLC conference is dedicated to Regulation 1/2003 which concerns the implementation of Article 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) and its first ten years of application. The event aims to summarize the series of decentralized lunch talks concerning the implementation of Regulation 1/2003 at national level, organized in France, Italy, Poland and Belgium throughout 2013 and 2014.

Full text of the speech is featured below.

Ladies and Gentlemen,

It’s an honour to speak at this acclaimed conference. I am not sure why the organisers have chosen a novice competition authority head to delve into the tricky subject of independence and accountability. Because I generally do not believe in coincidences, I assume this was done by design. And because I generally do believe in positive motivations, I hope this particular design was not to publicly expose my ineptitude.

But then, this may well be exactly what you get out of this presentation. For this, allow me to apologise up front. You are of course free to blame the organisers afterwards, although this is, I believe, a no-refunds policy event. 

Ladies and Gentlemen,

The independence of competition authorities as well as other regulators or even central banks is a hot topic in the post-crisis environment. In our field, a few months ago the Commission published its communication to the Council and the European Parliament on 10 years of antitrust enforcement under Regulation 1/2003 (one two thousand three), which underlines the need for greater institutional independence of national competition authorities.

The communication states that “It is necessary to ensure that National Competition Authorities can execute their tasks in an impartial and independent manner. For this purpose, minimum guarantees are needed to ensure the independence of NCAs and their management or board members and to have NCAs endowed with sufficient human and financial resources”.

The Commission suggests that such guarantees should comprise clear rules of appointment and dismissal, budgetary independence and adequate staffing. 

It’s hard to disagree with these recommendations. Institutional independence is a cornerstone of fair and impartial enforcement of competition law. It provides resilience and protection from political pressure or vested interests. 

Just like the independence of central banks and some sector-specific regulators, it is part of the system of checks and balances which have proven essential for making liberal democracies successful in the past decades.

So why is this a hot topic? In competition enforcement, the reason seems relatively straightforward – it seems that it is sometimes hard to achieve an EU-wide consistency because of the different institutional set-up of national agencies. Hence, the argument for a common minimum requirement for independence and common standards in the enforcement tools.

But there is a wider and more fundamental reason why the independence-accountability discussion is so important for all independent agencies in the aftermath of the crisis.

It comes from the realisation that considerable freedom to act independently of politics did not translate into decisive and adequate action by regulators, financial market supervisors or even central banks to correct market failures and competition distortions before they almost got out of hand. There is a discussion going on whether this was due to regulatory capture, overconfidence or flawed information sharing and cooperation between various agencies and ministries.

One thing is clear, however, that it was not due to political pressure or shortage of  institutional independence.  Even if the wider public, much of the academia and many governments seemed fixated by the idea of the end of the economic cycle and efficient markets, many agencies had enough clout and authority to interrupt this dangerous dream. It was exactly for such scenarios that their independence was given to them: to make them immune to potential political or even popular backlash for spoiling the party.

To complicate things further, once the crisis was in full swing, the independence of some of those agencies as well as their ability to cooperate with government proved critical in containing it. As we all know, there was a moment in the euro zone crisis when the power and credibility of one such institution stemmed the hemorrhage which seemed to threaten the existence of the European Union. 

The relief at this bold action was, however, accompanied by question marks over its legitimacy and ultimately the accountability of technocratic institutions. Not just to the democratically mandated political powers, but first and foremost to the wider public. No wonder, therefore, that the topic of „the EU’s democratic deficit” is an obligatory item on the agendas of the numerous conferences devoted to the „future of Europe”. 

Is this an important issue going further? This is above my pay grade to discuss, but I can probably risk stating the obvious - there is discernible public pressure for more accountability of bureaucracies. It’s visible in the emergence of big data society and the increasingly powerful role social networks play in the democratic discourse. In consumer rights enforcement, which in some EU countries including Poland is institutionally linked to competition enforcement, this is already a fact of life.

So how do we reconcile the need to maintain the independence while strengthening accountability and efficiency of market regulators, including the competition agencies? Where is the balance between independence on the one hand and political influence on the other?

I’m afraid there will be no universal one-size-fits-all answer. We will work it out as we go forward adapting to the new normal after the crisis and learning from one another. One clue might come from our British colleagues. As you know, they have just revamped their competition protection system by combining two hitherto separate agencies – the competition authority and the consumer protection agency. The idea, which we have practiced in Poland for several years now, is to strengthen the link between protecting consumers and enforcing fair competition, in the hope that this will create greater efficiency.  In the words of the chairman of this new Competition and Markets Authority, David Currie, „competition problems often manifest (themselves) as failures of compliance with consumer protection law, preventing consumers from making informed choices and thus from driving competition.”

I couldn’t agree more – miss-selling, misinformation and cavalier attitude to consumers are key issues we identify in Poland as a threat to competition.

But the creation of the CMA was accompanied by two other important changes in the UK, drawn from the lessons of the crisis. One is the introduction of a „strategic government steer” for the CMA. The other is the creation of an institutionalised Competition Network, formed around the CMA and comprising sector-specific regulators and agencies dealing with competition enforcement and broad market regulation.

Now, these measures could be interpreted as tampering with independence of both the CMA and the separate regulators. And yet, both seem an interesting way to address the challenge of increasing the efficiency and accountability of these institutions.

As far as I understand the „government steer” for the CMA, its purpose seems to ensure that there is an alignment between competition enforcement and broader economic policy goals. The obligation for sector-specific regulators and the CMA to work as a network should enable better information sharing, joint investigations and faster reaction to competition abuse or market failures in specific sectors. I suspect it is also meant to help prevent regulatory capture and give competition enforcement a stronger ex-ante flavour. 

So, is this a trade-off in which independence of all these institutions is sacrificed in the name of increased efficiency? More crucially, does that mean the government will exercise too much influence over enforcement? 

I’m not sure the CMA would like me to be their spokesman, so I will revert to David Currie again. 

„The steer,” he said in a speech in January, „is better understood as putting communication between government and the CMA on a more transparent basis and reflecting the importance of the competition regime as part of the government’s toolkit. It does not bind the CMA, but rather acknowledges the reality that independent regulators have to be sensitive to commercial and political developments and must maintain dialogue with government.”

Ladies and gentlemen,

I can just hear you thinking, „if this is to be understood as some kind of pragmatic rather than rules-bound approach, a lot will depend on the judgment of competition executives what is and isn’t interference, what is and isn’t a legitimate competition concern of the government. Instead of having a clear red line, there will be a shifting line in the sand.”

That indeed could be the case. But it doesn’t have to be, as I will now argue. First of all, it already isn’t as clear-cut as one can imagine and the NCAs already need to maneuver in such waters – take the topic of the telecom sector consolidation as one example. Second, if this is not black and white and if making a sound, impartial judgment based on multi-stakeholder input is the key element here, it can actually enhance a competition authority’s independence, while crucially also increasing its accountability.

I think that taking the government’s legitimate right to set policy objectives into consideration, or in other words showing this „sensitivity to commercial and political developments”, is a way of acknowledging the government’s democratic legitimacy in the same way we acknowledge the principal right of businesses to innovate and seek market domination. And like with businesses, we may need to vigorously oppose such policies if we have evidence that they will harm competition and economic welfare. In other words, we must apply procedural fairness as much to dealings with corporate as political or non-governmental stakeholders. This is going to be the ultimate proof of integrity and ability to defend public interest. Without such integrity, independence can be just a facade.  

Ladies and gentlemen,

Indeed it is the evidence obtained thorough impartial, procedural evaluation of each policy and each competition case followed by appropriate action that lies at the heart of both independence and accountability. 

Both can benefit from a number of measures other than changes in the legal framework of institutional independence. Since my appointment in March we implemented some of them at the Polish authority, the UOKiK. 

First, we boosted the role of economic analysis in all decisions and investigations. The economic department has effective veto power over all decisions;

Second, we communicated very clearly to stakeholders that we are open to dialogue and are happy to be challenged in terms of evidence or sector-specific knowledge;  

Third, we boosted the role of internal evaluation and challenging prior to issuing decisions;

Fourth, we appointed an advisory council comprising leading competition law academics and economists. One of its key functions will be to advise the authority on how to view government policies that affect competition;

Fifth, we increased the collegiality of decision-making by forming a „leadership team” comprised of the president, two vice-presidents and the chief economist, which reviews each controversial case and seeks consensus. This is important because under the Polish administrative law, the UOKiK president is a ”state organ”, meaning that he or she personally exercises the power of the authority. 

And finally we have engaged in building our own competition network, comprising regulators and law enforcement agencies, to share information and analysis in the hope we will be faster in spotting collusions and consumer abuses.

Ladies and gentlemen,

Unfortunately I cannot yet report to you if those changes have brought the expected result of increasing our independence, understood as the ability to make fair, evidence-based and impartial decisions. I see some encouraging signs but a longer run is needed for a proper evaluation. We will review this along with our newly amended competition law, which boosts the cartel fighting powers and streamlines merger approval procedures. Put forward by my predecessor, this change of law did not stipulate any changes in the institutional framework, based on the conviction that the authority was sufficiently independent. 

The review, which we hope to complete by the end of 2016, should verify this along with other changes in the law as well as the „soft” reform I just described.

So for the time being, instead of proper ex-post evidence, I must offer you, sadly and at odds with everything I was saying earlier, only the following
ex-ante conviction:

Institutional guarantees of independence are essential to a well-functioning competition authority. But in themselves, they do not guarantee that it will act in the most efficient way to protect consumers and economic welfare. To make the best use of the vestiges of independence, we need integrity based on broad dialogue, knowledge, impartiality and humility of knowing none of us is infallible. Short of being elected through the ballot paper, this is the best way we can claim to be accountable as well as independent.