The Return of the Celts

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The Return of the Celts

• Edward P. Henneberry
• Reykjavik 4th February 2005

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Overview

• 1. Iceland and Ireland Closer than we think

2. The Competition Coin Heads and Tails
3. The Legacy of Competition
4. The Irish Experience A Legacy of Protection
5. Concentration and Power The Irish Approach
6. The Lessons of the Irish Experience
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Closer than we think.
TO ICELAND!!
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(No Transcript)
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Common Characteristics

• Small, open economies
• Pro-competitive approach to regulatory policy
• Recent substantive changes in competition policy
• Active competition agencies with similar
  investigations
• Similar market problems
• Lack of competition in regulated sectors
• High concentration levels
• Abuse of market power

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The Competition Coin Heads and Tails
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The Competition Coin - Heads

• Value for Consumers
• Lower prices
• Better choice
• Higher quality

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The Competition Coin - Tails

• Value for Business
• Lower costs for business
• Export firms more
• competitive internationally
• Drives growth in the
• economy

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The Competition Message

• Vigorous competition works!
• Drives growth in the economy
• Innovation in business
• Value for consumers

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The Legacy of Competition
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Why did it start?

• Sherman Act 1890 United States
• Political and Social reaction to abuse of power
• Structural Approach
• Problematic
• Consumer Welfare Standard
• The Better approach

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The Irish Experience A Legacy of Protection
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What was the Irish legacy??
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Negative Legacy Market Power
HEALTH INSURANCE
TELEVISION
TRANSPORT
State-owned Monopolies
FORESTRY
ENERGY
SUGAR
POST
TELCOMMUNICATIONS
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Negative Legacy Private Public Restrictions

• CONCENTRATION
• Leading firm with more than 50 market share
• Newspapers,
• beer,
• whiskey/other spirits,
• impulse ice-cream,
• cement,
• liquid milk,
• liquid petroleum,
• gas,
• industrial cleaning and gasses

CARTELS State sanctioned cartel in banking
Private cement company Statutory monopoly until
2000
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How did this happen?

• PUBLIC RESTRICTIONS
• Regulation used to remedy lack of competition?
• Regulation prevents competition?
• Monopoly creation used?

• PRIVATE RESTRICTIONS
• Lack of merger control?
• Lack of public enforcement?
• Lack of private enforcement?
• Lack of effective sanctions to threaten
  wrongdoing?

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Examples of regulations that restrict or prevent
competition

• Barriers to entry
• Retail (pub, pharmacy, grocery)
• Utility (gas, electricity, post)
• Transport (bus, train, taxi)
• Communications (radio, TV)
• Universities
• Patents
• Regulation of conduct
• Price control (taxi, bus, energy, phone, cable,
  bank charges, pint, etc)
• Advertising (professions) and advertising volumes
  (radio)
• Uniform pricing (health insurance)

• Increased cost of entry/supply
• Taxis (part-time, uniform, colour)
• Registration of professional title
• Professional education
• Shannon stopover
• Restriction on organisational form can increase
  costs
• Corporate structure (many professions)
• Ownership (radio)
• Insurance brokers
• Services of general econ interest
• Health, education, that affect competition

Dont strain your eyes just to show how common
they are
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Concentration and Market Power The Irish
Approach
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Dealing with Market Power and Concentration
Small economies will always face some level of
high concentration
Market power is not the problem! Abuse of
market power is a problem
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Irish Approach to Concentration

• A Consumer Welfare test is essential
• Good merger review benefits not just consumers
  but business.
• Must look to barriers to entry, real market
  substitutes and empirical economical analysis,
  THIS IS OUR APPROACH

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Specific Irish Merger Cases

• SRH/ Radio 2000 Media Merger
• IBM/Schlumberger
• Grafton Heiton

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Using Advocacy against Concentration

• Banking Study
• Insurance Study
• Professions Study
• Enforcement and Advocacy an essential
  combination

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The Lessons of the Irish Experience
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• Lessons Learned
• Acceptance in theory
• Identify what we need
• Size doesnt matter

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Competition..accepted in theory
Yes to Competition!! BUT NOT IN MY BACK YARD!!!!

• What we hear
• Competition is good We welcome competition!
• How its qualified
• But this market is special
• There is a wider public interest
• Costs have gone up its not a competition
  problem
• What this really means.

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Because of this

• We need strong competition policy based in
  consumer welfare
• With the support of effective competition laws
  and a competition agency

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Size doesnt matter Why we must get involved

• Ireland and EU Modernisation
• EU Merger Regulation
• ECN
• Ireland and OECD
• Policy Development
• Ireland and the ICN
• Vice-Chair Steering Committee
• Heading Working Groups

E.g. Ireland has been at the forefront
internationally advocating use of economic and
empirical approach to competition issues
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Even more importantly

• Working with other Jurisdictions
• Take responsibility for the effects in our own
  markets
• Foster continued development
• Continued cooperation and contact
• Cooperation e.g. Ferries

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Closer than we think.
TO IRELAND!!