Connecting Regulations and Competition Law: A Swiss Perspective on Liberalization

Abstract

CHRISTIAN BOVET [*] PHILIPPE GUGLER [**] I INTRODUCTION It is debated whether it is possible to liberalize markets successfully by means of introducing unrestrained competition only, or whether it is necessary to have regulators to supervise the opening of markets in adversarial administrative proceedings. Presenting these as the only options, however, oversimplifies the issues involved. That simple opposition suggests that sectoral authorities--which are federal regulatory agencies having jurisdiction over a particular industry--and competition authorities--which are federal agencies with broad jurisdiction over all industries limited to the issue of fostering competition--are antagonistic and that an unrestrained market might, on its own, resolve the problems of liberalization. This view, however, ignores the fact that competition authorities can and do intervene in the market to prevent anti-competitive behaviors such as unlawful agreements and abuse of a dominant market position. Although it is true that regulators often must consider issues related to compet ition, it is also important to have persons with specialized knowledge of the regulated industries working for these authorities, as well as people qualified for activities specific to the regulator's job, such as the granting of licenses. When liberalizing its telecommunications industry--the only former public sector industry that is fully liberalized--Switzerland created a special administrative commission to oversee competition and introduced market regulations designed to protect effective competition. A modus vivendi has been established between the regulative and competitive authorities, with close cooperation on certain issues required by law. Measures aimed at liberalizing the electricity sector are also under way. This article is a description of the problems and solutions found in Switzerland. Part II begins with a description of the factual background. Part III discusses present or proposed regulations for the telecommunications and electricity industries. Part IV concludes with a discussion of national competition law. II FACTUAL BACKGROUND A. Terminology In recent years, the phenomenon has expanded in industrialized countries. In the process, the term privatization has taken on several meanings. [1] In everyday use, often is simply equated with market liberalization. However, the terms are not synonymous. Privatization in its narrowest sense refers to the opening of the capital of a state-owned industry to private investors. [2] France and England have seen several waves of this sort of as control of their governments has swung from the right to the left and back again. Typically, right-leaning governments move to privatize industrial companies involved in energy production, banks, insurance companies, and national railways. Market liberalization, on the other hand, refers to ending a state monopoly in an economic sector while usually maintaining government regulation of the industry. Once liberalization is realized, consumers have a choice among several operators. Strictly speaking, then, is distinct from market liberalization. However, of some portion of an industry previously under the complete control of the state often entails market liberalization, as demonstrated by the recent liberalization of the telecommunications market in Switzerland, which is discussed below. [3] There has not yet been any real, stricto sensu, in Switzerland; the Swiss Confederation still controls the majority of the share capital of the Swiss Telecommunications Company (Swisscom), which was privatized in 1998. [4] If this article dealt with in the narrower sense, it would conclude right here. In addition to market liberalization, a third form of privatization, in the broad sense, consists of changing the structure of public services. …