Independence and Accountability

Abstract

The independence of competition authorities as well as other regulators or even central banks is a hot topic in the post-crisis environment. 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, 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 is 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 excessive political pressure or vested interests. So why is this a hot topic? In competition enforcement, the reason is straightforward—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 standards in the enforcement tools. But there is a wider and more fundamental reason why the independence-accountability discussion is so important in the aftermath of the crisis. It comes from the realisation that considerable freedom to act independently of politics did not translate into decisive action by regulators, financial market supervisors, or even central banks to correct market failures before they almost got out of hand. Discussion continues as to whether this was due to regulatory capture, overconfidence, or flawed information sharing and cooperation between various agencies and ministries. One thing is clear, however—it was not due to political pressure or shortage of institutional independence. Even if the wider public, much of 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 by now famous ‘irrational exuberance’. It was exactly for such scenarios that they were granted independence—to make them secure from potential political or public backlash for necessary yet unpopular measures. Apart from exposing this inconsistency, the crisis demonstrated the need for independent agencies and market regulators to cooperate much more closely with one another and with government. So, how do we reconcile the need to maintain independence while strengthening accountability and the efficiency of market regulators? I am 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. The newly created Competition and Markets Authority (CMA) combined two hitherto separate agencies—the competition authority and the consumer protection agency. The idea, which we have had in place in Poland for several years now, is to strengthen the link between protecting consumers and enforcing fair competition. This was accompanied by two other important changes, 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 sectorspecific regulators. These measures could be interpreted as tampering with the independence of both the CMA and the separate regulators. And yet, both seem a novel way to address the challenge of increasing the efficiency and accountability. As far as I understand the ‘government steer’ for the CMA, it aims to ensure that there is an alignment between competition enforcement and broader economic