Regulator-Regulatee Interaction in the Liberalized Utilities

Abstract

In the last decade the industrial landscape and regulatory structures of the network industries such as telecommunications, energy and rail transport, have undergone a profound transformation. Liberalization has fragmented the former natural monopoly sectors; new players with new preferences have emerged. New regulatory institutions have been created to regulate the market at the national and the European level to foster competition, and at the same time to compensate for the negative consequences of market integration in order to protect services of general interest. This altered regulatory environment raises many important research questions such as: How were the new regulatory structures shaped and how do they function? What is their impact on market creation and service provision? In this article Heritier focuses on one specific aspect which has not yet been analysed much: How do firms in these sectors interact with the newly created regulatory bodies at the national and European level? To whom do they seek access and why? And, inversely, how do the newly created regulatory authorities at the national and the European levels deal with the regulated firms in order to secure compliance? Is the much cited informational asymmetry between the regulator and regulatee used by the regulatee to interpret the regulatory contract so as to save costs, and if yes, how does the regulatory authority cope with it? And inversely, is there a law of increasing regulatory intrusiveness, possibly linked to the size and number of regulatory bodies? I examine the interaction between the regulator and regulatee from two different systematic perspectives: firstly by focusing on the attempts by firms and industrial associations to gain access to and influence ex ante regulation, i.e. by focusing on their attempts to influence the setting of rules for businesses at the national and the European level, and secondly by examining ex post regulation, i.e. regulation that monitors behaviour and attempts to resolve disputes that arise in implementing the existing regulation at the national and European level in the day-to-day interaction between firms and regulators. The analysis focuses on regulator-regulatee interaction in the British and German rail sectors.