Report on Structural Separation

Abstract

The Structural Separation Report was prepared by the OECD Competition Committee to review the implementation of the 2001 OECD Council Recommendation concerning structural separation in regulated industries. The report shows that many countries have implemented legislation that seeks to promote non-discriminatory access to noncompetitive infrastructure. In a number of jurisdictions, there is dissatisfaction with the access provided by integrated companies to their non competitive infrastructure, leading a number of jurisdictions to strengthen the barriers that separate noncompetitive and competitive parts of a company. One new approach seeks to create managerial incentives that are equivalent to those that would be faced by managers in fully structurally separated companies while maintaining unified ownership of noncompetitive and competitive lines of business. This approach can be termed functional separation and has recently been pursued in the telecommunications sector in at least two jurisdictions. The results of implementing functional separation will be of considerable importance for future policy decisions related to structural separation. The OECD Council endorsed the report’s conclusion relating to maintaining the Recommendation in its current form and invited the Competition Committee to report back in three years’ time on the implementation of the Recommendation.