No Competition No Consumer Interest:
Regulation v.s. Deregulation
Hu, Tzu-Shun
Senior Specialist, Taiwan FTC
Vientiane, Lao PDR
7-8, March, 2006
1
2
economic regulation and
competition are present in everyday
life, even if we do not notice
3
A day in your life…
• alarm clock in the morning
the radio station that you listen was licenced by a
regulator, and a bandwidth of spectrum has been
given to it by the regulator
• open the light
electricity provided by a single company, the same
every day; it has obligations and quality
requirements to meet, imposed by regulation;
4
• Take a shower (hopefully)
the water is provided by a single and the same
company every day
• Take your breakfast
milk? but do you know how many brands are here?
5
• Coming to Office
take a bus, prices and quality of service are regulated.
Drive your own car, well, gasoline prices are regulated
and the car must pay licence, and if take the highway, pay
the regulated too, of course.
• Call a Telephone
no luck! Again regulated prices!
6
7
Give me answers , please.
How do you feel their service, quality, quantity
and price?
* Is service better?
* Is quality higher?
* Is quantity enough?
*Is price lower?
8
Improper regulation creates monopoly.
Improper regulation creates corruption.
9
Monopoly
P
Income transfer
Lost Consumer Surplus
Deadweight
Loss
Pm
A
B
C
PC
Because of the
higher
price,
consumers lose
A+B and
producer
gains A-C.
AR
Social welfare =
Consumers’ surplus
+ producers’
surplus
Social welfare =
public interest
MC
MR
Qm
QC
Quantity
10

The social costs of
P
monopoly are
unfortunately often
much higher than the P*
DWL.

Every producer has
an incentive to
establish a monopoly.

He is willing to spend
the monopoly profits
(at least some of it) to
bring him in that
position.
Rent
seeking
MC
AR
MR
Q*
Quantity
11
We need competition advocacy for enjoying
good service, high quality, enough quantity
and low price.
12
Purpose
The aim of competition advocacy is to foster
conditions that will lead to a more
competitive market structure and business
behavior without the direct intervention of
the competition authority. That means to
build a competition culture.
13
Policy in Taiwan
14
Article 46, FTL
Where there is any other law governing the
conducts of enterprises in respect of
competition, such other law shall govern;
provided that it does not conflict with the
legislative purposes of this Law.
15
Deregulation
Sectors
Year
Result
Civil
Aviation
1987
Before1987, only one internationalfreight company. Now, there are 6
companies.
Bank
1991
Before 1991, no private banks in Taiwan.
Now, most of banks are privates.
Telecom
1994
Before 1994, only one state-owned
Telecom company. Now, there are one
public and four privates.
Energy
2000
Gasoline --- 1
3
Power --- market open in generation
16
17
The ways to build a competition culture
With respect to policy-makers
* it has to do with the ways of dealing with the
industries and the markets.
* requirement of policy-makers to introduce
competition factors into the policy.
* should be a persistent habit of introducing
competition factor into policy-making process.
18
With respect to business community
* should be focused on the aspect of making business
operators to comply with the competition law.
* The way of making firms to comply with the
competition rule could include :
1. law enforcement – leniency program
2. Educational activities – compliance program
19
With respect to consumers
* Consumers need to know that they are responsible in acquiring fuller
information about the choices available in the market to assist them in
marketing wise consumption.
* Consumers should know the fact that they are in a very good position
to require the policy-makers to introduce more competition factors into
the market.
* Consumers need to be equipped with the competition culture so that
they can spot the existence of irregularity of business activities and
thus identify the existence of the violation of law.
20
The ways to build a competition culture
Strengthening Public Awareness
Improving Regulatory Environment
Promoting Research on Competition Issues
21
Strengthening Public Awareness
* To provide up-to-date enforcement information
through the mass media
* To brief to the press weekly the decisions of the
Commission Meeting
* To administer external liaison programs to
enhance communication
* To convene workshops
* To conduct 72-hours lecture programs for
managerial-level employees of firms
22
* To adopt business correction programs
* To response to business self-compliance programs
23
Improving Regulatory Environment
* Constantly advised and consulted with
government agencies
* Established a task force to investigate and
examine all the existing other laws
* Set up a deregulation task force to identify and
remove unnecessary or undue regulatory
control
* Closely monitored the regulatory reform of
public utilities
24
Promoting Research on Competition
Issues
* Commissions scholars and experts to research on
developing issues
* Publishes the academic journal Fair Trade
Quarterly and awards scholarship to postgraduates
* Holds liaison meetings periodically with the
prosecutors and judges
* Convenes international conferences regularly
* Establishes the Competition Policy Information and
Research Center
25
* Participates in international conferences overseas
* Establish and maintain the APEC Competition
Law and Policy Database
* Conducts technical assistance programs
26
Deregulation is re-regulation
Deregulation doesn't mean that we don’t
need any controls or regulations. In fact,
government should deregulate improper
regulations actively and build rules of game
which are transparent, fair and reasonable.
27