2.5 Market regulation and modern governance
Beyond State-Centric Law and Legal Doctrine. New Actors and Determinants.
Key words: economic regulation; global approach; competition law; good regulatory governance principles; substantive principles; institutional framework
Over the past 15 to 20 years, economic regulation has undergone a phase of fundamental change in Europe and elsewhere. The EU has witnessed a great boom in economic regulation, as regards both quantity and sophistication. 'Economic regulation' is understood as comprising the various areas of law which are concerned with intervention by public authorities in order to shape or police the workings of the economy. More precisely, it includes competition law (which can be seen as a general form of economic regulation) as well as all the sector-specific branches of law which govern areas such as electronic communications, energy, post, transport (especially by air or rail), media or even financial services.
This process has not yet come to an end. In fact, liberalisation processes actually lead to a greater volume of regulation. At the same time, economic regulation becomes more sophisticated, in no small part in order to try to improve effectiveness by making more room for economic considerations in policy- and decision-making. While a large body of recent literature on economic regulation exists, most of it being multi-disciplinary in nature and policy-oriented, publications of a more scientific nature concentrating on the legal aspects of economic regulation are far less numerous. In general, the legal scholarship on economic regulation is fragmented because:
- it deals with only one part of economic regulation (e.g. competition law or electronic communications or media law) to the exclusion of the others; and/or
- it relates to the law of a specific jurisdiction (country) only.
In multi-disciplinary works, such a fragmented perspective usually results in legal issues being neglected or sidelined. In contrast, other disciplines (in particular economics) take a more global view of economic regulation, above and beyond sectoral or country borders.
At the root of this research item is the proposition that there is enough commonality between the various instances of economic regulation for law to also take a global approach, which will result in useful insights contributing to economic regulation scholarship as well as to a more integrated and better equipped approach of economic regulation itself. The research conducted seeks to test that proposition.
Thereby, the following sub-items/questions will be taken into consideration:
- Goals of economic regulation: What specific economic welfare model(s) underlie(s) economic regulation? How are non-economic objectives (universal service, stability of sector, etc.) integrated into economic regulation? Should the preference go to 'black-box' blanket exceptions used on a case-by-case basis, as found in the EC and WTO law, or might it sometimes be better to deal with non-economic and economic objectives together, as is done in EC harmonization efforts?*
- Pre-requisites to intervention: Is evidence of market failure required before intervention? Which parameters are relevant in this respect (e.g. impact of market failure, probability thereof, cost of intervention, risk of government failure)? More specifically, when can intervention be based on assumptions about the market (so-called ex ante) as opposed to concrete evidence of failure (so-called ex post)?
- Regulatory disciplines: Can the 'usual suspects' - including proportionality, transparency, non-discrimination, objectivity, flexibility, technological neutrality, legal certainty, consistency, predictability - be ordered and given more substance? They appear everywhere, but are rarely systematically investigated.
These disciplines are often tied together in 'governance' models. What are the fundamental requirements for good market governance? What are the current models of EU regulatory governance and what is the background and history of these models? What are the legal and political requirements that influence the development of the different models of governance?
- Basic substantive themes: Which themes are typically found in regulatory regimes? General themes that readily spring to mind include market access, relationships between market players (symmetric or asymmetric regulation), and relationships with end-users.
- Interplay between the areas of economic regulation: How is the overall consistency guaranteed between the various areas? In particular, how are potential conflicts with central components such as competition and internal market law dealt with?
* See also the next item below, with specific focus on the issue of public service and services of general interest.
- Locus of decision-making: Where should the major decisions be located: in detailed legislation, in individual decisions (with more general legislation) or somewhere in between (via informal mechanisms such as committees, roundtables, networks, etc.)?
- Multi-level dimension: Within a multi-level structure, which level should deal with a given issue? How is the role of each level to be defined and the interaction between the levels to be organized? Which model of governance is suitable for which type of problem or area of regulation? Under which circumstances is it desirable to decentralise or centralise the application of EC law?
- Institutional vehicles: What is the adequate institutional and procedural framework (authorities, agencies, etc.)? What are the applicable principles (independence, sufficient funding and staffing, etc.) and what if they clash with constitutional or administrative law? Should the authorities be entrusted with broad or narrow powers? How can accountability be guaranteed if enforcement is carried out by an independent body? Is there a future for EU independent agencies for the regulation of the internal market? How can independent agencies be made accountable and how can the respect for the principles of good market governance be ensured? What are alternative scenarios for the centralisation of the application of EC law? To what extent are the networks of national authorities an adequate substitute for independent EU agencies? Can the networks contribute to a uniform and effective application of EC law? Is the governance model of networks of national authorities in harmony with the principles of good market governance?
- Role of non-State actors: Can policy objectives be better achieved by, or together with, actors other than the State (self-regulation, co-regulation, etc.)?
- Choice of instruments: How can intervention take place? Is it sufficient to rely on general competition law, or is additional sector-specific regulation needed? In both cases, should soft law be used instead of 'hard instruments'?
- Review and quality control: How is the adequacy of the intervention to be assessed, both in individual cases (administrative and judicial review) and more generally (built-in re-examination, etc.)? How can the legal instruments be optimized to ensure that judicial review is focussed on the core issues and does not give rise to endless and pointless litigation? How can effective legal protection of decisions of national authorities, EU independent agencies and networks of authorities be ensured? What should the role of the judge be in controlling the complicated decisions of the authorities? Should the judge control these decisions merely marginally or should the merits of the agency's decisions be reviewed thoroughly?
Key words: services of public/general interest; services of general economic interest under EC law; access of services; citizenship; discrimination
There are many constraints on national public interest issues imposed by European legal and policy developments relating to the provision of services in the public interest in the context of a single market without internal frontiers and free from distortions in competition. International law in this area is currently underdeveloped although access to the provision of such services under the GATS is currently under discussion in the present WTO 'Doha round'.
The concept of a service of public interest is not explicitly recognised in the European Treaty framework. Nevertheless the related concept of a Service of General Economic Interest (SGEI) appears in several Treaty Articles and will be anchored in the new Constitution, if and when adopted. In general, the EC Treaty recognises the right of the Member States themselves to define those services which they deem to be SGEIs but imposes certain constraints on how those services are organised and who has access to such services. In this way the application of the Treaty rules on the internal market - in particular the rules concerning the four freedoms and the competition and state aid rules - is assured unless a Member State can demonstrate that the very provision of an SGEI would not be possible under acceptable economic conditions if the same rules were applied in full.
The application of the EC Treaty rules is primarily focussed on two issues: the economic organization of public services or SGEIS at national level and a guarantee of access to such services on equal terms for all European citizens, irrespective of their nationality or origin. In the context of the first issue the Treaty rules are applied in such a way that only services of general economic interest (sometimes termed 'merit goods') may fall within the purview of the rules on competition.
Services of general interest - that is public services which are deemed collective goods and are non-economic activities or serve non-economic objectives (e.g. basic education, security) - are deemed to be outside these rules, whereas the rules on access for citizens continue to apply even if the service is non-economic. This dichotomy is to be explained in part by the different organising concepts informing European competition rules, on the one hand, and those affecting access rights, on the other hand. The former are based on the concept of market access whereas the latter appear to be more focussed on concepts such as discrimination.
It may be argued that in fact this dichotomy of approach forms an obstacle to creating a genuine concept of European public interest but, at the same time, prevents an effective national approach to guaranteeing public interests and the exercise of national prerogatives to this end. There are significant political objections to realising a truly European concept of public interest given the under-developed nature of the European State and the mechanisms to control its functions. This would seem to suggest that a potential way to move towards a greater Europeanisation of public service and related public interest concepts is to emphasise their economic aspects at the expense of the interests they serve to protect. It is in this respect that the limits to national sovereign prerogatives may begin to emerge more clearly. The basic purpose of the research is to explore the limits of the dichotomy signalled and to address the issue whether it adequately serves the purpose of protecting public interests, i.e. the very interests which are to be secured through the provision of public services, whether economic or non-economic in nature.