Monopoly Commission Proposes “Super Regulator”

Germany’s monopoly commission on Monday called for the setting-up of a cross-sector regulatory body, particularly for network-based industries that were once monopolies, e.g. utilities and railways.

The monopoly commission is appointed by Germany’s Federal President and consists of five independent members who advise the government on antitrust and competition issues. It compiles a major report on these issues every two years. It also makes recommendations on major merger and acquisition cases and comments on topical antitrust policy matters.

In its latest report on the state of competition in Germany, entitled “Network Competition Through Regulation”, the commission highlights the continuing lack of competition in many industry sectors, but in particular in network-based industries such as telecommunications, postal services, electricity, gas and railways.

Commission chairman Martin Hellwig said experience had shown that providing access to networks was the decisive factor in creating competition in markets where monopoly conditions once prevailed. Therefore the commission recommended the creation of a cross-sector regulatory body, which would determine how and at what prices competitors would gain access to the existing networks of former monopolies. The body would ensure fair competition conditions through what the commission calls “ex-ante supervision” rather than by punishing anti-competitive practices after the event.

Hellwig argued that it is of little use to companies to be guaranteed network access if it is left up to the monopolists to decide at what prices access is provided. “It has become apparent that we are dealing with natural monopolies,” he said, explaining that it would make no economic sense for parallel networks to be developed.

But the Economics Ministry on Monday dismissed the commission’s proposal. A spokesman said that the government saw no need to set up a new regulatory institution. Instead it would make more sense to strengthen the Cartel Office’s supervisory powers in relation to abuses arising from the energy market’s current self-regulation.

Hellwig said two big mergers – that of Veba and Viag to form E.On AG, and that of RWE and VEW – had brought about a regrettable level of concentration in Germany’s energy industry. The recent decision to provide ministerial clearance for E.On’s takeover of Ruhrgas AG would only exacerbate this problem.

But he declined to make a detailed comment on market consolidation in Germany, saying he had not had access to the relevant statistics. The commission’s report said that Germany’s 100 leading companies for the first time accounted for more than 20% of total value creation in 2000, up from 18.6% in 1998. But Hellwig said that overall there had been no fundamental changes in recent times.

HANDELSBLATT, Montag, 08. Juli 2002, 23:34 Uhr