Competition policy impact case study
Better measuring the impact of competition policy
Governments set competition policies and establish competition laws and competition authorities for several reasons but, ultimately, they do it for the benefit of the consumer. However, the impact of these competition policies hasn’t always been easy to measure or clearly understood even though such evaluations are instrumental in designing better policies, ensuring accountability, and more generally demonstrating that public money spent on the enforcement of the law creates significant benefits for consumers.
Research led by Prof Peter Ormosi and his co-authors at the Centre for Competition Policy (CCP) at the University of East Anglia (UEA) and Norwich Business School (NBS) has contributed to a more rigorous approach to evaluation, one which has been adopted by the Organisation of Economic Cooperation and Development (OCED), the European Commission, and several other national authorities.
The impact of the OECD toolkit
The OECD Competition Division is one of the largest international stakeholders in the area of competition policy and it was research carried out by the CCP at Norwich Business School (NBS) that was key in the decision to start a three-year project to assemble a best-practice Reference Guide for member and non-member countries.
"As a result of this work, the Committee endorsed our proposal to devote about one quarter of its time to this topic, as one of its two strategic projects over 2012 – 2015."
- Head of Competition Division (2013), OECD
Following his work on the Reference Guide, Prof Ormosi was invited by the World Bank to develop an impact framework for the Competition Authority of Kenya (CAK).
"Thanks to Prof Ormosi, the CAK is on course to adopt and systematically use the designed frameworks."
- Global Competition Policy Lead (2015), World Bank
The impact on OECD member states’ evaluation guidelines
The inclusion of UEA research in the OECD Reference guide brought the team’s work to the attention of numerous competition authorities setting up their own impact evaluation systems. The Spanish competition authority, CNMC used the team’s findings in the area of competition policy evaluation to underpin their own impact evaluation guidelines. Likewise, the Hungarian Competition Authority (HCA) updated their existing guidelines, again drawing heavily on the same OECD recommendations incorporating UEA research.
Recognised as an authority in his field, Prof Ormosi is regularly called upon by the Competition and Markets Authority (CMA) to provide academic guidance when CMA are constructing their annual impact evaluation reports.
The impact of the deterrent effect
If competition laws work well and unlawful conduct is deterred, harm on the economy and, in turn, society is greatly reduced. Competition authorities around the world have long recognised the importance of deterrence, but, despite this, there has been no consistent framework for gauging the magnitude of this deterrent effect. It was CCP research on cartel detection and deterrence that helped competition authorities to re-assess the role of deterrence when establishing and evaluating policy.
"When measuring deterrence, we have found recent work by Prof Ormosi extremely useful, reminding us not to deprioritise smaller enforcement cases as these can still have a large deterrent effect."
- Chief Economist, Competition and Markets Authority (CMA)
It would be no exaggeration to claim that the Norwich Business School (NBS) and CCP in particular have changed CMA’s way of thinking and approach to how you define and quantify deterrents. A fact that the CMA is first to acknowledge.