Erosion or innovation? The institutional design of competition agencies—A Dutch case study

Abstract

Looking at competition agencies world wide, we can see the emergence of a new trend, with more and more agencies merging with others and creating new combinations. Competition agencies are consequently moving away from being single-function bodies and instead becoming multifunctional authorities housing antitrust and regulatory functions under one roof. Competition literature has so far devoted little attention to the institutional design of such organizations and the implementation of their policy goals. The focus has been on substantive matters of competition law, rather than on governance aspects and optimal design. This article analyzes the merger on 1 April 2013 of the Netherlands Competition Authority (NMa), the Independent Post and Telecommunications Authority (OPTA) and the Consumer Authority (CA) in the newly created Netherlands Authority for Consumers and Markets (ACM). This Dutch case is used to illustrate how a bundling of tasks can be translated into an institutional strategy and to examine the implementation issues arising. Which factors matter when deciding to combine a series of functions under one roof? By taking an inside look at this case, we can learn lessons for other jurisdictions. The article examines the subject from a legal, political science, and public administration perspective.

I. Introduction

Research on institutional design in organizational and political science has to date mainly sought to explain the chosen design. In other words, why are public organizations structured as they are? Various models of institutional design have been presented, with most of these aligning either with the contingency theory¹ or the theory of structural change.² Organizational science looks at the task environment of the organizations and seeks to identify the functions explaining the outcome of the institutional design and change, while the theory of structural change in political science claims that organizational forms are merely the resultant of political considerations. In the Dutch case examined in this article, the decision to combine certain functions was primarily a political decision and ignored expert advice on alternative options.³ This article takes the Dutch Minister of Economic Affairs’ decision to merge the Competition Authority (NMa), the Post and Telecommunications Authority (OPTA) and the Consumer Authority (CA) as a starting point for further research. In other words, the main focus is not on ‘why’ these authorities have merged, but ‘how’, with the reason for this choice being the lack of literature to date on the ‘processes’ by which institutional transformation takes place.⁴

This article examines the process of institution building on the basis of the Dutch case and within the context of competition law, sector-specific regulation, and consumer protection rules. All three of the merging organizations’ boards were instructed to effect this merger, to create the new organization (the Authority for Consumers and Markets, or ACM) and to take all the steps needed to implement it. Bringing separate institutions under one roof does not, however, in itself create integration and innovation. As Hyman & Kovacic (2013) correctly comment:

Stated broadly, the coordination of functions and responsibilities will not happen merely because previously separate bureaus are combined into a single department.⁵

There is always a risk that cohesion will fail to be achieved and that the new design will create separate operating units for each function. These units can also, once again, become rivals and fight for prestige, headcount and budgetary resources.⁶ This article analyzes some of the instruments that can be used to prevent such separation and to promote integration. It argues that the new combination opens the way for institutional innovation, thus preventing or at least reducing the risks of regulatory and competition silos and of capture. In addition, greater coordination of the new authority’s interpretations of legislation and interventions can promote cross-fertilization between the different areas of the law. Improved integration of the different areas is also possible, without any need for complicated external coordination mechanisms between separate entities. As well as merging the three organizations in the Dutch case, those responsible have also made efforts to start thinking strategically as to how functions can be combined and integrated under the same roof.

This article provides insight into the practice of institution building by drawing on academic work and experience and using this to identitf key factors for the success and failure of these processes. Practice and experience over the coming years will show whether this new institutional model proves effective. This article’s aim is certainly not to advocate that every authority should rush to merge with counterparts in other sectors. The added value of multi- or cross-sectoral regulators or authorities is state-specific and maybe even authority-specific. The model chosen in the Netherlands is not necessarily, therefore, a suitable model for every state. However, describing the process that has been applied in this country will create a basis for more research into and designs of solutions for organizational structures.

II. Institutional design of agencies

Different types of agencies

Many countries are in the process of restructuring their competition agencies and sector regulators.⁷ Although some single-purpose agencies still exist, the trend is towards creating multiple agencies and combining functions. In the UK, for example, the Office of Fair Trading (OFT) and the Competition Commission are due to merge to form the Competition and Markets Authority (CMA) on 1 January 2014,⁸ while six industry-based regulators in Spain have merged with the Spanish National Competition Commission, and a new National Commission for Markets and Competition (CNMC) has been created on 1 October 2013.⁹ In Finland, meanwhile, the Competition Authority and the Consumer Agency merged to form a single agency (KKV) on 1 January 2013,¹⁰ while the Danish Competition Authority and the Consumer Agency merged in August 2010 to create the Danish Competition and Consumer Authority (KFST).¹¹

Looking at the above, in general, four different types of multiple agencies can be identified¹²:

• (a) Multisector regulators

• Germany: BNetzA (Bundesnetzagentur für Elektrizität, Gas, Telekommunikation, Post und Eisenbahnen), which regulates the electricity, gas, telecommunications, post, and railway markets;

• Luxembourg: ILR (Institut Luxembourgeois de Régulation), which regulates the electricity, gas, telecommunications, post, and transport markets.

• (b) Competition and consumer protection agencies

• Denmark: KFST (Konkurrence- og Forbrugerstyrelsen);

• France: DGCCRF (Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes);

• Finland: KKV (Kilpailu- ja kuluttajavirasto | Konkurrens- och konsumentverket);

• UK: CMA (Competition and Markets Authority);

• USA: FTC (Federal Trade Commission).

• (c) Combinations of competition agencies and multi-sector regulators

• Netherlands: the former NMa (Nederlandse Mededingingsautoriteit), which regulated the energy and transport markets;

• Spain: the new CNMC (Comisión Nacional de los Mercados y la Competencia), which regulates the energy, telecommunications, post, audiovisual, and railway markets.

• (d) Combinations of competition and consumer protection agencies and multi-sector regulators

• Netherlands: ACM, which regulates the energy, transport and telecommunications markets;

• Australia: ACCC (Australian Competition and Consumer Commission), which regulates the telecommunications, water, and postal markets (Table 1).

Key question: coordination or integration?

Looking at these options, the key question is which model can be regarded as the optimal institutional design. Or, to put it differently, does a single-function agency that coordinates its actions with other agencies perform better or more effectively (coordination model) than an integrated agency, where functions are combined under a single roof (integration model)? The question is whether coordination of activities ‘within’ the same entity produces better results than coordination ‘between’ separate entities. Scholars disagree on whether rivalry and competition between agencies is good or bad. They also differ in their views on the advantages and disadvantages of jurisdictional overlap and the process of coordination.

Regulatory competition scholars argue that regulatory outcomes improve in the event of overlapping powers and rivalry between institutions. These institutions will, they claim, have an incentive to perform better as they will have to compete with other agencies for power and reputation.¹³ Others argue that separate agencies with shared jurisdiction have to coordinate their actions, and that this can result in conflicting assessments and profound disagreements on the optimal solution.¹⁴ Jurisdictional overlap can lead, in their view, to jurisdictional chaos and border disputes, and even to a ‘turf war’ between agencies,¹⁵ as well as to forum shopping by complainants and extra transaction costs (through the duplication of teams and coordination costs). Others meanwhile take the view that capture can be avoided by agencies’ institutional design: sophisticated design mechanisms should be considered as a way to minimize capture¹⁶ as the fact that a single-function agency would have to coordinate means it would be exposed to a bigger risk of capture and political influence.

Some scholars have concerns that a multifunctional authority may result in a lack of focused enforcement. Antitrust lawyers fear that consolidating the different regulatory areas may dilute traditional antitrust law, while regulatory experts are afraid that all priorities and resources will be directed towards antitrust enforcement. Consumer lobbyists meanwhile are concerned that the agency will not be sufficiently focused on consumer interests. In other words, both camps fear the erosion of substantive law (whether competition law or sector-specific regulation) as a result of institutional choices. As they see it, prioritizing actions in a multifunctional agency will lead to the erosion of goals and tasks. Take for example Biber, who argues that such an agency will have so many things to do that ultimately it will do nothing.¹⁷ On the other hand, multifunctional agencies can also combine expertise and integrate policies in order to improve the agency’s effectiveness in dealing with complex regulatory issues.¹⁸

Hyman and Kovacic’s extensive paper takes a different angle by identifying the factors that they regard as essential for making the design of an agency a success. In their view, it is not so much the competition approach towards design that is relevant, but rather the circumstances in which the design takes place. They see an important causal link between agency design and agency performance, with the following elements in their view being key: (i) policy coherence, (ii) credibility/branding, (iii) capacity and capability, (iv) resilience, (v) cohesion, (vi) collateral effects on the regulatory ecosystem, and (vii) political support. Of all these factors, they consider political support, coherence and the capacity and capability to perform the assigned functions to be of most importance. Meeting these three conditions maximizes the chosen design’s chances of success and thus the agency’s chances of achieving a better performance. By examining these factors, agency creators can identify the issues they will need to consider.

A combination clearly has more potential for synergy and efficiency if it brings together complementary tasks. This should also ensure fewer internal disagreements. However, leadership of both the existing boards and the board of the new agency being created is key to ensuring that a new, combined agency produces the intended results. Setting a clear mission and priorities, built around a transparent strategy, will create credibility, both within and outside the agency, and give the new organization a strong drive to succeed. However, this can only be done with sufficient professional staff. Chisholm¹⁹ also stresses the need for professional capacities, with professionalism of the organization and its personnel (education and training) resulting in better performance and increased independence. Hyman and Kovacic identify political support as the most important factor. According to them, a new agency is doomed if it lacks a supportive constituency or generates political opposition, whereas a positive political context will give a major impulse to the new organization and help to achieve its goals. It obviously has to be recognized that any institutional change contains ‘the risk of disruption of the regulatory ecosystem’.²⁰ On the other hand, a fundamental strategic review within established organizations needs a disruptive change to ensure that innovation and new initiatives can occur. This change will trigger a cultural change within the organization, thus resulting in a new strategic approach. It is the board’s responsibility to ensure cohesion within the new entity in order to avoid conflicts and destructive effects.

Many different institutions can be created from the organization of the past and collected from bits and pieces.²¹ This makes it difficult to find the rationale behind every design and to come up with the optimal result. Pierson points out that the dynamics of agency design mean that actions by agencies have many unintended consequences, and that every rational-instrumental approach towards institutional design therefore has its limits.²² Choices of design are ‘partially but intrinsically subjective’.²³ In the case of the Dutch ACM, it is argued that integration can produce many synergistic benefits and cross-fertilization between the agency’s various fields of work. On the basis of a new strategy, synergies have been identified and measures taken to avoid the creation of new silos and ensure cooperation between the different departments. The following sections of this article discuss how ACM was structured so as to provide insight into the key elements of this process and to enable lessons to be learned from this.

III. ACM: a multifunctional agency

Merger of NMa, OPTA and CA

The NMa (the cartel authority), OPTA (the telecommunications and post authority) and the CA (the consumer authority) were relatively young organizations. The oldest of them was the OPTA, which was established in 1997 as the new, independent regulator for the post and telecommunications sectors. Although its mandate, based on the Telecommunications Act (Wet op de telecommunicatievoorzieningen) 1997, included both market regulation (aimed at competitive markets) and consumer regulation (aimed at consumer protection), its main focus over the years was on achieving competition in the telecommunications markets. It was only in the past 5 years of its existence that it began to devote more and more interest to consumer issues, also in response to the introduction of additional regulations (such as those relating to telemarketing, spam, and internet security). The NMa was originally created as an independent, single-function body under the Competition Act 1998. An independent energy authority, responsible for overseeing the gas and electricity markets, was also created in that same year, and this authority (the ‘Energy Chamber’) was later transferred to the NMa. Although this Chamber fell under the NMa board’s responsibility, it acted relatively independently of the NMa’s general antitrust department. In 2004 the Transport Chamber, which was responsible for supervising the Dutch railway and public transport markets and Schiphol airport, was added to the NMa. The agency responsible for regulating the energy market in the Netherlands had already been combined with the Competition Authority, but operated as a distinct entity. The country therefore already had some experience of achieving increased synergies through working together within a single authority. The CA, which was established in 2007 in response to European legislation, was set up as a department of the Ministry of Economic Affairs and operated as such until merging with the other two authorities. The CA was established under the Consumer Protection (Enforcement) Act (Wet handhaving consumentenbescherming). Although the authority’s name suggests that it was responsible for overseeing the regulation of a broad spectrum of consumer interests, in reality it had a limited mandate and focused solely on unfair conditions in commercial trade that adversely affected the interests of multiple consumers.

The three organizations already had close working relationships and, most importantly, prior to the merger, had already agreed to establish Consuwijzer, an information helpdesk offering consumers practical tips and advice on their rights. The Consuwijzer website provides support to consumers in the form of checklists, specimen letters, success stories and information on other consumers’ experiences. Although the organizations had already agreed before the merger on cooperation protocols (samenwerkingsprotocollen) for setting informal rules on cooperation and allocating cases as a means of preventing forum shopping, some regulatory competition continued to exist in practice, mainly between the NMa and OPTA, and mostly in cases where the legal boundaries were less clear and views on the need to intervene in markets varied.²⁴ One famous case, however, in which the organizations cooperated successfully was the Reggefiber case.²⁵ The personal commitment of the NMa and OPTA chairs enabled the authorities to cooperate closely in this case and ensure fully coordinated and interlinked decisions.²⁶ This experience showed there to be a solid basis for further cooperation. In addition, energy regulation was already part of the NMa’s remit, with general competition law on the abuse of dominant positions and energy regulation being combined and coordinated in some cases in order to ensure an optimal solution. This was possible because it was also the responsibility of the NMa board (including the Energy Chamber).

Rationale for the merger

From a political perspective, the rationale behind the merger was primarily financial. The Dutch Minister of Interior and Kingdom Relations submitted the central government’s budget-cutting programme to Parliament in February 2011. One of the proposals in this budget was to combine various regulatory authorities responsible for non-financial sectors. Following that proposal, the Dutch Minister of Economic Affairs, Agriculture and Innovation informed Parliament in March 2011 of the plans to consolidate the NMa, OPTA, and CA.

Another reason for this merger was the belief that consolidation would increase the efficiency and effectiveness of competition oversight and market regulation as a consolidated authority is able to anticipate developments in a flexible and integrated manner, and make better use of its consolidated knowledge and expertise.²⁷ According to the legislation, ACM will ‘promote well-functioning markets, orderly and transparent market processes, and treat consumers with care’.²⁸

These arguments were not elaborated upon and substantiated until the subsequent Parliamentary discussions.²⁹ The view was taken that increasing the choice and transparency for consumers would result in a better price/quality ratio and more innovation, insofar as these three organizations were responsible for those tasks.³⁰ Improving quality was a priority, with the aim in combining these three organizations being to remove the overlap between their activities and to enable their knowledge to be used where it was most efficient.³¹ As the legislator argued, ACM can approach cases from an integrated perspective and adopt a balanced, integrated approach, instead of being restricted by the limited scope of the three individual authorities. This merger is intended to strengthen sector-specific regulation by making it easier to use the other authorities’ knowledge. The previous division of powers between the three institutions was inconsistent and unclear, and this, according to the legislator, created confusion for consumers and companies alike.³² The result was a fragmented approach to resolving problems.³³

Building process: bottom-up approach

The three institutions’ boards realized that the new authority had to be more than just the sum of its parts. They were determined to develop a holistic approach, combining elements of consumer protection and regulation with competition enforcement. The process of institutional design was therefore constructed at two levels: designing the organization, and formulating the strategy.

Building the organization

Firstly, it was considered how best to design the governance of the agency and which separate directorates, functions, and portfolios to introduce. The merger has triggered a process of quality improvements, in which the parties have looked critically at standard practices and sought to learn from each other, and an exchange of expertise (eg use of detection instruments, consumer behaviour, review procedures etc). This has been made possible because of the culture of being willing to learn from each other; in other words, a readiness to agree on best practices.

An essential aspect of this Dutch case study is that although the new organization was built on the foundations of three existing organizations, the three boards had a comprehensive mandate to build the new organization in a way that maximized integration. The boards agreed to a fundamentally new approach to constructing the organization, one that combined the strengths of all three. However, the new authority’s regulatory portfolio was a fact of life: nothing could be done to alter its regulatory space. The underlying legislation was not redesigned in that respect. Instead, the legislation establishing ACM merely provided a legal basis for creating the new agency and replacing the original three agencies, and aligned some procedure-related issues in the underlying Competition Act and the consumer protection and market sector regulations,³⁴ which all otherwise remained wholly intact. The three organizations’ boards had no opportunity to change their portfolios; in other words, they could only design, or redesign, the interior of the house, not the house itself.

The ACM has 600 employees and a three-member executive board. The latter is the public face of the organization, both in the Netherlands and abroad. Board resolutions are passed by plurality vote.

It was decided that ACM’s organizational structure should reflect its mission and strategy. Regulatory and oversight tasks have therefore been organized in a way designed to maximize their synergistic benefits. This primarily means housing all the consumer tasks of the NMa, OPTA, and CA within a single department: the Consumer Department. By transferring powers to a single unit ACM can provide consumer protection in an integrated and coherent fashion, thus enhancing the effectiveness of its enforcement (Fig. 1).

The ACM’s regulatory tasks have been concentrated in two departments. The first of these, the Energy Department, is responsible for regulating the natural monopolies of the energy and drinking water markets, while the second is responsible for regulating the telecommunications, transport, and postal services markets. Competition in the latter department’s markets is possible between or on networks. These departments are also charged with overseeing potential abuses of dominant positions in these regulated industries. ACM is thus able to use its sector-specific knowledge as effectively as possible, and to tackle market failures in an integrated manner.

The Competition Department focuses on safeguarding and promoting competition, thereby providing businesses with fair opportunities to do business and to innovate, with the intended result being that consumers actually have something to choose from. This department aims to resolve the most important antitrust problems and so is responsible for handling all concentration and cartel investigation cases, as well as all cases involving abuse of dominance other than in the regulated industries.

The Legal Affairs Department is responsible for sanction and objection decision and all appeals. In addition it has advisory and coordination tasks, such as safeguarding the quality of ACM’s legal work and legislative affairs. Between the Legal Affairs Department and the enforcement department ‘Chinese walls’ have been drawn up, so as to ensure that employees involved in the first investigative stage cannot take part in the second investigative stage.

The Corporate Affairs and Communication Department and the Office of the Chief Economist have ACM-wide tasks relating to strategy, national and international cooperation, communication and corporate affairs and economic analyses and calculations. As such these departments form a vital connection between the various divisions of the ACM.

Formulating the strategy

An important condition for being more than just the sum of its constituent parts is having a comprehensive strategic vision of the new regulator’s core identity. This vision should colour the regulatory philosophy, both internally and externally, and create opportunities for cross-sector synergies within ACM. An ACM-wide strategy team was therefore set up to develop a comprehensive strategic vision for the organization. Formulating this strategy has been a key element of the integration process and focus. The strategy was built around the legal mandate, which was reworded by the new board to read ‘ACM creates opportunities and options for businesses and consumers’.

The board not only analyzed which practices of the three organizations could be regarded as best practices, but also considered alternative structures for identifying new solutions. The three organizations were all relatively young, having been in existence for between 5 and 15 years, and had a high international reputation and strong profile. Although all three obviously had their own culture and specific practices, these were not written in stone or built on long, well established traditions. Admittedly, there were fierce discussions as to what should be considered the best practices and which solutions constituted the best options. However, the typical Dutch pragmatism (‘hands-on mentality’) helped in designing a new organization, based on shared views and a mindset open to change. The combination of in-depth, expert knowledge of a specific sector and market conditions that derived from the collaboration between competition experts and sector regulators could now be internalized within a single authority.

At the same time, the three organizations’ relevant stakeholders were identified, and a series of interviews, round-table discussions and consultations with interest groups, supervised companies, politicians, ministries, and academics initiated. This process gave the outside world the opportunity to express ideas and give feedback on the strategy. Ideas were exchanged on what the primary areas of attention for ACM should be, and the proposed strategy was also examined in consultation with stakeholders. This external perspective provided ACM with a range of fruitful ideas and opinions on its focus, interventions, and style of enforcement.³⁵ Those formulating the strategy also consulted leading scholars in various disciplines on the structuring of organizations. This included Professor Kovacic’s work on the ‘institutional design’ of competition and consumer authorities, while the ‘experimental governance approach’ of Professor Zeitlin was used for setting up consultation and monitoring processes with stakeholders. The ‘problem-solving approach’ examined in Professor Sparrow’s work served as a basis for the implementation and integration and was used in daily practice from the start. Lessons were also learned from experience abroad, mainly in Australia and New Zealand.

Cultural change

As the Dutch case shows, the personality of leaders and a culture that is receptive to change are crucial in such processes, irrespective of the theory or design applied. These form important and sometimes underestimated ingredients for success. A special aspect in this merger process was that, as a result of a vacancy on the NMa board, the chair of OPTA was appointed to chair NMa and, at the same time, designated to chair ACM. This combining of positions in one person was an important factor in the merger and ensured close cooperation between the three organizations throughout the process. Reference can be made in this context to the work of Chisholm, who states that:

The structure, rules and procedures (…) result from day-to-day efforts of individuals, acting in their professional capacities to solve problems that impinge upon their ability to get on with their business. This does not assume any larger vision of any given institution and its development—rather, it considers institutions as cumulative consequences of the actions of many different people over time.³⁶

Ultimately, the success of operations such as these depends on people’s willingness to make them succeed, to achieve improvements and to be receptive to innovations. An important element of any institutional change should therefore be a focus on identifying a common culture, based on key values and a core vision. This requires continual investment in sending out the (ACM) message and ensuring that the tone at the top is embedded in the new culture. This was one of the reasons behind the decision to transform the NMa Academy into the ACM Academy. The latter has an important role to play in implementing ACM’s strategy through training and education in skills and expertise and by ensuring a common style of enforcement and cooperation between departments. The ACM Academy is responsible for in-house training of ACM staff and for building relationships with fellow authorities and the academic world. A professional training course at three levels of experience has been set up to provide education and training in skills and expertise.

Focus on consumers: the cement of the new building

This merger must be seen against the background of societal change in the Netherlands, where market competition is now being looked at more critically and attention has been redirected towards issues of public interest. Introducing competition as such is no longer accepted as the sole remedy for market failures; instead, additional remedies are seen as being required in order to ensure societal needs are protected.³⁷ This view also puts pressure on competition and regulatory authorities to take these concerns into account when considering market interventions and formulating remedies.³⁸

Consumers have a central position in the ACM Strategy.³⁹ Indeed they can be regarded as the cement of the new building: this principle applies in all ACM activities, ranging from the execution of specific consumer protection tasks to the application of industry-specific regulation and competition rules. The various types of legislation enforced by ACM affect consumers in different ways. The competition, regulation and consumer protection legislation enforced tends to focus on seeking to further the interests, either directly or indirectly, of consumers and consumer welfare. ACM can combine these approaches and thus improve the market for consumers by ensuring that consumer protection is geared towards protecting more vulnerable consumers and consumers in regulated or other markets where the products and services are dangerous, complicated or viewed as basic necessities. Consumers will be empowered through the provision of choice and information, as well as an increased awareness of their rights and the means of redress available to them.⁴⁰

Consumer empowerment will form an important part of ACM’s work, while competition law will be used to give consumers a better choice and lower prices. A well-functioning market provides the best guarantee that consumers’ interests will be properly served. Influences from behavioural economics⁴¹ and consumer choice in antitrust theory will be used to ensure that the choice provided is actually of use to consumers, or at least that consumers understand how this choice should be used.⁴² This involves devoting more attention to solving consumer problems ex ante, and more emphasis on empirical evidence.⁴³ The focus will be on long-term resolution of problems, if necessary involving private enforcement of competition law, mediation roles and alternative dispute resolution, rather than on short-term ad hoc intervention. ACM can also explore the use of behavioural economics by emphasizing the importance of the demand side in making markets work efficiently.⁴⁴ Behavioural biases highlight important synergies between consumer and competition policy and may also have implications for anti-competitive behaviour. Behavioural economics can be used in various ways to help understand consumers’ problems and improve the application of both competition law and consumer protection law.

An important tool for achieving this consumer focus is the decision to concentrate all ACM’s consumer work within the new Consumer Department and through the Consuwijzer helpdesk and website. While Consuwijzer makes information available to consumers, complaints submitted to the website make important information available to ACM. The latter can use this information to collect market data, to identify problems and to devise innovative solutions. Consuwijzer will also be used to analyse online consumer complaints and to set policy and enforcement priorities, with ACM primarily prioritizing its activities on the basis of the outcome for consumers.

Institutional design and the problem-solving approach

There are various ways in which problem-solving can be used in the context of institutional design. Chisholm uses the perspective of problem-solving to describe institutional design.⁴⁵ He sees how decision-makers identify problems and build procedures and processes around these problems. They then use these problems to construct an internal model for decisions needing to be taken. Sparrow views problem-solving from a different angle and focuses on enforcement (‘Find a problem and fix it!’),⁴⁶ recognizing that different problems require different solutions. It was the work of Sparrow that inspired the three organizations to opt for problem-solving as one of the key strategic choices for ensuring mixed teams and cross-fertilization between the various departments. ACM’s objective is to resolve market and consumer problems. This means continually taking the context and market structure into consideration. Do consumers in a specific market, for example, behave actively or passively? Are there any barriers to switching? And is the market sufficiently transparent?

The ACM will consequently look at the issue from a broader perspective, a more hybrid approach. Instead of merely investigating the alleged violation, it will also seek to determine the root cause of the market or consumer problem in question. One way to do this is by tackling harmful market developments from a broader angle. In many cases ACM will start by trying to establish whether unwanted market behaviour that has been identified is a symptom of a larger, underlying problem in the market. In this respect it will seek to take advantage of the fact that it has multidisciplinary teams with access to a wider variety of formal and informal instruments to tackle the particular market problem. Its solutions will be tailor-made. In addition to applying sanctions, ACM will also be able, whenever circumstances require, to deploy instruments such as norm-transmitting discussions, commitment decisions, monitoring, and market scans. It will also be able to make increased use of strategic communications aimed at increasing the willingness to comply as a means of resolving market problems.

The three ACM partners have already deployed this problem-solving approach in a number of cases, including the commitment recently given by KPN to amend its business telephone plans so as to make it easier for business customers to switch providers.⁴⁷ Another example of combining instruments is the NMa’s November 2012 trend report on consumer confidence in the energy market,⁴⁸ which revealed that consumers could save up to EUR 500 on their annual energy bills, as well as the fact that 64% of consumers had never switched energy providers. At the same time, however, the number of consumers willing to switch was reported to be at a record high. Consuwijzer consequently created an online ‘switching coach’, around the time the trend report was released, to help consumers compare energy companies’ offers.⁴⁹ ACM will be making increasing use of tailor-made solutions of this nature.

Preventing silos

A key question when building the organization was to decide whether to have all functions (such as legal units and detection teams) in all departments, or to centralize certain activities in a separate department. Rather than complete centralization around specific tasks, it was decided to apply a mix of choices, both for historical reasons and due to the availability of expertise. It was decided to concentrate all work relating to regulated sectors (including cases relating to the abuse of dominant positions) in the sectoral departments and to give each department its own detection team, while concentrating all consumer-related work in the Consumer Department, and to introduce horizontal coordination procedures and incentives to encourage cooperation between the departments. A network of detection officers has, for example, been created to collect and analyze indications and market information retrieved through various channels. All this information is being used for an ACM-wide prioritization of market and consumer problems. Such cross-departmental teams will be formed wherever they are expected to result in an effective approach.

Another important feature was the major reshuffling of personnel. No staff members, including board members and other management, were given an assurance that they would keep their jobs. Everybody had to apply for a new job, which was a very complicated, demanding and, for the personnel, stressful operation. Staff rotation can be an important recipe against capture⁵⁰ and tunnel vision, while participation in interdisciplinary problem-oriented teams and the flexible deployment of staff are ways of ensuring access to broader-ranging expertise, providing they are accompanied by careful cross-training. Although the in-depth knowledge that sectoral regulators require obviously means that not all personnel can be reshuffled, there will always be a need to rotate certain staff in order to prevent the creation of new silos. The risk of this must be regularly monitored and scrutinized. What has been done to prevent silos, both now and in the future, can be summarized as follows:

• Activities to counteract abuse of dominant positions have been integrated with regulatory work in each sector (integrated teams): the tasks have been transferred from the competition division to all sector-specific departments;

• All consumer powers have been integrated within one department (rather than per sector);

• Positions have been reshuffled: everybody had to apply for a new job (around 30% of the staff ended up in new positions); the application procedures for key management positions were conducted by the chair of the board and two outsiders;

• A strategy group has been set up, organizing workshops, case studies and discussion groups;

• Horizontal teams have been created, handling many key issues, including prioritization policy, review teams and cooperation on detection;

• A problem-solving methodology has been put in place, with multidisciplinary cross-border teams of, for example, consumer, competition, and regulatory staff;

• The Legal Department has been given the responsibility to oversee all draft decisions, and procedures to ensure consistency have been introduced;

• The ACM Academy has been established to provide professional training for staff at all levels.

External perspective: learning from experience

In addition to the ‘hard’ organizational structure, a number of important measures have been taken to encourage that all at ACM cooperate with external stakeholders, to promote the philosophy of ‘looking inwards from the outside’, and to support an integrated approach to dealing with market and consumer problems. The Consuwijzer consumer information desk, for example, plays a critical role in all ACM’s spheres of activity, and lessons can be learned from the experience gained in this respect.

The ACM has also set up an information desk to offer businesses a ‘one-stop shop’ covering the entire spectrum of ACM’s activities. Stakeholders will be regularly involved in round-table discussions, workshops, and consultations. ACM will also use its networks at a European (ECN, BEREC and ACER, for example) and international level (Organisation for Economic Co-operation and Development (OECD) and International Competition Network (ICN)) to develop and obtain active feedback on best practices and to learn from the experience of others.⁵¹

IV. Concluding remarks

Some people are concerned that a multifunctional authority may result in a lack of focused enforcement. Antitrust lawyers fear that consolidating the different regulatory areas may dilute traditional antitrust law, while regulatory experts fear that all priority and resources will be diverted towards antitrust enforcement. Consumer lobbyists meanwhile are concerned that there will be a lack of focus on consumer interests. While these concerns have to be taken seriously, this paper explains why they will not prove to be true.

Applying the key factors of Hyman and Kovacic to the ACM case, the political choice for this specific multifunction combination can be considered a lucky choice (or should it be described as a ‘lucky shot’?). Looking at these key factors, many of the necessary ingredients were present: political support, coherence, capacity and capability. The political decision to merge triggered an innovative process of institutional design. This case shows that three factors are essential ingredients for success. The first ingredient is to formulate a comprehensive strategic vision of the new regulator’s core identity. Formulating this strategy has to be one of the key elements of the integration process, as the strategy should colour the regulatory philosophy, culture, and organizational structure. Creating this ACM-wide strategic vision provides focus for the new organization’s work. In this regard, it can be very fruitful to give relevant stakeholders the opportunity to express ideas and give feedback. The second ingredients is the personality of leaders and a culture that is receptive to change are crucial in the process of forming a new regulator, irrespective of the theory or design applied. After all, the success of such processes depends on people’s willingness to make them succeed, to achieve improvements and to be receptive to innovations. An important element of any institutional change should therefore be a focus on identifying a common culture, based on key values and a core vision. This requires continual investment in sending out the message and ensuring that the tone at the top is embedded in the new culture. The final ingredient for success is the prevention of silos. This can be achieved by forming integrated cross-departmental teams and by reshuffling of positions and personnel.

Time will tell whether this proves to be true innovation or merely an erosion of all three organizations. Will they together end up doing too many things and, therefore, achieving nothing? By consolidating the wide range of duties and instruments of the constituent organizations, ACM believes that it will actually be in a better position to carry out its duties. Combining regulation, competition and consumer protection in an integrated manner will make it possible to devise better solutions. The three areas of the law will not, therefore, be eroded. On the contrary, the new organization will trigger a process of cross-fertilization and a better combination of tools and instruments for resolving problems in the different areas. Prioritization will obviously be needed, given the scarcity of resources, but a balanced portfolio should ensure enforcement in all three areas.

Further experimental and comparative research is needed to identify the relevant key factors to use as building blocks for future institutional design of competition agencies. The great challenges for the future revolve around focus, choices and the managing of expectations. Witnessing the cross-fertilization between the different fields within the new ACM is, however, a refreshing experience. This is a unique opportunity, and it is now up to ACM to show that it will work.

This article has been written in the author’s personal capacity and reflects her personal views. The author would like to thank all the members of the strategy team—Jarig van Sinderen, Dirk Janssen, Milou Dijkman, Siún O’Keeffe, Bob Boelema, and Merijn Schik—for their support, creativity and impeccable contributions during the strategy process and the writing of this article. The strategy team would like to express its gratitude to Professor Kovacic of George Washington University, Professor Zeitlin of the University of Amsterdam and Professor Brinkhorst of the University of Leiden for their inspiration and useful comments during the strategy process. And last but not least, the author would like to thank her fellow OPTA board member and friend Chris Fonteijn for his inspiration and support.

Footnotes