Cseres 2013

INTEGRATE OR SEPARATE.
INSTITUTIONAL DESIGN FOR THE

ENFORCEMENT OF COMPETITION LAW AND CONSUMER LAW
K.J. Cseres
Amsterdam Law School Legal Studies Research Paper No. 2013-03

Amsterdam Centre for European Law and Governance Research Paper No. 2013-01
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Integrate or separate
Institutional design for the enforcement of

competition law and consumer law
K.J. Cseres
Amsterdam Centre for European Law and Governance

Working Paper Series 2013 - 01
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or at the author’s SSRN page
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April 2013
© K.J. Cseres
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Dr. K.J. Cseres
University of Amsterdam
Amsterdam Centre for European Law and Governance
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NL – 1000 BA Amsterdam
The Netherlands
Tel.: +31-20-525-3654
Email: k.j.cseres@uva.nl
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Integrate or Separate
Abstract
Over the past years several EU Member States decided to integrate their competition
authorities with their consumer protection agencies. Most recently, the Netherlands
Authority for Consumers and Markets (ACM) has merged the Netherlands
Competition Authority (NMa) with the Dutch Consumer Authority (CA) and the
Netherlands Independent Post and Telecommunications Authority (OPTA) as from
1st April 2013. On the contrary, some other Member States separate the enforcement
of competition law and consumer law. The United Kingdom will abolish the Office of
Fair Trading (OFT) and merge its competition and national enforcement functions
with the also abolished Competition Commission to form a new Competition and
Markets Authority (CMA). The OFT’s consumer law enforcement roles are handed to
the National Trading Standards Board which will coordinate consumer law
enforcement with local and regional government’s trading standards departments.
The CMA will retain consumer enforcement powers for some purposes and have
responsibility for national oversight of the effective functioning of markets. These
institutional changes are the results of political decisions, based mainly on budgetary
concerns. National governments justified these institutional mergers by arguing that
consolidated agencies can increase the efficiency and effectiveness of competition
oversight and market regulation, enhance the importance of consumer and
competition affairs in society, ensure corporate responsibility with regard to
consumer interests and streamline administration. Similarly, the separation of
institutions was justified by the reduction of complexity in the enforcement
landscape, strengthening the effectiveness of law enforcement and achieving more
cost-efficient delivery of consumer advice, representation and enforcement.
These institutional and procedural changes seem to be experimental rather than
programmatic and are instituted without investigating their impact on law
enforcement. This paper discusses three different institutional models for separating
or integrating the public enforcement of competition law and consumer protection
and analyses the synergies and the drawbacks emerging from allocating enforcement
powers in one or two public agencies. The aim of the paper is to assess how the
allocation of enforcement powers affect law enforcement and map those normative
criteria that have to be assessed when the allocation of regulatory powers is decided
on. The paper analyses the likely consequences of a certain institutional arrangement
for procedural norms such as the proportionality of remedies and the time of
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K.J. Cseres
intervention and for institutional performance norms such as expertise,

administrative efficiency, independence, consumer participation and accountability.
This analysis is conducted against the backdrop of the regulatory state in EU law
and policy and it extends to examine the impact of EU law and policy on the Member
States’ institutional design as well as the EU’s constraining effects on institutional
path dependence.
Keywords: Competition law, Consumer Protection, Public enforcement, Institutional

design, Administrative authorities
Page 4
Introduction
In 2011 the Dutch Minister of Economic Affairs has decided to merge the
Netherlands Competition Authority (NMa) with the Dutch Consumer Authority (CA)
and the Netherlands Independent Post and Telecommunications Authority (OPTA)
into a new administrative authority named the Netherlands Authority for
Consumers and Markets (ACM). 1 The Dutch Ministry argued that this institutional
change will increase the efficiency and effectiveness of competition oversight and
market regulation, as a consolidated authority is able to anticipate market
developments in a flexible and integrated manner, and make better use of its
consolidated knowledge and expertise. Another anticipated benefit of the merger is
cost savings. 2
This is a remarkable development in the light of the fact that in 2007 when the
Dutch Consumer Authority was established the Dutch government has opted for a
separate new agency. The Dutch government argued that even though the
Netherlands Competition Authority (NMa) was a general supervisory authority, it
was unfit to enforce consumer protection laws as the NMa pursues a different
perspective, namely to maintain well-functioning markets which makes workable
competition possible and which guarantees an optimal allocation of resources
(Memorie van Toelichting, 2005).
Similar institutional reorganizations are taking place in several EU Member
States Denmark, 3 Finland, 4 Ireland 5 and the United Kingdom. 6 These institutional
1The consolidation of these three existing authorities will be realized through two separate
bills: the ‘bill on ACM Establishment Act was submitted to the Dutch Parliament and the
Second Chamber has accepted it by 2 October, the First Chamber has finally accepted it in
February 2013. The substantive bill planned to be passed before 2014.
Kamerstukken II, 2011-2012, 31 490, nr. 69. Kamerstukken 2011-2012, 33 186 nr. 2 Regels
omtrent de instelling van de Autoriteit Consument en Markt (Instellingswet Autoriteit
Consument en Markt); Wetsvoorstel stroomlijning markttoezicht ACM, juni 2012
2 The ACM’s three departments which focus on consumers, regulation and competition will
be complemented by a central legal department, an office of the chief economist, and the
corporate affairs department which will be responsible for (inter)national strategy and
communication and support staff. The new authority will be run by a collegial board,
consisting of three members. It will focus on three main themes: consumer protection,
industry-specific regulation, and competition oversight. With a collegial board, the coherence
between these three themes will be safeguarded. The substantive bill will amend legislation,
simplify procedures, and streamline powers.
3 In Denmark, the Danish Competition Authority and the Danish Consumer Agency merged
into the Danish Competition and Consumer Authority in 2010. The overall objective of the
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K.J. Cseres
changes are the results of political decisions, based mainly on budgetary concerns.
The institutional and procedural changes seem to be experimental rather than
programmatic and are instituted without investigating their impact on law
enforcement. Law enforcement is a fundamental and necessary function of effective
regulation a clear vision on how allocation of enforcement powers affect law
enforcement and which criteria are essential in these decisions is missing.
Political scientists have long underlined the significance of institutional
design on government performance (Wilks, 1999). It is now also well recognized in
the competition law community that institutions are a critical and underappreciated
driver of public policy that interacts in many subtle ways with substantive rules and
decisions (Crane, 2011, p. xi). The interaction of institutional design of competition
law enforcement with substantive rules and policy making is also widely discussed
and researched in both national and international competition law communities
(ICN, 2009; OECD, 2008; Fox, 2010; Fox and Trebilcock, 2012; Hyman and Kovacic,
2012).
The basic idea that institutions matter for economic development is based on
the assumption (North, 1995) that institutional frameworks create incentives for
merger was to take advantage of the synergies between the two areas of competition and
consumer policy. OECD, Annual report on competition policy developments in Denmark
DAF/COMP/AR(2011)3
4 In Finland, the Ministry of Employment and the Economy (the Ministry) announced in
March 2012 that it will merge the Finnish Competition Authority and the Finnish Consumer
Agency. The new Finnish Competition and Consumer Authority began operating on 1st
January 2013. The purpose of the merger is to enhance the importance of consumer and
competition affairs in society and to streamline administration. The purpose of the new
agency will be to ensure a healthy and functioning market where enterprises and other
players act responsibly and with regard to consumer interests.
5 Ireland, in its 2005 report the Consumer Strategy Group considered the integration of
consumer and competition policy within one agency. Eventually, the Irish government
decided to establish a separate agency, the National Consumer agency in 2007. However, in
2008 the Government announced in that the Competition Authority will be
amalgamated with the National Consumer Agency. In 2011 autumn the Minister for
Jobs, Enterprise and Innovation announced that the Board of National Consumer Agency is to
be dismantled. This comes as permission has been granted to draft the Consumer and
Competition Bill which is to merge the Agency with the Competition Authority. Bill to merge
Competition Authority and Consumer Agency gets go-ahead,
http://www.publicaffairsireland.com/news/772-bill-to-merge-competition-authority-and-
consumer-agency-gets-go-ahead Consumer Strategy Group, “Making Consumers Count: A
New Direction for Irish Consumers”
(Dublin, Department of Enterprise, Trade and Employment, 2005).
6 In the UK the coalition government is planning to amalgamate the Office of Fair Trading
and the Competition Commission into a new single body, the proposed Competition and
Markets Authority (CMA).J. given at the Law Society Competition Section Annual
Conference. http://www.oft.gov.uk/news-and-updates/speeches/2011/1011
Page 6
behaviour, leading to different outcomes. North defines institutions as the rules that
determine the behavior of individuals and organizations. He distinguishes between
formal rules such as laws and regulations and informal rules such as constraints on
behavior derived from culture, tradition, custom and attitudes. Formal rules and
informal constraints are interdependent and in constant interaction (North, 1995).
Lawyers would not tend to think of institutions as the rules of the game but
understand institutions to mean those bodies (formal and informal) that are charged
by a society with making, administering, enforcing or adjudicating its laws or
policies (Trebilcock and Prado, 2009). This paper will use institutional design to mean
organizational design and to denote the systems, structures, processes, and
procedures of law enforcement and application and policy advocacy (Fox, 2010).
The paper discusses one specific aspect of institutional design: the allocation
of enforcement powers for the public enforcement of competition law and consumer
protection. It distinguishes three different institutional models, which represent
different ways for combining or separating public enforcement responsibilities.
Accordingly, the paper examines the mechanisms through which competition law
and consumer law are enforced and it analyses the synergies and the conflicts of
allocating enforcement powers in one or two agencies.
The goal of the paper is to map the normative criteria of institutional design
that should be considered when the allocation of enforcement powers to
administrative authorities is decided on. The paper analyses how the allocation of
enforcement powers affect law enforcement. It assesses the likely consequences of a
certain institutional arrangement for procedural norms such as the proportionality of
remedies, the time of intervention and for institutional performance norms such as
expertise, administrative efficiency, independence and accountability. This analysis
is conducted against the backdrop of the regulatory state in EU law and policy and
it extends to examine the impact of EU law and policy on the Member States’
institutional design as well as the EU’s constraining effects on institutional path
dependence.
The paper has five sections. Section 1 briefly discusses the existing literature
and the relevance of institutional design for law enforcement. It also sets out the EU
law and broader international framework of institutional designs. Section 2 describes
the economic, legal and political developments that accompanied the emergence of
different institutional models for competition law and consumer protection
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K.J. Cseres
enforcement. This section includes a brief discussion of how the forms and theories
of regulation developed alongside these developments. Section 2 also discusses how
EU law and policy developed from the traditionally safeguarded procedural
autonomy and institutional neutrality towards some basic forms of EU standards in
these legal areas. Section 3 describes three institutional models in the EU Member
States for the enforcement of competition law and consumer protection and the
current changes that are taking place in these models. This brief overview illustrates
the relevance of alternative institutional designs for law enforcement. Section 4
discusses a basic set of criteria against which the alternative allocation of regulatory
powers can be evaluated and assesses the advantages and the drawbacks of
integration. The paper closes with conclusions.
1. Institutions matter for law enforcement
The relevance of institutions has already been emphasized by Stiglitz, who argued
that stages of development indicates how far an economy has advanced to generate
institutions necessary for well-functioning market economy and the capability of
economy’s institutional apparatus to generate wealth for its citizens (Stiglitz 2002). In
the economics literature it was first the late nineteenth century institutional
economics that stressed the evolutionary nature of law and economy and discussed
the social, economic and political institutions that govern everyday life. It extended
the discussion to the formal and informal institutions which control social interaction
and shape individual behaviour so that negotiation and coordination costs are
reduced (Medema and Mercuro and Samuels 2000). Later new institutional
economics 7 has developed as a movement within the social sciences, especially
economics and political science and united the theoretical and empirical research
examining the role of institutions in furthering or preventing economic growth
(Klein 2000). It includes work in transaction costs, political economy, property rights,
hierarchy and organization, and public choice. Most scholars view the work of
Ronald Coase as a central inspiration for the field (Coase 1937; Coase 1960). Coase’s
7 New Institutional Economics (NIE) is an interdisciplinary enterprise combining economics,

law, organization theory, political science, sociology and anthropology to understand the
institutions of social, political and commercial life. It borrows liberally from various social-
science disciplines, but its primary language is economics. Its goal is to explain what
institutions are, how they arise, what purposes they serve, how they change and how - if at all
– they should be reformed.
Page 8
approach helps to compare the economic consequences of the alternative ways of

organizing the allocation of resources and achieving economies of scale (Klein 2000). 8
In a recent paper Kovacic and Hyman have formulated the public
administration equivalent of post-Coase scholarship that has recognized the complex
issues raised by the specification of the boundaries of the firm, and the linkage
between organizational and institutional choices and firm “outputs.” They transform
the questions of when firms carry out some functions themselves, when firms
contract with others and how firms decide between contract, acquisition, and joint
venture to the public administration field. They ask the question how the “optimal”
boundaries for a government agency’s substantive responsibility should be decided
upon (Hyman and Kovacic, 2012).
The allocation of regulatory powers into different administrative agency
models is today a fundamental issue for national governments and supra-national
organizations as they see that the practices and procedures of different institutions
influence norm application. It has been argued that the institutional embeddedness
(Gerber, 2008) of legal rules involves important procedural and institutional
complexities and irregularities that influence effective law enforcement. Substantive
rules and policies are mediated through the institutions that investigate enforce and
adjudicate legal issues and the decision-making processes that these institutions
employ. Institutional and procedural differences are likely to generate widely
different substantive outcomes, even with a similar legislative mandate (Trebilcock
and Iacobucci 2010). The respective institutional contexts will each shape decisions
in their own ways and may lead to differing functions of the legal rules and thus
potentially very different outcomes (Gerber 2008). With regard to the widely
discussed literature on responsive regulation Baldwin and Black argue that really
responsive regulation should take account of the institutional setting of the regulatory
regime because the position that each organization (regulator or regulatee) occupies
with regard to other institutions can have a critical effect on the actual and potential
operation of regulation. The actions of a regulatory agency, for instance, are strongly
8 The economic relevance of legal institutional arrangements lies in the presence of non-
negligible transaction costs. The reduction of these costs as well as the maximisation of
efficiency through alternative institutional arrangements has been a relevant contribution by
Coase to public policy regarding institutional design. Transactions costs theory provides
insights to both the costs and benefits of integrating or separating the enforcement of
consumer law and competition law in one organisation as well as the costs of internal
organisation such as information flows, incentives, monitoring and performance evaluation.
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K.J. Cseres
shaped by the distribution of resources, powers, and responsibilities between that

body and other organizations, including those that oversee it (Baldwin and Black
2010).
In the field of economic regulation several authors discussed the issue of how
regulatory tasks and powers are allocated among the different public authorities
(Lodge, 2002; Minogue, 2002; Ogus, 2002; Hyman and Kovacic, 2012) but they have
not investigated the impact of alternative allocation of regulatory competences on
law enforcement. Earlier literature has emphasized the relevance of internal structure
of regulatory authorities (“intra-agency” structure) as well as the issue of shifting
enforcement powers between regulatory agencies (“inter-agency” structure) for
actual law enforcement (Biber, 2009). As mentioned above, more recent research in
the field of competition law analyzes the institutions of competition law enforcement
and discusses normative criteria of institutional design. These criteria will be briefly
mapped out in the next section.
1.1. Normative criteria for evaluating enforcement institutions

Trebilcock and Iacobucci discuss the normative criteria of evaluating competition law
institutions and argue that these criteria seem uncontroversial. However, when the
trade-offs among these criteria proves to be a highly contestable exercise. They put
forward five dyadic criteria: independence-accountability, expertise-detachment,
transparency-confidentiality public credibility, administrative efficiency-due process,
and predictability-flexibility (Trebilcock and Iacobucci 2010). In the framework of a
broader international project Fox and Trebilcock study global administrative law and
they seek to determine whether there are global norms of procedure and process
across very different institutional arrangements (The GAL Competition Project). Fox
et al., investigate institutions of competition law enforcement in the global space,
they test the enforcement institutions against a set of norms used to assess the
operations of administrative agencies (Fox and Trebilcock, eds, 2012). They address
major normative issues relating to institutional design and decision-making
processes, such as institutional structure, mandate, rights of defense, institutional
performace and trade-offs between the various criteria. Within the institutional
performance criteria, they review five broad norms—operational efficiency,
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expertise, transparency, accountability, and the rule of law (First and Fox and Hemli,
2012).
This paper will discuss these normative values by addressing the
institutional varieties of law enforcement in the context of the increased
Europeanization of economic regulation. While the process of convergence in the
field of substantive rules is well-advanced, similar convergence and harmonization
of institutions has not taken place in the EU. This is a challenge in the multi-level
governance system of EU law enforcement (Cafaggi, Micklitz, 2009) where similar
substantive rules have to be implemented through diverging procedural rules and
institutional arrangements. This decentralized enforcement framework is query to
the coherent and uniform application of EU law, which is a puzzle across various
fields of EU law. 9 While, it has been long recognized by the EU Courts that the
Member States’ national procedural autonomy finds its correlative duty to provide,
in accordance with the principle of sincere cooperation, an adequate procedural
framework for the enforcement of EU rights, the divergences of national procedures
and institutions are still substantial. The full effectiveness of EU law, effective judicial
protection 10 and effective law administration may be at risk by an enforcement
system where Member States may apply divergent procedures, may impose a variety
of sanctions and remedies and operate in various institutional settings. In EU
competition law, for example, it has been questioned whether consistent policy
enforcement and the effective functioning of the European Competition Network
requires a certain degree of harmonization of procedures, resources, experiences and
independence of the NCAs (Cengiz 2009; Gauer 2001; Frédéric 2001). The next section
will first, map the economic developments that lead to complex market failures in
9 As Advocate General Kokott in T-Mobile Netherlands and Others argued:

“[i]n those circumstances, it is of fundamental importance that the uniform application of
competition rules in the [European Union] be maintained. Not only the fundamental objective
of equal conditions of competition for undertakings on the single market but also the concern
for uniform protection of consumer interests in the entire [European Union] would be
undermined if in the enforcement of the competition rules of Articles [101 and 102 TFEU]
significant disparities occurred between the [NCAs] and courts of the Member States. For that
reason, the objective of a uniform application of Articles [101 and 102 TFEU] is a central
theme which runs throughout Regulation No 1/2003.” Case C-8/08 [2009] ECR I-4529, points
85 and 86. Opinion of Advocate General Kokott delivered on 19 February 2009 in Case C-8/08
[2009] ECR I-4529 p. 85
10 The general principle of effective judicial protection, which has been enshrined in Articles 6
and 13 of the ECHR as well as in Article 47 of the Charter of fundamental rights of the
European Union and which has now been reaffirmed in Article 19(1) TEU.
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K.J. Cseres
the liberalized and newly emerging markets affecting both the demand and supply
side and second, the legal developments in EU law that affect the traditional EU law
principles of national procedural autonomy and institutional neutrality. Both these
developments have put the institutional design of administrative authorities on the
political and legal agenda of national governments and the EU institutions.
2. Towards an integrated approach to market regulation
2.1. Market failures at the intersection of competition law and consumer protection
As Gersen has noted, “[f]rom the perspective of institutional design, the optimal
bureaucratic structure depends on the ends to be achieved.” (Gersen, 2010).
Competition law and consumer protection share the common goal of providing
consumers with access to a range of competitively priced goods and services in
markets free of unfair and deceptive practices. Despite their common goal
competition law and consumer protection have developed in most jurisdictions as
two separate fields of law and policy with their particular enforcement mechanisms
and institutional framework. While both legal fields strive for well-functioning
markets they address different market failures respectively on the supply or demand
side and apply different enforcement tools in different enforcement environment
(Cseres, 2007).
As economies develop the relevance of market-wide problems is growing and
market failures come from wider range of sources. A “separated” approach does not
suffice any longer to assess risks and remedy the full range of detriments in the
marketplace. Market regulation and supervision is being challenged by the
emergence of new markets and new technologies, especially in utility markets where
previously the state had a monopoly. Traditionally utility markets were regulated
and it was believed that utilities can be the best distributed through a monopoly. The
shortcomings of this approach have formed the basic tenet of neo-liberal public
policy to reduce the role of the state in regulating markets. The post-regulatory state
(Scott, 2004) introduced competition into markets previously dominated by state
monopolies and respond better to consumer needs in terms of cost effectiveness,
lower consumer prices, higher quality, wider range of choices. The liberalisation and
(de)regulation of markets in the network industries was dominated by focusing on
the supply side. The legislative tools primarily targeted a competitive market
Page 12
structure by introducing specific regulatory frameworks that complemented existing

competition rules and institutions. Market failures were in the first place anticipated
on the supply side and therefore (de)regulation was aimed at effective competition
through disciplining incumbent and new firms. It was assumed that lifting entry
barriers for firms, lowering prices and widening the range of products and services
will be sufficient to activate consumers to make rational and efficient choices in
markets. Consumers could, however, not make (optimal) use of their newly acquired
possibilities. Regulatory approaches strongly focused on supply side market failures
and the role and function of private consumers in the liberalisation process has been
mainly neglected (Micklitz and Reisch, 2006) (Cseres, 2008).
While public policy of the 1970s empowered public agencies to intervene
proactively in markets, from the 1990s public policies were characterized by post-
interventionism that attributed a different and often more modest role to the state.
Regulation became “decentred” and has been depicted as a process of “steering not
rowing” and “coordinating, steering, influencing, and balancing interactions
between actors” (Black, 2001). Decentred regulation rests on greater reliance on self-
regulation and provides greater opportunities to participate in the market. This
decentred regulatory approach “responsibilised” (Ramsay, 2006) consumers,
reconstructing them as regulatory subjects and not merely as passive regulatory
objects. Decentred regulation harnessed consumers as essential economic agents in
market regulation and as individuals in civil society whose participation in the
administrative decision making processes is key to the democratization of the
regulatory processes (Ramsay, 2006; Black, 2000).
This post-interventionist regulatory model is built on increased marketization
and a consumer centered governance where responsibilities and powers for
economic decision making, rule-making and law enforcement is (partially) shifted
from the state to consumers. Consumers have been reconstructed as regulatory
subjects with the goal to achieve competitive markets, particularly in the financial,
the energy and telecommunications markets.
More competition and less regulation has been expected to lead to increased
consumer welfare in terms of price, quality and range of products. However,
empirical evaluations of the liberalisation process showed that opening up markets
to more competition did not result in expected levels of competitiveness and
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K.J. Cseres
consumer benefits. 11 Many consumer related failures were not well anticipated and
the amount of unfair trade practices, unfair contract terms, complex pricing practices
resulted in significant consumer detriment and high degree of consumer inertia
(Giulietti and Waddams and Waterson, 2005) (Wilson and Waddams, 2005). 12
In many sectors a growing number of market wide problems emerged where
both competition law and consumer law issues are present. Complex market failures
take a compound form of abuse of a dominant position and unfair trade practices.
The traditional divide between consumer protection and competition law became
hazy. Competition authorities and sector regulatory agencies have to investigate
cases, where a mix of competition and consumer protection issues arise. Imperfect
information-based market power may harm consumers by imposing excessive
(unfair) prices or other unfair trading conditions and thus distort consumers'
otherwise welfare maximising choice (Vickers, 2003). This is especially so in markets
of non-homogeneous, complex products such as financial services, where thus
consumer behaviour can often create significant barriers to entry (Waterson, 2003).
Sellers may exploit consumers’ lack of knowledge about their rights or their inability
to understand standard contract terms, complex goods, to conduct direct
comparisons and to monitor service delivery. The potential role of bundling as a
strategic response to consumers’ imperfect rationality has already been recognized in
two important articles by Thaler and Craswell (Thaler, 1985; Craswell, 1982), 13 and
11 For example, evaluations and new proposals in the EU indicate that the regulatory
framework was insufficient to enable consumers to reap the full benefit of the liberalisation
process. In many countries liberalisation has led to mixed results. While it improved
competition for large users and provided better prices and new products and services at the
same time it also resulted in much consumer harm. Report on energy sector inquiry
SEC(2006)1724, 10 January 2007, Brussels 13th Report on the Implementation of the
Telecommunications Regulatory Package – 2007, Final report 2007 (COM(2008)153) - 19
March 2008
The Network Industries in the 21st Century: Regulating for Growth and Competition in the
Internal Market, European Government Business Relations Council, Brussels, 5 March 2007;
Telecoms: Consumers have more choice but full potential of EU's internal market remains
unexploited, 29 March, 2007, IP/07/435
12 While it is usually correct to assume that consumers change their behaviour and allegiance
in response to price changes, this only holds if the market supplied the necessary information,
which businesses and consumers need to behave rationally and conclude efficient
transactions. Consumers facing significant information problems will make less rational
decisions. If demand is inelastic and switching costs are high or unfair trade or abusive
practices prevent them acting in their best interest they will not be able to enjoy the
advantages of a competitive market.
13 Thaler’s seminal article shows how mental accounting (by consumers), and specifically the
framing and coding of multiple gains and losses, can lead sellers to adopt a bundling strategy.
Page 14
more recently, Bar-Gill studied firms’ bundling practices as a strategic response to

consumer misperception (Bar-Gill, 2006). 14
Combatting these kind of practices requires considerable resources, expertise
and ability to bear financial risk as it might involve large multinational companies
violating both consumer laws and competition law through abuse of a dominant
position (OFT, 2011). The complex market failures necessitated a more integrated
approach merging both legal and economic knowledge from competition law and
consumer protection. It brought together competition law and consumer protection
experts and administrative authorities in order to initiate more coordination (OFT,
2009).
There has also been relevant legal developments with regard to the
institutions of law enforcement and especially, with regard to administrative
authorities. These developments will be reviewed in the next section.
2.2. Development of EU law on law enforcement: breaking with institutional

neutrality
The above described integrated approach to market regulation was taking shape in a
legal and political environment where EU law and policy carefully began to
influence national law enforcement. First, the EU induced liberalisation of state-
owned enterprises has been accompanied by the creation of regulatory agencies in
order to maintain elements of public control and to provide reassurance of
independence from government in creating a level playing field for new entrants
(Gorecki, 2011; Scott, 1993; Thatcher, 2002). Second, the influence of EU law on
national procedures and remedies of law enforcement has been gradually and slowly
growing since 1992 (de Moor-van Vugt, 2011). From the early 1990s the Commission
began to monitor the Member States’ enforcement of EU law due to insufficient
implementation of EU law resulting in fraud with EU structural funds (de Moor-van
Craswell, working at the intersection of competition law and consumer protection law,
identifies the viability of misperception-driven bundling in competitive markets.
14 In contrast to the bundling and tying in the competition law literature - strategies used by a
seller with market power in market A trying to leverage its market power into market B -
bundling in response to consumer misperception may occur in intensely competitive markets.
His analysis demonstrates that such competitive bundling can be either welfare enhancing or
welfare reducing. When bundling exacerbates the adverse effects of consumer misperception,
regulation designed to discourage bundling may be desirable. Bar-Gill suggests several
"unbundling policies" that can protect consumers and increase welfare in markets where
bundling is undesirable.
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K.J. Cseres
Vugt, 2011). As a result, the Commission implemented a stricter policy which limited
the Member States’ procedural autonomy and obliged them to comply with the
principles of sincere cooperation, non-discrimination and effectiveness (de Moor-van
Vugt, 2011). 15 The CJEU’s judgment in Greek Maize opened the way for the
Commission to lay down obligations for the Member States in consequent Directives
and Regulations that concerned subsidies in order to take appropriate measures in
case of infringements of EU law. 16 De Moor-van Vugt demonstrates that the same
pattern of Europeanizing national enforcement models has been followed by the EU
in several other sectors such as agriculture, environmental law, financial services and
sector regulations such as telecomm and energy (de Moor-van Vugt, 2011, p.72).
At the same time, the accession of 10 new Member States in 2004 has opened
the discourse on enforcement and it made the relevance of enforcement for the
effective working of EU rules manifest (Nicolaides 2003). This enlargement round
formed a significant challenge for the EU’s multi-level governance system with
regard to law enforcement. During the accession process procedural diversity among
Member States became visible in many fields of EU law such as competition law and
consumer law. While previously issues of enforcement and institutional structures
were regarded to rest in the exclusive competence of the Member States according to
the EU principles of procedural autonomy and institutional neutrality, enlargement
has pushed crucial questions of enforcement and institutional choice to the forefront
of the EU agenda (Cseres, 2010).
15 Since the CJEU’s judgment in C-68/88 Greek Maize the Member States are required by
Article 4 (3) TFEU to take all measures necessary to guarantee the application and
effectiveness of EU law. While the Member States remain free to choose the appropriate
enforcement tools, they must ensure that infringements of EU law are penalized under
conditions, both procedural and substantive ones, which are analogous to those applicable to
infringements of national law of a similar nature and importance and which, in any event,
make the penalty effective, proportionate and dissuasive. Case 68/88 Commission v Hellenic
Republic, Judgment of the Court of 21 September 1989, I-2965, paras 23-24
16 Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-
spot checks and inspections carried out by the Commission in order to protect the European
Communities' financial interests against fraud and other irregularities When this proved
insufficient to stop fraud in the Member States the Commission began to support the setting
up of national associations to protect economic interests of the EU and invited these
associations to conferences to discuss the barriers of effective enforcement and for the
exchange of information. At the same time, the Commission revised EU legislation and
obliged the Member States to issue administrative sanctions in cases of infringements.
Infringements had to be notified to an EU database and Member States had to annually report
their enforcement efforts. As a final move, the EU set up an EU agency, OLAF for monitoring
Member States’ enforcement. Regulation 1260/1999 laying down general provisions on the
Structural Funds OJ 1999L 161
Page 16
In the liberalized network industries the EU gradually extended the EU

principles of effective, dissuasive and proportionate sanctions as formulated in the
European courts’ case-law to a broader set of obligations and criteria for national
supervision of EU legislation. This process of Europeanization of supervision (Ottow 2012)
obliged Member States to establish independent national regulatory agencies with
core responsibilities for monitoring markets and safeguarding consumers’ interests
(Micklitz, 2009) through ensuring effective law enforcement and complaints
processes (Davies and Szyszczak 2010). In the course of these national and EU law
developments many Member States have strengthened the role of regulatory
agencies and have empowered them with a growing number and diversity of
regulatory competences. Liberalization thus was not only characterized by a
noticeable shift from the state to individual consumers and their collectives to
enforce the rules, but also by a shift from judicial enforcement to more administrative
enforcement (Cseres and Schrauwen, 2012). Van Cleynenbreugel shows that the
European Court of Justice’s judgment in Vebic 17 even reflects a new assimilation
approach to national institutional autonomy in the realm of decentralised EU
competition law enforcement (Van Cleynebreugel, 2012).
However, the mushrooming of regulatory agencies is now being replaced by
a public policy of reducing their numbers in order to address the problem of control
over regulatory agencies (Black, 2012). This signals a new legal and political
framework for regulatory agencies which builds on accountability as its central tenet
instead of the initial concept of independence that justified the creation of regulatory
agencies. This issue will be further discussed below in section 5.3 below.
3. Diversity of institutional designs
3.1. Institutional designs for the enforcement of competition law and consumer
law in the EU Member States
There is presently a wide diversity of institutional designs for the enforcement of
competition law and consumer law. The institutional arrangements of national
17Case C-439/08, Vlaamse federatie van verenigingen van Brood- en Banketbakkers, Ijsbereiders en
Chocoladebewerkers (VEBIC) VZW, judgment of 7 December 2010. Vna clyenebreugel argues
that the Court considers itself directly competent to determine the institutional design of
national competition authorities. While an institutional assimilation approach enhances the
uniform application image of EU competition law across the Member States, it also raises
fundamental questions of legitimacy.
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K.J. Cseres
administrative authorities are based on country-specific factors such as legal

administrative traditions, stage of economic development and political realities.
Table I below illustrates the mandates of national competition authorities in the EU

Member States.
Table I. Mandate of national competition authorities in the European Union

Member State NCA Portfolio
Austria BWB Competition, unfair
competition and
broadcasting
Belgium Autorité Belge de Competition
concurrence
Bulgaria Commission on protection Competition, public
of competition procurement and
concessions and unfair
competition
Croatia Agencija za zaštitu Competition, state aid
tržišnog natjecanja
Cyprus CPC Competition
Czech Republic UOHS Competition, public
procurement and
concession and state aid
Denmark Konkurrence-og Competition, consumer
Forbrugerstyrelsen protection, public
procurement and water
Estonia Konkurentsiamet Competition,
communication, energy,
water and railway
Finland FCCA Finnish Competition and
Competition and consumer protection
Consumer Authority
France L´Autorité de la Competition
concurrence
Germany Bundeskartellamt Competition and public
procurement
Greece Hellenic Competition Competition
Commission
Hungary Gazdasági Versenyhivatal Competition and unfair
(GVH) trade practices
Ireland TCA Competition
Italy AGCM Competition and unfair
trade practices
Latvia KP Competition and
misleading advertisement
Page 18
Lithuania CC Competition, state aid and

advertisement
Luxembourg CCM Competition
Malta MCA Competition and
consumer protection
Netherlands NMa (ACM from April Competition, energy and
2013) transport
Poland UOKiK Competition, state aid and
consumer protection
Portugal Autoridade da Competition, restrictive
Concorrência trade practices
Romania Consiliul Concurentei Competition, state aid
Slovakia Antimonopoly Office Competition

Slovenia Competition Protection Competition
Agency
Spain Comisión Nacional de la Competition
Competencia
Sweden Konkurrensverket Competition, public
procurement
United Kingdom Office of Fair Trading Competition and

consumer protection
Three different models can be distinguished for the public enforcement of

competition law and consumer protection. In the separate agency model the
enforcement of competition law and consumer law takes place in two distinct
administrative agencies. The partially integrated model combines the enforcement of
competition law and some specific parts of consumer law related to information,
such as rules against deception or misleading advertising. The integrated model
represents an agency with a double mission: responsibilities for the enforcement of
both competition law and consumer protection law. Table II. provides an overview
of the three models in the EU Member States.
Table II. Institutional models

Integrated agency model Partially integrated agency Separate agency model
model
Bulgaria, Poland, Malta, Hungary, Italy, Lithuania, Romania, Greece, Portugal,
France, United Kingdom, Latvia, Belgium, Luxembourg,
Ireland, Spain, Netherlands Slovakia, Cyprus, Slovenia,
(as from 2013), Finland, Austria, Estonia, Czech
Denmark Republic, Sweden, Germany
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K.J. Cseres
3.2. Changing institutional landscape: three examples
3.2.1. The Netherlands: from separate agency model to integrated model

Even though the Netherlands will have a new integrated agency as from February
2013 the current institutional design is described here for the purpose of illustration.
As of 1st January 2007 the Dutch Consumer Authority was established with the task
of promoting fair trade between businesses and consumers focusing on the economic
interests of consumers. One of the reasons for the new authority was the
implementation of EC Regulation 2006/2004 on consumer protection cooperation.
The Proposal for this Regulation recommended to combine competences in the
supervision and enforcement of competition law and consumer protection in those
Member States that already have a public Competition Authority but lack a
consumer authority. The Proposal argued that there are positive synergies between
the consumer protection and competition dimensions of market surveillance and
enforcement (COM(2003) 443 final note 36).
The Dutch government has chosen to create a new authority because on the
one hand, most of the existing supervisory agencies focus on sectoral legislation,
whereas consumer protection requires a more general supervisor. On the other hand,
even though the Netherlands Competition Authority is a general supervisory
authority, it was considered to be unfit for consumer protection. It was argued that
the Netherlands Competition Authority pursues a different perspective, namely to
maintain well-functioning markets which makes workable competition possible and
which guarantees an optimal allocation of resources (Memorie van Toelichting, 2005).
The Consumer Authority was authorised to take action against national and
cross-border infringements of consumer law provisions in the fields of misleading
advertising, package tours, including holiday packages and roundtrip packages,
unfair contract terms in consumer agreements, timesharing, distance selling also in
the Telecommunications Act, certain aspects of the sale of and guarantees for
consumer goods, E-commerce, agreements entered into away from business premises
(i.e. doorstep selling) and quoting of prices for products offered to the consumer. The
Consumer Authority was not authorised to take action in the financial sector, which
remains the exclusive supervisory domain of the AFM (Netherlands Authority for
the Financial Markets).
Page 20
The Netherlands Competition Authority (NMa) was a typical competition

authority with the main task of supervising corporate behaviour and penalize
violations of the Dutch Competition Act. Besides compliance with the Dutch
Competition Act, the NMa enforces a number of transport acts, and several energy
acts. Its actions are mainly ex-post than ex- ante. The new ACM has three departments
which focus on consumers, regulation and competition will be complemented by a
central legal department, an office of the chief economist, and the corporate affairs
department which will be responsible for (inter)national strategy and communication
and support staff. The new authority will be run by a collegial board, consisting of
three members. It will focus on three main themes: consumer protection, industry-
specific regulation (telecommunications), and competition law (Houdijk, Schäfer,
2012).
3.2.2. Hungary: partially integrated model

The Hungarian Competition Authority (Gazdasági Versenyhivatal – GVH) was
established by Act LXXXVI of 1990 on the prohibition of unfair market practices, and
started its operation on 1 January 1991. The Competition Act, which is currently in
force, is Act LVII of 1996 on the prohibition of unfair and restrictive market practices.
The Act entered into force on 1 January 1997. The task of the GVH in relation to the
freedom of competition is to enforce the competition rules that are laid down in the
Competition Act of 1996. The Competition Act contains rules on restrictive
agreements, abuse of a dominant position, concentrations and the unfair
manipulation of business decisions. The unfair competition law rules of the Act are
enforced by the national courts. The GVH’s enforcement competence includes certain
provisions of the Act on Business Advertising Activity, of the Act on Price Setting
and, as a new task since 2006 the Act on Trade, 18 which controls the conduct of large
retailers that have significant market power falls within the competence of the GVH.
Since 2008 on the basis of Act XLVII of 2008 on the Prohibition of Unfair Commercial
Practices the GVH has the power to proceed against infringements of the prohibition
18The Act on Trade (Act CLXIV of 2005 on Trade) introduced rules that are intended to
influence the conduct of large retailers, which have significant market power, since it
prohibits traders having significant market power from abusive conducts vis-á-vis suppliers.
Based on the substantive provisions of the Act on Trade, the GVH supervises traders having
significant market power with regard to abuses. In these cases, the GVH proceeds pursuant to
the procedural and other provisions concerning the abuse of a dominant position of the
Competition Act.
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K.J. Cseres
of unfair commercial practices, where the commercial practice is capable of

materially affecting competition. Before 2008 the consumer protection related
provisions were situated in Chapter III of the Competition Act. Article 8 prohibited
the deception of consumers in economic competition and Article related to the
unjustified restriction of the freedom of consumer choice. Till 2008 the GVH was the
chief enforcement agency for unfair practices, misleading or deceptive advertising.
The GVH established a rich body of decisional practice under the general clauses of
the HCA concerning various types of unfair practices and the core concepts of the
now implemented Unfair Commercial Practices Directive (UCPD) have developed in
the compound decisional practice of Hungarian unfair competition law, which
traditionally protected both the interests of consumers and the interest of fair
competition through the concept of public interest.
In 2008 the implementation of the UCPD in Hungarian law brought
substantial changes. Articles 8 to 10 HCA were amended in a way that its legal
provisions now protect B2B relations against unfair manipulation of business
decisions if this occurs in the course of a practice that does not qualify as advertising.
The Hungarian legislation faithfully adopted EU law and broke with traditional
legacies of law making and law enforcement in Hungary. It is a strong example of
Europeanization, but at the same time it breaks with its traditional line of legislation
and enforcement by separating the enforcement of B2C and B2B relations (Balogh,
Cseres, 2012). This means that the consumer protection related provisions are
enforced when the process of competition is also affected for example, as a result of
which market player would acquire unfair advantage in competition.
During the transposition of the UCPD, Hungary decided to broaden the
group of regulatory agencies that would enforce the provisions of UCPD. The
legislator considered the UCPD not merely as a protective device of unfair
competition, but also as a legal tool to protect consumers – and as such, it conferred
broad competence to the National Consumer Protection Authority (NCPA) to enforce
the provisions of the Act on Unfair Commercial Practices. The NCPA is also
responsible for the enforcement of the core of consumer law such as unfair
commercial practices (when the process of competition is materially not affected),
product safety, guarantees, unfair contract terms or consumer education and
consumer complaints. Since the financial services sector proved to be one of the most
demanding area of consumer protection, the Hungarian Financial Supervisory
Page 22
Authority (HFSA) was also given the competence to enforce the provisions on unfair
commercial practices in the financial sector. Finally, the GVH is enforcing provisions
on unfair commercial practices in those cases where the distortion of competition can
be established. 19 The three enforcement agencies delineate their competences on the
basis of the requirement of material distortion of competition. 20
While the GVH investigates cases on the basis of examining whether
consumer detriment leads to indirect consumer harm and thus distorts competition,
the NCPA concentrates on consumer protection issues as its first and foremost
priority and the HFSA integrates the enforcement against unfair commercial
practices into its sectoral regulatory practice (Balogh, Cseres, 2012).
3.2.2.1. The Hungarian inter-agency” structure

As the above-detailed legislative framework established a system where three
competent agencies enforce the same legal provisions and where the competences of
the agencies depend upon a complicated legal assessment, Article 12 of the Act on
Unfair Commercial Practices explicitly calls for a cooperation between the agencies in
order to safeguard uniform application. This cooperation includes among others the
obligation to inform each other about their enforcement practice and avoid
unnecessary debates over questions of competence. 21 The Cooperation Agreement
states that the agencies shall operate an internet-based database, in which they shall
upload the material information on each consumer complaint received. They shall
also inform each other about their decisions to launch an investigation and their
decisions in the cases opened. The agencies, moreover shall appoint contact persons
who shall continuously discuss with each other competence allocation and the
19 Article 10 of the Act on Unfair Commercial Practices

20 The substantive test of material distortion of competition was newly introduced in Articles
10 and 11 of the Act on Unfair Practices. As the new regulatory framework did not allocate
specific regulatory powers to any of the enforcement agencies so as to intervene for the
protection of public interest, they can all investigate unfair commercial practices – even if
these would only harm a single consumer. This concept was meant to ensure that the GVH–
similarly to its earlier practice –would continue to investigate cases that also effect
competition.
The Hungarian text of the Cooperation Agreement is available on the website of all three
agencies.
(http://www.pszaf.hu/data/cms2355459/egyuttmuk_megall_PSZF_GVH_120716.pdf)
21 The Hungarian text of the Cooperation Agreement is available on the website of all three
agencies.(http://www.pszaf.hu/data/cms2355459/egyuttmuk_megall_PSZF_GVH_120716.
pdf)
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K.J. Cseres
interpretation of the provisions of the Act on Unfair Commercial Practices for the
sake of uniform application.
There are, however, other cooperation agreements between the three agencies
concerning other legislation and the agencies also set their own enforcement
priorities based on the basis of their traditional enforcement tasks. Consequently,
priority setting with regard to the enforcement of the Unfair Commercial Practices
Act may differ.
Furthermore, enforcement of the UCPD can differ greatly among the three
authorities due to the fact that the three agencies are entitled to impose different
sanctions upon establishing the infringement of the Act on Unfair Commercial
Practices. Moreover, the processes of the three agencies also differ in length, and the
agencies have different financial and other means to enforce the provisions of the
UCPD.
This brief overview of the latest changes in the partially integrated model of
consumer and competition law enforcement demonstrates that even highly
harmonized substantive laws can lead to a wide diversity of national practices due to
the different procedures and sanctions but also due to very different institutional
arrangements of enforcing the same piece of law. In such an institutional setting
enhanced cooperation is crucial to ensure the uniform interpretation of the
provisions on unfair commercial practices in the interest of the consumers.
3.2.3. United Kingdom: from integrated agency to separate agencies

The Office of Fair Trading (OFT) in the UK has been combining consumer and
competition enforcement. It works under an organizational structure arranged by
markets, rather than legislation. The OFT has combined its competition and
consumer protection enforcement in the Market Project Division of the OFT, where
mechanisms for effective coordination, information and intelligence sharing and risk
assessment could be improved. The integrated agency joined up intelligence and
complaints received in one area (whether from consumers or businesses) could also
effectively be dealt with under different powers. The integrated approach also
allowed the optimal choice of enforcement tools. The starting point was the issue in
the market and then the tools available to address the issue were considered. These
could include competition and consumer enforcement, consumer codes, public
Page 24
education and/or market studies and market investigatory powers. 22 In order to

ensure greater consistency between competition and consumer enforcement the OFT
focused on risk-based assessments to avoid unintended consequences on each area of
policy from the other. Within its policy and strategy area, the activities now sit
within the same groups, requiring staff to have a greater understanding across a
wide spectrum of statutory and non-statutory tools. Key prioritisation issues are
addressed at a cross-office prioritization committee and key substantive policy issues
are addressed at a cross-office policy committee, both of which cover the competition
and consumer areas in a consistent and holistic way. 23
However, the OFT will carry out some major changes in the coming years. In
particular, the organization will be restructured to merge the UK’s two competition
authorities, the OFT and the Competition Commission to create a single authority,
the Competition and Markets Authority (CMA). The new CMA’s primary function as
a competition regulator is confirmed, it will retain some consumer law powers,
including lead responsibility for enforcing unfair contract terms legislation. The
CMA will also be able to conduct studies and impose remedies in markets where
competition is not working due to practices or conditions that make it difficult for
consumers to exercise choice. A key proposal was that the OFT should transfer its
consumer law enforcement powers entirely to Trading Standards Services (TSS). In
other words, that TSS should primarily enforce consumer law, taking on both local
and national-level cases. At the moment, local authority Trading Standards Services
enforce small scale breaches of consumer law, whereas the OFT tends to take on
larger cases involving more widespread consumer detriment. In terms of the scope of
the CMA’s consumer activities, the consultation proposed that it should have a clear
focus on competition and market issues. It could start market studies addressing
consumer problems where it was not initially clear whether the cause of the problem
was a competition or structural market issue but if it found there was not a
competition issue, the study would be stopped and passed to Trading Standards to
complete. The CMA would retain consumer enforcement powers only for the cases
with a “structural market” problem where consumer choice was hindered although
22 Contribution from United Kingdom, OECD Global Competition Forum, The Interface
between competition and Consumer Policies, DAF/COMP/GF/WD(2008)18, p.5
23 Joining up competition and consumer policy, The OFT’ approach to building an integrated
agency, December 2009, p.7; Contribution from United Kingdom, OECD Global Competition
Forum, The Interface between competition and Consumer Policies,
DAF/COMP/GF/WD(2008)18, p.6
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K.J. Cseres
some questions were raised about how such a problem could be defined. It has been
argued during the consultation that the CMA's consumer enforcement role should go
wider than this and that consumer and competition policy should be joined up across
the regime, ensuring it delivers effective consumer protection which helps create the
conditions for economic growth (OFT, 2011).
Consumer advice, education and advocacy will be brought together under a
single, well-recognised brand like Citizens Advice. This may have advantages as
long as appropriate mechanisms for accountability and coordination are put in place
to ensure that these functions support the delivery of national policy objectives and
can respond effectively to emerging challenges. However, transferring consumer
Market Studies to Citizens Advice and thus divorcing consumer Market Studies from
markets-based thinking may result in inappropriate or unduly burdensome
interventions, increasing costs for businesses and consumers. This existing UK
consumer protection body will work under the guidance of the new National
Trading Standards Board, which commenced operations in 2012. Together, their
expanded responsibility remit will include consumer codes and the enforcement of
consumer law at national (as well as local) level. The consultation of the UK
government voiced that TSS lacked the experience, the resources and quite possibly
the will to take on difficult national cases against well-funded opponents
(Freshfields, 2012).
The following section will map and analyze the criteria that are relevant
when institutional design of administrative agencies is determined. These criteria can
be used in order to assess the likely of the above described institutional changes on
law enforcement.
4. Allocation of regulatory powers: criteria for assessment

The set of criteria discussed in this section focuses on the specific issue of separation
and integration of enforcing competition law and consumer law and therefore it is a
narrower set than the sets discussed in other studies on measuring the quality of
regulatory agencies (Hanretty and Larouche and Reindl, 2012). The criteria below
illustrate the potential drawbacks and advantages of integrating or separating these
two enforcement areas. Accordingly, the cons and pros of integration will be
highlighted in the discussion of the specific process and institutional performance
norms.
Page 26
4.1. Constituencies, objectives and enforcement tools

Competition law and consumer protection have different constituencies and different
law enforcement objectives. The main focus of competition law is market failures
originating from collusive or exclusionary practices. By prohibiting anti-competitive
behaviour competition law enhances the competitive structure of markets for goods
and services. It maintains the availability of consumer choice on the market by
lowering prices and widening the range of products and services for consumers.
Consumer protection addresses information failures like imperfect information and
information asymmetries. Its objective is to provide good quality and cost of
consumer information and to enable consumers to make well informed decisions.
Moreover, in some jurisdictions, like the US or the UK the place of agency in the
national administrative law system division of power leaves true consumer
protection mandate at individual level to the local administration.
There are substantial differences in the substance and implementation of
consumer law and competition law that would call for separating law enforcement
institutions. The advantages of specialized and separate agencies are twofold. First,
consumer law is a complex body of law and specialized in nature, which makes it
unfit for a generic agency. Second, a separate agency can avoid the risk that the
merged agency’s agenda is dominated by competition law enforcement.
Competition law is general, horizontal and prohibitory in nature. It is
adaptable to various industries and situations. Competition law enforcement takes
place through administrative proceedings and litigation. Competition law is a rather
blunt instrument, there are small number of cases, which are often large in absolute
terms and they are handled in a formalized procedure.
Trebilcock and Iacobucci argue that when a competition agency is vested
with functions beyond the area of competition policy, such as consumer protection
or with a more vague public interest mandate these functions may be adversative to
promoting competitive markets. They are also likely to carry serious risks of
deflecting the agency from an unambiguous commitment to this policy goal and to
complicate and potentially compromise accountability for its performance against a
clear set of policy goals (Trebilcock and Iacobucci, 2010). Consumer law is, on the
other hand, varied in form, substance and instruments. It is industry specific, it
applies soft regulatory tools and there are typically many small cases. Recent studies
Page 27
K.J. Cseres
in Australia and the UK (Australian Productivity Commission Inquiry Report, 2008)

(BIS, 2012) concluded that consumer law is strongly decentralized and therefore it
should be consolidated and streamlined. In the UK the modernization of consumer
law takes place parallel to major changes in the institutional system of consumer law
enforcement.
The differences in the nature of consumer and competition law enforcement
pose relevant limits on fully integrating the two fields of law enforcement in practice.
Even though several agencies have positive experience with the integration of
competition and consumer policies enforcement in one agency a more coordinated
approach is also possible between two separate agencies through cooperation
agreements and guidelines for case allocation. Separate agencies may be able to
better prioritise especially with regard to consumer policy. The fragmentation and
inconsistency between general consumer law and sector specific regulations is a
problem in itself (Cseres, 2007). While the different sectors exhibit different industry
features and thus require different policies and regulation there are also similarities
in market failures on the demand side and in the way regulation can approach them.
A separate agency may better remedy the layering and fragmentation of consumer
protection across several industries, several regulations and across several public
agencies. As the OECD has noted there should be within government, an entity that
has oversight of consumer protection, and that exercises that oversight in a manner
mindful of competition concerns. While centralisation of the whole of consumer
protection might not be possible there is a need for designing governance
frameworks among the various layers of enforcement and within the scattered
institutional framework (OECD, 2008).
4.2. Time of intervention

The institutional divide between ex ante control and monitoring and ex post control of
law infringements has traditionally had implications with regard to time. Allocation
was determined by the availability of information. Ex ante control is justified when
firms have limited knowledge whether their practices will violate the law. If the
information became known only after violation of the law then judicial enforcement
was applied. In consumer law there has been a strong tradition of ex ante
administrative control over product safety and quality standards has been ex ante
and judicial enforcement has been an ex post device when consumers suffered
Page 28
damages as a result of marketing certain products. In competition law ex post control

has been traditionally strong. The regulatory modes are, however, changing. Sector
inquiries and market studies are a subtle way of ex ante market surveillance. There is
also a move in consumer law towards iterative and ex post control in the monitoring
of product related risks and administrative control involves rule-making as well
through standard setting market-based and responsive regulation. Regulators and
firms cooperate in setting quality and safety standards and private bodies participate
through control strategies of self-regulatory nature. In judicial enforcement
injunctive relives serve as a way of preventing firms from selling unsafe products or
services and to force them to remove those from the market. (Cafaggi, Micklitz, 2008).
4.3. Proportionality of remedies and sanctions

Remedies and sanctions considerably differ between competition law and consumer
law. Competition law mainly relies on monetary fines or and personal sanctions as
well as damages actions. In consumer law the remedies can take the form of informal
and formal warnings, withdrawal of (credit) licences other soft law instruments, but
also injunctions, pecuniary fines and criminal sanctions of imprisonment.
Furthermore, remedies and sanctions in consumer law infringements vary across
countries from administrative fines, to civil law and criminal law sanctions. In most
European jurisdictions the present set of remedies for consumer offences is limited to
declaratory remedies such as formal and informal warning, and injunctions.
Sanctions are mainly in the form of administrative fines and criminal sanctions such
as fines and imprisonment. Monetary remedies in the form of damages claims can
provide consumers with compensation for damages suffered as a consequence of
“anti-consumer” practices.
An integrated agency may improve the understanding of both the positive
and adverse effects of the different remedies. An integrated approach to remedies
and sanctions is relevant for two reasons. First, different market failures trigger
different remedies and call for different redress and implementation schemes.
Market failures are manifold and not all of them trigger regulatory or other kind of
intervention in the market. Still, when some kind of intervention seems necessary the
question is what the specific reasons are to tackle a certain market failure on the
supplier or on the consumer side. It is relevant to identify the actual and direct
causes of market failures and to find proportionate remedies. Identifying the nature
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K.J. Cseres
and degree of consumer detriment and competitive harm is indispensable to

determine which types of remedies and sanctions should be imposed. There are
certain market failures that can clearly be better addressed by competition law or by
consumer protection tools. However, it is not always obvious whether competition or
consumer protection tools or both should address a specific market failure. The
choice for one or another set of enforcement tools has to take into consideration the
economic incentives behind these practices, the strategic behaviour of firms and
consumers to legislation, the actions of public authorities and last but not least the
social and economic setting they operate in.
Many agencies argue that a combined analysis of market failures and
proposition of remedies is one advantage of an integrated agency (OECD National
contributions, 2008). For example, in Hungary (partially integrated agency) a sector
inquiry regarding home mortgage loans with steadily growing profits and interest
rate margins exceeding EU-average suggested that effective price competition might
be limited. The sector inquiry indicated that the market failures were related to
consumers’ information need to increase market transparency by providing
consumers information in a clear and understandable way in order to enable them to
make meaningful comparison of the various offers by the banks. 24 Similarly, Poland
(integrated agency) reported that the Polish Office of Competition and Consumer
Protection often conducts an antimonopoly proceeding, for example, in the case of
abuse of dominant position the Office takes into consideration the fact that the
undertaking may also recourse to an unlawful activity prejudicial to collective
consumer interests. An example of such “two-fold stroke” is the proceedings carried
out in one of the OCCP’s regional branches against a water-supply enterprise
operating on one of the regional markets. The proceedings entailed an abuse of a
dominant position consisting in the application to equivalent transactions with third
parties of not homogenous agreement terms and conditions, thus creating for the
parties diversified conditions of competition. Furthermore, it was found that the
practice was harmful to the consumers, who were offered different prices for exactly
the same product (water). That is why a proceeding referring to practices violating
collective consumer interests was conducted at the same time and one decision
24 Contribution from Hungary, Financial sector inquiries – a Hungarian example illustrating
some overlaps between competition and consumer policies,22 February, 2008, p.2-3
Page 30
elaborating on both competition and consumer aspects was issued. 25 The UK’s OFT
reported that looking at how consumers actually behave, rather than making
economic assumptions about ‘rational consumers’, promote more effective remedies.
A policy mistake that illustrates this point was the opening-up of directory enquiry
services to competition, which traditional economic theory had predicted would
deliver consumer benefits, and led instead to confusion and a plethora of services
that consumers found harder to use and compare. 26
Second, in recent years in both competition law and consumer law the focus
has been on how enforcement can be improved in order to effectively discipline firms.
In both areas the methods of detection and control, forms of sanctions and remedies
are being explored in order to increase deterrence and achieve compliance. The
target of both sets of rules is to modify corporate behaviour and policy and to impose
such an impact on business that will prevent future violations of the law. Effective
deterrence requires that undertakings that might otherwise engage in illegal
activities perceive a reasonable probability of being detected, as well as a sufficiently
severe punishment when indeed they are (Baker, 2001). The question is whether the
threat of the potential punishment is sufficiently large to assure compliance with the
legal rules and behaviour within the boundaries set by the law. In both competition
law and consumer law enforcement the effectiveness of administrative fines proves
to be limited. Corporate fines are not capable of efficiently deterring either cartels,
other anti-competitive practices or anti-consumer behaviour.
While in competition law there are economic studies that show that fines
based on a percentage of sales concerned are substantially less than the estimated
benefits related to the average infringement (Connor and Bolotova, 2005; Wils, 2005),
the effectiveness of fines has not been extensively examined in consumer law. It can,
however, be reasonably argued that the low level of fines for consumer law
violations are often seen as a fee to stay on the market. In both areas a drawback of
these sanctions is that they affect the corporation and not the private individuals,
25 Contribution from Poland, OECD Global Competition Forum, The Interface between
competition and Consumer Policies, DAF/COMP/GF/WD(2008)13, p.4
agency, December 2009, p.10
Page 31
K.J. Cseres
which can be both higher and lower management, who decide on the undertakings’
business strategy including possible anti-competitive and anti-consumer acts. 27
Integrated agencies reported positive results by studying remedies and
sanctions in a joint approach. For example, the US FTC reports show that experience
with remedies, like restitution and disgorgement in fraudulent sales to consumers,
provided the foundation for the use of similar remedies in competition law. Similarly,
the FTC’s health care antitrust policy benefited from what the agency learned when
enforcing the laws concerning advertising and marketing practices (Muris, 2002).
Poland has acknowledged the synergy between competition policy and consumer
protection policy by pointing to the transfer of solutions, which proved to be useful
in one area to the other. The Polish Competition Act, on the basis of which the Polish
Office of Competition and Consumer Protection has been operating since April 2007,
provides for, inter alia, imposition of financial penalties on the undertakings who
apply practices infringing collective consumer interests amounting to 10% of their
income from the previous year. 28
4.3.1. Other types of sanctions

Beyond criminal sanctions such as jail sentences for high-executives, public
awareness and thus the role of media is very important in both consumer and
competition cases. In fact criminal prosecutions carry a powerful deterrent effect
through the publicity they receive. The power of adverse publicity for example by
setting up black lists has earned some experience in consumer law enforcement. The
publicity for violations of competition law is increasing and certain consumer law
violations receive broader media attention. Still, in both cases the level of public
awareness of the seriousness of competition and consumer law violations, incurring
a negative reputation with regards to compliance with the rules, does not seem to
worry many companies in Europe.
Other means to achieve effective enforcement can be freezing business assets
or requiring the creation of compliance programmes. In some jurisdictions courts can
issue provisional remedies before a case is decided in order to maintain the status quo
27 There is an extensive body of corporate governance literature, based on principal-agent

problems relating to asymmetric information and imperfect monitoring, which points out that
managerial incentives are often difficult to reconcile with corporate profit maximization
objectives (Cseres, Schinkel, Vogelaar, 2006).
28 Contribution from Poland, OECD Global Competition Forum, The Interface between
competition and Consumer Policies, DAF/COMP/GF/WD(2008)13, p.3
Page 32
pending the outcome of the case. One important type of provisional remedy is a
temporary order that “freezes” a defendant’s assets to ensure that there will be funds
available at the conclusion of the case to satisfy the judgment. An asset freeze places
a temporary hold on the assets of the defendant, pending the outcome of the case.
This protective tool greatly increases the likelihood of collecting on any money
judgment that is ultimately issued for return to consumer.
In sum, remedies and sanctions provide a strong case for closer cooperation
between competition law and consumer law enforcement. While it is not a conclusive
point on bringing the two enforcement tasks together they do present one of the
main arguments to consider an integrated agency.
4.4. Institutional performance norms: Expertise

Sharing staff’s expertise in competition and consumer law issues may improve the
agency’s effectiveness in dealing with complex regulatory issues as discussed above
in the course of liberalization. For example, the assessment of restrictive practices
curing moral hazard problems or the assessment of possible changes of market
structure of proposed mergers. Joint team work in an integrated management may
also provide opportunities for professional development in both supply and demand
side issues.
Coordinating between consumer and competition policy making and law
enforcement can be positive by avoiding over- or under-regulation and over-or
under-enforcement. Such a coordination is especially meaningful when market
failures are identified and analysed, when cases are selected and allocated to the
agency or a specific unit within the agency. Moreover, analysing consumer detriment
and competitive harm can valuably benefit from joint expert teams. Finally, choosing
proportional remedies to law infringements can avoid adverse effects. Identifying
market failures on the demand or supply side is essential in order to determine
whether competition law or consumer protection rules and remedies or a
combination of both should apply. A joint analysis of consumer detriment and
competitive harm by looking at the indicia of both should help to avoid Type I and II
errors. Such a wide market screening approach with a combined analysis of both
disciplines can choose remedies that can avoid adverse “spill-over effects” either on
the demand or supply side.
Page 33
K.J. Cseres
For example, the European Commission’s sector inquiries, in the energy

market have indeed detected market failures on both the supply and demand sides. 29
Being unaware of the tensions policymakers proposed solutions that improved one
side of the market (demand or supply) but escalated problems on the other side. The
over-reliance on competition during the liberalisation of network industries is one
example. Consumer frictions continue to exist even in competitive markets and
might even lead to consumer detriment where consumers lack information or other
instruments of capability to make the choices introduction of competition in principle
makes possible. For example, where price competition erodes consumer quality and
reduces choice or makes choosing difficult (Cseres, 2008). Tensions can also emerge
as a result of regulation in order to protect consumers, when such regulation
disregards the positive effects of competitive markets for consumers. Consumer
authorities tend to regulate believing that the solution to market failures is a new
rule, law or licence, however, in some of these cases competition can solve consumer
problems and regulation raises entry barriers while it takes away the useful effect of
letting consumers make their active informed choice and learn from their
experience. 30 For example, restriction or ban on advertising in some of the markets
for liberal professions remedied consumers’ asymmetrical information problems but
restricted competition among service providers to the detriment of consumer choice.
Typical examples are related to remedies targeting consumers’ information
problems, such as mandatory market standards or rules of behaviour that prove to
be far too overreaching and regulatory in their approach for industries to comply
with (Hobbs, 2005). Being unaware of the complementarities results in
overregulation or increased costs of enforcement.
The EU Commission’s initiative launching a Consumer Markets Scoreboard is
another successful way to detect market failures. 31 Consumer Markets Scoreboard is
to identify markets which are malfunctioning in terms of economic and social
outcomes. 32
29 DG Competition report on energy sector inquiry SEC(2006)1724, 10 January 2007, Brussels

31 Monitoring consumer outcomes in the single market: the Consumer Markets Scoreboard,
COM(2008) 31 final, Brussels, 29.1.2008, not published in the Official Journal.

32 For example, the 2nd CMS targeted the energy, banking and transport sectors. The
scoreboard uses the indicators of malfunctioning of prices, satisfaction, switching, safety and
consumer complaints. Furthermore, the Commission has engaged in EU Sweep under
Page 34
Several countries have reported similar beneficial effects of screening markets

by taking a cross-category and economy wide approach irrespective whether the
issues are of competition or consumer protection nature. 33 These market studies and
investigations show that coordination is indispensable in markets where competition
has recently been introduced and where consumers have new responsibilities to
make economic decisions and to enforce the law. There are cases where both
competition law and consumer law violations are present that can give rise to a mix
of competition and consumer issues and which can be more efficiently viewed and
solved together. The experience gained in the consumer protection function could
provide useful information for addressing competition issues and consumer
protection activities might enhance the credibility of the agency with the public and
improve public understanding of the agency’s competition law function. Several
agencies report positive experience with market screening with a combined policy
look on market failures. The OFT has conducted such market studies in the primary
and secondary markets for tickets for sports and entertainment events and servicing
restrictions associated with car warranties. The OFT expected to find serious
competition problems but instead found information problems and poor sales
practices that required consumer remedies. 34 Similarly, the Hungarian GVH has
conducted a sector inquiry in the home mortgage loans and among others found that
switching was a fundamental factor of competition in the financial sector. The GVH
stated that previously switching was considered as a relevant factor in defining the
market, however its role as competitive pressure was also acknowledged in the car
liability insurance liberalisation. The GHV concluded that informed consumer
choice, and also “physical” ability to make that choice was essential for effective
competition i.e. in the context of subsequent switching between financial services or
between banks (service providers), at least in the case of long term services such as a
Regulation 2006/2004 joint EU investigation and enforcement action to check for compliance
with consumer laws on a particular market in order to see where consumer rights are being
compromised or denied Communication on harmonized methodology for classifying and
reporting consumer complaints and enquiries, 2009
33 See for example Contribution from Hungary, Financial sector inquiries – a Hungarian
example illustrating some overlaps between competition and consumer policies,22 February,
2008, p.2-3; Contribution from United Kingdom, OECD Global Competition Forum, The
Interface between competition and Consumer Policies, DAF/COMP/GF/WD(2008)18,
Page 35
K.J. Cseres
home loan or a current account. 35

However, the differences also have to be acknowledged. Competition law
matters typically require high levels of expertise in their resolution—expertise with
respect to particular industries, expertise in understanding and interpreting
empirical data, and expertise in industrial organization theory. Consumer protection,
on the other hand, is increasingly making use of insights from behavioural
economics. Coordination in expertise is thus becoming also fundamental in
economics.
A further question is how a full or partial integration of the enforcement of
competition law and consumer protection into one single authority and which
internal organization of the agency can accommodate such coordination and how the
institutional structure can contribute to the effectiveness of law enforcement. It is
certainly not sufficient when the two enforcement groups sit under one roof. At the
same time, if the risks of mandate diffusion or ambiguity are sought to be mitigated
by vesting these various functions in other agencies, a new set of problems arises in
managing institutional interdependencies and cooperation effectively (Trebilcock
and Iacobucci, 2010).
4.5. Administrative efficiency

The benefits of integration are the possibility to have a single portfolio of policy
instruments by achieving economies of scope in access to resources and in efficacy of
monitoring, developing and sharing expertise as well as gaining wider visibility to
the community and improving accountability processes.
With regard to the existing interdependence and substitution between
competition and consumer policies a single portfolio of policy instruments can be
useful in order to avoid overregulation or over-enforcement as well as for lowering
net administrative costs as has been the main policy argument for the institutional
merger in the Netherlands. For example, providing better information to consumers
and reducing switching costs can make demand more elastic and thus provide
incentives for firms to compete more effectively. While competition policy is a rather
blunt instrument, consumer policy can address sector specific issues such as
customer information in the electricity retailing. This can help to avoid
35Contribution from Hungary, Financial sector inquiries – a Hungarian example illustrating
some overlaps between competition and consumer policies,22 February, 2008, p.2-3
Page 36
inconsistencies in the policies creating adverse spill-over effects in the other area
(OECD, 2008). Furthermore, performance of the authorities can be improved by
improved levels of independence and accountability as has been recently argued in a
CERRE report (Hanberry, Larouche, Reindl, 2012). The following two sections will
deal with these two core concepts and their relationship with integrating or
separating competition law and consumer law enforcement.
4.5.1. Independence
It has been argued that an administrative authority might be captured by its
consumer agenda without proper appreciation of costs of regulation or it might be
captured by the regulated firms and industry (OECD, 2008). However, agencies have
to be insulated not only from market parties but also from the executive and
legislative powers in a given jurisdiction.
The independence of regulatory agencies has been traditionally justified, by
the technical complexity of the regulated markets and thus the need for expert
decision making. An agency should be insulated from short-term political pressures
in order to adopt public policies based on expertise - i.e. to bring expertise-driven
independent decision-making to the administrative state. It was believed to yield
better public policy over the long term (Barkow, 2010). Accordingly, the concept of
independence builds on the regulator’s legal and functional separation from market
parties and its independence from the legislative and executive powers.
While in the US the concept of independence traditionally implied the US
President’s limited interference in the operation of independent agencies and the
need for expert decision making (Landis, 1938), in the EU the concept has been less
clear-cut and developed mostly at national level independently from EU law
requirements (Hanretty, Larouche, Reindl, 2012). EU law has traditionally focused on
independence from market players 36 and the Courts established this as a core
36 It was already in 1988 in Directive 88/301 on competition in the markets in

telecommunications terminal equipment that the Commission introduced in Article 6 an
obligation on the Member States to entrust the regulation of terminal equipment to a body
independent from market parties active in the provision of telecommunications services or
equipment. This requirement of independence has also been implemented in the second
liberalization package in the energy and telecommunications sector.
Page 37
K.J. Cseres
element in regulated markets. 37 However, in recent years the relevance of political

independence has become a fundamental cornerstone of the institutional design of
administrative authorities in the EU also. While EU legislation has become
increasingly detailed on the concept of independence, the European courts have not
formulated a general principle of independence of regulatory authorities. The latest
package of liberalization Directives, in 2009, mention a general principle of
independence towards the legislative and executive organs. 38 Accordingly, EU law
requires regulators to be independent from political institutions but without laying
down independence criteria’ that regulatory authorities must comply with (Hanretty,
Larouche, Reindl, 2012).
This fragmented EU approach is also present in recent case-law of the CJEU,
where it has merely confirmed that national supervisory “authorities shall act with
complete independence in exercising the functions entrusted to them”. 39 Still the effect
of this developing concept of political independence can be seen in the Member
States. For example, the new Dutch ACM raised significant concerns with regard to
the independence of its organization from the Ministry of Economic Affairs,
Agriculture and Innovation and in fact the establishment of the authority has been
postponed due to the fact that the Dutch Parliament’s First Chamber wanted to make
37 Case C-202/88, France v. Commission [1991] ECR I-1223 paras. 51-52; Case C-18/88, RTT v.
GB-Inno-BM [1991] ECR I-5973 at para. 25-26. Case C-82/07, Comisión del Mercado de las
Telecomunicaciones [2008] ECR I-1265
38 Article 35 of the Directive 2009/72 on electricity compels Member States to make the
regulatory authority “functionally independent from any other public or private entity” and
give it the autonomy to decide “independently of any public body” Article 39 of the Directive
2009/73 for gas formulates the same obligation. , In electronic communications, Directive
2009/140 adds a provision to the Framework Directive (Article 3(3a)), stating that “national
regulatory authorities responsible for ex-ante market regulation or for the resolution of
disputes between undertakings”… “shall act independently and shall not seek or take
instructions from any other body in relation to the exercise of these tasks assigned to them
under national law implementing Community law.” The Directive says in its Preamble that
the independence of the national regulatory authorities should be strengthened in order to
ensure a more effective application of the regulatory framework and to increase their
authority and the predictability of their decisions. To this end, express provision should be
made in national law to ensure that, in the exercise of its tasks, a national regulatory authority
responsible for ex-ante market regulation or for resolution of disputes between undertakings
is protected against external intervention or political pressure liable to jeopardise its
independent assessment of matters coming before it. “
39 Case C-518/07, European Commission v Federal Republic of Germany, Judgment of the
Court of 9 March 2010; Case C-614/10, European Commission v Republic of Austria,

Judgment of the Court (Grand Chamber) of 16 October 2012.
Page 38
sure these concerns of political independence will be sufficiently dealt with by the
Minister of Economic Affairs. 40
In the US political independence has somewhat overshadowed the question
of agency capture and the goal to protect the diffuse interest of the general public or
a vulnerable segment of the public. Agency capture concerns the desire to protect an
agency from one-sided political pressure from the well-financed industry interests
that the agency regulates. Barkow argues that the value of institutional design
mechanisms such as guaranteed agency funding, substantive expertise requirements
and revolving door limits, relationships with other agencies and the states, and an
agency’s ability to independently gather and disseminate information and represent
itself in court have received less attention in discussions of agency independence,
however they proved to be critically important for insulating agencies from one-
sided interest group pressure. She illustrates her argument with the institutional
design of the Consumer Products Safety Commission (CPSC) in the context of the
Consumer Products Safety Act and shows how procedural mechanisms that were
designed to help consumers ended up benefitting the industry instead (Barkow,
2010). The CPSC was a de iure independent agency with all the traditional insulating
designs, but it has fallen far short of its statutory mandate due to chronical
underfunding and understaffing. The procedural rights that aimed at benefitting
consumers and creating better policy became hijacked by well-financed and well-
organized industry representatives (Barkow, 2010).
Accordingly, the allocation of regulatory powers and the question of how
much responsibility a single agency should be given as opposed to splitting
functions among agencies has to take critical account of agency capture. Concerns
about agency capture may dictate to have agencies with broad jurisdictions to make
them more likely to resist pressure from any one interest group. However, giving a
single agency conflicting responsibilities that require the agency to further the goals
of industry at the same time that it is responsible for a general public-interest mission
should be avoided. In that case, there is a significant risk that industry pressure and a
focus on short-term economic concerns that are easily monitored will trump the
long-term effects on the public that are harder to assess (Barkow, 2010).
Consequently, shared enforcement responsibility has a real potential to achieve some
degree of agency independence and thus independence from the legislative and
40 http://www.eerstekamer.nl/nieuws/20130205/behandeling_instellingswet
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K.J. Cseres
executive power may also become a more fundamental issue with the integration of
authorities. For example, the new Dutch ACM will be more independent than the
Dutch Consumer Authority used to be. 41
However, it is difficult to defend institutional independence without some
form of accountability (Trebilcock and Iacobuci, 2010). Public accountability
mechanisms for general agency functioning including personnel and budgetary
decisions, periodic reviews of appropriateness of legislative mandate and agency
effectiveness have been high on the legal and political agenda in the EU but also in
international law and politics. Against the backdrop of globalization and the rise of
EU and international systems of governance fundamental questions of accountability
and legitimacy of these international and also national governance systems were
raised.
4.6. Accountability
Integrating the competition and consumer law enforcement powers under one roof
may improve the public accountability of the agency. It has been argued that wider
visibility to community increasing public awareness of both policies and explaining
the linkage between them can enhance public acceptance of competition policy and
can raise political priority and support of the administration for consumer protection
(OECD, 2008) Competition policy reaches out economy-wide and the individual
actions and decisions of competition authorities are of broad interest to the business,
legal and academic communities, as they are seen as precedents that may be
extended beyond the firms and industries directly affected. As a result, the conduct
of competition authorities is subject to reasonably effective monitoring. In contrast,
consumer policy is at times highly-industry specific and additionally involves many
decisions that individually, have quite low stakes in absolute, economy-wide, terms.
Accordingly, relatively few social actors have the incentive or ability to cautiously
monitor decision-making by consumer agencies. This absence of effective monitoring
can lead to regulatory failure, with the agency at issue being captured either by the
ideology of consumer protection – without a proper appreciation of the costs
regulation imposes – or by the regulated firms, which have an interest in using
consumer protection to create barriers to entry. These risks are likely to be smaller in
an agency that also has the competition policy functions, both because of the internal
41
Page 40
culture of such an entity and because of the close scrutiny that entity will naturally
attract (OECD, 2008).
Accountability has been extensively discussed through developing
frameworks of analysis, typologies of mechanisms, categorising its goals and
analysing its institutions and mode of organisation (Black, 2012). Accountability is a
mechanisms which involves informing, explaining and justifying conduct with
(Hanretty, Larouche, Reindl, 2012).
One can distinguish various forms of accountability such as accountability to
politicians, accountability to the market, accountability to the judiciary, and
accountability towards relevant peer groups such as networks of sectoral regulators,
or the European Commission.
With the changing role of the state from market monopolist to market
supervisor, the institutional framework of market regulation has also changed. The
regulatory state is characterized by the a shift from the direct provision of public
services to the privatization and marketization of public services and the rise of non-
majoritarian regulatory bodies (Baldwin and Cave and Lodge, 2011). Scott argues
that the most fundamental feature of the regulatory state governance is the
fragmentation of responsibility to oversee the provision of public services and thus
the dilemma how to give sufficient autonomy to the decentralized actors to achieve
their tasks while maintaining adequate control of them (Scott, 2000). The emergence
of the regulatory state thus sharpened and extended accountability mechanisms to
actors previously immune. When public authorities were set up with the double task
of guaranteeing well-functioning markets and protecting the individual interests of
market participant, the legal mandates of the market supervisors explicitly required
the promotion of consumer interests. The neo-liberal model of accountability has
importantly been built on market mechanisms and thus so-called “downwards
accountability” structures (Elcock, 1997), where agencies are held account to lower
level institutions or groups, their stakeholders such as consumers or the public at
large. However, when the mechanisms through which institutional design can
provide accountability the criticism of downwards accountability has to be
considered. Mechanisms that improve participation, openness, transparency, equal
access and deliberation may at the same time weaken the effectiveness and
credibility of the agencies’ regulatory action (Majone, 1994, Magetti, 2010) because
these procedures increase transaction costs. Moreover, only powerful interest groups
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K.J. Cseres
may be capable to influence the regulatory process excluding and not consumers or
consumer groups (Olson, 1971).
Black has argued that engagement by ‘civil society’ through consumer panels
and advisory bodies in regulatory processes is usually much weaker than that of
business, however to the extent it exists, it is usually stronger at the ‘input’ stages of
policy processes (through consultation) than at other stages. She argues that the
development of consumer panels, like in the UK, which are embedded within
regulatory structures is good example of a form of accountability which is sitting
between the visible, formal processes of consultation prior to decisions, and ex post
reviews of performance. The engagement of consumers or other individuals in the
regulatory process and in calling the regulator to account has the potential to be
considerably enhanced through the operation of consumer panels and external
sectoral bodies, but only if their accountability capacity is adequate. This means that
they possess appropriate personnel, technical expertise, financial resources, and
access to information and research, they are able to respond quickly to changing
events, their members need to have adequate negotiating and advocacy skills, and
their personal authority and institutional position has to be such that they are
respected by consumers, regulators and industry alike (Black, 2012).
An integrated agency housing consumer law and (behavioural) economics
experts could thus be a valuable source of information for regulators as to what
consumer interests are on significant but highly technical issues which can have both
national and international dimensions. The accountability capacity of such a
“consumer voice” is better guaranteed within an integrated administrative agency
while its importance in providing legitimacy to the regulatory process, and
reassurance to consumers that their interests were being effectively represented and
taken into account.
Accountability to the national public and the strengthening of consumer-
citizens’ involvement and active participation in regulatory and decision-making
processes is today a central aspect of regulatory governance (Davies, 2011; Cseres
and Schrauwen, 2012; Jovanic, 2012). It has been argued that effective consumer
involvement improves the democratic accountability of the regulator as it builds
trust and confidence, widens the range of information on which decisions can be
based and leads to a better quality of decision making (Black, 2012).
Page 42
The democratization of regulatory processes and the role of stakeholders

especially consumers’ participation in decision making processes has become a core
issue in the liberalization process, which involves provision of services of general
economic interest, access to which is considered a fundamental human right (Jovanic,
2012).
Consumer involvement in the regulatory process can take four main forms:
information, consultation, partnership and empowerment. (Arnstein, 1969). In short,
information and consultations assume the advisory role, while partnership and
empowerment consumer powers in decision-making (Muzzini, 2005). Such elevated
forms of consumer participation is also easier to realize and maintain within
integrated agencies.
While consumer participation may, in fact, be essential to call service
providers accountable for the delivery of the “regulatory contract” (Muzzini 2005), it
will always incur political transaction costs and may undermine the decision-
making capacity of the agency (Majone, 1999; Magetti, 2010)
Conclusions
Despite the different constituencies and different enforcement objectives of

competition law and consumer protection recent economic and political
developments call for more coordination between these two legal areas. One way to
closer coordination is allocating the enforcement powers for competition law and
consumer protection or certain parts of consumer protection to one single
administrative authority. This paper discussed the pros and cons of such an
integration. While there are clear demarcation lines along the different enforcement
methods including investigation, procedures, remedies and sanctions, there are three
phases of the law enforcement cycle where joint work and close coordination proves
useful in practice: case-selection, analysis of market failures with regard to the nature
of consumer detriment and respectively competitive harm and the selection of
remedies. Moreover, a combined agency permits useful learning between the two
enforcement areas developing integrated expertise in both law and economics as well
as with regard to management skills. There will inevitably be also cost-savings once
back offices and other practical matters are merged. Separate agencies, however, may
formulate and achieve enforcement goals by setting clear priorities without having to
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K.J. Cseres
compromise between different objectives. They may avoid regulatory capture more
easily. Nevertheless, this paper finds that integration of policymaking and
enforcement can take place through separate agencies and separation can exist
within an integrated agency. Still, the institutional changes taking place in Hungary
and the UK demonstrate that institutional constituencies of long-established and
effective models of integrated agencies cannot be separated without carefully
considering how inter-agency structures will be able to effectively enforce the same
rules.
While it is critical that institutional arrangements comply with fundamental
procedural and institutional norms guaranteeing basic values of a national
administrative law system such as due process, independence, public accountability
or stakeholder participation, other factors such as administrative efficiency and
credibility, administrative law legacies, constituencies and the socio-political context
of institutions as well as its relationships or concurrencies with other institutions will
be decisive. Moreover, the basic norms receive new interpretation and dimension
along the various institutional changes and models such as accountability to the
public and in the form of consumer-citizen participation.
Page 44
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INTEGRATE OR SEPARATE.

INSTITUTIONAL DESIGN FOR THE

Amsterdam Law School Legal Studies Research Paper No. 2013-03

Institutional design for the enforcement of

Amsterdam Centre for European Law and Governance

Available for download at www.acelg.uva.nl under the section Publications

Address for correspondence

intervention and for institutional performance norms such as expertise,

Keywords: Competition law, Consumer Protection, Public enforcement, Institutional

1. Institutions matter for law enforcement

7 New Institutional Economics (NIE) is an interdisciplinary enterprise combining economics,

approach helps to compare the economic consequences of the alternative ways of

shaped by the distribution of resources, powers, and responsibilities between that

1.1. Normative criteria for evaluating enforcement institutions

9 As Advocate General Kokott in T-Mobile Netherlands and Others argued:

2. Towards an integrated approach to market regulation

structure by introducing specific regulatory frameworks that complemented existing

more recently, Bar-Gill studied firms’ bundling practices as a strategic response to

2.2. Development of EU law on law enforcement: breaking with institutional

In the liberalized network industries the EU gradually extended the EU

3. Diversity of institutional designs

administrative authorities are based on country-specific factors such as legal

Table I below illustrates the mandates of national competition authorities in the EU

Table I. Mandate of national competition authorities in the European Union

Lithuania CC Competition, state aid and

Slovakia Antimonopoly Office Competition

United Kingdom Office of Fair Trading Competition and

Three different models can be distinguished for the public enforcement of

Table II. Institutional models

3.2. Changing institutional landscape: three examples

3.2.1. The Netherlands: from separate agency model to integrated model

The Netherlands Competition Authority (NMa) was a typical competition

3.2.2. Hungary: partially integrated model

of unfair commercial practices, where the commercial practice is capable of

3.2.2.1. The Hungarian inter-agency” structure

19 Article 10 of the Act on Unfair Commercial Practices

3.2.3. United Kingdom: from integrated agency to separate agencies

education and/or market studies and market investigatory powers. 22 In order to

4. Allocation of regulatory powers: criteria for assessment

4.1. Constituencies, objectives and enforcement tools

in Australia and the UK (Australian Productivity Commission Inquiry Report, 2008)

4.2. Time of intervention

damages as a result of marketing certain products. In competition law ex post control

4.3. Proportionality of remedies and sanctions

and degree of consumer detriment and competitive harm is indispensable to

24 Contribution from Hungary, Financial sector inquiries – a Hungarian example illustrating

agency, December 2009, p.10

4.3.1. Other types of sanctions

27 There is an extensive body of corporate governance literature, based on principal-agent

competition and Consumer Policies, DAF/COMP/GF/WD(2008)13, p.3

4.4. Institutional performance norms: Expertise

For example, the European Commission’s sector inquiries, in the energy

29 DG Competition report on energy sector inquiry SEC(2006)1724, 10 January 2007, Brussels

COM(2008) 31 final, Brussels, 29.1.2008, not published in the Official Journal.

Several countries have reported similar beneficial effects of screening markets

agency, December 2009, p.18

home loan or a current account. 35

4.5. Administrative efficiency

35Contribution from Hungary, Financial sector inquiries – a Hungarian example illustrating

36 It was already in 1988 in Directive 88/301 on competition in the markets in

element in regulated markets. 37 However, in recent years the relevance of political

Court of 9 March 2010; Case C-614/10, European Commission v Republic of Austria,

The democratization of regulatory processes and the role of stakeholders

Despite the different constituencies and different enforcement objectives of