Recommendations to public authorities: Towards a pro-competitive framework and an inclusive economic recovery

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The Covid-19 pandemic has caused a strong contraction of the global economy and most individual economies. Although there is still a high degree of uncertainty, forecasts suggest that the economic crisis is likely to have a long-lasting economic impact.

One of the most cheap and efficient policy options to contribute to a fast, inclusive and sustainable recovery is to promote competition and efficient regulation.

Competition and efficient regulation may deliver great benefits at a low budgetary cost: they promote an optimal use of scarce economic resources, boost firms’ productivity and production levels, multiply business opportunities and create more and better jobs. They facilitate cheaper, variated, high-quality goods and services for users and consumers. They also accelerate the adoption of new technologies and encourage both innovation and training. Competitive and innovative companies will spur its competitors to compete and innovate, thus promote competitiveness and productivity.

Overall, those benefits boost growth and accumulate overtime, increasing prosperity in the long run, and minimising the impact of the economic crisis on the most vulnerable groups.

In addition, competition is a key policy for achieving the goals of the twofold transition, ecological and digital, that will create a stronger economy in the future.

Competition authorities are particularly well positioned to defend and promote competitive markets and efficient public intervention in market regulation and other public areas (e.g., public aid, public procurement). Particularly, they can assist policymakers to both promote pro-competitive structural reforms and prevent unjustified regulatory barriers.

Public intervention measures have been taken thus far in Spain and in most developed countries sought to contain the damage caused by the health and economic crises while paving the way for a rapid, inclusive and sustainable economic recovery. In this context, in order to make the most of competition, market intervention by public authorities should respect economic regulation principles (namely, the principles of necessity and proportionality) and the competitive neutrality principle.

To help address these challenges, the CNMC has made use of its advocacy powers to prevent potential distortions to competition caused by public intervention in the markets in this post-Covid19 era. It has published Guidelines to policymakers to boost growth and accelerate economic recovery. This initiative addresses to all public authorities and includes three sets of 10 recommendations each (i.e., three Decalogues) on the areas where public intervention can have the greatest impact on competition: (1) Market regulation; (2) State aid; and (3) Public procurement.

There are some horizontal recommendations that cover those three areas for public action such as: the benefits of strategic planning for any public intervention, the sound of competitive neutrality for all public actions and the importance of dealing with ex post evaluation exercise for gaining knowledge and adopting better future actions. Also, it is highlighted the CNMC´s willingness to advise and assist policymakers to ensure that their performance is consistent with the principles of competition.

Concretely, as regards to market regulation, the CNMC offers several guidelines to promote the implementation of better regulation principles, not only in new pieces of regulation, but also in the current regulatory framework (regulatory review plans). Therefore, constant review from the competition point of view is appropriate. Additionally, it is recommended to avoid protectionism measures against external competition since protection of local firms might deploy a negative effect in both national and global markets.

As far as state aid measures is concerned, the CNMC provide many recommendations for improving the effectiveness of public support. It is advisable to clearly identify the public objective behind the public support measures and to apply open and competitive granting procedures. Other important aspects, such as the incentive effect of the aid, transparency for all public aid actions and the promotion of the participation of SME are also emphasized by the CNMC. Additionally, the CNMC recommends to carefully use public aid for accelerating the ecological and digital transition by promoting competition and productive investments in these areas.

As to public procurement, the CNMC provide several recommendations for a more competition-oriented design of tender procedures in order to foster participation, competition and efficiency. In this sense, it is highly recommended to invest in trained public procurers and provide them with resources and tools to engage with complex contracts and markets. It is very appropriated to carry out robust market research (demand and supply) before launching a tender procedure in order to obtain better outcomes. Additionally, it is considered that public private partnership based on competitive criteria is an effective instrument for carrying out structural transformation projects.

All of the recommendations set forth in these Guidelines have in fact been regularly put forth by the CNMC in its advocacy actions.