What are sector inquiries?

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BRIEFING NOTE

What is a Sector Inquiry?

 

Source:

Ennis, S. (2024) "Sector inquiry: Definition and Commentary", in The Competition Law Dictionary, Concurrences: Paris. https://www.concurrences.com/en/dictionary/sector-inquiry

 

 

Executive Summary:

This document defines and explains sector inquiries , which are formal examinations of specific markets to understand why competition might be hindered. Unlike typical enforcement actions focusing on individual company violations, sector inquiries look broadly at regulatory, economic, and behavioral factors. A key purpose is to inform advocacy efforts by competitive authorities, providing reasoned support for influencing government and industry. While information gathering tools, in some places, these inquiries can escalate to market investigations with the power to primarily impose remedies.

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Key words:

Sector Inquiries

Competition Enforcement

Market Studies

Information Gathering

Remedial Powers

Understanding Competition Sector Inquiries

 

Definition and Purpose: Sector inquiries are formal examinations into specific markets or sectors to identify and address issues hindering or distorting competition. They aim to understand the underlying regulatory, economic, and behavioral factors contributing to these issues and propose solutions to improve competitive outcomes.

 

Distinction from Traditional Competition Law Enforcement: Unlike traditional competition law enforcement (mergers, abuse of dominance, cartels), sector inquiries do not target individual companies or arise from specific evidence of a violation. Instead, they are broader market-wide assessments.

 

Advocacy Tool: A significant outcome of sector inquiries is providing a reasoned basis for competitive authorities to engage in advocacy activities, aiming to influence government regulations, private sector behavior, and industry standards.

 

Information Gathering: Competition authorities often possess powers to request information during sector inquiries, though these powers are typically more limited than those used in more serious investigations.

 

Remedial Powers: In some jurisdictions, market studies can evolve into "market investigations" with the authority to impose remedies, including behavioral and structural changes for private actors and mandates for government regulatory changes.

 

Most Important Ideas/Facts:

 

Core Definition: The fundamental definition of a sector inquiry is provided:

"A sector inquiry is an examination into why a particular sector or market may experience restricted or distorted competition – taking into account regulatory and economic factors as well as business and consumer behavior – and how to reduce such restrictions or distortions." 

 

Goals of Sector Inquiries: Sector inquiries have a two-pronged objective:

"Sector inquiries" as performed by competition authorities are focused on first, identifying regulatory, behavioral or structural problems in a market that can explain perceived failures of competition and second, suggesting solutions for improving competitive outcomes or processes." 

 

Role of Sector Inquiries as a Supplementary Activity: Sector inquiries are not typically the primary tool for enforcement but rather complement existing powers:

"These studies are generally performed as an activity that supplements competition law enforcement duties related to mergers, abuse of dominance and cartels." 

 

Advocacy as a Key Outcome: The findings of sector inquiries are used to inform and strengthen advocacy efforts:

"Such inquiries provide reasoned support for advocacy activities of competition authorities." 

 

Initiation of Sector Inquiries: While often initiated by competition authorities ("own-initiative"), they can also be triggered by external requests:

"The opening of a sector inquiry is often based on “own-initiative” by competitive authorities. The opening may also arise from other sources. Governments (eg, France, Mexico), legislatures (eg, US) or even specifically identified bodies may have an ability to request a market study..." 

 

OECD Competition Assessment Toolkit: A widely used methodology for identifying regulatory restrictions on competition during sector inquiries is highlighted:

"The use of sector inquiries to examine government restrictions on competition can be performed using the OECD's Competition Assessment Toolkit methodology, which is focused on identifying general principles for finding regulatory restrictions that are valid across sectors." The Competition Assessment Toolkit project was led by Sean Ennis, starting in 2005 and concluding in 2018.

 

Remedial Powers in Market Investigations: In certain jurisdictions, market investigations following a sector inquiry can lead to enforceable remedies:

"Outcomes of such investigations can include the ability to impose remedies. Remedies in such cases can be behavioral or structural, affecting private actors, or can include obligations on government to change rules and procedures, including to implement price regulation or regulatory oversight of an activity." (Source 4)

 

Due Process in Remedial Investigations: Given the potential for invasive interventions, market investigations with remedial powers include due process protections:

"Consequently, the procedures of competition investigations provide due process opportunities for parties that would be affected by the investigation to access and challenge evidence, enter their own arguments into the process and appeal decisions." (Source 4)

 

Examples of Sector Inquiries: The text provides a list of various sectors that have been subject to inquiries by different competition authorities, demonstrating the wide applicability of this tool. 

 

Examples include:

"...contact lenses to car fuel, for example)... (Chile), payments and insurance (EC), long-distance coach transport, hearing aids, Fintech, food retailing (France), milk, gas transmission, and district heating (Germany), ride-hailing, tortillas (Mexico), airports, classified directories, and groceries (UK))." (Source 2)

 

Conclusion:

Sector inquiries are a valuable tool for competition authorities to proactively examine market dynamics, identify potential issues beyond specific enforcement cases, and advocate for changes that promote a more competitive environment. While they differ from traditional enforcement actions, in some jurisdictions, they can escalate to market investigations with the power to impose remedies, making them a significant instrument in the competition toolkit.

 

Paper Summary Initial Draft By NotebookLM