| Ex Ante Regulation |
Sets forward looking expectations for firm behaviour. Avoids damage from anti-competitive behaviour by anticipating and preventing it
Can provide certainty for market participants, by setting out clear rules in advance. (This requires good regulatory and institutional design that prevents the government or regulator from changing the rules unpredictably)
Promotes transparency
Eases dispute resolution, as the competition framework is already established
Regulators and affected parties know in advance the types of information required for regulatory proceedings, and can collect it accordingly |
Prevents all conduct of a certain type, regardless of whether it would actually be harmful. May prevent potentially beneficial behaviour
Often uses the perfect competition model as a benchmark, which can lead to unnecessary or excessive intervention
Can introduce unforeseen distortions in the operation of the market. Asymmetric regulation can encourage service providers to focus on exploiting opportunities for arbitrage
Imposes high informational requirements on regulators
Can be costly. Inevitably involves lengthy regulatory proceedings
Regulatory processes can be captured by regulated entities |
| Ex Post Regulation |
Competition laws specify in advance which forms of conduct are prohibited
Attempts to only stop conduct that is shown to be harmful to the social good. Temporary departures from competition benchmarks (for example due to innovation) are not punished without investigation
Lower informational and monitoring requirements than ex ante regulation, and therefore lower costs. Competition authorities can limit monitoring and information gathering to firms that are the subject of investigations
Ex post competition laws apply the same rules across all sectors, and so should produce consistent outcomes across sectors
Ex post regulation is the least disruptive form of regulation for emerging markets
Competition authorities are less susceptible to capture than sector specific regulators |
Ex post regulation is triggered after alleged anti-competitive conduct has already occurred. Does not prevent harm to competition, only ameliorates it
Securing the information needed to enforce ex post regulation, from the accused firm, can be difficult
General competition laws may be unsuitable for identifying and penalizing anti-competitive conduct specific to a certain market
When applied alongside industry-specific ex ante regulation, general competition laws can cause inconsistencies in regulatory outcomes
Can create uncertainty for firms, particularly firms with market power. At what point do they cross the line between aggressively competitive behaviour and anti-competitive use of market power? |