### 6. Advocacy Role of the Competition Agency

Because other governmental agencies may lack the consumer welfare optimizing standards that the competition authorities bring to their work, the competition agency must serve as the watchdog to prevent the encroachment of anti-competitive actions and regulations by private and public actors. In particular a competition agency in a country with a significant number of recently privatized companies and SOEs must be vigilant to make sure that such companies do not engage in anti-competitive practices. In many cases, the restraints placed on trade by public sector actions present significant problems to the formation of a competitive market. The US Department of Justice (“DOJ”) has competition advocacy guidelines that highlight the following factors that DOJ needs to consider going forward: (a) highlight the costs and benefits of the particular regulatory system from a competition standpoint, specifically a consumer welfare optimizing standpoint; (b) if regulatory scheme is an existing one, has regulation fulfilled its purpose; (c) is regulation well tailored and is it the least anti-competitive possible to achieve the regulatory purpose. The methodology used by DOJ is to testify to the executive branch with regard to legislation, to publish reports on particular industries, to intervene in regulatory agency proceedings, and sometimes to use litigation.

We have seen from International Competition Network (“ICN”) reports that it is very difficult for competition agencies to advocate successfully, and early engagement is vital to the process. $ ^{52} $ Where agencies wait until after the regulatory framework of a privatization for example has already been established, it becomes very difficult to actually impact that regulatory structure in a pro-competitive fashion. In the ICN meeting in Bonn in 2005, many of the participants in discussing the role of competition advocacy noted that the key was to advocate early. The reason this was specifically mentioned was because there are many examples where a failure to advocate early has resulted in an inability to effectively make the case for competition after the regulatory structure has been put in place. Applying this in the Japanese context, if the competition agency does not react prior to the completed process of postal privatization, assuming this happens, then it will find it extremely difficult to change the behavior of the postal company itself, post privatization. There are many examples in the case of telecoms where there is a lot of data on privatizations where competition has not been successfully introduced into the privatization program.

The competition agency must operate to ensure that the voice of consumers is heard throughout the privatization process, especially early in the privatization process, as regulation and competition are frequently in conflict. Sectoral regulators and competition regulators may go about implementation of policy in different ways – the former uses a centralized process to make decisions about prices, entry, investment, and service quality, while the latter is a decentralized process in which each competing firm makes independent decisions that are driven by the goal of profitability, and winning customers by offering them a superior combination of products, services and prices. Submissions to the sector regulator are required from the “guardian of competition,” the independent competition agency, to prevent regulation from being destructive to competition and the overall goal of consumer welfare optimization. A common way to institutionalize competition advocacy is for the competition agency to intervene in regulatory proceedings. Only the competition agency has the institutional capacity to best understand the economic impact of regulation on competition and therefore is best suited to provide such guidance to other agencies. The issues raised in regulatory proceedings tend to involve the same types of questions that the