competition agency has to deal with, e.g., whether competition is feasible, whether an industry is naturally monopolistic, whether cross subsidies exist and, if so, whether they are desirable, whether economies of scale are substantial, and whether particular regulations are likely to accomplish their stated objectives.

As noted above, the goal of competition policy is to enhance consumer welfare. Competition leads to lower prices, a wider choice of goods, and technological innovation, all in the interest of the consumer. Competition laws have been structured to achieve this goal and it is through competition policy that public sector anticompetitive restraints can be countered. A country's competition agency needs to study the regulated sectors such as energy, telecommunications, financial services and postal services as part of its competition advocacy. This advocacy refers to activities conducted by the competition authority related to the promotion of a competitive environment for economic activities through its relationships with other governmental entities and by increasing public awareness of the benefits of competition.

Competition laws particularly are required to restrict anticompetitive business practices and prevent cross subsidization. Cross subsidies occur when a regulated part of a business subsidizes its competitive affiliates by shifting affiliate costs to the regulated portion of the business. When some of the affiliate's costs are paid by the regulated side (and built in to the cost structure for the regulated price through the use of accounting methods that do not accurately allocate costs), consumers will have subsidized the competitive affiliate and the affiliate will have a cost advantage relative to its competitors. Cross subsidization and its cost shifting distorts markets. Under such a system, the efficient allocation of resources and the development of competitive markets can be stymied. Adam Smith appreciated the efficiency that competition creates noting that, “[m]onopoly, besides, is a great enemy to good management, which can never be universally established but in consequence of that free and universal competition which forces everybody to have recourse to it for the sake of self-defense.” $ ^{53} $

A previous report by the ICN notes that competition can be hampered by public regulations and rule making. $ ^{54} $ It further notes that while regulatory intervention is necessary in some sectors, such intervention may go beyond what is strictly necessary. The competition agency must become involved in the regulatory and the rule-making process to ensure that adequate consideration is paid to competition concerns. The report’s Executive Summary specifies as follows:

Competition may not only be hindered by private anti-competitive conduct, such as collusion among competitors, anticompetitive mergers...but also...by public regulatory intervention and rulemaking. Such regulatory intervention may be warranted in sectors featuring extensive economies of scale or other market failures. In particular, without intervention, some markets may fail to provide minimal levels of service considered of public interest. However, regulatory intervention may go beyond what is strictly necessary and may impede competition in those sectors. $ ^{55} $