The Institutional Architecture of Regulation and Competition: Spain's 2012 Reform

The decision to allocate a given number of governmental interventions in one or more agencies, for example, in the field of regulation and antitrust, raises important issues in organizational and institutional economics. The economics literature suggests that this decision should take into account horizontal and vertical incentive issues and should also take into account the risk of capture and the degree of optimal regulatory independence. More specifically, it should also consider the subtle complementarity and substitutability between competition policy and ex-ante regulation, and its relationship with the vertical chain of government. These issues are illustrated with the decision of the Spanish government to send a legislative proposal to Congress in early 2012 to merge the main network industry regulators with the competition policy authority. The combination of the economic literature's insights with the specific characteristics of regulated sectors in Spain suggests the need for regulatory reform, but does not seem consistent neither with full integration nor with a homogeneous level of (lower than in the status quo) regulatory independence.