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Measuring What Matters: Performance Standards for Competition Agencies

This presentation explores the importance of assessing performance in competition agencies and offers an alternative framework for measuring effectiveness. It discusses the flaws of using activity as a proxy for effectiveness and proposes a clear definition of aims, a problem-solving orientation, internal quality control, capital investments in agency capacity, and evaluation for periodic assessment and adaptation as key components for measuring performance.

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Measuring What Matters: Performance Standards for Competition Agencies

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  1. Measuring What Matters: Performance Standards for Competition Agencies William E. Kovacic George Washington University Law School GCLC, Brussels December 1, 2011

  2. The Questions for This Evening • Academia as Natural Habitat • Common question from students at start of term • “What is the basis for the grade in this course?” • Pose Same Question for Competition Agencies • How Do We Assess Performance? • How should we assess performance? • Absolutely fundamental question that receives too little attention

  3. Roadmap • Conventional Techniques • An Alternative Framework • Examples from Modern Experience • Motivation: • Start of tenure as FTC General Counsel 2001 • Michael Lewis: Moneyball • Measure what matters

  4. How Do We Measure Performance Today? Not Very Well • GCR Ratings“: Elite Five Star Category” • Agency is performing “at the top of its game” • 2011: USFTC, USDOJ, UK CC • 2010: US FTC, US DOJ, UK CC • 2009: US FTC, US DOJ, UK CC • 2008: US FTC, DG Comp, UK CC • 2007: US FTC, DG Comp, UK CC

  5. The GCR Methodology • Heavy Emphasis on Levels of Activity as Proxy for Effectiveness • Extra Credit for High Profile Matters • The Larry Ellis Caveat: “Activity is not the same thing as accomplishment” • Typical Agency Speech: “We’ve been very busy!” • Have you been very effective?

  6. What’s Wrong With Emphasis on Activity as Proxy for Effectiveness? • Indifference to Results • Real Question: How did you affect economic performance? • Cartel fines always upward? CF. Homicides • International Race to the Pole • OECD peer reviews and country studies • Google? End of US and EU duopoly • Capabilities and Commitments Mismatch

  7. FTC Abuse of Dominance Cases 1970 to 1980: 13 Cases • WEK Case Handler • Shared monopoly cases: breakfast cereal and petroleum • 3 predatory pricing cases seeking structural relief • Case against major citrus fruit agricultural cooperative • Patent thicket case involving Xerox • Novel cases involving duty to deal and entry deterrence • Compulsory licensing case against pharmaceutical firm • High stakes: economic, doctrinal, political • Not to mention: AMA, soft drink bottlers, RPM

  8. From “Great Job” to “What Were They Thinking”? • Some Successes (Xerox, Sunkist, Eli Lilly) • Many Failures (e.g., Exxon, Kellogg, DuPont) • Blind Side: Change in Economic, Legal Learning • Little Attention to Resource Implications • Powerful Political Backlash • Walter Mondale in Battle Creek Michigan: November 1980

  9. An Alternative Report Card • Coherence: Especially Well-Specified, Clearly-Communicated Goals? • Careful Attention to Setting Strategy? • Problem Solving Orientation? • Internal Quality Control? • Capital Investments in Agency Capacity? • Evaluation, Periodic Assessment, Adaptation?

  10. Clear Definition of Aims • Why State Aims Clearly? • Internal discipline: do staff understand priorities? • External accountability • Restatement Amid Changing Conditions • Clear Connections: Aims, Programs, Results • Who’s Good : OFT , New Zealand, Romania • Who’s Ailing: USA and Germany

  11. Conscious Plan to Set Strategy • Path Dependent Temptations • What Yields Best Returns to Society? • Balanced Portfolio: Risks and Returns • Match Commitments to Capabilities • OFT: What cost, how long, who will do it?

  12. From Case-Centrism to a Problem Solving Orientation • Traditional Focus: Cases and Big Cases • Activity is equated with accomplishment • Internalizing costs/benefits: Take-offs vs. landings • Underinvestment in long-term capability • Emerging View: How Best to Solve Problems? • Right tools: Flexible portfolio of policy instruments • A good report can be as valuable as a good case • Portugal: petroleum products studies

  13. Internal Quality Control • Aims: • Ensure sound doctrine, evidence, theory • See the facts as others will see them • Means: Review by Other Operating Units, Devil’s Advocates, Scrutiny Panels, Audits • Routine Element of Operations and Not Merely a Response to Crisis

  14. Capital Investments in Building and Retaining Knowledge • Why Have an “R&D” Budget? • Compression of decision making cycles • Dealing with dynamism and crisis • Data collection and research: how to invest? • External Consultations: Hearings, Workshops • Early identification of trends • Connection with major external constituencies • Partnerships with Academic Research Centers

  15. Human Capital • “Who’s Playing?” • Recruiting/Retaining Capable Staff/Managers • Do skills match commitments? E.g., Patent Law • Increasing Effectiveness • FTC 1980 (1800 employees) vs. 2010 (1200) • Major improvements in productivity • Key factor of production: Technology outlays • Vulnerability: succession/institutional memory

  16. Networks With Other Public Bodies at Home and Abroad • Regulatory Archipelago: Costs and Benefits • Collusion Avoidance and Interoperability • Is Existing Distribution of Authority Sensible? • Synergies and Productivity Enhancements • Absorb knowhow and benchmark • Address common needs: e.g., training • Joint work on program development

  17. Assessing Performance • The Relevant (and Difficult) Question: Did Our Programs Improve Economic Performance? • The Question That We Prefer to Answer: What Was the Agency’s Level of Activity? • When an Agency Leader Says “We’ve Been Very Busy,” We Should Ask “Have You Been Very Effective?”

  18. Evaluation: Programs and Processes • What Worked and What Did Not • Increasing Importance of Assessing • Program outputs • Operations: e.g., measuring speed of activity • How can costs to agency and affected firms be reduced without diminishing effectiveness? • Means: Internal Assessment, Consultation with External Experts, Peer Review

  19. Three Critical Structural Focal Points • Multiple Function or Single Purpose • >60: UK, Sweden, Romania, Bulgaria, CZ, Poland • Rationale for combination: in theory, practice? • Board or Unitary Executive • Integration of Functions • Multiple Decision Makers • Integration by contract or ownership

  20. Key Element of Assessment: Disclosure and Engagement • Reveal Enforcement Intentions, Reasons for Intervention and Non-Intervention • Maintain and Disclose Data Sets on • Program activities: e.g., cases • Operational effectiveness • Invite Public Discussion about Substantive Program and Agency Process

  21. Continuous Assessment: The Virtuous Cycle • Cumulative Nature of Policy Development • Advantage of Superior Regulatory Design • Need for upgrades in statutes, organization? • Respond to New Learning, Industry Trends • Who’s Doing Well: European Commission, France

  22. Concluding Thought: Centrality of Leadership • Long-Term Perspective: Consume or Invest? • Good signs: growing awareness • View Self as Part of Long Term Relay • How Do You Depict Predecessors? • Foster Norms for Leaders: Fordham • Hilmer’s Precept • Positive externalities for future agency leaders • There’s a Big Prize for Getting This Right

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