The Impact of Substitute Services on Regulation

Services subject to various forms of regulation often compete with other substitute services subject to different regulatory controls. When the existing regulatory regime promotes a legitimate public policy objective, competition from substitute services subject to different regulations may give rise to a problem of regulatory asymmetry. There are at least three possible policy responses to regulatory asymmetry: maintaining asymmetry, levelling up (by extending existing regulation to the unregulated service) or levelling down (by lifting regulation on both services). Levelling down is particularly relevant when the existing regulatory regime is designed to control for a lack of competition. The emergence of substitute services creates challenging issues for competition law and policy. This document comprises proceedings in the original languages of a Roundtable on the Impact of Substitute Service on Regulation, held by the Working Party n∞2 of the Competition Committee in May 2005.