Strategic behaviour and the law: how legal authorities deal with factual strategic behaviour of former monopolists
by Martin de Jong, Helen Stout
International Journal of Technology, Policy and Management (IJTPM), Vol. 3, No. 1, 2003

Abstract: In most of the western world and to some extent elsewhere, public utility provision is moving rapidly towards privatisation, liberalisation and marketisation. The end stage of all these restructuring processes is invariably expected to be some form of healthy competition. But former monopolists, whilst officially hailing competition, may apply technical standards, traditional social links with the public sector and information advantages to keep new entrants at bay. This conduct is called strategic behaviour. Strategic behaviour is quite understandable and even rational from the point of view of the actor and is not necessarily always wrong from a moral or wider societal perspective. Wronged parties often feel inclined to invoke regulators or legal authorities to remedy their predicament and correct the perceived detrimental strategic behaviour. Yet quite often, regulatory and legal authorities have no easy job dealing with such conduct, for lack of substantial information on the matters at hand. In this paper, therefore, the main question is, How do regulatory and legal authorities deal with strategic behaviour in the evolving market structures in liberalised utility sectors? Legal theory, in order to get to concrete judgements of right and wrong, has just two binary concepts to come to final decisions: legal (unmistakably in agreement with the law) or illegal (unmistakably in conflict with the law). Legal authorities or institutions, such as regulators, arriving at legally relevant decisions are therefore said to digitise the analogue world of social perception. Greyish categories such as strategic behaviour can acquire no meaning in this context. In the case at hand, the regulator experienced quite serious difficulties in pinpointing the nature of the strategic behaviour and see-sawed for a long time before undertaking legal action. Once it did so, it transformed a technical issue on interconnection capacity to a procedural issue of correct forecasting, therefore changing and perhaps to some extent limiting the options parties had for strategic behaviour.

Online publication date: Sun, 13-Jul-2003

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