Regulation

Institutional regulation emerged simultaneously in nineteenth century England and the United States. With the advent of railways, electric energy, telecommunications and other technology and infrastructure-based industries came the need to create a specialized administration to supervises this new areas. From the very outset regulatory authority were granted independence from politics as the latter would provide a transmission belt for lobbying by the powerful owners of the most crucial sectors. In the United States regulatory administration evolved around the issue of constitutional checks-and-balances. It was feared that if the President of  the United States  received control over the new industries the relations between the legislative, judiciary and the executive would be thrown out of balance. To prevent it  a new type of administration had been devises, one where the President may appoint the members of regulatory authorities but may not revoke them during their term in office. Independent regulatory authorities appeared in continental Europe relatively late, in the second half of the XX century.  The principle of independence was maintained but without the ideological concerns of the Americans. After all, except of France nowhere in Europe the executive branch was as strong as the American presidency. In Europe independence had only practical dimension, to insulate the regulatory authorities from political pressure.
 The second pillar of regulation is the mode of decision making. Unlike in traditional administration it is based on wide discretionary powers. These powers are structured in a specific manner – by tying the ability to impose regulatory obligations on companies to the situation on a relevant market. In a manner comparable with general competition law they allow for making ex ante decisions based also on the anticipated development of the relevant market shaping its structure for the future. Typically a regulatory authority may intervene only where competition is failing and their decisions should be withdrawn once the proper functioning of the market has been restored. In practice this feature is unevenly distributed between the sector. For example the Polish railway regulator is more concerned with safety issues than the market, with the all important exception of access to the network. Also, regulators are granted many competencies which are not strictly market-oriented such as qualifications of personnel. The vast discretionary powers regulators have are exercised differently according to the peculiar features of the specific markets. Tools also differ from sector to sector. They may be quasi-legislation although typically they are administrative decisions. Their common denominator rather then content is the discretionary way the regulators are allowed to use them.