Promoting Competitive Markets Through Regulatory Design
By OIRA Administrator Richard L. Revesz
Today, delivering on President Biden’s commitment to promoting healthy competition in order to lower costs for families, drive innovation, and help entrepreneurs and small businesses thrive—a central pillar of Bidenomics—OIRA is publishing guidance to help agencies better develop and analyze regulations with competition goals in mind. Developed in collaboration with the National Economic Council, the Council of Economic Advisers, and other members of the White House Competition Council, this guidance will help agencies design regulations that promote competition in the marketplace while also achieving other important policy goals.
When businesses compete—for customers, for employees, for market share—American workers, consumers, and entrepreneurs win. Without enough healthy competition, markets are at greater risk for overconcentration, monopolization, and unfair practices that can undermine innovation and prosperity. Bidenomics recognizes that for markets to function—and for workers and consumers to benefit—our economy requires healthy competition among market actors. That’s why President Biden issued Executive Order 14036, “Promoting Competition in the American Economy,” identifying 72 specific initiatives across government to promote competition and launching the first-ever White House Competition Council, of which the Administrator of the Office of Information and Regulatory Affairs (OIRA) is a member.
Since pro-competitive regulations are one of the most effective tools to safeguard and promote healthy competition in the economy, the President directed OIRA to consider how to further competition as it modernizes regulatory review, including by helping agencies better account for regulations’ “effects on competition and the potential for creation of barriers to entry.” When regulations make markets more competitive, they lead firms to improve product quality or lower prices, offer workers higher wages or better benefits, and develop and bring to market innovative products and services. These outcomes boost economic growth and dynamism, and increase standards of living.
In some cases, a slight modification of a regulation’s design will substantially enhance competition while achieving the other regulatory benefits of the policy. For example, crafting a regulation that ensures interoperability can make it easier for customers to switch to other producers’ products. The Federal Highway Administration did exactly that when it set standards for electric vehicle chargers funded by the Bipartisan Infrastructure Law, requiring that those chargers have consistent plug types, power levels, and app accessibility.
In other cases, slight design modifications may preserve a regulation’s benefits while providing substantially greater competition benefits (or substantially reduced competition harms). For example, changing a regulation with overly-specific requirements to a general performance standard may increase competition by allowing firms to produce products with innovative designs that meet or exceed that performance standard but have lower costs. That’s exactly what the Food and Drug Administration did when regulating to allow over-the-counter sale of hearing aids that meet certain safety and efficacy standards.
Considering competition in regulatory design is critical not only to improving the competition effects of regulations that primarily address other important issues, but also to directly enhancing competition through regulatory action. OIRA’s work on competition supports key Biden-Harris Administration priorities, including initiatives to crack down on junk fees and related pricing practices and efforts to limit private companies’ ability to restrict workers from seeking out better-paying jobs.
In fact, as explained in the guidance, when labor markets are uncompetitive, workers’ compensation and job quality suffer. But by tackling sources of employer market power, regulations can make labor markets more competitive, allowing workers to more easily find another job with better wages or working conditions. For example, reforming licenses and permits so that they are not tied to a single employer or geographic location can make it easier for workers to switch jobs, reducing employers’ labor market power and increasing wages.
Building on these efforts, OIRA will continue to work with regulatory agencies—as well as with its interagency and White House partners—to institutionalize and embed consideration of regulations’ effects on competition. By doing so, OIRA will help advance more pro-competitive regulation, strengthening our economy by lowering prices for consumers, raising wages for workers, leveling the playing field for small businesses, and facilitating the development of higher-quality and innovative products.
