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Price Control Design

Regulators face a constant challenge of better aligning incentives and sharing the risks more appropriately between customers and shareholders with more innovative approaches to the design of regulatory regimes. More targeted incentive schemes relating to the outcomes valued by customers, less prescriptive approaches to how companies can achieve (and benefit from) efficiency savings and longer durations of price controls to encourage longer-term planning have all been considered. Different regulators have adopted different approaches according to the circumstances of their sector and jurisdictions that they operate within. FTI Consulting and its subsidiary, Compass Lexecon have been at the heart of the development of these new approaches, combining theoretical evaluation of different options with quantitative scenario-based modelling of potential impacts to arrive at optimal price control designs.

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Appeals in Regulatory Decision

Even the lengthiest evidence-based regulatory consultations can lead to determinations that have conceptual or practical flaws. Given the highly material strategic and financial implications of such decisions, and the potential impact on shareholder value, there is considerable precedent for regulatory appeals and disputes. Successful outcomes require exceptional levels of expertise as well as the ability to articulate complex arguments such that robust decisions can be taken by the relevant appellate bodies.

FTI Consulting, in conjunction with its subsidiary Compass Lexecon, is a leading provider of services to law firms and regulated companies in the context of appeals of sector regulators’ decisions to appellate bodies, such as the Competition and Markets Authority (CMA) in the UK. The team has also had experience of working on appeals of regulatory decisions in other jurisdictions. Our work typically involves assisting companies assess the strengths and weaknesses of its position and to shape their arguments to be as influential as possible with the appellate body, having due regard to whether this is a specialist agency such as the CMA or a court which may have limited experience of regulatory law and financial economics.

When undertaking this work, we draw on the experience of our team that includes a number of ex-Competition Commission staff and former senior regulators. Where appropriate, drawing on our range of expertise across all aspects of price controls, we help companies buttress their arguments with additional supporting evidence.

Sector Enquiries

In addition to individual company enquiries, government authorities also may look into entire markets or sectors that are perceived to be not performing well. For example, governments might suspect that competition isn’t working as well in a market with multiple competitors selling similar products at similar prices. FTI Consulting and its subsidiary, Compass Lexecon provide competition economics services to help either government entities or individual sector or market participants to build a solid case for status quo or for remedial market change. This is a rigorous process, where every nuance in the competitive landscape is examined, and that delivers a clear plan of action to resolve any problems identified.

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