Should Commissioner Kroes trust the Spanish Government?

Two weeks ago, Commissioner Kroes from the European Commission sent an official letter to the Spanish government threatening it with sanctions unless the proposal to merge the network industry regulators with the competition policy authority was profoundly changed. The main concern of the EC was that the new merged agency would have a significantly lower degree of regulatory independence relative to government than the preceding agencies. The Spanish government replied just a few days later saying that it would reform the proposal to accommodate the requests of the Commission. However, the Spanish government is not withdrawing the proposal, which is what it should do. I have analyzed the proposal in an extended paper, where I draw from the literature on institutional and organization architecture to conclude that the specific characteristics of network industries in Spain, and the experience of countries of similar size in the European Union make this proposal a bad idea. The fact that the proposal was inspired by a Consulting Report commissioned by the telecommunications incumbent, Telefónica, raised the suspicion that the government's proposal was a result of legislative capture. The EC should not even allow that a country with the size and regulatory problems of Spain creates such a big agency, where its governing council will have to be expert in telecoms, energy and transportation, besides competition policy. It should ask the Spanish government to do what it has not done: to open a debate with experts, the public and interested parties to reform regulation in a way that it increases its quality and credibility.