BMS 405 PUBLIC RELATIONS III
HANDOUT 4:
ARGUMENTS FOR AND AGAINST SELF-REGULATION
This is an extract from ‘Self-Regulation and the Media’ by Angela J. Campbell. The full article is here.
Definition of Self-Regulation
The term self-regulation means different things to different people.
To devise a definition it is useful to break apart the term “self-regulation.” The word “self” refers to the actor. It could mean a single company. More commonly, however, it is used to refer to a group of companies acting collectively, for example, through a trade association.
The word “regulation” refers to what the actor is doing. Regulation has three components: (1) legislation, that is, defining appropriate rules; (2) enforcement, such as initiating actions against violators; and (3) adjudication, that is, deciding whether a violation has taken place and imposing an appropriate sanction.
Thus, the term “self-regulation” means that the industry or profession rather than the government is doing the regulation. However, it is not necessarily the case that government involvement is entirely lacking.
Instead of taking over all three components of regulation, industry may be involved in only one or two. For example, an industry may be involved at the legislation stage by developing a code of practice, while leaving enforcement to the government, or the government may establish regulations, but delegate enforcement to the private sector. Sometimes government will mandate that an industry adopt and enforce a code of self-regulation.
Often times, an industry will engage in self-regulation in an attempt to stave off government regulation. Alternatively, self-regulation may be undertaken to implement or supplement legislation.
Arguments in Favor of Self-Regulation
The claimed advantages of self-regulation over governmental regulation include efficiency, increased flexibility, increased incentives for compliance, and reduced cost. For example, it is argued that industry participants are likely to have superior knowledge of the subject compared to [a] government agency.
Therefore, it is more efficient for government to rely on the industry’s collective expertise than to reproduce it at the agency level.
This factor may be particularly important where technical knowledge is needed to develop appropriate rules and determine whether they have been violated.
Second, it is argued that self-regulation is more flexible than government regulation.
It is easier for a trade association to modify rules in response to changing circumstances than for a government agency to amend its rules. Not only are government agencies bound to follow the notice and comment procedures of the Administrative Procedure Act, but it is often difficult for an agency to obtain the political support and consensus needed to act. It is argued that industry is better able to determine when a rule may be changed to result in better compliance. Moreover, self-regulation can be more tailored to the particular industry than government regulation. While “command and control” regulation may have worked well in the past when addressing near monopolies, it does not work well with different types of market failures.
Given the sheer magnitude of individual problems, general rules may lead to absurd results.
Another argument in support of self-regulation is that it provides greater incentives for compliance. It is thought that if rules are developed by the industry, industry participants are more likely to perceive them as reasonable. Companies may be more willing to comply with rules developed by their peers rather than those coming from the outside.
Fourth, it is argued that self-regulation is less costly to the government because it shifts the cost of developing and enforcing rules to the industry.
Of course, the government may still be involved in supervision, but supervision requires fewer resources than direct regulation. Indeed, Ian Ayres and John Braithwaite argue that self-regulation is an attractive alternative to direct government regulation because the state “cannot afford to do an adequate job on its own.”
They acknowledge, however, that self-regulation will only result in a net reduction of cost if the costs to industry are lower than the government’s cost savings.
Self-regulation may also be justified where the rules or adjudicatory procedures differ from the surrounding community or the rules of the surrounding community are inapplicable. Specifically, the argument is sometimes made with respect to the Internet, where jurisdictional and sovereignty issues make it difficult for nations to enforce their laws.
Finally, self-regulation may be used instead of governmental regulation to avoid constitutional issues.
For example, it is doubtful under the [United States] First Amendment whether government can prohibit the advertising of alcoholic beverages.
However, no constitutional question arises if a [television] station or group of stations independently decides not to accept alcohol advertising.
Arguments Against Self-Regulation
Critics of self-regulation question the basis for the arguments in favour of self-regulation. For example, while acknowledging that industry may possess greater technical expertise than government, Professor Peter Swire questions whether companies will use that expertise to the benefit of the public, suggesting instead that they are more likely to employ their expertise to maximize the industry’s profits.
Similarly, the idea that industry will comply more willingly with its own regulations than those imposed from the outside seems somewhat weak where industry is actively involved in developing regulations at the agency.
Other criticisms are directed against self-regulation itself. Leaving regulation to the industry creates the possibility that industry may subvert regulatory goals to its own business goals; or as one article put it, “self-regulators often combine—and sometimes confuse—self-regulation with
self-service.”
Self-regulatory groups may be more subject to industry pressure than government agencies. Moreover, the private nature of self-regulation may fail to give adequate attention to the needs of the public or the views of affected parties outside the industry.
Many question the adequacy of enforcement in self-regulatory regimes.
Industry may be unwilling to commit the resources needed for vigorous self-enforcement.
It is also unclear whether industry has the power to enforce adequate sanctions. At most, a trade association may punish noncompliance with expulsion. Whether expulsion is an effective deterrent depends on whether the benefits of membership are important.
In many cases, expulsion or other sanctions, such as denial of the right to display a seal, are insufficient.
Without adequate incentives to comply, “bad actors” will be unlikely to comply, and the “good actors” that do comply will be placed at a competitive disadvantage.
Where a company can make greater profit by ignoring self-regulation than complying, it is likely to do so, especially where noncompliance is not easily detected by the consumer or likely to harm the particular company’s reputation.
Like cartels, self-regulatory frameworks may unravel because of cheaters.
On the other hand, when enforcement actions are taken, concerns are raised about the exercise of unreviewable discretion.
Another problem with self-regulation is that it can facilitate anticompetitive conduct.
Self-regulation involves competitors getting together to agree on how they will conduct their business. As one article points out, this type of agreement inherently raises antitrust issues, and agreements by professional organizations have sometimes been challenged by the government under antitrust laws.
