Regulatory capture: defining it, refining it, and mitigating it

This guest editorial was written for the ANZSOG/National Regulators Community of practice monthly newsletter, highlighting new additions to the Regulation Policy and Practice collection on APO. The RP&P collection brings together a range of practical resources from national, local and state/territory governments, regulatory agencies and external institutions conducting monitoring, inquiries and reviews. You can receive this newsletter by  joining the ANZSOG/National Regulators Community of Practice (membership is free) or subscribe to the newsletter directly.

This guest editorial for the ANZSOG-auspiced National Regulators Community of Practice (NRCoP) has been written by Dr Grant Pink, RECAP Consultants and Pracademic Advisor to the NRCoP.

In their book Regulatory Delivery Hodges and Russell note that:

‘[w]hen regulatory agencies seek to improve their accountability; they face competing criticisms – those seeking to build relationships with those they regulate can be accused of regulatory capture whilst those proposing a role for the beneficiaries of regulation may be seen as neglecting their statutory role’ (2019, p. 11). [i]

Introduction

‘Regulatory capture’ is a topic that frequently comes up in my discussions with regulators. Despite the frequency of these discussions ‘regulatory capture’ remains an opaque topic. Often regulatory staff have difficulty in explaining exactly what it is, what it looks like, and how they might go about reducing it.

In the last few months, I have considered, discussed, and reflected upon ‘regulatory capture’ when it presented in three different and distinct situations:

• several months ago – when I was reviewing the learning curriculum for a regulatory program;
• a month ago – when I developed and delivered a one-day regulatory capture workshop for regulators; and
• several weeks ago – when I read an article that intersected strongly with regulatory capture.

These three situations are now considered briefly in turn.

The Professional Regulator Program

For those not aware, The Professional Regulator Program is a foundational level program which consists of six modules that participants undertake in their own time at their own pace as part of online (asynchronous) learning. Participants then come together as a group in online (synchronous) learning, and in seminar format they discuss their individual learnings and experiences. These seminars are facilitated to reinforce and extend the learnings, with the aim being to advance regulatory practice.

Several months ago – I found myself reviewing the materials for the Module 6: Regulatory Professionalism and Ethics as part of my preparations to facilitate the seminar. I noticed that in relation to regulatory capture the material suggested that:

‘It can be helpful to conceptualise or think about regulatory capture along a continuum. The continuum starts with collaborative relationship – this is essential in many regulatory contexts [and] … At the other end of the continuum is corruption’ (2023, p. 5). [ii]

While I agree with and appreciate the logic of the continuum conceptualisation, and that it was appropriate for a foundational level program, I suspected that a ‘capture continuum’ would likely contain additional stages or phases. For this reason, I started to think of how regulatory practitioners, regulatory managers, and regulatory executives might describe how they feel in certain circumstances, between the extreme bookends of ‘collaborative’ and ‘corrupted’. The following came to mind:

• ‘conflicted’;
• ‘compromised’; and
• ‘captured’.

A few days later, and during the seminar, it was clear that ‘regulatory capture’ was a topic of extreme relevance and interest to the regulatory practitioners and regulatory managers completing the programme. But once again when it was discussed, and even when drawing upon their lived experiences it remained relatively opaque. To expand the thinking, and to assist the learners, we briefly discussed the three additional stages or phases mentioned above. The conversation was transformed immediately and enabled participants to provide more granular, transitional, and practical examples of their experiences within and around ‘regulatory capture’.

Regulatory capture workshop

Around a month ago – and within weeks of the seminar, I was asked by a regulator to design, develop, and deliver a regulatory capture workshop.

Given what has been outlined above, we know that ‘regulatory capture’ is a pervasive topic that regulators often talk about. But it is rare for them to act upon it – and it is even more rare for them to act upon it proactively – and almost unheard of for them to discuss it with those outside of their own agency. For this reason, the courage and commitment by this regulator should be applauded, especially given that they invited co- and peer- regulators to actively participate in the workshop.

This Regulatory Capture Workshop provided the ideal opportunity to ‘field test’ and workshop the Regulatory Capture Continuum (the RCC) that was taking shape in my mind.

The Regulatory Capture Continuum (2023, p. 10) [iii]

Workshop participants were briefly exposed to the seminal and contemporary research related to ‘regulatory capture’ but spent most of their time purposively using the RCC as a frame to assist them to identify and discuss where ‘regulatory capture’ is or is likely to be located within a continuum. With the purpose of the exploration being that participants could better identify early warning signs or indicators that would assist or prevent graduating to the next and higher risk category.

Key outcomes and takeaways from the RCC workshop were that participants were able to:

• develop – a working definition of ‘regulatory capture’, that was relevant to their regulatory agency and roles;
• describe – what ‘regulatory capture’ looked like, in their operating and/or authorising environment; and
• detail – the impacts that ‘regulatory capture’ has in terms of their regulatory practice, regulatory delivery, and achievement of regulatory outcomes.

A key observation and contribution that the participants came up with, from considering the RCC in totality, was that they considered that ‘complacency’ at an individual, functional, and organisation level – and that this was a key factor that could lead to progressing to the next and higher risk category.

APO article – The regulator’s dilemma: regulating in a sea of influence

Several weeks ago – I found myself reading the latest edition of the Regulation, Policy & Practice Newsletter, which contained Michael Riches’ article with the title The regulator’s dilemma: regulating in a sea of influence.

The first sentence of the article noted that:

‘Regulators must carefully navigate the need to positively engage with the sector they regulate while also ensuring standards are enforced’ (2023, para. 1). [iv]

I could immediately see a connection with the issues associated with ‘regulatory capture’, which were reinforced when the article went on to note that:

‘… great care must be taken in respect of engagement. As regulators, we must be alive to the risks that such engagement may influence, even sub consciously, our approach to regulatory enforcement’ (2023, para. 3). [v]

The article then reinforced the ‘regulatory capture’ aspect when it made the point that:

‘[t]he risk of grooming and capture is ever present within regulatory organisations. [and that] … a regulator may experience such a sense of obligation or loyalty to an industry member that regulatory decisions are compromised’ (2023, para. 4). [vi]

The article goes on to outline some key issues that regulators should consider when they need to engage and participate in activities with regulated entities and key stakeholder groups. Suggesting that agencies should also consider developing mitigation strategies.

Conclusion

These three situations highlight that regulatory networks and communities of practice, such as the ANZSOG NRCoP, provide an ideal platform and mechanism for regulators to:

• be exposed to contemporary regulatory training and continuing professional development;
• reach out to co- and peer- regulators as part of dealing with regulatory issues and challenges; and
• receive contemporary grey literature on a range of regulatory issues that help them advance their regulatory: practice, delivery, and professionalism.

While regulators still have additional work to do, to define and refine their understanding of and approaches to ‘regulatory capture,’ the good news is that it appears that regulatory practitioners, managers, and executives are more actively and consciously thinking about ‘regulatory capture’.

More than this, the thinking is going beyond the theoretical aspects and is focussing more on the pragmatic and practical aspects of ‘regulatory capture’ and where and how it impacts on regulatory practice.

Given the interrelationship between regulatory practice and regulatory delivery Hodges suggests that:

‘regulators should understand their regulated communities and the problems that they face, and … challenge the over-riding fear of regulatory capture and its use as a justification for a lack of engagement’ (2019, p. 459). [vii]

While this shift challenges the historical ‘us and them’ and ‘don’t get too close’ mindset – the reality is that for regulatory professionals in an emerging and evolving regulatory profession this is precisely the reflexive practice that they should be involved in.

Article prepared by:

Dr Grant Pink, Pracademic Advisor ANZSOG NRCoP, Managing Director RECAP Consultants, Adjunct Professor (Regulation and Enforcement) University of Tasmania.

Grant has more than 25 years regulatory and enforcement experience spanning practitioner, management, executive, academic, and consultancy roles, operating at local, state, national and international levels.

Grant has written more than thirty articles for practitioner and academic publications in the areas of regulatory practice, capacity building, networking, and collaboration. In 2021 he authored the book Navigating Regulatory Language: An A to Z Guide.

Academically Grant has a MA by research in the area of regulatory and enforcement networks (2010), and a PhD which considered how regulators build, maintain, and sustain regulatory capability and capacity (2017). In 2016 Grant founded RECAP Consultants Pty Ltd (RECAP). RECAP is a specialist regulatory consultancy providing services domestically and internationally.

[i] Russell, G., & Hodges, C. (2019). Regulatory Delivery. Oxford: Hart Publishing.

[ii] ANU School of Regulation and Global Governance, RegNet, and Australia and New Zealand School of Government (ANZSOG) for the National Regulators Community of Practice. (2023) Professionalism and Ethics, Module 6 – Summary and Take-Home Points, in The Professional Regulator.

[iii] RECAP Consultants (2023). Regulatory Capture Workshop: Notes and Reflection Document. Canberra: RECAP Consultants.

[iv] Riches, M. (2023). The regulator’s dilemma – regulating in a sea of influence. Guest Editorial, Regulation Policy & Practice Newsletter, APO, Edition 37, August 2023.

[v] Ibid.

[vi] Ibid.

[vii] Hodges, C. (2019). ‘Reflections on Regulatory Delivery: Evolution and Future’ (pp. 453-463)’, in G. Russell, G., & C. Hodges, C. (2019). Regulatory Delivery. Oxford: Hart Publishing.