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.
By Chris Ingham
Sometimes terminology once reserved for lecture theatres and dry academic journals finds its way into the common vernacular.
Take ‘regulatory capture’. A Google search brings up a smorgasbord of recent examples in the popular press. A few highlights:
- A Manila Times columnist eviscerates national energy regulators for taking the side of industry over consumers through failure to support small scale energy distribution (e.g., solar panels in private homes).
- A Dallas TV report on oil and gas Commissioners in Texas accepting financial contributions from the industry they regulate.
- A Time Magazine article on Department of Health and Human Services’ Office of Inspector General (OIG) review of the Federal Drug Administration’s controversial approval of Biogen’s anti-Alzheimer drug. The OIG media release cites allegations of an ‘inappropriately close relationship’ with the pharmaceutical industry.
Regulatory capture gets the attention it deserves. I’m interested in the opposite end of the spectrum, which could be called ‘regulatory discord’, where the relationship is distant, confrontational or non-existent. A regulator with little or no relationship with the other side, like the regulator that is captured, is ineffective.
You find it in a range of circumstances. Below is a non-exhaustive list.
- Where there are first order questions about the legitimacy of state oversight. Take the United States National Rifle Association’s view of federal and state regulators. Put simply, it’s, a) the Second Amendment says the right to bear arms ‘shall not be infringed’; b) regulators seek to infringe; c) therefore, should gun owners and clubs have a working relationship with regulators? See (a) and (b) for the answer.
- Like the example above, when technological innovation creates new services that compete with regulated services, such as ride-sharing and taxis. Massachusetts introduced ride-sharing regulation. The industry’s response seeks to overturn it in a November 2022 ballot.
- An industry, or parts thereof, believe a regulator is politicised or biased. A good Australian example is the federal building industry regulator, the Australian Building and Construction Commission, and its relationship with building and construction unions.[1]
- Regulatory activity is seen as ineffective or unethical. Sanctuary Cities in the United States, supported by churches, advocates and charities, limit cooperation with the federal Immigration and Customs Enforcement agency.
Extremes make good examples, but the average regulator probably positions themselves somewhere in the middle of the regulatory capture – regulatory discord spectrum.
How does a regulator prevent a descent into regulatory discord? Here are a few pointers.
Detect and address bias. Do your colleagues make disparaging remarks about entities they regulate? Are industry critics dismissed out of hand (‘they would say that, wouldn’t they?). If you sense bias, be sure that industry feels it ten-fold.
If the relationship is distant, try a shift to radical transparency. It’s the Elvis principle – ‘we can’t go on together, with suspicious minds’. Don’t get caught in a trap like Elvis. Own up to past mistakes. Invite industry representatives to present at Board/Commission meetings and join your recruitment panels. Sure, there are risks, but if things are bad, lack of boldness is riskier.
Use standard assurance reviews of internal regulatory policies and processes as relationship health checks. So you’ve got a ‘What You Can Expect from Us’ published statement and did well in your recent survey of industry peaks and regulated entities? That’s great, but don’t rest on your laurels. Do you walk-the-talk on your consultation commitments? Do regulated entities ever declare non-compliance, or do you always have to detect it?
The regulator-regulated relationship – like any relationship – can never be taken for granted.
[1] See especially the submission from the Construction, Forest, Mining and Energy Union to the Senate Education and Employment Committee on the Building and Construction Industry (Improving Productivity) Bill 2013, 27 September 2016. [https://www.aph.gov.au/DocumentStore.ashx?id=68a4b3bc-5db0-4257-beed-a78e757422f4&subId=414322]
- Published Date: 3 February 2022