Responsive Regulation Major Issues - Essay Example

Responsive regulation Responsive regulation calls for the regulator to desist from using his powers unless the response is not positive. As long as the organizations being regulated cooperate the regulator only ought to focus on educating the organizations on how best to comply with the set regulations1 . This consequently promotes self regulation which reduces the need for the regulator to get involved. Responsive regulation therefore, can be seen as one that takes advantage of the benefits of both strong regulation and self regulation. If anything, organizations understand that regulations can be easily side stepped by realigning the market. Therefore, responsive regulation prescribes how best regulatory enforcement can promote compliance. Responsive regulation provides a chance for the regulator to understand the intricacies between state regulation and private regulations. This is because the regulator steps aside only to become involved if need be. Good regulation however has to realize the important role played by both self regulation and state regulation and offer room for both2 . Hence formal law ought to incorporate the best commercial practices and serve to entrench those practices. This is what responsive regulation seeks to achieve. Formal law should serve as a basis for the industry to self regulate. Business communities ought to formulate law for themselves with the courts checking how businesses use those laws. A good policy needs not force the businesses choose between self regulation and government regulation. This is because it is possible to have the best of both3. Good policy has to do with understanding self regulation and how it relates to government regulation. Hence laws that regulate businesses have to be developed and implemented with the involvement of the affected businesses. Other than the government designing policies for the businesses it has been found out that, better policies are arrived at when both the government and the private sector participate. Responsive regulation advocates that the regulator responds to the structure of the industry being regulated. This means that different structures in the industry will be subjected to different degrees of regulation4. This is because different levels of the industry have different motivations hence deserve slightly different degrees of regulation. Regulation from the government should take into account the diverse objectives of the businesses under regulation. This is because regulations can not only affect the structure of the regulated businesses but it can also affect the motivation behind those businesses. Consumer Protection from Unfair Trading Regulations 2008 not only ensures that traders do not trade unfairly; it also seeks to ensure that traders are honest towards their customers. The regulations are aimed at dealing with businessmen who have unfair practices. Under the regulations the enforcer may go to court to prevent community or domestic infringements. In case infringement of the regulations has already occurred, the enforcer can still go to court seeking to prevent a repeat of the same. In enforcement of the Consumer Protection from Unfair Trading Regulations 2008, Office of fair trading and local authorities have several roles to play. They have the power to make test purchases to determine whether the law is being complied with. They also have the power to enter a business premise without a warrant to check compliance. In case of domestic premises, they require a warrant to search the premises for compliance. Responsive regulation is the idea that government regulation should respond to the conduct of the industry. Rather than controlling organizations, government regulation should focus on making sure that self regulation works5.Depending on the behavior of the regulated organizations, the government then decides whether to increase or decrease the degree of regulation. By delegating regulatory functions to the regulated businesses themselves, the government promotes private market governance. By applying responsive regulation the government can take advantage of all the benefits of hands off kind of regulation without actually neglecting its regulation role. The best way to regulate an industry is to take into account the culture, history and the context of the industry being regulated6 . This is what responsive regulation advocates for. Hence responsive regulation is an attitude that allows use of wide levels of regulation depending on the specific context at hand. This enables use of the most appropriate intervention depending on the context as opposed to using strict laid down interventions that do not take into account the context. In responsiveness regulation, the regulator does not have best regulatory solutions for all problems. Rather the regulator has to come up with solutions specifically tailored for specific situations7. Rather than having solution considered to be permanently better than others, the regulator has solutions considered to work better than others depending on the situation. While other theories promote either deterrence or cooperation approaches as the best way to regulate an industry, responsive regulation seeks a middle ground between the two. Responsive regulation takes into account that there are those in the industry who comply for social reasons while others comply only when it is convenient for them (Nielsen & Parker, 2009). Responsive regulation admits that a firm or an individual can several reasons for complying or not complying with the law. The theory therefore suggests that enforcement ought to be done in hierarchy, regulatory pyramid. In the hierarchy, cooperative strategies should be applied first and punitive strategies applied only when cooperative strategies fail. The regulator should start by assuming that the organization being regulated will be cooperative. If it is ready to repair any damage it may have caused, then the punishment should not be very harsh. If the organization fails to cooperate, then the regulator should step up the punishment little by little. In case a formerly non cooperative organization becomes cooperative the regulator ought to tone down the punitive regulation and embrace the reformed organization. Responsive regulation discourages resistance and promotes compliance in a number of ways. This type of regulation makes it beneficial for the regulated organizations to comply with set requirements as opposed to non compliance. The threat of being taken up the pyramid for non compliance also acts as a benefit in that it acts as deterrence to non compliance on the part of the organizations8 . This way the regulator does not have to use punitive measures against the regulated organizations. This results in better working relations between the regulator and the regulated organizations. Effectiveness Whenever a regulatory agency takes action on a business, the action always has an effect on the relationship between the agency and the business. Contact between the regulator and the regulated organization always has an effect on cooperation with the regulators and commitment to compliance on the part of the regulated organizations9 . This way, the regulator is able to mitigate cases of, lack of cooperation in the future. Responsive regulation emphasizes the need for cooperation during investigation and enforcement. In so doing both regulator and the regulated firms cooperate to ensure that the firm achieves the objectives set out in the law as opposed to mere strict compliance. In most cases, responsive regulation results in more compliant attitude in the future. Studies show that responsive regulation causes organizations to develop behaviors that aim at promoting own compliance with set regulations. Studies show that this is most common in cases where the regulator acts in a responsive manner during both the investigation as well as the enforcement process. In cases where the investigator does act responsively, businesses have been found to assess the outcome of the investigation As a result of responsive regulation, companies now considers the regulator to be fairer and less stigmatizing to them10.This makes them develop more positive attitudes and efforts towards regulation. These include seeking better ways to comply, and cooperate better with the regulators. Similarly regulated companies avoid negative activities relating to regulation, for instance fighting off the regulator. Responsive regulation has succeeded in making the regulator seen as a being more procedurally more flexible11 . Generally speaking businesses have developed a more positive opinion of the regulator, thanks to responsive regulation. This is not just in relation to checking its compliance with the law but generally speaking. Where responsive regulation is applied, businesses do more to ensure that they comply with the relevant laws. This means that those organizations that have at one time or another experienced responsive regulation have a higher level of daily compliance. This is in line with the theory which suggests that responsive regulation builds commitment to comply with the law. It also improves the ability of the regulated organization to comply with the law. This is promoted by the fact that enforcement agents choose their behavior carefully depending on each situation. Responsive regulation ensures that there is constant communication between the regulator and the regulated companies 12. The regulator begins with an attitude of trust towards the business as he carries out the investigation. The firm then gives responses to the regulators queries at each stage of the investigation. Once the investigation is complete the business then remains in communication with the regulator as it tries to rectify any instances of non-compliance found. Good interaction between the regulator and the business leads to both reaping the benefits of responsive regulation. While there are numerous challenges that face regulation, the effectiveness of responsive regulation is commendable. For instance, detecting non compliance is a problem for the regulators. Responsive regulation has encouraged more organizations to self regulate reducing the burden of having to detect non compliance13. It takes into account not only compliance but also how businesses respond to regulation in dealing with them. This encourages businesses to adopt self regulation to adopt good treatment from the regulator. Self regulation advocates for tit for tat kind of regulation. Those businesses that fail to behave as required are met with a more severe deterrent every time they are found with non compliance14 . This kind of regulation lays down a well thought out procedure for disapproval, and emphasizes on respecting the regulatees. This serves to boost the morale of regulated businesses knowing despite the fact that they are required to comply with the law; the regulator too has a duty to treat them with respect. The businesses understand that they will only be penalized if they fail to show genuine efforts to comply. Although effective, responsive regulation has it has faced a number of challenges that reduce its effectiveness15. One factor that makes it ineffective is that in some circumstances, the step by step approach advocated for by the theory is not applicable. For instance in cases where the regulator is dealing with a serious case of non compliance, it not reasonable to take the step by step approach given by the theory. In such cases the regulator has to resort to more severe actions which may be higher up the pyramid. Hence under such circumstances it may not be reasonable to go by the theory. As per the theory the regulator is expected to move up and down the pyramid depending on whether the business is cooperating or not. This means that the regulator may escalate or deescalate down the pyramid depending on the response of the regulate. This however has proved difficult in practice. This is because punitive strategies always prejudice the relationship between the regulator and the regulated business. The fact that businesses are always threatened with stiffer penalties may it difficult for them to have voluntary compliance. Another that factor diminishes the effectiveness of responsive regulation is that the tit for tat strategy advocated for by the theory in dealing with the non compliance16 . Whereas the theory assumes that businesses respond positively to pressure applied by the regulator. Studies have however revealed that businesses respond more to the culture of their industries as opposed to responding to the pressure by the regulator. Other studies have found that businesses are more likely to respond to competition compared to pressure from the regulator. Hence it would be more appropriate for the regulator to analyze each problem. If a problem is too rampant or too serious and requires urgent intervention the regulator can then decide on an appropriate action regardless of whether the action is high up the pyramid or not. For instance if the regulator realizes that firms failure to comply with the set policy results from lack of education among the companies that are expected to comply then it would e more appropriate to roll out an education plan as opposed to starting at the base of the pyramid as advocated for by the theory17 . Starting at the base of the pyramid when it would more appropriate to apply interventions higher up the pyramid serves to reduce the effectiveness of responsive regulation. Another factor that reduces the effectiveness of the responsive regulation theory is that it only works in situations where there exists a relationship between the regulator and the businesses being regulated. Where such a relationship does not exist it is almost impossible for the theory to be employed effectively. The theory assumes that the regulator will be sending clear messages to the businesses being regulated. The businesses being regulated on the other hand are also expected to understand the message of the regulator and work on it with an intention of complying with the requirements made by the regulator18. The theory assumes that the regulator and the business being regulated understand the strategy being employed and work together to make it a success. In cases where there is a poor relationship between the regulator and the businesses being regulated, it is almost impossible for such an understanding to develop. Hence responsive regulation rarely works in cases where the parties involved have not taken steps to establish a relationship. Studies have found that in most cases, the relationship between a regulator and a business s is not uniform across the whole sector. A regulator may have a very good relationship with one player and at the same time have a very bad relationship with other players in the same sector. In conclusion, responsive regulation is a very effective method of regulation. So far the method has shown impressive results. Rather than treat all business that show non compliance the same, responsive regulation theory advocates that regulators be treated each depending on their willingness to comply. The theory advocates that regulators have the power to punish those businesses that do not comply but they should rarely use those powers. There are a number of factors that reduce the effectiveness of this approach. Despite these, one can say that the responsive regulation is still a very effective approach. Bibliography Ian Ayres and John Braithwaite, ‘Responsive Regulation: Transcending the Deregulation Debate’ (1992) http://islandia.law.yale.edu/ayres/respons.htm. Accessed April 20 2014 Vibeke Lehmann Nielsen and Christine Parker, ‘Testing responsive regulation in regulatory enforcement’ (2009) http://www.law.unimelb.edu.au/files/dmfile/NielsenandParkerTestingResponsiveRegulationinRegulatoryEnforcementPreprintformat1.pdf. Accessed April 20 2014. Robert Baldwin and Julia Black, ‘Really Responsive Regulation’ (2007). http://eprints.lse.ac.uk/23105/1/WPS2007-17BlackandBaldwin.pdf. Accessed April 2014. Charlotte Wood, Mary Ivec, Jenny Job and Valerie Braithwaite, ‘Applications of responsive regulatory theory in Australia and overseas’ (2010) http://asiapacific02.cap.anu.edu.au/sites/default/files/ROP15.pdf. Accessed April 2014. Judith Freedman, ‘Responsive regulation, risk, and rules: applying the theory to tax practice’ (2012) http://denning.law.ox.ac.uk/tax/documents/08.03.12Freedman.Resp.Reg.pdf. Accessed April 2014 Christine Parker, ‘Responsive Regulation in Enforcement & Compliance: Elegant, Inspirational... and Impractical?’ (2011) http://www.videnet.nl/download/?id=17713171. Accessed April 2014 Susan S. Silbey, ‘The consequences of responsive regulation’ (2000) http://web.mit.edu/ssilbey/www/pdf/resp_regulation.pdf. Accessed April 20 2014. Orr Karassin and Oren Perez, ‘From regulation to implementation: responsive assessment of environmental compliance and enforcement’ (2010). http://regulation.upf.edu/dublin-10-papers/4C2.pdf. Accessed April 20 2014 Read More