Ogus, Anthony; Carbonara, Emanuela --- "Self-regulation" [2011] ELECD 1071; in Parisi, Francesco (ed), "Production of Legal Rules" (Edward Elgar Publishing, 2011)

Book Title: Production of Legal Rules

Editor(s): Parisi, Francesco

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848440326

Section: Chapter 13

Section Title: Self-regulation

Author(s): Ogus, Anthony; Carbonara, Emanuela

Number of pages: 25

Extract:

13 Self-regulation
Anthony Ogus and Emanuela Carbonara



1. Introduction
Self-regulation, understood narrowly as law formulated by private agencies
to govern professional and trading activities, has been rigorously criticised
by lawyers and economists alike. From a legal perspective, it is seen as an
example of modern "corporatism", the acquisition of power by groups which
are not accountable to the body politic through the conventional constitutional
channels (Schmitter, 1985). The capacity of such groups to make rules
governing the activities of members of an association or profession may itself
constitute an abuse if they lack democratic legitimacy (Page, 1986). The
potential for abuse may become intolerable if, and to the extent that, the rules
affect third parties (Cane, 1987). Further, if the group's functions cover policy
formulation, interpretation of the rules, adjudication and enforcement (including
the imposition of sanctions) as well as rule making, this conflicts with basic
notions of separation of powers (Harden and Lewis, 1986). For their part,
economists have traditionally focused on how self-regulatory powers may be
exercised to impede competition on the supply side of the market. Barriers to
entry may be created, thereby raising prices and conferring rents on incumbent
practitioners; standards governing practice may be devised more to confer utility
on suppliers than to meet consumer preferences (Shaked and Sutton, 1981a).
And the prospect of gaining such advantages may lure groups into spending
resources to persuade legislatures to grant them self-regulatory powers ­ a
social deadweight loss (Tullock, 1967).
While criticisms such ...