Standards and enforcement

Some agencies think it’s improper to adopt a regulation unless they have the manpower to mount an enforcement program which will ensure that regulated companies will comply with the requirement. Some agencies think that emphasis on legal enforcement is the way to get compliance with the regulations.

The regulator should adopt those regulations which are required to protect the public, without regard for his agency’s ability to enforce the requirements. The agency should then seek compliance with the requirements through a variety of means, of which enforcement is but one.

Every regulator has some means of legally enforcing his regulations with either civil or criminal penalties, as provided in the legislation setting up the particular program. The vigor with which the agency enforces its regulations depends upon a number of variables which are not within the control of the agency, such as the disposition of the regulated industry voluntarily to comply with the regulations, economic stability of the industry (experience has shown that a prospering business is less apt to cut costs on regulatory requirements), the resources which Congress has given the agency for inspection and enforcement, and the disposition of the Department of Justice to take legal action at the request of the regulatory agency. Though the agency has a large measure of initiative, it does not have complete control over its enforcement program.

The agency protects the public by setting standards for the conduct of industrial activities and then getting regulated companies to comply with the standards. These functions are interrelated, but not interdependent. The regulator has an obligation to set the standards, even though Congress may have given the agency no manpower for enforcement. The regulator must recognize that his primary duty to set standards is separate from, and not dependent upon, his ability to enforce the standards.

Even though the agency does not have enforcement capacity, the public will benefit from the improved performance which results from voluntary compliance. Spokesmen for industry trade associations frequently argue that “you shouldn’t impose this burden on the responsible members of the industry unless you have the manpower to enforce it against the irresponsible members, because that would put the responsible members at a competitive disadvantage.” Parenthetically, these spokesmen are never willing to name the irresponsible members of the industry group. This argument is based on an unwarranted lack of confidence in the initiative of the American businessman. His self-interest will lead him to find a way to blow the whistle on a competitor who gains an advantage by violating the law.

The prospect of public liability resulting from failure to comply with a regulation is an important collateral enforcement device – probably more effective than the rather sterile and predictable agency enforcement, because it is more dynamic. If a regulated company fails to comply with a regulation designed to protect the public, and if a member of the public is injured as a result of the failure to comply, the company will be liable for the resulting damage. The prospect of liability for damages will be a greater incentive for compliance than the occasional slap on the wrist which is all the agency can do in legal enforcement. Insurance companies have an interest in compliance on the part of their insured parties, as a matter of minimizing liability. Thus, the agency should enlist the aid of the insurance companies in securing compliance.

After issuing a regulation, the agency is interested in compliance, not enforcement. Enforcement is a means, not an end in itself. Since most of the regulated industry will comply with most of those regulatory requirements with which they are acquainted, the agency’s emphasis should be on education and surveillance, rather than enforcement. The agency’s resources are probably misapplied if it spends as much as five percent of its inspector’s time on legal enforcement actions. But there is a need for regular and well-publicized enforcement action, as a club to get attention of the mulish.