Challenging Government-Sponsored Private Regulation of Competitors

It has been a longstanding practice in America for governments to give private entities made up of professionals in an industry the authority to regulate the profession (e.g., state bar associations regulating lawyers and state medical boards regulating doctors). This private sector self-regulation has its advantages: people in an industry know more about it than government does. When that self-regulation is non-coercive, it seems essentially unobjectionable.
But if the government gives private actors coercive power to regulate their own industry, that power isn’t really self-regulation: it’s really some people in an industry regulating other people in that industry. Sometimes these regulatory arrangements involve participants in an industry regulating their competitors. In other cases, existing businesses regulate, and possibly exclude, potential new entrants. When industry has a hand in regulating “itself,” it’s reasonable to be concerned about the potential for self-interested bias and anti-competitive behavior.

Alexander Volokh

Reason Foundation

May 22, 2014

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