News from the self-regulation world

Here are my meeting notes of the CEPS lunchtime seminar on Self Regulation and Regulation where I got a good update on how self regulation had been contributing to the wider BR agenda (we classify self regulation among the "alternatives to regulation" with co-regulation and softlaw).

1/ The session started with an "état des lieux" thanks to Jean-Pierre Faure, Single Market Observatory (SMO), European Economic and Social Committee, who presented the self and co-regulation database, which gathers information about all ongoing self regulation (SR) initiatives, including a description of each approved instrument. The SMO is planning a review and a paper will be presented, following consultation, on 29 October.

2/ Oliver Gray, Director General, European Advertising Standards Alliance, gave a brief description of the benefits of SR in the advertising sector. He demonstrated that SR was particularly appropriate to regulate advertising, which must enjoy a high level of consumer trust and confidence, which is achieved if standards are enforced: adverts must be legal, decent, honest and truthful. It is in the interests of the advertising industry to ensure that advertising is properly regulated. Self-regulation is also an alternative to detailed legislation, but not to all legislation. It is now widely accepted that self-regulation works best within a legislative framework. The two complement each other, like the frame and strings of a tennis racquet, to produce a result which neither could achieve on its own. The law lays down broad principles, e.g. that advertising should not be misleading, while self-regulatory codes, because of their greater flexibility, can deal quickly and efficiently with the detail of individual advertisements. SR schemes are operated by self-regulatory organisations, (SROs), that apply the agreed code of standards and practice, and are generally competent to:

• Handle complaints
• Give copy advice (in most countries, checking each single SRO for further information)
• Give pre-clearance (in very few countries, checking each single SRO for further information)
• Monitor ads to check that they comply with the code

More information on the EASA website.

3/ Pierre-Olivier Bergeron, Secretary General, The Brewers of Europe, gave the audience a testimony "at the micro level". On the basis of a report published on that day (see press release), he outlined the SR scheme as it operates in the brewing industry. In 2007, The Brewers of Europe set up a Europe-wide advertising self-regulation initiative to empower national brewing associations across the EU into reviewing and optimising their advertising self-regulation systems. They took the European Commission's comprehensive best practice model and developed 7 Operational Standards, for the enhancement of advertising self-regulation systems and responsible beer communications in all the European countries. The report concludes that substantial progress has been made and underlines that "the effectiveness of self regulation is increasingly recognised by the European Union and other policymaking bodies as an important and valid complementary regulatory option".

4/ John Watson, Secretariat General, European Commission explained how the option for SR was always considered in the impact assessments. A list of upcoming impact assessments and corresponding roadmaps, including options with their advantages and drawbacks, are now published ahead of time to allow stakeholders to participate in the consultations.SR has been the subject of inter-institutional discussions of a revised Framework Agreement on relations between the European Parliament and the Commission.

He drew some lessons about conditions that can improve the chances of a SR scheme, on the basis of two recent examples: credit rating agencies (the SR was not adopted) and self certification of agricultural products (where SR could be useful for some traditional markings).

5/ Andrea Renda, Senior Fellow, CEPS, examined how SR fits into the smart regulation movement and contributed to its wider objectives, and conditions for the introduction of a new SR instrument, generally on the basis of an initiative from an actor in the professional organisations, encouraged by the Commission. The use of SR and other forms of flexible regulation is on the increase, due to the need to greater need for flexibility of markets, along with cost reduction and effectiveness, three key indicators when SR is assessed as an alternative to command and control regulation. SR has the advantage of tapping information held by the interest groups, increasing transparency and non discrimination, and sending the signal that they are committed to ethical values. On the competition effects of SR, opinions are less unanimous, as there is a residual risk of interest groups agreeing on prices, hence the need for a watchdog. This monitoring and enforcement role of regulators must however be limited by public indicators used to monitor outcomes. New approach directives and standardisation measures are also well supported by SR. One way to ensure appropriate use of SR is to introduce a sunrise clause in regulation, whereby the sector is given a deadline for organising itself, failing which regulation intervenes (example roaming charges). Finally, A. Renda raised the issue of the risk posed by the rigidity of the definitions of self regulation and co-regulation, and the practical difficulties of setting up SR mechanisms in certain MS, once the principle had been agreed at EU level.

The final part of the seminar was devoted to a lively general discussion of the conditions of success of SR initiatives, with questions from the floor. Here are some highlights pell-mell, which would all justify developing. It would be good that conditions to fullfill by interest groups to obtain recognition of their SR intitiative be better known and circulated; this may encourage other initiatives. SR can often go against the need for greater harmonisation of implementation of EU law. There can also be a plethora of SR initiatives (example food labelling) ending up in some consumer confusion and/or fragmentation of the market. "Some markets cannot be left alone" (Greenspan): this quote shows the limits of SR, some products (such as financial services) either already have some anti-competitive practices, or lend themselves with difficulty to ethical controls. One can make a difference between production standards and advertising standards (SR more directly useful in the latter). Self regulation is not necessarily an alternative to command and control regulation, but a parallel solution, to be used in complement to regulation. It should not be governed by dogma, but stay practical, and bank on its strength, interactivity with civil society.
See also website on New Approach directives.