The Responsive Regulation Model - Case Study Example

Effectiveness of Responsive regulatory model in Consumer Protection regulation Responsive regulation approach is the most appropriate and significant approach that prescribes and describes various ways regulatory enforcement actions should be done to promote compliance1. The responsive regulation model was first established by Ian Ayres and John Braithwaite in their work “Responsive Regulation” in 1992. The regulation strategy is applicable in many areas such as environmental regulations, political regulations, and tax regulations. It is also applicable in other regulations and policies such as trading regulations. The Australian government was the first to embrace the responsive regulatory model in various regulations. Currently, many countries especially the developed countries in Europe and America are embracing the responsive regulation strategy in their application and enforcement of certain policies and regulations. This is because the model is more appropriate, stable and systematic in application to the public to comply with regulations set by the regulator. The responsive model of regulation contains some features that make it effective, adaptable and convenient to many users of regulations. However, developing countries are unable to embrace the responsive regulation approach due to low capacity of the state to mobilize various sectors and industries through regulations.2 The responsive regulation model has two different ways of interpretation. These are “tit for tat” (TFT) and “restorative justice (RJ).3 The approach also combines both compliance and deterrence models of regulatory enforcement and creates a balance between them.4 According to Ayres and Braithwaite, the government should apply the pyramid of regulatory approach where it first offers self-regulatory solutions to companies and industries. When the self-regulatory strategies fail, it should leave the self-regulation and embrace command regulation that contains discretionary punishment. Finally, the government should use a command regulation accompanied with non-discretionary punishment in failure of command regulations with discretionary.5 The model highlights that regulations should be inform of steps or processes. A pyramid form of the display is appropriately used to explain these steps involved in responsive regulatory approach of enforcing regulations. According to Braithwaite and Ayres, the regulator should effectively persuade the public to changing in some forms activities like the amount of tax paid. Majority of the concerned parties will willingly follow the regulation when persuaded to follow it. Persuasion may be done through different ways. For example, the concerned party may be persuaded to comply with regulations through advice, guidance, public information campaigns, negotiations, education or dialogue. Failure to comply with the regulations through persuasion, the government may take the next action of sending warning letters to the concerned group. In addition, penalty notices may accompany the warning letters to convince the concerned party to comply with laws and regulations set by regulators. The group of parties that require warning letters and penalty notices to comply with regulations is smaller than the group that complies with regulations after persuasion. However, if some people fail to comply with regulations after receiving warning letters, the government or the regulation body proceeds to the next step of applying civil penalties. In this stage, the government imposes some civil penalties to individuals who fail to comply with regulations set. The number of these individuals is much smaller than those given warning letters earlier. The government or regulatory body increases the intensity of the penalty from civil penalties to criminal penalties if individuals in the industry fail to comply with regulations. In this case, offenders will be subjected to severe and harsh penalties as criminals for failure to comply with laws and regulations. For example, offenders may be judged in court of law as criminals, and they would be required to pay a huge amount of fine or jailed. If offenders fail to comply with regulations even after facing criminal charges, the government has the right to suspend the legal license of the individual partner in the industry. For instance, the local authority may suspend the license of a company in a certain industry for some time. This means that the company will not operate until it complies with regulations set by the regulatory body. In case of the business failure to further comply with policies and regulations, the government will take the last step of license revocation. The legal rights of a company or partner to carry out any activity in the industry will be terminated completely by the government. The number of this category of offenders is much smaller since very few people or organization would wait termination of trading license by the government. Therefore, the company may not exist any longer hence resulting to a great loss to the company owner or partner.6 The responsive regulatory strategy has three main elements. First, strategy is systematic in nature where the regulator embraces different and more influential regulatory approach after the failure of another. For instance, if the self-regulation strategies fail to work, the regulatory can use command regulatory approach to achieve the regulation. In addition, the model completely explains disapproval and directs actions fairly. Secondly, the responsive regulatory approach show some respect for people required to follow the regulation. Use of the self-regulatory approaches like persuasion to enforce a given regulation to people reveals that the regulator has respect for people and their decisions. Lastly, the model involves an increase of intensity of response or regulatory actions when the person expected to comply with the regulation fails to comply. This shows that penalties increase in intensity as people fail to comply with regulations developed by the government. Regulatory bodies worldwide currently apply this approach worldwide due to its effectiveness and stability. The regulatory approach has been effective in various ways under the Consumer Protection from Unfair Trading Regulations 2008. The United Kingdom government imposed the Consumer Protection from Unfair Trading Regulations for a number of reasons. First, these regulations ensure that businesses do not treat customers unfairly. Businesses may treat customers unfairly in several ways. For example, businesses may charge customers higher prices than the required price. They may also sell unhealthy and low quality products to customers. The Consumer Protection from Unfair Trading Regulations ensures businesses and organization charge required prices and offer safe and high quality products to consumers. Secondly, it improves and expands the single market in Europe by ensuring that customers buy freely across Europe and businesses and enterprises sell freely in European countries. The responsive regulatory approach works efficiently in the Consumer Protection from Unfair Trading Regulations 2008. The government always considers the appropriate approaches to use in persuading businesses and traders to comply with regulations. For example, it considers business sizes and objectives before coming up with an approach to persuade traders to comply with regulations such as the Consumer Protection regulation. The UK government uses several strategies to apply responsive regulatory approach enhancing compliance of the Consumer Protection from Unfair Trading regulation by traders and businesses. First, the UK government persuades businesses and organization to comply with regulations by treating their customers fairly. The government also encourages companies and enterprises to offer good services at the required costs in order to comply with the Consumer Protection regulation.7 (Office of Fair Trading, 2008, p. 7). In addition, the government is encouraging businesses to comply with consumer protection regulation by providing true and reliable advertising information to consumers about their products. Encouraging organizations and businesses to comply with Consumer Protection regulations reveals the effectiveness of using responsive regulatory model. Secondly, the UK government applies the responsive regulatory model efficiently running a number of public information campaigns. Public information campaigns are important to consumers in several ways. Through public information campaigns, the government educates and creates awareness to consumers on their rights and freedom. For instance, the government informs consumers on steps to take to report unfair treatment by a trader or an organization. In addition, the government informs consumers of the standard prices and qualities they expect from traders. Web-based guidance on legislative requirements is another approach of responsive regulatory model that the UK government uses. The purpose remains to inform and persuade businesses and industries to follow and respect government regulations, like the Customer Protection, from Unfair Trading regulations. This guidance is available to businesses and enterprises in order to influence their decisions and practice in the process of complying with regulations.8 The government of United Kingdom applies the responsive regulatory model in compliance of the Consumer Protection from Unfair Trade Regulations by providing advice to business owners and managements of enterprises. The advice provided by the government aims at persuading businesses and enterprises to change behaviours of business in order to provide high consumer satisfaction through their service treatment. Businesses get advised on various effective production methods and consumer treatments to comply sufficiently with the Consumer Protection from Unfair Trading regulations. Therefore, the government applies the self-regulation approach of compliance by advising traders. Advice is also available for customer use from customer direct telephone helpline and email service provided by the government. Through this service, customers complain about the poor quality products sold by various businesses and enterprises. In addition, customer can use the government helpline to request for information on some consumer rights and freedom. According to Gilligan, Bird and Ramsay, investigations, examinations and inspections are useful tools to determine whether concerned parties comply with regulations set by regulatory bodies. In UK, the government carries out inspections and investigations to business and traders to determine whether they act according to the Consumer Protection from Unfair Trading regulations. The government evaluates services that businesses offer to their consumers and the condition of the service. In addition, it also compares the cost of products with quality. Through investigation and inspection, the government identifies businesses that do not comply with regulations. This enables the government to take appropriate actions in ensuring that businesses and traders comply with regulations. For example, it gives warnings letters, and penalty notices to businesses to persuade them to take necessary actions to comply with government regulations. Dialogue is another important tool used by the UK government to enhance compliance of the Consumer Protection regulations. This method is applicable where several selected businesses get approached by government officials, and there is a dialogue on how to change some trading behaviours to comply with regulations. Dialogue occurs later after business’ failure to comply regulations through education, advice or guidance. Dialogue is effective since government official clearly highlights requirement that the business should comply with and act towards providing fair treatment to its consumers. Use of dialogue in convincing traders to comply with the Consumer Protection regulations reveal the effectiveness and success of using responsive regulatory approach in the compliance of the Consumer Protection from Unfair Trading Regulations by the UK government. Where persuasive approaches fail to enhance compliance of the regulation, the government adapts more intense and influential strategies in ensuring that businesses and traders comply with regulations. Warnings are the next tools that the government adopts in persuading traders and businesses to comply with government regulations such as the Consumer Protection regulations. Government use warnings to persuade few businesses and traders how fail to comply with regulations after the government provides simple instructions through advices, campaigns, dialogue and education. Government gives general warnings through publications like newspapers and media such as television and radio advertisements. Specific warnings are sent to the concerned business through official letters from government offices. Warnings highlights obligations traders ought to achieve in order to comply with regulations. They also indicate consequences resulting from failure to comply with government regulations. In some cases, penalty notices accompanies warning documents especially when sent to individual businesses or enterprise. Therefore, warnings reveal that the responsive regulatory approach is effectively applied in compliance of the Consumer Protection from Unfair Trading regulation in United Kingdom. The next action in the responsive regulatory model that the government may take is placing a civil penalty on business for failure to comply with regulations set by the government of United Kingdom. For example, the government may impose a set amount of money as a civil fine for failure to respect and follow the Consumer Protection from Unfair Trading regulation. In this case, traders and businesses that fail to comply with this regulation must pay the stated amount as a fine. The approach of placing a civil penalty targets few offenders who fail to comply with government regulations9. The civil penalty ensures that business comply with regulations in order to avoid the fine. Lastly, if a business persists in failure to comply, severe and harmful actions may be taken by the government against the business. Criminal penalties maybe imposed by the government through a court of law. This would require the business to pay a large amount of fine stated by the court of law. Alternatively, the court may order the business to close down due to failure to comply with regulations. Another action that the UK government takes is suspending the legal license of the business in the industry. Failure to conform to government regulations such as the Customer Protection from Unfair Trading regulation results to huge losses and expenses after license suspension. The last option that the government can take is to terminate the legal license of the business. This will result to immediate close down of the business and exit from the industry. Bibliography Ayres, I & Braithwaite, J. Responsive regulation: Transcending the deregulation debate. (Oxford University Press 1992) Baldwin, R & Black, J, Really responsive regulation (London School of Economics and Political Science 2007) Balwin, R & Cave, M, Understanding regulation: theory, strategy and practice (3rd e.d, Oxford University Press 2012) BERR, Consumer Protection from Unfair Trading (Crown 2008) Better Regulation Executive & National Audit Office, Effective inspection and Enforcement (Hampton 2009) Black, J, Rules and regulators (Oxford University Press 1997) Braithwaite, J, Responsive Regulation and Developing Economies (The Australian National University 2006). Braithwaite, J, Restorative justice and responsive regulation (2nd e.d, Oxford University Press 2002) Braithwaite, V & Braithwaite, J, An evolving compliance model for tax enforcement (Oxford University Press 2002) Freedman, J, Responsive regulation, risk, and rules: applying the theory to tax practice (Oxford University Press 2009) Johnstone, R & Sarre, R, Regulation: Enforcement and Compliance (Australian Institute of Criminology 2004) Leviner, S, An overview: A new era of tax enforcement-from “big stick” to responsive Regulation (Blackwell Publishing Asia Pty Ltd 2008) Nielsen, V, Testing responsive regulation in regulatory enforcement (University of Aahus 2009) Office of Fair Trading, Statement of consumer protection enforcement principles (Hampton 2008) Wood, C, Ivec,M, Job, J, Braithwaite, V, Application of Responsive Regulatory theory in Australia and overseas (The Australian National University 2010) Read More