Self-regulation and the media.

• Author: Campbell, Angela J.

1. INTRODUCTION

   Calls for self-regulation of electronic media have recently been heard in Washington, D.C. In December 1998, a Presidential Advisory Committee recommended that digital television broadcasters adopt a voluntary Code of Conduct highlighting their public interest commitments.(1) The Advisory Committee Report even included a "Model Voluntary Code" drafted by a subcommittee headed by Professor Cass Sunstein.(2)

   Similarly, President Clinton has called for industry self-regulation to address consumer privacy concerns on the Internet.(3) This theme has been echoed by the Department of Commerce's National Telecommunications and Information Administration (NTIA)(4) and the Federal Trade Commission (FTC).(5) However, the FTC released a report in June 1998, finding that self-regulation had not been successful thus far in protecting consumer privacy.(6) It recommended congressional action specifically to address the issue of children's privacy online, while giving more time to industry to prove it can regulate itself before calling for general privacy legislation.(7)

   In the last few days of the 1998 session, Congress in fact passed legislation designed to protect the privacy of children online. Yet, the regulatory scheme established by this legislation contains specific incentives for industry to self-regulate.(8)

   Why are the Advisory Committee, the Clinton Administration, and the FTC all calling for self-regulation? It is most likely that they see self-regulation as superior to (or at least more politically acceptable than) government regulation. Many scholars have also touted the benefits of self-regulation, but self-regulation is not without its critics.

   Part II of this Article reviews the literature on self-regulation to define what is meant by the term, to identify the purported advantages and disadvantages of self-regulation, and to identify the conditions needed for its success. Part III examines situations involving media where self-regulation has been utilized to determine why it was undertaken and whether is has been successful.(9) Based on these examples, Part IV suggests some tentative conclusions about the circumstances under which self-regulation works. Finally, it applies these findings to recent proposals to utilize self-regulation in connection with digital television and privacy on the Internet.

2. SELF-REGULATION

   1. The Definition of Self-Regulation

      The term self-regulation means different things to different people. In introducing a collection of papers analyzing the prospects of self-regulation for protecting privacy on the Internet, Assistant Secretary of Commerce Larry Irving observed:

      Most basically, we need to define what we mean, as the term "self-regulation" itself has a range of definitions. At one end of the spectrum, the term is used quite narrowly, to refer only to those instances where the government has formally delegated the power to regulate, as in the delegation of securities industry oversight to the stock exchanges. At the other end of the spectrum, the term is used when the private sector perceives the need to regulate itself for whatever reason--to respond to consumer demand, to carry out its ethical beliefs, to enhance industry reputation, or to level the market playing field--and does so.(10) To devise a definition for purposes of this Article, it is useful to break apart the term "self-regulation." The word "self' refers to the actor. It could mean a single company. More commonly, however, and for purposes of this Article, it is used to refer to a group of companies acting collectively, for example, through a trade association.(11) The word "regulation" refers to what the actor is doing. Regulation has three components: (1) legislation, that is, defining appropriate rules; (2) enforcement, such as initiating actions against violators; and (3) adjudication, that is, deciding whether a violation has taken place and imposing an appropriate sanction.(12)

      Thus, the term "self-regulation" means that the industry or profession rather than the government is doing the regulation. However, it is not necessarily the case that government involvement is entirely lacking.(13) Instead of taking over all three components of regulation, industry may be involved in only one or two. For example, an industry may be involved at the legislation stage by developing a code of practice, while leaving enforcement to the government, or the government may establish regulations, but delegate enforcement to the private sector. Sometimes government will mandate that an industry adopt and enforce a code of self-regulation.(14) Often times, an industry will engage in self-regulation in an attempt to stave off government regulation. Alternatively, self-regulation may be undertaken to implement or supplement legislation.(15)

   2. Arguments in Favor of Self-Regulation

      The claimed advantages of self-regulation over governmental regulation include efficiency, increased flexibility, increased incentives for compliance, and reduced cost. For example, it is argued that industry participants are likely to have "superior knowledge of the subject compared to [a] government agency."(16) Therefore, it is more efficient for government to rely on the industry's collective expertise than to reproduce it at the agency level. This factor may be particularly important where technical knowledge is needed to develop appropriate rules and determine whether they have been violated.

      Second, it is argued that self-regulation is more flexible than government regulation.(17) It is easier for a trade association to modify rules in response to changing circumstances than for a government agency to amend its rules. Not only are government agencies bound to follow the notice and comment procedures of the Administrative Procedure Act, but it is often difficult for an agency to obtain the political support and consensus needed to act. It is argued that industry is better able to determine when a rule may be changed to result in better compliance. Moreover, self-regulation can be more tailored to the particular industry than government regulation. While "command and control" regulation may have worked well in the past when addressing near monopolies, it does not work well with different types of market failures.(18) Given the sheer magnitude of individual problems, general rules may lead to absurd results.

      Another argument in support of self-regulation is that it provides greater incentives for compliance.(19) It is thought that if rules are developed by the industry, industry participants are more likely to perceive them as reasonable. Companies may be more willing to comply with rules developed by their peers rather than those coming from the outside.(20)

      Fourth, it is argued that self-regulation is less costly to the government because it shifts the cost of developing and enforcing rules to the industry.(21) Of course, the government may still be involved in supervision, but supervision requires fewer resources than direct regulation. Indeed, Ian Ayres and John Braithwaite argue that self-regulation is an attractive alternative to direct government regulation because the state "cannot afford to do an adequate job on its own."(22) They acknowledge, however, that self-regulation will only result in a net reduction of cost if the costs to industry are lower than the government's cost savings.(23)

      Self-regulation may also be justified where the rules or adjudicatory procedures differ from the surrounding community or the rules of the surrounding community are inapplicable. Specifically, the argument is sometimes made with respect to the Internet, where jurisdictional and sovereignty issues make it difficult for nations to enforce their laws.(24)

      Finally, self-regulation may be used instead of governmental regulation to avoid constitutional issues.(25) For example, it is doubtful under the First Amendment whether government can prohibit the advertising of alcoholic beverages.(26) However, no constitutional question arises if a station or group of stations independently decides not to accept alcohol advertising.

   3. Arguments Against Self-Regulation

      Critics of self-regulation question the basis for the arguments in favor of self-regulation. For example, while acknowledging that industry may possess greater technical expertise than government, Professor Peter Swire questions whether companies will use that expertise to the benefit of the public, suggesting instead that they are more likely to employ their expertise to maximize the industry's profits.(27) Similarly, the idea that industry will comply more willingly with its own regulations than those imposed from the outside seems somewhat weak where industry is actively involved in developing regulations at the agency.(28)

      Other criticisms are directed against self-regulation itself. Leaving regulation to the industry creates the possibility that industry may subvert regulatory goals to its own business goals; or as one article put it, "self-regulators often combine--and sometimes confuse--self-regulation with self-service."(29) Self-regulatory groups may be more subject to industry pressure than government agencies. Moreover, the private nature of self-regulation may fail to give adequate attention to the needs of the public or the views of affected parties outside the industry.

      Many question the adequacy of enforcement in self-regulatory regimes.(30) Industry may be unwilling to commit the resources needed for vigorous self-enforcement.(31) It is also unclear whether industry has the power to enforce adequate sanctions. At most, a trade association may punish noncompliance with expulsion. Whether expulsion is an effective deterrent depends on whether the benefits of membership are important.(32) In many cases, expulsion or other sanctions, such as denial of the right to display a seal, are insufficient.(33)

      Without adequate incentives to comply, "bad actors" will be...