A “captured agency” refers to a regulatory agency or government body that has been unduly influenced or controlled by the very industries or entities it is supposed to regulate. In such a situation, the agency no longer acts in the best interest of the public but instead serves the interests of the industries it is supposed to oversee.
This can result in weakened or ineffective regulation, reduced enforcement of rules and standards, and a failure to adequately protect the public and the environment.
Key characteristics of a captured agency may include:
Industry Influence: The regulated industry often has significant influence over the agency’s decision-making process. This influence can manifest through lobbying, campaign contributions, revolving door employment (where agency officials later work for the industry they once regulated), or other means.
Revolving Door: A revolving door phenomenon occurs when individuals move back and forth between working in the industry and holding positions within the regulatory agency. This can lead to conflicts of interest and the potential for industry insiders to shape regulations in their favor.
Regulatory Capture: Regulatory capture occurs when the agency begins to prioritize the interests of the industry it regulates over its primary mission of protecting the public interest.
Weakened Oversight: The agency may adopt industry-friendly policies, reduce regulatory requirements, or ignore violations of existing regulations, which can lead to lax oversight and enforcement.
Lax Enforcement: In captured agencies, regulations may not be adequately enforced, and violations by the industry can go unchecked. This can lead to a lack of accountability and a reduction in compliance with regulations.
Erosion of Independence: Regulatory capture can result in the regulatory agency becoming more aligned with the goals and interests of the industry rather than acting independently and impartially to protect the public interest.
Weakened Regulations: Regulatory capture can result in regulations that favor the industry’s interests, potentially leading to weaker rules and standards that do not adequately protect the public, consumers, or the environment.
Policy Bias: The agency may develop policies and regulations that benefit the industry, sometimes at the expense of public health, safety, or the environment. Even if no explicit wrongdoing has occurred, the perception of bias and industry influence can erode public trust in the regulatory process and lead to skepticism about the agency’s decisions.
Erosion of Public Trust: The perception of a captured agency erodes public trust in the regulatory process, as people may believe that decisions are being made for the benefit of powerful corporations rather than the broader public.
Lack of Transparency: Captured agencies may operate with limited transparency, making it difficult for the public to scrutinize their decision-making processes and hold them accountable.
Examples of captured agencies in the past have included regulatory bodies overseeing industries such as banking, energy, pharmaceuticals, and environmental protection.
Efforts to prevent or address regulatory capture may involve strengthening ethical standards for agency officials, increasing transparency and public input, and implementing measures to reduce the influence of special interest groups on agency decisions.
Regulatory capture is a concern because it can undermine the effectiveness of government oversight, reduce accountability, and potentially lead to regulatory failures that harm the public interest.
Regulatory capture can occur in various sectors, including finance, energy, healthcare, environmental protection, and more. It is considered a significant challenge to effective governance and regulation, as it can undermine the primary purpose of regulatory agencies, which is to protect the public interest and ensure fair and safe practices within the industries they oversee.
Regulatory capture
Regulatory capture is a concept in political science and economics that describes a situation in which a government regulatory agency, which is supposed to act in the public interest by regulating and overseeing a particular industry or sector, becomes excessively influenced or controlled by the industry it is meant to regulate.
In such cases, the regulatory agency may prioritize the interests of the industry over the interests of the public, consumers, or the broader society.
Regulatory capture can be a concern in various countries, including Australia. Here are a few examples where regulatory capture has been alleged or observed in Australian contexts:
Banking and Financial Services Royal Commission: The Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry, which concluded in 2019, revealed numerous instances of regulatory capture within the financial sector in Australia.
The commission found that some financial institutions had undue influence over regulators, leading to lax enforcement of regulations, widespread misconduct, and deceptive practices. This example highlighted the need for stronger regulatory oversight and reform.
Pharmaceutical Industry Regulation: In the realm of pharmaceutical regulation, there have been concerns about the influence of the pharmaceutical industry on the Therapeutic Goods Administration (TGA) in Australia. Critics have argued that industry lobbying has influenced the approval of certain drugs and that the TGA’s standards for safety and efficacy have been compromised.
Mining and Resources Sector: The mining and resources sector in Australia is a significant industry, and there have been allegations of regulatory capture in this area. Critics have pointed to the cozy relationships between mining companies and government officials, potentially affecting environmental regulations and land-use decisions.
Energy Regulation: The energy sector, including electricity and gas, has faced allegations of regulatory capture in Australia. Concerns have been raised about the Australian Energy Regulator (AER) and the Australian Energy Market Operator (AEMO) being influenced by energy companies, which may result in inadequate price regulation and a lack of incentives for renewable energy development.
Environmental Regulation: Regulatory capture concerns have also been raised in relation to environmental agencies and their oversight of industries with significant environmental impacts, such as logging and mining. Critics argue that some environmental agencies may have prioritized economic interests over environmental conservation.
It’s important to note that allegations of regulatory capture may be subject to ongoing debate and investigation. The Australian government and regulatory bodies have taken steps to address these concerns by increasing transparency, accountability, and independence in regulatory processes, but the issue remains a topic of concern in various sectors.
Effective oversight and measures to prevent regulatory capture are essential to maintain public trust and protect the public interest in Australia and elsewhere.
CSIRO Gisera
CSIRO Gisera, short for “Gas Industry Social and Environmental Research Alliance,” is a research initiative in Australia that focuses on studying the social, economic, and environmental aspects of unconventional gas development, particularly coal seam gas (CSG) and shale gas.
See our story: Controversial CEO Dr Larry Marshall Leaves CSIRO
“When we get funded, whoever, the funder is, they’re funding us to do something and they expect a deliverable, a result, so if we don’t earn that, if we don’t deliver that result they will cease funding us, and CSIRO has experienced that many times in the past.”
Larry Marshall, 10 February, 2016
It is a collaboration between the Commonwealth Scientific and Industrial Research Organisation (CSIRO), which is Australia’s national science agency, and various industry and government partners.
The primary goal of CSIRO Gisera is to conduct independent scientific research to better understand and manage the potential impacts of unconventional gas extraction on the environment, communities, and the economy.
This research includes investigating issues related to water resources, air quality, greenhouse gas emissions, land use, and social and community impacts associated with gas development.
The initiative aims to provide objective and evidence-based information to regulators, policymakers, industry stakeholders, and the public to help inform decision-making and ensure that gas development is carried out in an environmentally and socially responsible manner.
CSIRO Gisera is an example of a collaborative approach to research that involves multiple stakeholders to address the challenges and opportunities associated with unconventional gas extraction in Australia. It seeks to balance the economic benefits of the gas industry with the protection of the environment and the well-being of communities.
Efforts to prevent and address regulatory capture often involve measures to increase transparency, accountability, and independence within regulatory agencies, as well as stricter ethics and conflict-of-interest rules for agency officials and industry participants.
USA examples of regulatory capture
Here are a few US examples of captured agencies:
Financial Industry Regulatory Authority (FINRA): FINRA is a self-regulatory organization responsible for regulating securities firms operating in the United States. It has been criticized for being too close to the financial industry it oversees. Some argue that it has not effectively protected investors and that its industry-friendly policies and revolving door relationships with Wall Street have led to regulatory capture.
Environmental Protection Agency (EPA): The EPA, tasked with enforcing environmental laws and regulations in the United States, has faced allegations of regulatory capture in the past. Critics argue that some of its actions have been influenced by political pressure and lobbying from industries, resulting in weakened environmental standards and a failure to address pressing environmental issues adequately.
Minerals Management Service (MMS): The MMS, a former agency within the U.S. Department of the Interior, was responsible for regulating offshore oil drilling. It faced criticism and accusations of regulatory capture, particularly in the aftermath of the Deepwater Horizon oil spill in 2010. MMS was accused of being too cozy with the oil industry and not adequately enforcing safety and environmental regulations.
Food and Drug Administration (FDA): The FDA, responsible for regulating the safety of food and pharmaceuticals in the United States, has faced allegations of being influenced by the pharmaceutical industry. Critics have pointed to issues like fast-tracking drugs without sufficient safety testing and allowing pharmaceutical companies to market drugs for off-label uses.
California Public Utilities Commission (CPUC): The CPUC has faced allegations of regulatory capture in the context of its regulation of utilities in California. Critics argue that the commission has been influenced by the utilities it regulates, which has impacted decisions on issues like energy rates, safety standards, and environmental policies.
It’s important to note that allegations of regulatory capture can be complex and may involve various factors, including political pressures, industry lobbying, and individual agency officials’ actions. These examples highlight the need for ongoing scrutiny, transparency, and efforts to prevent or mitigate regulatory capture to ensure that regulatory agencies fulfill their mission of protecting the public interest.
Further reading
Preventing Regulatory Capture: Special Interest Influence and How to Limit it by Daniel Carpenter and David A. Moss, 2013
Carbon Capture and Storage: Emerging Legal and Regulatory Issues by Ian Havercroft, Professor Richard Macrory Hon KC, et al., 2018
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