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In the context of government and public services regulation (as a process) is the control of something by rules, as opposed to its prohibition. In economics, it is part of the government relationship with markets, often seen as the opposite of deregulation.
Note: See also administrative law. Regulations are, in some countries, narrowly termed as the legal restrictions promulgated by administrative agencies through rulemaking. This administrative or regulatory law is in contrast to statutory or case law. This article deals with regulation in a broader sense.
Regulation as a process
Regulation is a compromise between prohibition and no control at all.
Public services can encounter conflict between commercial procedures (e.g. maximising profit), and the interests of the people using these services. (See market failure.) Most governments therefore have some form of control or regulation to manage this possible conflict. This regulation ensures that a safe and appropriate service is delivered, while not discouraging the effective functioning and development of businesses.
For example, the sale and consumption of alcohol and prescription drugs are controlled by regulation in most countries, as are the food business, provision of personal or residential care, public transport, construction, film and TV, etc. Monopolies are often regulated, especially those which are difficult to abolish (natural monopoly). The financial sector is also highly regulated.
Regulation can have several elements:
- Public statutes, standards or statements of expectations.
- A process of registration or licensing to approve and to permit the operation of a service usually by a named organisation or person.
- A process of inspection or other form of ensuring standard compliance, or reporting and management of non-compliance with these standards: where there is continued non-compliance, then:
- A process of de-licensing whereby that organisation or person is judged to be operating unsafely, and is ordered to stop operating at the expense of acting unlawfully.
Even activities which are not public services often have a limited form of regulation, for example FIFA is the association for professional soccer, RYA is for sailing in Britain. Regulation therefore comes close to the idea of an ethics for a given activity, to promote the best interests of the people participating as well as the acceptable continuation of the activitiy itself within specified limits.
In the United States, from the time of the administration of President Franklin D. Roosevelt until the late 1970s, the regulation of infrastructure was considered necessary from the standpoint of national security: whether in war or peace, a nation without adequate and reliable transport, telecommunications, public health, banking, and public utilities was considered insecure, and the government assumed the responsibility to ensure that this infrastructure was adequate. It was considered imprudent to give this responsibility over to private hands. In 1946, the U.S. Congress enacted the Administrative Procedure Act, which established some means to oversee the expansion of federal regulation. The APA established uniform procedures for a federal agency's promulgation of regulations, and adjudication of claims. The APA also sets forth the process for judicial review of agency action.
Trends towards de-regulation
During the late 1970s and 1980s, regulation was seen as imposing unnecessary 'red tape' and other restrictions on businesses. This in turn was interpreted as hurting economic efficiency. Further, regulatory agencies were often seen as having been captured by the regulated industries and so not serving the public interest. As a result, there has been a movement towards deregulation in recent years.
One example is the international monetary system: it is now much easier to transfer capital between countries. As a result, the globalisation of markets has increased.
Privatisation of industries which had been under previous government control was a wide form of deregulation in Britain throughout the later years of the last century. Some argue that although this has increased choice in services, their standards have declined and wages and employment have been reduced.
Some, particularly libertarians, feel that there has been little progress on deregulation, and that controls on small businesses are greater than ever. They feel that deregulation is an aspirational rather than a real intention. Others, usually those on the Left, have argued that deregulation has gone too far, and given too much power to corporations and special interests, while removing the power of the people's elected representatives. Therefore they support a process of re-regulation.
Regulation as a legal term
A regulation (as a legal term) is a rule created by an administrative agency or body that interprets the statute(s) setting out the agency's purpose and powers, or the circumstances of applying the statute.
A regulation is a form of secondary legislation which is used to implement a primary piece of legislation appropriately, or to take account of particular circumstances or factors emerging during the gradual implementation of, or during the period of, a primary piece of legislation.
Other forms of secondary legislation are statutory instruments, statutory orders, by-laws and rules. Some of these (but not all of them) need to be referred back before being implemented, to the primary legislative process.
An example in Britain is that there is primary, Central Government legislation covering the operations of Local Authorities. These functions include Education, Social Services, Leisure provision, etc..
In that primary legislation there are provisions to allow Local Authorities to legislate for themselves, within reason and under proper process, on a range of matters in their areas of responsibility. This allows the law to be effectively applied with appropriate flexibility and taking account of local factors. These are often best known by the Local Authority concerned.
Regulations also assist the primary legislative process, the national parliament, to avoid the potential bottleneck of the detailed implementatin of all the laws it produces in all the varying cirumstances throughout the land or throughout the process of their implementation.
In French law, the difference between statute law (adopted by the legislative branch) and regulation is of paramount importance when it comes to adoption, amendment or judicial review. The French constitution reserves a number of topics for statute law; in normal times, the executive branch may take decisions on such matters only if it has been specifically authorized by a statute to do so as secondary legislation through decrees, or if it has been specifically and rarely authorized by the legislative branch to do so as primary legislation through ordinances. On all other matters, the executive branch is solely responsible for issuing primary legislation through decrees. Secondary or tertiary legislation may come in the form of arrêtés.
EU regulation has a general scope, and is obligatory in all its elements and directly applicable in all Member States of the European Union. Any local laws contrary to the regulation are overruled, as EU Law has supremacy over the laws of the Member States. New legislation enacted by Member states must be consistent with the requirements of EU regulations. For these reasons regulations constitute the most powerful or influential of the EU legislative acts.
- public affairs
- emissions trading
- Price-cap regulation
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