Reform and Regulation

EARLY SCHOLARS of white-collar crime, including Edwin Sutherland, recognized that the dominant legal response to crimes by businesses was regulatory rather than penal. Regulatory enforcement occurs in only a very small percentage of the cases in which it could be applied, and it has far less of the moral outrage and stigma associated with the criminal justice system. The regulatory justice system has a lower profile and is less likely to involve an adversarial confrontation between two parties than the criminal and civil justice systems.

Regulation has been very broadly defined as any attempt by the government to control the behavior of citizens, corporations, or sub-governments, but there is no real consensus on its meaning. Regulation typically involves the imposition of official standards and rules on some form of productive human activity, and it includes an enforcement mechanism and some type of sanctions. It can involve rate-setting, licensing, and financial disclosure requirements, among other stipulations.

A distinction is often made between economic regulation, which addresses market relations (for example, securities, antitrust matters, interstate commerce) and attempts to ensure stability in this realm, and social (or protective) regulation, which addresses harmful consequences to workers, consumers, and citizens of productive activities. Although significant interaction occurs between these two forms of regulation, the social form in particular has expanded greatly since the early 1970s. Because social or protective regulation is much less likely than economic regulation to serve business interests and involves an inherent conflict between the regulator and the regulated, it is met with far more resistance from business interests. Social regulation typically arises following a crisis, tragedy, or panic over some industrial condition or practice. In response to public pressure, the government reluctantly develops regulatory agencies and rules, which the affected industry initially resists and then lobbies to limit in scope. Regulatory laws and enforcement practices are often weak at the outset but may become more potent over time.