What Should Governments Take Into Account When They Consider To Involve Private Parties In Regulation?

Based on a literature review, this paper addresses the questions under what conditions four different types of private parties (manufacturers, purchasers, private regulators, and civil society) are more or less likely to have an added value to governmental regulation and how public regulatory bodies can further this added value. It appears self-regulation by manufacturers or purchasers works better as branches have a more self-evident interest to counter market failure, are smaller and more homogenous, have more experience with self-regulation and as self-regulatory systems are less ambitious (and, hence, can achieve less); private regulators seem to be more effective as consumers and purchasers are more willing to pay for quality, as companies not only want to obtain certificates in order to improve their market position (‘degree purchasing syndrome’) but also to improve the quality of their production processes, and as certifiers and accreditors compete with each other on price as well as quality; regulation by civil society seems to work better when citizens or interest groups are more powerful in relation to business, are better able to balance risks, and are more concerned about companies violating public or private norms. Public regulatory agencies can positively influence the conditions determining the added value of private parties’ contribution to the regulation of market failure by coordinating, facilitating, and intervening.