Author granted license

Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International

Document Type

Working Paper

Publication Date

12-2019

Language

en-US

Abstract

The world’s largest businesses must routinely police other businesses. By public mandate, Facebook reviews app developers’ privacy safeguards, Citibank audits call centers for deceptive sales practices, and Exxon reviews offshore oil platforms’ environmental standards. Scholars have devoted significant attention to how policy makers deploy other private enforcers, such as certification bodies, accountants, lawyers, and other periphery “gatekeepers.” However, the literature has yet to explore the emerging regulatory conscription of large firms at the center of the economy.

This Article examines the rise of the enforcer-firm through case studies of the industries that are home to the most valuable companies: technology, banking, oil, and pharmaceuticals. Over the past two decades, administrative agencies have used legal rules, guidance documents, and court orders to mandate that private firms in these and other industries perform the duties of a public regulator. More specifically, firms must write rules in their contracts that reserve the right to inspect third parties. When they find violations, they must pressure or punish the wrongdoer.

This new form of governance has important intellectual and policy implications. It imposes more of a public duty on private firms and gives resource-strapped regulators promising tools. If designed poorly, however, the enforcer-firm will create an expansive area of unaccountable authority. Any comprehensive account of the firm or regulation must give a prominent role to the administrative state’s newest gatekeepers.

Comments

forthcoming publication in Virginia Law Review

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