Industry, Regulatory Capture and Transnational Standard Setting

Abstract

In this essay I discuss the rise in industry's participation in transnational standard setting, which implicates transnational legal ordering, and address the risks such participation generates: Economic globalization has led to increased demand for transnational standards. Yet regulators lack the expertise needed to write increasingly complex and rapidly changing standards, and turn to those that hold the expertise: industry. Thus, industry engagement in standard setting has clear benefits. Such engagement introduces, however, a problem well known from the national context: the risk of capture. In the context of standard setting, two kinds of capture are of particular importance: (i) information and (ii) representational capture. The consequence of such capture, in the transnational context, is that it may (i) undermine the global public interest, (ii) lead to unfair competitive advantages, and (iii) undermine the public interest in developing countries. I illustrate these risks with examples from health law and policy. While states have national laws to manage capture (albeit not effectively at times), at the transnational level, organizations are largely free of such legal constraints. As the “new frontier” of standard setting, transnational bodies should introduce reforms for balancing the benefits and risks of industry engagement, otherwise, they risk impairing the public interest and undermining trust in their integrity.