Private regulatory capture via harmonization: An analysis of global retailer regulatory intermediaries

Abstract

AbstractStudies using the Regulatory–Intermediary–Target (RIT) framework have examined a variety of forms of regulatory capture, including how targets capture intermediaries (T➔I) and how intermediaries capture regulators (I➔R). Little attention has been paid to why and how regulators themselves might engage in capture. Yet such a scenario is likely in transnational governance settings characterized by regulatory competition and conflict, as well as power differentials between different types of private regulators (non‐governmental organizations, multinational corporations, and business associations). This paper elucidates why and how a private regulator might capture another private regulator via a regulatory intermediary: R1➔I➔R2. Drawing on interview and archival data, I examine three industry‐driven regulatory intermediaries created to harmonize private labor codes of conduct and ethical audit processes. These are founded and governed by a small group of retail trade associations and global retailers who also fulfill the role of private regulators (R1). My analysis reveals that the creation of these intermediaries is driven by global retailers’ reliance on standardization, low transaction costs, and regulatory harmonization across all aspects of their operations. It further reveals how the harmonization platforms are designed to leverage global retailers’ market power and evolve from regulatory intermediaries into de facto regulators that supplant existing private regulators (R2), and thereby capture transnational governance of consumer product supply chains. The article concludes by discussing contributions, implications, and avenues for future research.