Regulation Through Agreement

The question of choosing the right regulatory tool and rule type has been a ‎cornerstone of regulatory theory and policy for decades. Scholars and ‎policymakers have long debated the pros and cons of approaches such as self-‎regulation, performance-based standards, command-and-control, voluntary ‎programs, and disclosure-based regulation, studying their unique features and ‎optimal applications. Directly challenging this view, this article argues that the ‎specific legal framework under which industries are regulated is less ‎important than traditionally assumed, as regulation is frequently subject to ‎negotiation and agreements with regulated firms. The conventional dichotomy ‎between “hard” and “soft” regulatory approaches––and between rigid versus ‎flexible rule types and regulatory instruments––is far less consequential when ‎considering that all forms of regulation are, in essence, negotiable and thus ‎‎“soft.” The article introduces a novel theory of agreement-based regulation, ‎suggesting that negotiation and agreement are not merely an additional tool in ‎the regulator’s toolkit, but rather constitute the dominant paradigm of ‎regulation. It further shows how this hidden yet fundamental nature of ‎regulation extends to both classic regulatory tools––typically viewed as ‎restrictive and one-sided––and innovative instruments such as regulatory ‎sandboxes and regulatory shaming. The theory is illustrated through a diverse ‎range of established and emerging fields, from climate change and artificial ‎intelligence to gun control and public health and safety, where regulators and ‎regulated entities routinely negotiate rulemaking, supervision, and ‎enforcement. The article examines various mechanisms employed to establish ‎both direct and indirect agreements for creating, implementing, and modifying ‎regulation, often in ways that remain hidden from public view.