1. Utrecht University ACLE conference 5-6 March 2009 Amsterdam ENFORCEMENT BY REGULATORS THROUGH SELF REGULATION AND COMPLIANCE PROGRAMS Prof. Dr. Annetje Ottow

2. Utrecht University Vertical vs. Horizontal Supervision Classic command-and-control model (Baldwin & Cave 1999): “the force of law is used to prohibit certain forms of conduct or to demand some positive action or to lay down conditions for entry into the sector” Horizontal approach: focus is on collaboration with the supervisee, based on trust

3. Utrecht University Horizontal Instruments Examples of horizontal instruments: *self-regulation *co-regulation *covenants *compliance programs Stimulation of horizontal instruments? Responsive regulation model of Ayres & Braithwaite (1992): use of enforcement pyramid to examine which enforcement instruments should be deployed.

4. Utrecht University Pyramid model The base of the pyramid is made up of the most co-operative instruments for ensuring compliance. The most severe instruments, such as fines and withdrawal of permits and licences are found at the top.

5. Utrecht University Mix of instruments Message of the model is clear: a regulator must first search for co-operation and consulation, and opt for heavier sanctions only as last resort. Difficult balancing act: finding the right mix of horizontal and vertical instruments Question: when to use what? More research is needed to measure he effectiveness of the different instruments

6. Utrecht University Regulators and horizontal supervision Tendency to use more horizontal instruments? Over or under horizontalisation? The use of compliance programs should be stimulated by regulators, but must always have repressive instruments up its sleeve. Risks of horizontalisation: capture, discrimination, intransparancy

7. Utrecht University Tasks of regulators Task of regulators to regulate and not to delegate its powers to the supervisee: its raison d’etre is supervising companies Obligation to enforce? According to European and national law such an in- principle obligation does exist Horizontal supervision is designed to ensure compliance: the regulator is under no (legal) obligation to use only repressive measures.