Regulatory Capture
Regulatory Capture
Regulatory capture is a form of government failure that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate the industry or sector it is charged with regulating.
How Regulatory Capture Happens
- Lobbying and Political Donations: Powerful corporations can use their financial resources to influence politicians and regulators.
- Revolving Door: The movement of individuals between roles as legislators and regulators and roles in the industries affected by the legislation and regulation.
- Information Asymmetry: The regulated industry may have more information about its own activities than the regulators, making it difficult for the agency to effectively regulate the industry.
The Case of Google
The book "Move Fast and Break Things" argues that Google has effectively captured the regulatory agencies that are supposed to oversee it. Through a combination of lobbying, political donations, and the "revolving door," Google has been able to shape the regulatory landscape in its favor, avoiding antitrust action and other forms of government oversight.