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Regulation by Third-Party Verification

64 Pages Posted: 9 Sep 2011 Last revised: 30 Jan 2012

Lesley K. McAllister

University of California, Davis - School of Law

Date Written: September 8, 2011

Abstract

This Article proposes greater governmental reliance on private auditors to enhance the achievement of regulatory objectives. Regulatory failure is a growing problem as governmental agencies lack resources to adequately monitor and detect noncompliance. Third-party verification partially privatizes the regulatory function by requiring regulated entities to hire independent third parties to verify compliance data and make compliance determinations. As a type of privatization, third-party verification presents both opportunities and potential problems. The key issue, as in other forms of public-private governance, is ensuring that accountability and other public values are protected when private actors perform functions that are fundamentally public. This Article argues that, as third-party verification is incorporated into regulatory frameworks, it must be carefully regulated itself. Regulatory agencies must assume the role of “auditing the auditors” through making and enforcing rules that govern who can serve as a verifier, how regulated entities select verifiers, and how verifications are performed. With well-designed rules and strong governmental oversight, third-party verification has the potential to cost-effectively improve the implementation of social regulation.

Keywords: regulatory governance, private-public partnership, social regulation, environment, food safety, certification

JEL Classification: K23, K32

Suggested Citation

McAllister, Lesley K., Regulation by Third-Party Verification (September 8, 2011). Boston College Law Review, Vol. 53, No. 1, 2012; San Diego Legal Studies Paper No. 11-073. Available at SSRN: https://ssrn.com/abstract=1924624

Lesley K. McAllister (Contact Author)

University of California, Davis - School of Law ( email )

400 Mrak Hall Dr
Davis, CA CA 95616-5201

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