{"id":9417,"date":"2025-09-30T08:00:00","date_gmt":"2025-09-30T06:00:00","guid":{"rendered":"https:\/\/eulawenforcement.com\/?p=9417"},"modified":"2025-09-24T14:07:18","modified_gmt":"2025-09-24T12:07:18","slug":"regulation-as-agreement-rethinking-the-hard-soft-divide","status":"publish","type":"post","link":"https:\/\/eulawenforcement.com\/?p=9417","title":{"rendered":"Regulation as Agreement: Rethinking the Hard\u2013Soft Divide"},"content":{"rendered":"\n

Introduction<\/em><\/strong><\/p>\n

It is common to view agreements between regulators and regulated entities, such as enforcement settlements, voluntary compliance agreements, and even permits and licenses, as a specific regulatory tool grounded in negotiation, exchange, and consensus. In a forthcoming article<\/a> in the Harvard Negotiation Law Review<\/em>, titled \u201cThe Hidden Nature of Regulation,\u201d I offer an alternative view and suggest that all types of regulation\u2013including command-and-control (c&c), self-regulation, voluntary programs, regulatory sandboxes, disclosure, and \u201cnaming and shaming\u201d\u2013 are based on agreements between government regulators and regulated entities (e.g. corporations and businesses).<\/p>\n\n\n\n\n\n\n\n

This counterintuitive understanding, I argue, makes negotiation and agreement not merely an additional tool in the regulator\u2019s toolkit, but rather the dominant paradigm of regulation. Furthermore, it aims to break from conventional tool- and rule- based typologies in legal and regulatory theory and practice, such as \u201csoft\u201d and \u201chard\u201d approaches, rules and standards, and consensus-based and coercive models. The theory of regulation as agreement is therefore especially relevant to those interested in tool selection and rule design in regulatory contexts. By challenging core assumptions about lawmaking, the theory\u2019s implications may significantly impact legislative and regulatory processes across diverse fields and jurisdictions.\u00a0\u00a0\u00a0\u00a0<\/p>\n

Although not an empirical study, the article\u2019s elaborate descriptive foundation includes dozens of examples from diverse areas such as environmental protection and climate change, labor and employment, healthcare and pharmaceuticals, education and welfare, consumer protection, securities and financial markets, technology, and privacy. These examples illustrate that negotiation and consensus are present, either formally or informally, directly or indirectly, throughout all regulatory stages, including establishing, designing, amending, implementing, and enforcing regulation.<\/p>\n

However, despite their ubiquity and centrality in shaping regulatory arenas, regulatory agreements often remain hidden from the public, who are only exposed to the formal legal frameworks and not to their true contractual nature. The theory advanced in the article therefore offers a new unified framework for how regulatory norms are shaped, applied, \u200eand enforced across a wide range of traditional and innovative, small- and large-scale industries. While the article primarily examines the United States, negotiations and agreements are arguably likewise serving as foundational regulatory elements<\/a> in many other jurisdictions<\/a>, including the European Union<\/a>. This framework reshapes our perspective on \u200eagencies\u2019 exercise of regulatory power and the interplay between regulators and regulated \u200ecompanies. It is an essential piece in the puzzle of how regulation works in action, not in \u200ebooks.\u200e<\/p>\n

Examples of Agreement-Based Regulation<\/em><\/strong><\/p>\n

Agreements underlie all forms of regulation, including those that appear \u201chard,\u201d command-based, and top-down. For instance, the U.S. National Highway Traffic Safety Administration (NHTSA) promulgated command-and-control style safety standards<\/a> that \u200emandate automakers to install airbags and other safety systems, subject to civil and criminal penalties.\u200e However, in effect, the rules detailing these standards \u200ewere based on prior agreements<\/a> between NHTSA, the Alliance of Automobile \u200eManufacturers, and the Association of International Automobile Manufacturers, covering most of the automobile industry<\/a>.\u200e<\/p>\n

Another example relates to negotiation-based regulatory supervision and monitoring. In this case, the U.S. Consumer Financial Protection Bureau has engaged in months-long discussions<\/a> with Google regarding the imposition of a supervision order<\/a> on the company\u2019s financial services. Under such an order, the company would be subject to close inspection<\/a> and monitoring to ensure the interests of the users of its payment applications are protected.\u00a0<\/p>\n

It is not only \u201chard\u201d command-and-control regulation that is based on agreements; \u201csoft\u201d regulatory approaches, such as disclosure and self-regulation, are also premised on talks, dialogue, and consensus between regulators and regulated firms. For instance, the \u201cFacts Up Front<\/a>\u201d food label developed by the industry that highlights four key nutritional information icons, was based on an agreement<\/a> between major U.S. food manufacturers and the U.S. Food and Drug Administration (FDA).\u200e The agreement allowed the \u200eindustry to avoid the promulgation of new FDA front-of-package disclosure standards and instead implement its self-developed labeling rules<\/a>.\u200e<\/p>\n

Naming and shaming<\/a> is another soft informational tactic that, while appearing confrontational towards industry, is often based on agreements. Other soft approaches to regulation, such as voluntary programs<\/a> and regulatory sandboxes<\/a>, are more obvious cases where regulation is fundamentally based on consensus between regulators and regulated entities. In these instances, private organizations typically agree to adhere to the abovementioned compliance standards in return for waivers, technical or financial assistance, or reputational benefits. Regulators and regulatees enter these innovative, exchange-based frameworks voluntarily, with company-specific or sector-specific terms negotiated between the parties.<\/p>\n

Challenging the Hard-Soft Divide<\/em><\/strong><\/p>\n

Drawing on the descriptive part of the article, I argue that the conventional dichotomy between \u201chard\u201d and \u201csoft\u201d regulatory approaches is far less consequential when considering that all forms of regulation are, in essence, negotiable and thus \u201csoft.\u201d I further argue that if we accept the premise that regulation is frequently subject to negotiation and agreements with the regulated, then the specific legal framework and regulatory style governing an industry are less important than traditionally assumed.<\/p>\n

This idea is sharply contrasted by the categorization prevalent in regulatory instruments and rule-type scholarship<\/a> as well as in public policy design across many jurisdictions. The prevailing narrative within these domains maintains that \u201chard\u201d tools greatly differ from \u201csoft\u201d tools\u2013a family of approaches<\/a> that typically rely on third parties like corporate stakeholders, regulated entities, or the public. In these accounts<\/a>, regulatory instruments, including soft tools, are classified according to their mechanisms, degrees of flexibility, social justifications, efficiency, legitimacy, and effectiveness, among others. In the same vein, the conventional understanding is that selecting and designing suitable tools and legal frameworks for specific regulatory challenges are not just technical tasks but important substantive policy choices. Accordingly, extensive scholarship<\/a> has been devoted to the question of choosing the right regulatory tool<\/a> for the task ahead.<\/p>\n

The classic account<\/a> in the literature further highlights that the limitations of the command-and-control approach have led regulators to develop and implement less restrictive tools and tactics. This narrative explains<\/a> how different regulatory instruments have evolved<\/a> to differ from the hard-law command-and-control approach, through less interventionist, less coercive, and less burdensome mechanisms. Within this framework, disclosure rules, for example, are commonly portrayed as soft and flexible instruments, contrasted with rigid command-and-control rules grounded in detailed prohibitions and interventionist obligations enforced through severe criminal or administrative sanctions. Yet this standard classification loses much of its weight when considering the notion that all types of rules and regulatory tools are negotiated with regulated entities either ex ante<\/em> or at implementation and enforcement. Therefore, rather than viewing regulatory instruments as either hard or soft, my article proposes that all regulation is, in fact, negotiable and based on consensus, cooperation, and agreements, making it inherently soft. Moreover, the theory of agreement-based regulation not only dilutes the traditional distinction between \u201chard\u201d and \u201csoft\u201d regulatory instruments but also unsettles the conventional categorization within the soft approaches to regulation.<\/p>\n

Concluding Remarks, Future Research, and Implications for EU Law Enforcement<\/em><\/strong><\/p>\n

Certainly, this theory does not imply that all regulation is always negotiable with every regulated entity. Instead, it pertains to regulation being negotiable in specific segments, at particular times, including situations that may not initially appear open to negotiation<\/a>. But the general idea is that negotiability is a characteristic feature of regulation.<\/p>\n

Future research could explore more about the types of cases, actors, or industries that are more prone to regulation through agreements. It could also examine its application to regulation occurring in EU countries and at the EU level, particularly in the realm of enforcement. By challenging entrenched assumptions in legal and regulatory scholarship, this theory creates space for new lines of inquiry in regulatory studies and public law. In doing so, it offers the potential for a more realistic and critical understanding of regulatory law and theory.<\/p>\n

From a more practical point of view, the theory of agreement-based regulation suggests that the decision to regulate new activities and industries with specific methods or particular types of rules is not as critical as we once thought. Consider artificial intelligence (AI)\u2013a recent regulatory challenge that has garnered attention from regulators and governments<\/a> worldwide. AI can, in principle, be regulated through tools such as command-and-control, voluntary programs, guidelines, self-regulation, and design standards<\/a>. Yet, while policymakers and scholars have suggested a variety of tools<\/a> to regulate AI, the choice is not that consequential. This is because under the agreement-based theory of regulation, the AI industry and its regulators will engage in processes of dialogue and negotiation<\/a>, regardless of the formal structures, legal mechanisms, or regulatory frameworks chosen.<\/p>\n

Where do we go from here, and what does the agreement-based theory imply for EU law enforcement? An interesting implication of the theory is that if regulatory norms are negotiated (and often renegotiated), we should assign less importance not only to regulatory frameworks and tools but also to the precise content of specific rules and restrictions. To be sure, rules still matter for various reasons, including fostering public trust in regulators, shaping regulators\u2019 reputations, providing guidance for entities that cannot reach an agreement with their regulators, and influencing broader industry perceptions of regulation and regulators. However, in regulatory environments, in the U.S. and arguably in the EU as well, rules are generally less critical than we often assume, serving mostly as a convenient, somewhat artificial starting point for negotiation.\u00a0<\/p>\n

Read the full article here.<\/a><\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Introduction It is common to view agreements between regulators and regulated entities, such as enforcement settlements, voluntary compliance agreements, and even permits and licenses, as a specific regulatory tool grounded in negotiation, exchange, and consensus. In a forthcoming article in the Harvard Negotiation Law Review, titled \u201cThe Hidden Nature of Regulation,\u201d I offer an alternative … Continue reading “Regulation as Agreement: Rethinking the Hard\u2013Soft Divide”<\/span><\/a><\/p>\n","protected":false},"author":300,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-9417","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/eulawenforcement.com\/index.php?rest_route=\/wp\/v2\/posts\/9417","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/eulawenforcement.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eulawenforcement.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eulawenforcement.com\/index.php?rest_route=\/wp\/v2\/users\/300"}],"replies":[{"embeddable":true,"href":"https:\/\/eulawenforcement.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9417"}],"version-history":[{"count":7,"href":"https:\/\/eulawenforcement.com\/index.php?rest_route=\/wp\/v2\/posts\/9417\/revisions"}],"predecessor-version":[{"id":9441,"href":"https:\/\/eulawenforcement.com\/index.php?rest_route=\/wp\/v2\/posts\/9417\/revisions\/9441"}],"wp:attachment":[{"href":"https:\/\/eulawenforcement.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9417"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eulawenforcement.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9417"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eulawenforcement.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9417"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}