Evaluating Regulatory Legitimacy: a Study of Policy and Rule-Making in the Regulation of Independent Local Radio by the Independent Broadcasting Authority
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EVALUATING REGULATORY LEGITIMACY: A STUDY OF POLICY AND RULE-MAKING IN THE REGULATION OF INDEPENDENT LOCAL RADIO BY THE INDEPENDENT BROADCASTING AUTHORITY. A Thesis submitted for the degree of Doctor of Philosophy by TIMOTHY H JONES Department of Law, Brunel University January 1989 ABSTRACT This thesis presents a' detailed study of the regulation of Independent Local Radio by the Independent Broadcasting Authority. The I.B.A. is an independent regulatory agency established to decide questions affecting both public and private rights. Two key functions performed by regulatory agencies are identified: law-elaboration and law-application. Law- elaboration is a quasi-legislative power which involves both the making of policy and the subsequent articulation of that policy through rule-making. Law-application entails the application of those rules in individual decisions. It is argued that the exercise of such powers can usefully be analysed in terms of legitimacy. What can validate the exercise of legislative powers by an unelected and largely unaccountable agency? In addressing this question, use is made of four ideal-type models of regulatory legitimacy: (1) legislative; (2) accountability; (3) due process; and (4) expertise. The general conclusion drawn is that it would be problematical for the I.B.A. to claim legitimacy for its policies and rules on the basis of its legislative mandate, its accountability, its respect for due process or its expertise. In particular, it is argued that there is little direct correlation between the I.B.A.'s activities and its legislative mandate. This is stated to be a problem inherent in the nature of the relqtionship between the legislature and a regulatory agency. It is argued that the present system of regulating I.L.R. is in need of reform if it is to make out a more convincing case for its legitimacy. The two main approaches to reform are deregulation and procedural innovation. Administrative lawyers have tended to focus on the latter type of reform. It is argued that administrative lawyers should widen their horizons beyond the procedural and become concerned with the outcome of the regulatory process: the concern should be with substantive as well as procedural legitimacy CONTENTS Title Page Abstract Contents Acknowledgments and Declaration Part One - Regulation and Legitimacy 1 1. Introduction 1 Regulation: General Issues 1 Regulatory Agencies 6 Discretion, Law-elaboration and Legitimacy 8 References 13 2. Regulation and Legitimacy 15 Introduction 15 The Theoretical Basis of Legitimacy 17 Socio-Legal Values 21 Evaluating Regulatory Legitimacy 27 Conclusion 32 References 33 Part Two - The Independent Broadcasting Authority and Independent Local Radio 36 3. The Independent Broadcasting Authority 36 Introduction 36 Functions of the I.B.A. 40 Conclusion: Independence and Accountability 45 References 49 4. The Development of Independent Local Radio 51 Origins of I.L.R. 51 The Sound Broadcasting Act 1972 55 The Report of the Committee on the Future of Broadcasting and the 1978 White Paper 56 The Broadcasting Acts of 1980 and 1981 58 I.L.R. in the 1980s: Decline and Deregulation 59 Report of the Committee on Financing the B.B.C. 64 The 1987 Green Paper 65 The 1988 White Paper 71 Conclusion 71 References 73 5 The Franchising Process 76 Introduction 76 Statutory Requirements 77 The I.B.A.'s Franchising Procedures 79 Conclusion 87 References 94 Part Three - The Legal and Regulatory Framework 96 6 The Legal Parameters 96 The Formal Framework 96 Informal Regulatory Activity 101 Conclusion 104 References 106 7 The Legal Mandate and Discretionary Powers 108 Introduction 108 Discretionary Powers 113 Legal Accountability 118 References 124 Part Four - The Law-Elaboration Function 128 8 Policy-Making and Rule-Making 128 Introduction 128 Policy-Making 129 Rule-Making 134 Conclusion 141 References 144 9 Law-Elaboration and the I.B.A. 148 Introduction 148 Programming 150 Advertising 156 Conclusion 162 References 164 10 The Institutions & Procedures of Law-Elaboration 165 Introduction 165 Institutions and Procedures 165 Explaining I.B.A. Policies 170 Conclusion 173 References 175 Part Five - Conclusion 176 11 Evaluating Regulatory Legitimacy 176 Introduction 176 Deconstructing & Reconstructing Regulatory Legitimacy177 Conclusion 188 References 190 iv ACKNOWLEDGMENTS In the course of a research project extending over four years one incurs a debt of gratitude to a large number of people and it seems unfair to single out particular individuals. Nevertheless, a special word of thanks is due to Dr. Robert Baldwin, who first suggested the research topic and who supervised the early stages of this thesis. I would also like to express my appreciation to the numerous officials of the I.B.A. and to those working in the I.L.R. industry who agreed to be interviewed by me. For the normal reasons of research confidentiality they must remain anonymous. Thanks are also due to my two typists, Mrs. Angela Duncan, of Brunel University, and Mrs. May MacPhail, of the University of Dundee. DECLARATION The account of the 1987 Green Paper in Chapter 4 was published in a slightly different form at [1988] Public Law 24 under the title, "The Deregulation of Independent Radio?" Chapter 5 draws upon an article written jointly with Robert Baldwin and Martin Cave which was published at (1987) 7 International Review of Law and Economics 177 under the title, "The Regulation of Independent Local Radio and its Reform." The analytical framework outlined in Part One has its origins in this same article. PART ONE - REGULATION AND LEGITIMACY CHAPTER ONE - INTRODUCTION This study presents a detailed examination of the regulation of Independent Local Radio (I.L.R.) by the Independent Broadcasting Authority (I.B.A.). The main foci of the research are the making of regulatory policy by the Authority and the subsequent articulation of that policy in the form of administrative rules. Three areas of I.B.A. policy-making are considered in detail: the award of I.L.R. programme contracts; the supervision of programming; and the control of advertising. What follows is not simply a descriptive account of the regulation of I.L.R. There is an examination of the problems of evaluating regulatory regimes and a possible method of assessment is put forward. This method is then applied to the regulation of I.L.R. The regulation of I.L.R. is a topical and contentious area. It is a sphere of regulation which has been subject to unusually harsh criticism. Indeed, it is a regulatory regime which is commonly regarded as a failure. It appears that the responsibility for regulating I.L.R. is to be taken away from the I.B.A. by the Government.' In this context, it would seem that the regulation of I.L.R. offers an interesting example for an exercise in regulatory evaluation. The remainder of Part One sets out in detail the analytical framework which is to be utilised. Regulation: General Issues Government control of economic activity by means of legislation is both varied and pervasive in contemporary society. Indeed, regulation is now so widespread that it would be difficult to maintain that the organising premise of our economy is one of laissez-faire. It is probable that governmental 1 regulation of industry will continue to play an important part in our social organisation. Nevertheless, there continues to be ambivalence in attitudes towards regulatory activity by governments. These attitudes will vary depending upon the area concerned. In one situation regulation may be perceived as an undue infringement of individual freedom and in another situation as an unjustified interference with private enterprise and the operation of the market economy. Moreover, even where there is a relative consensus over the appropriateness of regulation, there may still be controversy over the mechanisms or procedures to be employed. One method of analysing regulation is to view it as an attempt to solve various problems of 'market failure'. 2 Regulation can be justified on the basis that the market has failed to protect or to represent consumer or public interests adequately. This view, which is popular with economists, treats the unregulated marketplace as the norm and holds that consumer interests will be best satisfied as the result of competition. The onus is placed on those who advocate regulation to demonstrate that it is necessary to protect an important public interest that an unregulated market cannot. The literature on regulation identifies a number of different market 'defects' upon which demands for regulation have been based: (1) The need to control monopoly power. (2) The need to control 'windfall' profits. (3) The need to correct for 'spillover' costs. (4) The need to compensate for inadequate information. (5) The need to eliminate 'excessive' competition. (6) The need to alleviate scarcity. (7) The need to overcome conservative business practices. 2 (8) The need to equalise bargaining power. (9) The need to protect individuals from their own irresponsibility. (10) The need to conserve scarce resources. An economic rationale for government regulation can thus be found in 3 the need to supply 'the elements of responsibility' which are missing in an unregulated market. The question of whether a particular programme or system is necessary can only be answered on an individual basis and will give rise to differing interpretations. A number of political and social factors also have to be taken into account when considering the need for regulation. The fact that regulation operates within a legal framework goes some way towards ensuring that important public decisions are not the result of 'bargaining between 4 the powerful' and that both public and private interests are properly protected. An example of a respectable case for regulation can be found in the field of broadcasting. A number of different justifications for the 5 regulation of broadcasting can be put forward.