[The Editors' Verdict] Self-Regulation, Government Regulation, and Co-Regulation

Seong-Yeop Lee, Professor at Korea University Graduate School of Technology Management and Director of the Technology Law Policy Center

Recently, self-regulation has been proposed as an alternative to direct government regulation in areas such as regulation of the harms of online platforms, regulation of fake news, personal data protection regulations targeting numerous businesses, and financial regulations on virtual assets. Self-regulation refers to a system where businesses individually or collectively control the behavior of their members without government intervention.

In 1996, Julia Black classified self-regulation into mandatory self-regulation, sanctioned self-regulation, coerced self-regulation, and voluntary self-regulation. Among these, voluntary self-regulation can be considered the original form of self-regulation as it involves no direct or indirect government intervention, while the other three involve joint regulation (co-regulation) where the government and private sector exercise regulatory authority together.

Co-regulation is a regulatory approach where the private sector actively participates in regulatory areas traditionally handled by the government, and the government actively cooperates and supports the roles and activities of the private sector to enhance the rationality, efficiency, and acceptability of regulation. So, why is self-regulation emphasized rather than government regulation in fields related to digital transformation such as the internet, as in the examples above?

First, the internet is a network of networks and was originally a decentralized system without central authority intervention, believed to guarantee autonomy and freedom. However, with the emergence of giant platforms and issues such as their market monopolies and illegal content distribution, government regulation is being discussed. Nevertheless, the ideology of non-regulation of the internet and the philosophy of sharing, participation, and cooperation remain strong, and self-regulation still plays an important role in the internet sector, as seen in Korea’s internet policy self-regulatory organizations.

Second, government regulation may hinder rapid technological innovation. Since innovation is dynamic and uncertain, while regulation is static and must be predictable, government regulation and innovation are inherently different. As a result, premature regulation often ironically blocks the social benefits brought by technological innovation.

Third, there are limits to the government’s regulatory capacity and information acquisition ability. In a complex and rapidly changing socio-economic environment where the global economy is universalized and market power is strengthened, the government’s ability to acquire information about the private sector is limited, which ultimately manifests as limits in regulatory capacity. Consequently, the government finds it difficult to design and enforce regulations independently and ends up sharing regulatory authority with the private sector.

Finally, there is a need to increase the rationality and acceptability of regulation. For regulation to work effectively in the market, it must be rational and simultaneously acceptable to the regulated groups. For these reasons, cooperative regulation with the private sector is more effective than government-imposed mandatory regulation.

Pure self-regulation is difficult to exist in reality and may risk being used for private gain through regulatory evasion. Practically, co-regulation is desirable, where the state requests and sets a broad framework within which autonomous regulatory forms are created, or where businesses themselves create the structure and rules of self-regulation and ultimately obtain state approval for them to take effect. It is hoped that research and regulatory design on co-regulation in the field of digital transformation will be actively discussed in the future.

Seong-Yeop Lee, Professor at Korea University Graduate School of Technology Management and Director of the Technology Law Policy Center