December 2021 Modernising the regulatory framework 2 Responsive regulation 2.1 The concept of responsive regulation The concept of ‘responsive regulation’ was developed by Professors Ian Ayres and John Braithwaite in 1992.24 It is a theory which involves ‘a dynamic model of enforcement that is premised on an ongoing relationship between the regulator and regulatee’.25 The model is founded on the assumption that regulators can assume and nurture virtue, corporate responsibility and ethical standards on the part of regulatee but it also requires them to be realistic enough to know when these elements are absent or inadequate.26 The model is depicted in the form of a regulatory hierarchy or enforcement pyramid. Regulatory methods of enforcement are arranged along ‘a continuum of coerciveness’.27 ‘Regulatory pyramids’, are ‘an attempt to solve the puzzle of when to punish and when to persuade’.28 Under the ‘enforcement pyramid’ model, breaches of increasing seriousness are dealt with by sanctions of increasing severity, with the ultimate typically held in reserve. Braithwaite argued that compliance was most likely ‘when the regulatory agency displays an explicit enforcement pyramid’. Most regulatory action occurs at the base of the pyramid, ‘where initially attempts are made to coax compliance by persuasion’. The elements in the pyramid reflect the particular regulatory arena in which it is to apply: ‘[t]he form of the enforcement pyramid is the subject of the theory, not the content of the particular pyramid’.29 Braithwaite also argued that ‘persuasion will normally only be more effective than punishment in securing compliance when the persuasion is backed by punishment’.30 Voluntary measures are used first but, if necessary, more intense measures are used, with measures escalating in severity to achieve compliance. Persuasive measures are not enough on their own. The model was used as a conceptual tool in the 2002 Australian Law Reform Commission (ALRC) report, Principled Regulation. As the ALRC described, it envisages the regulator as having powers, but not necessarily using them: as a ‘benign big gun’.31 The model requires regulators to behave as though the organisations being regulated wish to cooperate, and ensure that it is economically rational for them to cooperate. Where breaches occur, the initial response should be to persuade and educate them as to the appropriate behaviour. Such an approach promotes self-regulation and the wish to preserve reputation.32 96 FREE AND EQUAL An Australian Conversation on Human Rights