I blogged yesterday about administrative enforcement, an area that lies at the intersection of criminal and administrative law. Among other topics, my scholarship has considered the civil penalty process. In particular, what are the inputs and incentives that shape administrative agency penalties?
A standard model used to describe the penalty process emphasizes economic theories of deterrence. Financial penalties are a mechanism to raise the price for violations either to make misconduct completely unprofitable or, in the alternative, to force violators to internalize the costs of violations. I’ve pointed out one way that this theory may break down – administrative agencies might not focus on deterrence at all. Instead, their penalties may be crafted to achieve retributive ends.
In our recent Harvard Law Review article, For-Profit Public Enforcement, Margaret H. Lemos and I looked at penalties from another perspective: public enforcers may have self-interested reasons to maximize civil penalty recoveries. These incentives are widely recognized in private enforcement. Class action lawyers, for example, operating on a contingency fee basis have straightforward reasons to maximize recoveries.
Perhaps less obviously, public enforcement lawyers can have comparable incentives to impose large penalties. These incentives work most clearly in cases where enforcement agencies keep a portion of the civil penalties imposed. This structure is common in the asset forfeiture process used in connection with many criminal cases and also exists in other state and federal enforcement contexts. Even when penalties are turned over to the general treasury, enforcers may have reputational incentives to maximize penalties. Both agencies as a whole and individuals working in enforcement agencies may seek to build a reputation as an aggressive enforcer for reasons other than deterrence.
Assuming that these claims are right and that civil penalties can be driven by retributive or self-interested goals, is this a problem? Perhaps, perhaps not. Self-interested public enforcement may push enforcers to emphasize financial recoveries over other tools of regulatory control, such as injunctive relief. However, if our default assumption is that administrative agencies underenforce and usually do not impose adequate penalties, the pressure of self-interest may correct this trend to some degree.
The presence of retribution in civil penalties has similarly mixed effects. Of course, if penalties are supposed to be carefully calculated to deter, retributive ends will hamper this goal. On the other end, we now widely recognize the role of norms in shaping compliance behavior. Retributive punishment done well can shape and reinforce industry norms.
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