important role in a lead regulator’s ability to set industry best practices and influence codes of
conduct. Such normative dynamics often have cascading effects, as newly persuaded foreign
regulators become new allies that can help convince others.
In reality, the strategies developed by lead regulators are likely to straddle several of these
and other mechanisms. Yet whether effective market power affects international regulation
through coercion, competition, or persuasion, it is clear that regulatory capacity plays a critical
role in each case. Since our primary goal in this paper is to problematize the notion of market
power, and to introduce a domestic institutional perspective, the following empirical evaluation
does not contain a specific test of these or other mechanisms. Instead, we test and contrast the
conventional wisdom on the role of market size with the effective market power argument.
In order to scrutinize the market power debate, we examine the arguments in two critical
areas – international securities and transborder personal information flows. The cases are
uniquely suited to test the market size argument against the effective market claim. Owing to the
transnational nature of these industries, the chance of regulatory conflict is high and the two,
therefore, represent most likely cases for international market regulation. Additionally,
international securities and personal data regulation offer both significant across and with-in case
variation that allows for rigorous comparisons. Finally, the sectors represent substantively vital
economic activity for the U.S. and Europe, the regions on which we focus. Given these stakes,
governments paid close attention to dynamics in the two policy spheres and took the regulatory
challenges seriously.
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Convention