IN THE NEWS

• The U.S. Supreme Court ruled that the federal government may limit the award of retroactive disability benefits to veterans. The Court observed that the government offers benefits to veterans for “service-connected disabilities.” The Court denied a veteran’s request for retroactive benefits going back decades, concluding that federal law allows retroactive rewards, but only for one year and only if the application is submitted within one year of the veteran’s discharge.
• The Biden Administration announced actions to increase rental affordability and housing quality nationwide. The announced actions included the U.S. Department of Housing and Urban Development publishing a notice of proposed rulemaking to require public housing owners to provide at least 30-days’ notice before terminating a lease for nonpayment of rent. In addition, the U.S. Federal Trade Commission (FTC) and U.S. Consumer Financial Protection Bureau (CFPB) will collect information on practices such as algorithmic tenant screenings that can unfairly prevent applicants from accessing housing.
• The U.S. Department of Agriculture (USDA) announced a final rule that will provide protection from road development for the Tongass National Forest in Alaska. The final rule will repeal the 2020 Alaska Roadless Rule, which exempted the Tongass from roadless protections, and return to the prior version of the rule, which prohibits road construction and timber harvesting in the area. Protecting the Tongass—the largest intact temperate rainforest in the United States—from development is “key to conserving biodiversity and addressing the climate crisis,” according to USDA Secretary Tom Vilsack.
• The U.S. Food and Drug Administration (FDA) proposed new guidelines for maximum lead limits in baby food. The proposal is part of FDA’s “Closer to Zero” action plan, which aims to reduce the prevalence of toxic substances in food intended for young children. FDA’s proposal would cap lead levels at 10 parts per billion for most types of foods created for babies and young children and 20 parts per billion in dry infant cereals and root vegetables in baby food products. FDA Commissioner Robert M. Califf said that the proposed guidelines would “result in long-term, meaningful and sustainable reductions in the exposure to this contaminant from foods.”
• The Federal Communications Commission (FCC) issued a declaratory ruling that enables agencies to send Medicaid enrollment texts and calls without violating the Telephone Consumer Protection Act. The FCC’s ruling responded to a letter from U.S. Department of Health and Human Services Secretary Xavier Becerra requesting guidance on whether encouraging individuals to follow up with or enroll in state Medicaid programs by sending texts and prerecorded calls to individuals’ phones would be permissible under the Act. The Act protects individuals from unwanted solicitation by requiring consent before sending prerecorded calls or texts. The FCC confirmed that individuals who provide their phone number while applying for Medicaid consented to be contacted about enrollment eligibility, which is acceptable under the Act.
• The CFPB requested public input on the state of the U.S. consumer credit card market. A federal law requires the CFPB to review the consumer credit card market every other year to “establish fair and transparent practices related to the extension of credit.” The most recent review in 2021 found that consumers’ applications for new credit cards and satisfaction with credit card issuers decreased significantly during the COVID-19 pandemic. For the upcoming review, the CFPB called for public feedback on issues related to the practices and risks associated with different credit card issuers, product innovation in the credit card market, and consumer access to information about credit card fees and terms.
• The Farm Credit Administration (FCA) issued an advance notice of proposed rulemaking that seeks comment on whether or how to update capital requirements for the Federal Agricultural Mortgage Corporation (Farmer Mac) to ensure Farmer Mac has enough money to continue lending, even during periods of economic stress. Farmer Mac—which is regulated by the FCA—promotes access to credit in agricultural and rural communities by operating as a secondary market for agricultural real estate and rural housing loans. The FCA called for public comment on whether it should require Farmer Mac to comply with more stringent capital requirements, such as capital buffers, adopted from other existing regulatory frameworks, and, if so, what adaptations to those requirements would properly consider Farmer Mac’s unique position in agricultural and rural markets.

WHAT WE’RE READING THIS WEEK

• In a chapter in the forthcoming book, The Oxford Handbook of AI Governance, Nikita Aggarwal, postdoctoral research fellow at UCLA School of Law, analyzed the impacts of artificial intelligence (AI) and data privacy regulation in an increasingly automated financial sector. Aggarwal noted that increased use of AI in the financial sector represents conflicting ideas about data privacy. On one hand, as more personal data is processed for consumer financial decision-making, consumers lose sole control over their data, but on the other hand, more data increases the accuracy of credit scoring, which could reduce lending discrimination, according to Aggarwal. Aggarwal concluded that regulators must continue to monitor AI’s costs and benefits to consumers as its role in the consumer financial sector grows.
• In a note in the Michigan Law Review, Sarah M.L. Bender, a student at the University of Michigan Law School, described the role AI plays in election administration. Bender noted that some states use AI to automate certain processes, such as voter roll updates and absentee ballot signature verification. Bender observed, however, that AI can produce “inaccurate and biased results” due to flawed design and inadequate training. Bender urged election administrators to reduce these risks and noted that the decentralized nature of election administration nationwide may complicate efforts to do so.
• In a working paper, Daniel Solove, professor at George Washington University Law School, discussed the fiction of consent in data privacy law. Solove noted that privacy laws’ treatment of consumer consent as permission for companies to collect user data poses two problems: first, companies struggle to prove that users actually consented to the use of their private information and second, that users even have the capacity to consent to such practices in the first place. Solove cautioned that removing consent from privacy laws could reduce individual autonomy. Instead, Solove proposed what he calls “murky consent”: a “middle ground” solution in which privacy regulators impose “guardrails” on platforms. These “guardrails” include limitations on how much data platforms can collect once users have given their consent and a legal obligation to protect individuals from certain risks and harms.

EDITOR’S CHOICE

• In an essay in The Regulatory Review, Samuel Becher, professor and associate dean at Victoria University of Wellington and Yehuda Adar, law faculty at University of Haifa, argued that regulatory agencies should better screen standard-form consumer contracts to prevent consumer exploitation. According to Becher and Adar, most business-to-consumer relationships are governed by standard-form contracts that often include non-negotiable or one-sided terms, which can exploit or harm consumers. Becher and Adar posited that regulatory agencies should try to reduce harm to consumers by collecting samples of standard-form contracts, analyzing them for exploitative terms, and instructing businesses whose contracts contain the challenged terms to modify, justify, or remove them.

“A million dollars isn’t cool. You know what’s cool?”

Twelve trillion dollars.

That is the amount of money that the U.S. Department of Labor estimates is held in pension plans regulated under the Employee Income Security Act of 1974 (ERISA). According to the Labor Department, ERISA governed nearly 734,000 retirement plans in 2021.

All investments made using ERISA-regulated plans’ assets must comply with minimum standards. ERISA plans are administered by fiduciaries—regulated representatives that make investment decisions and manage assets in these retirement funds—who must act in accordance with certain legal and ethical duties.

The Labor Department has now issued a final rule that will permit plan fiduciaries to consider environmental, social, and governance (ESG) factors more readily in investment decisions. The updated rule will take effect on January 30, 2023.

Under ERISA, fiduciaries are bound by a duty of loyalty, meaning they must act for the exclusive benefit of plan participants and beneficiaries. Plan fiduciaries are also bound by a duty of prudence, meaning that, in any given situation, they must act as a prudent person would in similar circumstances. The duties of loyalty and prudence require ERISA fiduciaries to center risk-return analysis in their decision making.

A previous Labor Department rule—published at the end of the Trump Administration’s term—limited ERISA fiduciaries to making investment decisions based “solely on pecuniary factors,” with two limited exceptions. The rule defined pecuniary factors as those that a fiduciary “prudently determines will have a material effect” on risk-return analysis for the economic value of an investment. Moreover, it instructed that fiduciaries were not permitted to subordinate the interest of investment returns to ESG objectives or take on additional risk to further “non-pecuniary objectives.”

Although the former rule did not bar fiduciaries from considering of ESG factors in decision making, experts largely viewed it as unfriendly to these factors.

Neither did the former rule’s exceptions leave much room for ESG considerations. The first exception permitted fiduciaries to consider non-financial factors as a tie-breaker—but only if investment alternatives were indistinguishable based on pecuniary factors alone. The Labor Department noted that this circumstance should be rare.

The second exception allowed fiduciaries to consider non-pecuniary factors for designated investment alternatives in participant-directed individual account plans—and only if the fund is not used as a qualified default investment alternative (QDIA). Again, the Labor Department emphasized the limited nature of this exception.

Soon after President Joseph R. Biden took office, however, the Labor Department announced it would review its previous rule for amendment and, in any event, would not enforce it. The Labor Department explained that it received feedback from stakeholders expressing particular concern about the prior rule’s dismissal of “substantial evidence” showing that the use of ESG analysis could improve investment value and long-term returns. In addition, the Labor Department noted that its previous rule had a chilling effect on considering even financially relevant ESG factors when selecting investments.

The Labor Department’s revised rule maintains that ERISA’s duties of loyalty and prudence necessitate that fiduciaries do not subordinate investment returns for collateral benefits, with several key changes.

The rule now specifically allows—but does not require—fiduciaries to consider “the economic effects of climate change” and other ESG factors when making investment decisions, so long as the considerations remain rooted in the typical risk-return analysis a fiduciary would complete. The new rule clarifies that fiduciaries must weigh any factor considered using a value that “appropriately reflects an assessment of its impact on risk and return”—a measure intended to prevent deemphasis of investment objectives.

The new rule also changes the exceptions under the previous rule. First, with respect to the tie-breaker exception, the final rule broadens the definition of a tie between investment alternatives. The new rule encompasses circumstances in which a fiduciary prudently concludes that competing investments serve the overall financial interests of a plan equally well. In that case, a fiduciary may select one investment over another based on collateral benefits.

Second, the new rule eliminates the former disparate treatment of QDIAs, allowing fiduciaries to consider ESG factors there as elsewhere

Finally, the new rule considers that certain shareholder rights accompany investments in company stock. It also changes previous guidelines for proxy voting, now emphasizing fiduciaries’ responsibility to manage proxy votes attendant to investments.

The new rule does not go as far as one initially proposed by the Biden Administration, which would have created a presumption that ERISA fiduciaries should consider ESG factors. Nor does it elevate ESG factors to equal footing with traditional factors. Nevertheless, the new rule brings ERISA into closer alignment with the Biden Administration’s goal of allowing workers to use their retirement investments to promote public health, protect the environment, and address the climate crisis.

Over half of Americans invest money in the stock market. Most Americans are also worried about global warming and the harm it will cause future generations. These worries have led many workers to consider how their retirement investments will affect the environment. But until recently, it has been difficult for individuals to invest in environmental, social, and governance (ESG) retirement funds, as federal regulations precluded the managers of these funds from even considering ESG factors when making investment decisions. 

The U.S. Department of Labor recently took steps to change these rules. In November, the Department issued a new regulation under the Employee Retirement Income Security Act (ERISA) of 1974 that allows retirement plan decision-makers, called fiduciaries, to consider ESG factors when deciding how to invest.

This new rule will allow, but will not require, fiduciaries to consider ESG factors when selecting 401(k) investments and exercising shareholder rights. Fiduciaries must still put the financial interests of plan participants first and cannot sacrifice potential gains for ESG goals.

The rule follows an executive order signed by President Joseph R. Biden advising the Labor Department to rescind or revise the Trump Administration’s less ESG-friendly rules, which went into effect shortly before President Biden took office. Specifically, the Trump Administration restrained fiduciaries’ ability to weigh social or policy objectives when choosing investments, even when those objectives would benefit plan participants.

Lisa M. Gomez, Assistant Secretary for Employee Benefits Security, described the Trump Administration’s regulations as having a “chilling effect” on the flexibility of fiduciaries to consider ESG factors. The Trump rules repealed Obama-era guidance that had stated that ESG issues do impact a plan’s economic value and are “proper components” of a fiduciary’s analysis of competing investment choices.

But the Trump rules have now been repealed by the Labor Department’s new regulatory action.

Many individuals have praised this new action. Perhaps predictably, Democratic leaders expressed strong support for the rule and have even introduced legislation that would codify environmental consideration in retirement plan decision-making.

Moreover, in a recent letter to Congress, 17 state attorneys general rejected arguments that the consideration of ESG factors “is inconsistent with prudent investing.”

As part of the process of developing its new rule, the Labor Department received approximately 900 written comments from the public. According to the Department, 97 percent of commenters supported reversing the Trump Administration rules and clarifying that the use of ESG factors in investment selection is consistent with fiduciary duties under ERISA. Some of these supportive comments came from financial services firms and organizations, including the Investment Company Institute, Mercer Investments, and Council of Institutional Investors.

In general, younger investors increasingly prioritize ESG factors when making investment decisions. A recent survey shows that investors in their twenties and thirties look to invest in ways more consistent with their social and political values, even if it winds up being costlier. Although typical Millennial and Generation Z investors are reportedly willing to lose between 6 and 10 percent of their investments to see companies improve their environmental practices, the average Baby Boomer is apparently unwilling to lose anything.

Despite the support for the new rule, critics of the Labor Department’s recent action have raised several concerns.

Republicans have accused investors of forcing companies to adopt a socially conscious agenda at the expense of corporate profits. Currently, over 17 states have proposed or adopted legislation limiting the ability of the state government, including public retirement plans, to conduct business with certain ESG-conscious entities. Most recently, Florida Governor Ron DeSantis banned state pension fund managers from incorporating ESG into investment decisions.

In addition, critics have argued that ESG funds are not always managed with ESG goals in mind and that the ESG label can be misleading. The U.S. Securities and Exchange Commission has even launched a Climate and ESG Task Force to pursue lawsuits against companies or funds that mislead investors about strategies to address climate change risk.

Recent studies nonetheless have shown that ESG funds for the most part do offer investments in alignment with ESG principles. Studies also indicate that ESG-conscious companies see increased profits.

Martin Walsh, the U.S. Secretary of Labor, agrees that companies are more profitable when they focus on environmental impact, treat workers fairly, and prioritize diversity on management teams. “If retirement investors cannot take these factors into account—even when it would benefit you financially—that’s a problem,” Walsh observed when announcing the new rule.

ESG investing is currently still rare in 401(k) plans. According to Vanguard, a leading investment management firm, only 13 percent of its 401(k) plans offer ESG funds. But the new Labor Department regulation could create new opportunities for large money managers, such as BlackRock and Vanguard, to market new ESG-conscious investment options, especially considering that the next generation of investors has expressed interest in these funds.

Small businesses are a primary engine of the U.S. economy, providing a steady income and path to wealth creation for tens of millions of U.S. residents. But when it comes to ensuring loans to these businesses comply with fair lending laws, regulators have been flying blind.

Despite federal law that prohibits discrimination in lending based on race, sex, and age, among other factors, regulators have traditionally had little access to the demographic data of small business borrowers. This gap has left regulators unable to enforce laws prohibiting bias in lending and to address discrimination against minority and female small business owners.

But regulators will soon have an opportunity to close this gap.

The Consumer Financial Protection Bureau (CFPB) is currently drafting a rule that would implement Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1071 requires the CFPB to gather demographic data from lending institutions about the owners of the small businesses to which they lend. Congress passed the Dodd-Frank Act in 2010, but the Bureau has never issued the rule called for in Section 1071 to create a process for lending disclosure.

This lack of implementation of Section 1071 may have heightened longstanding disparities in lending to small business owners based on race and gender. In one study, researchers conducted “secret shopper” tests in which small business owners of different races applied for loans. The results showed lenders rejected Black and Hispanic small business owners at higher rates than less-qualified white borrowers.

Female-owned small businesses were also less likely to receive loans than those owned by men in similar tests.

The COVID-19 pandemic exacerbated these trends, with a study of Florida businesses showing that Black-owned restaurants were 25 percent less likely to receive government assistance checks from the federal Paycheck Protection Program than white-owned restaurants.

Although these studies are far from comprehensive, they do suggest the presence of discrimination in lending markets. The lack of complete data, however, makes it difficult for federal regulators to determine precisely where and how discrimination occurs.

Improved disclosure could help ameliorate the difficulty regulators face in identifying discrimination. The Home Mortgage Disclosure Act (HMDA), for example, requires lenders to disclose the demographic data of every borrower, allowing regulators to pinpoint patterns of discrimination.

Although the CFPB did start a rulemaking process during the Obama Administration that would have required lenders to disclose the demographic information of their small-business borrowers, the work halted under the Trump Administration. A resulting lawsuit led to a court-ordered deadline of March 2023 for the CFPB to issue a rule that requires disclosure.

The CFPB is poised to issue its final rule before that March deadline. The proposed rule, though, has already received some pushback from business groups that claim that it will harm small community-owned banks by imposing onerous compliance and reporting costs. The American Bankers Association (ABA), for example, has called for raising the currently proposed threshold of including lenders that have made at least 25 credit transactions in the preceding two years to include only those who made at least 500 credit transactions in that time frame.

But limiting the number of institutions subject to the reporting requirement could undercut the purpose of the proposed rule: granting regulators access to comprehensive data that allows them to identify lending discrimination.

One analysis showed that excluding banks that made under 50 credit transactions in the preceding two years would exempt from the disclosure requirement as much as $40 million in annual loans made in a handful of southern states—and likely hundreds of millions of dollars of additional loans nationally. Raising the threshold to 100—still well below the ABA’s suggestion of 500—would result in over $500 million in loans exempt from the same southern states.

Although limiting the number of banks included in the regulation could exclude many loans from the coverage of the rule and limit the rule’s effectiveness, a compromise that the CFPB might consider would be to exclude lenders holding assets below a specified level. The regulation implementing the HMDA features such a test, exempting financial institutions with under $50 million in assets from the law’s disclosure requirement.

Applying a similar asset-based threshold under the proposed regulation could balance concerns about potential burdens on small community banks with the regulation’s goal of promoting disclosure. CFPB Director Rohit Chopra has indicated support for targeting the disclosure requirement at larger financial institutions, citing the need to keep community banks profitable and promote continued competition in the financial sector.

Regardless of the exact threshold used to determine coverage, the proposed regulation aims to have the effect of shining a light on racial and gender-based disparities in lending to small businesses. The CFPB regulation’s impact could even possibly rival that of the HDMA—which provides data both to the federal government and to private plaintiffs, who have used it to bring numerous lawsuits against mortgage lenders engaged in discriminatory practices. If it works, it will help reduce discrimination from a key engine driving the U.S. economy.

Last year, U.S. consumers filed nearly a million complaints with the Consumer Financial Protection Bureau (CFPB) over financial products or services. After reviewing these complaints, the CFPB has reported its concern about innovative financial products and services entering the market through nonbanks.

To monitor and reduce financial risks from new products and services offered by nonbanks, the CFPB has proposed the creation of a public registry of agency and court orders against these nonbank financial firms, which include fintech companies. The registry would include enforcement orders imposed for violations of federal consumer protection laws as well as state laws prohibiting unfair, deceptive, or abusive acts or practices. The CFPB would also require that each nonbank financial firm listed on such a registry identify an executive responsible for ensuring compliance with the agency or court order.

The CFPB argues that a public registry would support the agency’s ability to “identify, understand, and ultimately prevent harm” from nonbank financial firms. Given that no single federal or state regulator oversees all nonbank financial firms, and there exists no comprehensive list of agency and court orders against such firms, the CFPB currently must rely on other state and federal agencies to provide information about enforcement orders.

With a centralized list of orders, the CFPB suggests that it could better monitor the financial market for red flags—the existence of multiple state or federal violations against an individual nonbank financial firm—that indicate broader risks to consumers or the economy.

“The proposed registry will help the CFPB, the law enforcement community, and the public limit the harms from repeat offenders,” said CFPB Director Rohit Chopra, “Often you have an entity that violates the law in one state and picks up and moves to someplace else.”

In the United States, thousands of nonbank financial firms have emerged in recent years. One such nonbank financial firm, Chime, offers services exclusively through online banking. Through an intuitive digital interface, no minimum account balance requirements, and no monthly fees, Chime particularly attracts those underserved by the banking system, such as consumers with poor credit histories.

The CFPB estimates that 45 million consumers are considered credit “invisible” or “unscorable” by the three nationwide credit bureaus: Equifax, Experian, and TransUnion. Because traditional lenders often use data from these nationwide credit bureaus to make lending decisions, invisible or unscorable consumers can face reduced access to credit.

U.S. regulators have also recognized the promise of innovation and digitization by nonbank financial firms. Because many of these services require “expertise and economies of scale that most banks do not have,” nonbank financial firms have stepped in to fill a digital banking void, according to Acting Comptroller of the Currency Michael J. Hsu.

Despite these benefits, “the result is an increasingly de-integrated stack of banking services,” in which the introduction of nonbank financial firms increasingly removes the banking sector from regulatory oversight, suggests Acting Comptroller Hsu.

Similarly, Secretary of the U.S. Department of the Treasury Janet Yellen has cautioned that the entrance of nonbank financial firms into consumer financial markets “has not come without additional risks to consumer protection and market integrity.”

Nonbank financial firms, for example, are not insured by the Federal Deposit Insurance Corporation (FDIC), which protects at least $250,000 of a depositor’s funds at a chartered bank. Recognizing the growth of online and app-based lending, the FDIC has cautioned that consumers should verify with nonbank financial firms whether deposited funds are FDIC insured, even if nonbank financial firms advertise business partnerships with traditional banks.

Moreover, nonbank financial firms pose the same systemic risks to the economy as traditional banks through bank runs, which can occur when too many depositors withdraw their money from a financial institution causing the institution to become insolvent.

But critics of the CFPB proposal say that the agency should have no authority to enforce or publicize a consent order levied against a nonbank financial firm by a state regulator. U.S. Senator Pat Toomey (R-Pa.), for example, argues that the agency is engaging in nothing more than “name and shame tactics” and is encroaching upon “other agencies’ orders for violations of state and federal laws” for which it “has no jurisdiction.”

Despite an ongoing debate about the financial and systemic risks posed by nonbank financial firms as well as concerns about agency overreach, the CFPB expects to announce and launch a registration system that could take effect as early as January 2024.

A picture may be worth a thousand words. But what about a picture generated entirely by a machine?

That is the question scholars, advocates, and internet users have been considering lately, as art generated by artificial intelligence (AI) has exploded in popularity. Some commentators have asked who regulates this digitally created art and whether the courts can prevent theft of creative ideas and techniques in the process of its generation.

But the reality is that little regulation protects the copyrighted works used to train these AI-based technologies, and privacy protections for images used in the creation of AI-based art are scant. Advocates have called for regulatory solutions rooted in copyright and privacy law.

Toward the end of last year, popular use of the Lensa AI app, which generates stylized portraits based on users’ uploaded selfies, spurred the latest round of controversy over the ethics of AI-generated art. Debate over AI art had been raging since earlier last year, when other popular AI models such as DALL-E 2 and Stable Diffusion rapidly gained popularity.

Some commentators have noted that these programs have made art more accessible. Stable Diffusion generates images for free based on strings of text entered by users, and Lensa sells its portraits for as little as $3.99. Queer users of Lensa have shared that the avatars created by the app, which allows users to specify their gender, have made them feel joyful and aligned with their true gender identity.

Stable Diffusion produced the image above in response to the prompt, “essay about artificial intelligence regulation.”

But many others have voiced concerns that stem from the mechanisms that such algorithms use to generate new images. Their creators collect and use captioned images to train the AI algorithm on the relationships between textual and visual representations. For example, Stable Diffusion trained its algorithm on data sets collected by the German nonprofit LAION, which has collected billions of captioned images from art shopping sites and websites such as Pinterest.

And it has done so without consent, causing artists and advocates to raise copyright concerns.

One artist, Greg Rutkowski, has reportedly complained that AI-generated images mimicking his art are drowning out his own work. Users had apparently prompted Stable Diffusion with text including Rutkowski’s name nearly a hundred thousand times as of September 2022.

But LAION disclaims copyright liability for its use of the images—and whether it is correct is unclear. The Copyright Act of 1976 provides copyright owners of artistic works with exclusive rights to reproduce and adapt their works. But for someone to be liable for violating the right to reproduce images, they must create copies that are fixed.

And courts have found that intermediate copies generated for only 1.2 seconds to be insufficiently fixed, raising questions as to whether the intermediate copies used to train the machinery in AI programs can give rise to liability.

Copyright owners may not have better luck alleging violations of adaptation rights because of the doctrine of fair use. Fair use allows for the creation of a new work based on a copyrighted work—without the copyright owner’s permission—if the work is sufficiently transformative, meaning it somehow changes the work’s meaning or message or carries a different purpose.

Traditionally, fair use has presented a relatively low bar for those claiming it. Soon, however, the U.S. Supreme Court will decide a fair use case, and it could adopt a stricter standard.

In addition to expressing concerns about copyright, commentators have also expressed privacy concerns over the use of personal and private images to train the AI.

DALL-E 2 recently began allowing users to upload real people’s faces, and Stable Diffusion has operated without any limitations or moderation since its inception. Users have expressed concerns about personal data being used. One person, for example, found out that LAION had collected her personal medical images when she looked herself up on Have I Been Trained, a website built by German artists to help identify any artwork or personal images used by AI.

Lensa has also garnered scrutiny over its privacy policy, which allowed its technology to rely on user-uploaded images to train its algorithms. Prisma, the company that owns Lensa, claimed that it permanently deletes user images after creating avatars. In December 2022, it updated its privacy policy to state that it does not use personal data to train Prisma’s other AI tools.

Individuals with personal privacy concerns do not have many options. European Union residents can file General Data Protection Regulation (GDPR) complaints to request the takedown of images used in LAION. But this only prevents the images from being used in the future—it does not reverse past usage or training. And U.S. users are without even such limited recourse. The LAION website only permits users to request image takedowns via email, with the same limitation, and no federal privacy protections akin to the GDPR exist in the United States.

Advocates have proposed a variety of regulatory solutions. To address copyright concerns, some experts have argued that the U.S. Congress should pass legislation aimed specifically at AI. Others have likened the problem to illegal file-sharing in the early 2000s and have suggested that legislators pursue a broad licensing scheme for underlying works.

To mitigate privacy risks, companies running AI generators could self-regulate to prevent the use of personal data. But some commentators have argued that relying on this strategy is insufficient.

Other experts have pushed for federal statutory privacy protections that would allow people to protest the use of their images by these platforms. Still others have suggested that the Federal Trade Commission employ algorithmic destruction, an enforcement tool that it has used to address illegal or bad faith collection of personal data.

Regulation often lags behind technology. Even now, just a few months into AI-generated art’s explosion in popularity, the regulatory path ahead remains hazy.

When Taylor Swift announced her upcoming Eras Tour, fans knew they would have to be vigilant to score tickets. But the way Swift’s exclusive ticketing partner, Ticketmaster, handled the demand left fans furious. Many fans waited for hours to purchase presale tickets, battling glitches and bots, only to come up emptyhanded. Some Swifties have filed complaints and lawsuits against the company.

They have some choice words for Ticketmaster: “Look What You Made Us Do.”

After merging with Live Nation in 2010, Ticketmaster has become a go-to purveyor of tickets for large stadium shows and blockbuster tours. But critics, including U.S. Federal Trade Commission (FTC) chair Lina Khan, say that large companies such as Ticketmaster are “too big to care.” Fans allege a failure to prevent bots from snapping up tickets, a series of glitches that led to site breakdowns and cancellations, and confusing fees and pricing.

In addition to fan-initiated legal actions, Ticketmaster is facing probes by federal and state lawmakers after the company failed to handle the “unprecedented demand” for the Eras Tour presale. Attorneys general in states such as Pennsylvania and Tennessee have launched investigations. A U.S. Senate antitrust committee has announced that it would hold a hearing on competition in the ticketing industry. And the U.S. House Committee on Energy & Commerce sent a letter to the CEO of Ticketmaster and Live Nation expressing concerns and requesting a briefing on its ticketing practices.

But the issues that consumers and lawmakers have with the ticketing industry do not start and end with Ticketmaster, according to concert industry experts. In addition to alleging monopolistic conduct and lack of quality service from Ticketmaster, lawmakers and consumers have accused ticketing companies generally of charging inflated fees on top of ticket prices, obscuring those fees from customers, and masking how many tickets are actually available to fans.

To mitigate these concerns, legislators for years have been exploring ways to make ticketing fairer and more transparent by all major ticket sellers.

Early efforts resulted in the Better Online Ticket Sales Act of 2016—or the BOTS Act, for short. The BOTS Act targets bots, or programs used by scalpers to snap up massive amounts of tickets at once. These programs autofill false customer information and solve CAPTCHA prompts otherwise designed to deter robot purchases. Through the Act, lawmakers sought to prohibit the use of these bots and the sale of any tickets obtained by those means, claiming that bots force consumers to buy marked-up tickets on the secondary market. But the FTC, which is charged with enforcing the BOTS Act, has so far only brought a single enforcement under the Act.

The BOTS Act and a patchwork of state consumer protection laws currently serve as the main mechanisms for regulating the ticketing industry in the United States. Some states are more aggressive than others, and the laws are far from uniform. For example, New York requires full, upfront disclosure of ticket fees and services charges. Meanwhile, Michigan recently loosened one of its laws that forbade residents from reselling tickets.

But lawmakers everywhere seem to acknowledge that existing mechanisms are not enough. In the years since the BOTS Act was passed, several federal agencies and members of Congress have put forward other ways to crack down on imbalances between consumers and ticket sales companies.

In 2018, the U.S. Government Accountability Office (GAO) undertook a study to identify consumer protection issues in the ticketing industry.

In 2019, the Energy & Commerce Committee investigated the industry’s unfair practices. The chair of the committee and two other lawmakers then reintroduced the Better Oversight of Secondary Sales and Accountability in Concert Ticketing Act of 2019, or BOSS Act, which lawmakers initially proposed after Bruce Springsteen had a similar showdown with Ticketmaster.

More recently, the FTC hosted a workshop to explore possible solutions to online ticketing issues in 2019 and published a recap in 2020.

As for how regulators might crack down on ticketing companies in the future, a look into the past—the GAO study, the proposed BOSS Act, and the FTC workshop— may illustrate likely paths forward. Previous efforts have focused on primary and secondary market problems.

Primary market issues concern the ticket companies themselves. One such issue is pricing transparency. The 2018 GAO study found that stakeholders generally supported clear, upfront disclosure of ticket fees, although opinions varied on “all-in” pricing or line-item fee reporting. The BOSS Act would have required sellers to disclose all fees upfront and would prohibit primary ticket sellers from setting ticket resale price floors or preventing purchasers from reselling.

The FTC workshop identified holdbacks as another issue plaguing consumers who struggle to find tickets at a fair price. Holdbacks occur when sellers reserve tickets for future sales or people affiliated with the venue or artist. The BOSS Act would have addressed holdbacks by requiring primary sellers to disclose the total number of tickets available to the public before tickets go on sale.

Secondary market issues concern resellers. One issue is that resellers’ affiliation is often unclear to potential buyers. For example, GAO condemned “white-label” resale sites, which are designed to confuse customers into thinking they are affiliated with the artist or the venue. These white-label sites often pay to appear first in search results. Meanwhile, they charge higher fees than official sites. The BOSS Act provided that secondary sellers would need consent before representing themselves as affiliated with an artist or venue.

Another transparency issue arises when actors affiliated with the primary seller, venue, or artist enter the secondary market. The BOSS Act would have required disclosure of the relationship in this circumstance, as well as disclosure of the face value of the ticket and time of original purchase.

The FTC workshop also illuminated issues with bots even after the passage of the BOTS Act—and these concerns reemerged again in the aftermath of the Taylor Swift ticketing fiasco. Lawmakers continue to urge the FTC to pick up enforcement efforts.

In addition to investigating Ticketmaster’s potential monopolistic power, lawmakers will likely consider other regulations targeting primary and secondary market issues as they seek to craft a solution for the industry at large. It is evident that many lawmakers and regulators believe a solution is needed to fix the “broken” ticket market.

The new U.S. House of Representatives will probably revisit this year some critical pieces of legislation adopted last year. One issue the U.S. Congress should reexamine is the domestic sourcing requirements and other limitations on electric vehicle (EV) tax credits under the Inflation Reduction Act (IRA).

We suggest that these limitations on the incentives in the IRA reflect neither U.S. public opinion nor global political logic. They have become a major point of friction between the United States and its allies in Europe and Asia. When President Emmanuel Macron visited the United States last month, for example, he raised this issue with President Joseph R. Biden.

Our research suggests that U.S. public support for EV subsidies does not depend on either economic nationalism or equity concerns. Instead, the U.S. public favors faster uptake of technologies by making the EV tax credit available to all.

Admittedly, the IRA did make some important steps forward for climate policy. It generously funds several climate initiatives, including by providing a $7,500 tax credit for EV purchases. It also corrects a major problem with the existing system of EV tax credits by lifting the manufacturer-level cap, which restricted credits after manufacturers sold more than 200,000 vehicles in North America. For reference, Tesla sold about 360,000 vehicles in 2021 alone.

Sales numbers for EVs are only likely to increase. California, Washington, and New York have enacted laws requiring that new cars sold in these states be EVs or plug-in hybrids by 2035—and several other states are likely to follow their lead. In the face of these state mandates, the preexisting cap of 200,000 would have severely limited the availability of EV tax credits, thereby impeding the decarbonization of the transportation sector. In California alone, about 1.8 million new cars were sold in 2021.

Although the IRA laudably lifted restrictive sales limits, it has made EV credits more limited in other ways. In response to concerns that EV credits benefit the rich, for example, the IRA now restricts these credits to households making less than $300,000 and to single-filing taxpayers who make less than $150,000. The credits are also limited to cars that cost less than $55,000 as well as SUVs, vans, or trucks below $80,000.

Moreover, given China’s dominance of the EV supply chain, and the insistence of U.S. Senator Joe Manchin (D-W. Va.) that the U.S. protect its own manufacturers, the IRA restricts tax credits to U.S.-assembled cars whose battery’s critical minerals are extracted, processed, or recycled domestically or by countries with fair-trade agreements, such as Chile and Australia. By 2023, manufacturers must source 40 percent of a vehicle battery’s critical minerals domestically or under fair-trade agreements, and, by 2026, they must source 80 percent.

The scheme has drawn angry responses from U.S. allies in Asia and Europe that see the United States as discriminating against foreign-made vehicles and breaching World Trade Organization rules. IRA supporters, however, suggest that the tax credits reflect equity concerns and will help U.S. automakers regain global competitiveness and create homegrown jobs.

In recent months, several carmakers have attempted to find a way around the IRA’s stipulation about onshoring the EV supply chain. In the House of Representatives, lawmakers introduced the Affordable Electric Vehicles for America Act, which would make a tax credit available to essentially all EVs. However, what seems to be missing in the IRA debate is the views of U.S. consumers about who should be eligible for EV tax credits.

In a recent article, we argue that the U.S. public does not support restrictions on who should be eligible for EV credits. Using an original survey-based experiment, we found that limiting eligibility for incentives to U.S. automakers or vehicles made within the United States had no effect on support for the policy. This result held even when we primed respondents with an economic nationalism frame, such as an argument that EV incentives would otherwise benefit foreign companies over domestic companies.

We also found that respondents prefer EV incentives to be universal. Respondents do not support income-based or car price-based restrictions. In this respect, the IRA might be at odds with public opinion about general policy design that favors certain kinds of redistribution.

We simultaneously ran the survey in Japan where subsidies for domestic firms are an established feature of industrial policy, and we found the same type of support for the universalist tax credit policy.

The invasion of Ukraine and production cuts by the Organization of the Petroleum Exporting Countries (OPEC) are focusing policy attention on energy security. Although some argue for policy measures to enhance domestic oil and gas production, others emphasize achieving energy security by reducing demand for fossil fuels and not by increasing the supply. Demand reductions depend, in part, on how quickly the transportation sector moves from internal combustion engine-based vehicles to EVs. Thus, in addition to running in tension with public opinion that favors EV tax credits being made available to all, restrictions on who might avail themselves of EV credits could slow down the transition to a cleaner transportation sector.

The OPEC decision last fall to cut back oil production, and the consequent rise in gas prices at that time, emphasize the vulnerability of the U.S. transportation sector to global events—suggesting another reason to hasten the transportation sector’s decarbonization. To achieve a speedier transition, it is important to design a decarbonization policy package that can garner broad-based public support. Our research suggests that, at least for EV tax credits, public support is not affected by equity concerns or economic nationalism. Instead, the U.S. public favors faster uptake of technologies by making the tax credit available to all.

Climate change is regarded as one of the greatest failures in human history. The devastating consequences of climate change include droughts, floods, global warming, heat waves, rising sea levels, wildfires, and biodiversity destruction.

The wide-reaching and complex nature of climate change makes tackling this challenge exceptionally difficult—especially in the domain of economic decision-making. Many outcomes of economic activities, often unintended or unforeseen, contribute to climate change and environmental degradation.

Responding to this challenge, economists, environmentalists, and politicians seek ways to ensure that financial decision-makers consider climate change. In 2015, the international Financial Stability Board established an industry-led task force on climate-related financial disclosure. The task force developed guidelines for voluntary climate-related disclosures to promote informed investments and allow stakeholders to understand reporting entities’ exposures to climate-related risks.

Progressing beyond voluntary rules, governments worldwide have started developing initiatives aimed at fighting climate change by adopting new disclosure requirements. These countries include Brazil, the United Kingdom, New Zealand, Switzerland, and Singapore, which have already adopted regulations that mandate disclosures. At the same time, many other jurisdictions, including the United States and the European Union, have issued concrete proposals for such mandates.

Climate-related risk disclosures compel financial actors to report the impact of climate change on their businesses, including their operations, risks, balance sheets, and future profitability. Presumably, these disclosures are based on the rationale that systematic, comparable, and understandable disclosures promote better climate-related decision-making and risk management. The assumption is that climate-related disclosures will elucidate how companies react to and consider the impacts of climate change and thus improve their response.

To illustrate, consider the potential exposure of an insurance company to climate risks. Some homes, perhaps many homes, may become uninsurable because of increasing flood and storm surge risks. Other insured assets may incur greater damages, resulting in more claims against insurers. These risks, however, are important not only to the insurance company’s profitability but also to homeowners, mortgage lenders, renters, investors, and banks.

As they proceed to design disclosure regimes, policymakers and other stakeholders should consider several key policy features. They should, for starters, define the target audience of these disclosures. New Zealand’s proposed disclosure framework targets “primary users,” defined as investors, lenders, and other creditors. In other words, the definition of primary users does not encompass employees, customers, or the public.

This definition may be too narrow. Targeting a wider audience would increase the impact and relevance of climate-risk disclosures and thus better serve their goals. A wider audience also better aligns with a modern conception of the firm, called stakeholder capitalism, which focuses on stakeholders rather than merely shareholders.

Unlike shareholders, stakeholders typically look beyond the narrow and sole perspective of the firm’s short-term profits. Stakeholders attend to broader social and community interests and the firm’s long-term sustainability. Stakeholders seek and demand strategies that benefit wider present and future populations rather than merely the shareholders.

Interestingly, the European Union adopted such a broad perspective in 2019 when it published guidelines on reporting climate-related information. The EU guidelines specify a “double materiality” standard for determining what to report. This standard considers what is material for both shareholders who are the financial audience and stakeholders who are the environmental and social audiences. Other countries should follow this path when developing guidelines for climate-related disclosures.

A closer examination of proposed disclosure guidelines and frameworks reveals additional issues that merit discussion. One of these issues relates to the dilemma of rules versus standards. While rules are specific and clear—consider, for example, speed limits, deadlines, and age restrictions—standards and principles are more general and ambiguous.

Policymakers may be tempted to use standards in designing disclosures. The New Zealand initiative, for example, makes “fair presentation” the overarching principle of climate-related disclosures. Fairness, however, is a notoriously ambiguous legal norm. Without making it more concrete, firms can abuse such ambiguity and comply with the letter of the law while evading its spirit.

Another key issue relates to ensuring that disclosures are readable and understandable. Indeed, the literature suggests that disclosures, especially when they target individuals such as consumers, clients, and patients, tend to be too complex and do not achieve their goals.

In advancing climate-related disclosures, regulators and legislators should articulate clear metrics and rules about what “understandable” and “readable” disclosures are. Here, policymakers could use established linguistic formulas, such as Flesch-Kincaid readability tests, or advanced tools, such as the open-source CommonLit Ease of Readability corpus, which can measure text readability and complexity. Specific organizational signals—such as headings and subheadings, paragraph numbering, table of contents, a one-page summary, and eliminating all caps—can also promote readability and understandability.

To enhance the effectiveness of disclosures further, policymakers should consider comparability and consistency. Unified and consistent standards help people understand disclosures and make them more effective while reducing reading costs. We recommend that regulatory frameworks adopt a standardized template or disclosure structure that all reporting entities must follow. Furthermore, we suggest that there should be specific climate scenarios—for example, a pre-specified increase in mean temperature, sea levels, and the extent of the shift in the statistical distribution of high precipitation events—against which entities must report.

Disclosures typically include large amounts of data, but humans have limited cognitive capacities. Multiple disclosures in various domains tax humans’ ability to read and process them. Automating the process and capitalizing on technological developments can aid meaningful disclosure.

To that end, companies should make their disclosures machine-readable. To ensure machine readability, disclosures should be provided in an adequate digital format, include unique data identifiers, and have a structured layout and standardized taxonomy. This processing will enable humans to defer to machines and rely on technology to process the disclosed information.

Likewise, big data and recent developments in artificial intelligence and sophisticated language models and reading tools—for instance, GPT-3—offer significant social and economic benefits. Presumably, they should turn reading, analyzing, and comparing disclosures into a simple, cheap, and easy task. These tools, however, are not a magic bullet, and they are prone to mistakes and adversarial attacks. At least for the foreseeable future, any proposed legislation mandating disclosures should consider the requirements, benefits, and limitations of machine-readable texts and automatic reading tools.

Climate-related disclosures have the potential to prompt the business community to consider more regularly and more deeply the effects of climate change and the risks they entail. Well-designed disclosures could encourage firms to adopt more climate-friendly strategies and lead a smoother transition to a resilient and sustainable economy.

A number of fashion designers recently accused Shein, the most popular online fashion retailer in the world, of stealing their designs. Their plight is all too common, critics argue, as the digitization of the fashion industry has fueled a concerning increase in “design piracy,” or the unlicensed copying of a fashion designer’s work.

Fashion industry insiders insist that distinction is key to success. Lazaro Hernandez, designer and co-founder of Proenza Schouler, once testified that “design piracy can wipe out young careers in a single season.”

Some designers claim that fast fashion manufacturers and retailers, which rapidly produce cheap knockoffs of original designs, are the primary culprits of design piracy. In the era of social media and ecommerce, experts argue that finding and copying designs is faster, easier, and more profitable than ever before.

Design piracy critics blame the current intellectual property (IP) framework, claiming that statutory loopholes enable copying and make infringement claims complicated and costly.

U.S. IP regulation aims to protect the work of creators while encouraging continued creativity and innovation. Some scholars insist that design piracy demonstrates a failure to achieve either goal in the fashion industry, as copying hinders the growth of innovative designers. Other scholars disagree and support the prominent Piracy Paradox, which posits that copying feeds the rapid turnover of fashion trends, triggering a cycle that keeps consumers buying and designers creating.

Scholars argue that copyright law and patent law contain the most viable IP protections for fashion designs. Although patent protection is more comprehensive, it involves a lengthy and expensive application process that is often inaccessible to small designers lacking adequate resources.

Critics contend that many designers are left with only partial protection under copyright law, as the Copyright Act does not extend full protection to clothing and accessory designs. Instead, it protects  “pictorial, graphic, or sculptural” design features only if they can be identified separately from, and exist independently of, the design as a whole. This separability analysis, scholars explain, protects only certain design aspects, such as patterns, prints, and combinations of colors.

Advocates have pushed for legislation providing comprehensive protection for fashion designs, such as the Innovative Design Protection Act and the Design Piracy Prohibition Act, but none have gained congressional approval.

Is the traditional intellectual property framework leaving fashion designers without protection and enabling design theft in the name of innovation?

In this week’s Saturday Seminar, we feature the work of scholars who discuss intellectual property piracy in the fashion world and pose potential regulatory solutions.

• In an article published in the AIPLA Quarterly Journal, Loren Mulraine of Belmont University College of Law discusses the current state of international IP law in the fashion context. Mulraine compares. fashion design protection to that of China, Australia, and African and Latin American countries. Mulraine observes that copyright law appears to be the primary form of protection for fashion designs in the United States, and yet many design elements fall outside the scope of protection. He blames reliance on copyright law’s separability analysis and a congressional refusal to expand fashion design protection despite significant lobbying efforts. Mulraine contrasts the U.S. approach with design protection efforts in Nigeria and South Africa, which are moving to modernize and expand intellectual property protections in order to capitalize upon their growing fashion industries. To strengthen the global fashion economy and continue the international development of fashion IP, Mulraine suggests that citizens encourage legislators to augment national IP law protections and engage in cross-border cooperation.
• The evolution of the internet and the advent of social media over the last decade have made the work of emerging designers both more accessible to consumers and more vulnerable to piracy, contends Lucrezia Palandri of the University of Florence in an article published in New Frontiers of Fashion Law. She explains that fast fashion giants like Zara and H&M can now draw design inspiration from the social media accounts of small-scale designers and reproduce those trends quickly, often before designers themselves can produce their collections. But designers also increasingly use their social media accounts to call out plagiarism, Palandri observes, capitalizing upon the outcry of consumers to reach favorable outcomes—like compensation—with large companies who have pirated. She argues that informal dispute resolution through social media may be more effective than formal IP litigation at balancing the power between established and emerging brands in the digital fashion space.
• In an article published in Technology & Society Faculty Publications, Clovia Hamilton of Stony Brook University discusses the ways in which fashion industries in developed countries appropriate cultural artisan crafts from under-developed countries. Hamilton explains that fashion designers and product industries collaborate with artisans in impoverished communities, but sometimes these industries appropriate the artisans’ creations and cultural intellectual property without royalty compensation. Companies often disguise these instances of IP piracy, Hamilton argues, as engaging corporate social responsibility through “empowering the poor by encouraging entrepreneurship.” Hamilton proposes best practices in response to such piracy, which include providing artisans with steady income or forming non-profit organizations that donate all revenues from fashion sales back to artisans in need.
• In a recent article in Fashion Theory, Alice Jannsens and Mariangela Lavanga of Erasmus University Rotterdam argue that the statutes and legal remedies that exist to protect and support small, United Kingdom-based fashion businesses fail to address design piracy, discouraging designers and future innovation in the fashion space. Emerging designers, they explain, often refrain from exercising their intellectual property rights because registering their designs is expensive and does not yield significant performance benefits. Furthermore, the authors note, large companies dominant in national and international fashion markets can afford to battle lawsuits by infringers, whereas independent designers cannot. Consequently, Jannsens and Levanga find, young fashion designers struggle to balance their concerns over piracy with the necessity of promoting their wares online.
• In a note published in the Drexel Law Review, Denisse F. García critiques a lack of fashion design protection within U.S. IP law and pushes for legislative change in the internet age. Garcia suggests that the internet serves as a “double-edged sword” for the fashion industry: It provides designers with a platform to advertise and sell to a larger digital audience, but it simultaneously gives design pirates the opportunity to access, copy, and profit from original work faster than ever before. Garcia contends that targeted design legislation, adopted by many European countries, would provide ideal protection and ensure continued innovation and economic growth within the U.S. fashion industry. Given congressional opposition to such legislation, however, she insists that regulators create IP dispute resolution processes to allow designers an organized means to combat infringement without wasting their own resources.
• In an article published in the Cardozo Arts & Entertainment Law Journal, Aman Gebru of the University of Houston Law Center explores the piracy paradox in indigenous fashion. The piracy paradox, or the theory that copying designs can encourage creativity in the fashion industry, would not apply when indigenous designers do not wish to commercialize their fashion, Gebru contends. Gebru explains that the piracy paradox can apply when indigenous designers are open to commercialization, however, because it could encourage designers who want their cultural representations to reach a broader audience to create new designs to compete with mainstream fashion. For indigenous fashion to thrive in a global market, Gebru argues, mainstream fashion must be conscious of cultural appropriation, and companies should implement corporate social responsibility initiatives.

IN THE NEWS

• The U.S. Supreme Court rejected an emergency request from firearms dealers to block certain New York gun regulations. The gun dealers’ lawsuit challenges laws that require security systems at gun stores, mandate background checks for ammunition sales, and prohibit people under 18 years old from entering gun shops without a guardian. The gun dealers’ emergency request relates to their lawsuit in federal court, where their appeal of a district court decision in favor of New York is pending. The latest order follows a Supreme Court ruling earlier this month that declined a separate request to pause other provisions of New York’s gun control measures, which were passed in response to the Supreme Court’s decision in Bruen.
• The U.S. Department of Veterans Affairs (VA) announced that veterans in “acute suicidal crisis”—that is, at imminent risk of self-harm— can now access free emergency treatment, including 30 days of inpatient care and 90 days of follow-up outpatient care. Although the VA already provided emergency suicide care, the expanded policy allows veterans to receive free suicide care at VA or non-VA facilities, regardless of whether the veteran is enrolled in the VA system. The expansion is part of the Biden Administration’s strategy for reducing veteran suicide, which the VA has stated is its highest priority.
• The Bureau of Alcohol, Tobacco, Firearms, and Explosives finalized a rule that requires gun owners to obtain a permit before using firearm stabilizing braces, which convert pistols into short-barreled rifles. The U.S Department of Justice explained that Congress imposed heightened regulations on short-barreled rifles under the National Firearms Act because they are easier to conceal than long-barreled rifles and more dangerous than traditional handguns. U.S. Attorney General Merrick B. Garland stated that the rule will prevent individuals from evading these restrictions “by adding accessories to pistols that transform them into short-barreled rifles.”
• Florida Governor Ron DeSantis announced a proposal to prohibit schools and businesses from enforcing COVID-19 vaccine mandates and masking requirements. The proposal also includes a provision that protects medical professionals from being fired or losing their medical licenses for voicing their professional opinions or religious views. State Surgeon General Joseph Ladapo said that the measures will ensure that medical professionals can “engage in scientific discourse without fearing for their livelihoods or their careers.”
• The Centers for Medicare and Medicaid Services (CMS) announced that it will begin conducting audits of nursing homes’ use of antipsychotic drugs in an effort to reduce on inappropriate prescriptions. The effort is part of the Biden Administration’s strategy to improve the quality of nursing homes in light of recent reports that found that nursing homes have misdiagnosed residents as schizophrenic. If CMS finds that a nursing home has a pattern of misdiagnosing patients with schizophrenia, CMS will lower that home’s rating on its “Care Compare” website, which consumers use to evaluate nursing homes.
• The U.S. Department of Agriculture (USDA) finalized a rule that increases oversight over the production, handling, and sale of products certified as “USDA organic.” The rule updates existing USDA regulations by standardizing the certification process and increasing the amount of data that producers of organic produce must provide inspectors. USDA Under Secretary for Marketing and Regulatory Programs Jenny Lester Moffitt stated that the rule intends to “reinforce the trust of consumers, farmers, and those transitioning to organic production.”
• The Federal Communications Commission (FCC) proposed a rule to improve the accuracy with which wireless communication providers route 911 calls and texts to public safety officials. The FCC explained that providers misroute approximately 23 million calls per year because providers determine the caller’s location based on the location of the cell tower that transmits the call. The proposed rule would require wireless communications providers to implement location-based routing, which routes calls based on the location of the device. This more accurate routing method, the agency stated, will “reduce emergency response times and save lives.”
• The Alcohol and Tobacco Tax and Trade Bureau (TTB) issued a rule that recognizes “Singani”—a spirit distilled from grape wine produced in certain valleys of the Plurinational State of Bolivia—as a distinct classification of brandy. Bolivia petitioned TTB for the classification, citing Bolivian laws that establish Singani as an exclusive product of Bolivia. In exchange, Bolivian officials agreed to recognize Bourbon Whiskey and Tennessee Whiskey as distinct products of the United States. Bolivia will prohibit the sale of products labeled “Bourbon Whiskey” and “Tennessee Whiskey” that are not manufactured in the United States.

WHAT WE’RE READING THIS WEEK

• In a forthcoming article, Daniel E. Walters, associate professor at Texas A&M University School of Law, and Andrew N. Kleit, professor at Pennsylvania State University, argued that Regional Transmission Organizations (RTOs)—nonprofit corporations that plan and manage most of the U.S. electric grid—exclude clean energy interests from decision-making processes. Walters and Kleit observe that, by excluding these interests, RTOs make decisions that are incongruous with public policy encouraging a transition to clean energy generation. The authors urge reform of RTOs’ governance structure to allow for broad public participation and transparency, like that of federal administrative agencies.
• In an article in the Washington and Lee Law Review, Albert Lin, professor at the University of California, Davis School of Law, argued that corporate pledges to achieve net-zero greenhouse gas emissions may not result in meaningful emissions reductions. Lin explained that corporate pledges to offset their greenhouse gas emissions face minimal regulatory oversight. To push more companies to follow through on their pledges, Lin urged the U.S. Securities and Exchange Commission and the Federal Trade Commission to increase oversight by adopting disclosure rules.
• In an article in the Environmental Law Reporter, Madison Hinkle, a community advocate at Mountain Watershed Association, and Jesse Richardson, professor at West Virginia University College of Law, argued that environmental litigation is a “powerful tool” in delaying or canceling pipeline construction. Environmental groups, for example, have sued agencies for neglecting to protect endangered species or for approving rights-of-way for a pipeline on land outside their authority. Hinkle and Richardson suggested that pipeline companies may develop new strategies to address environmentalists’ concerns, and may also begin project preparation earlier in the hopes of overcoming regulatory and legal obstacles.

EDITOR’S CHOICE

• In an essay for The Regulatory Review, Shelley Welton, professor at the University of Pennsylvania Carey Law School, argued that the Federal Energy Regulatory Commission’s (FERC) new Office of Public Participation (OPP) should make its proceedings inclusive and accessible to communities that energy infrastructure impacts most. Welton urged OPP to provide materials that translate technocratic issues for these communities, solicit input about how energy infrastructure affects their lives, and communicate about how their input affects FERC decisions.

Corporate spending on midterm elections doubled from 2010 to 2014, and then doubled again from 2014 to 2018. This increase in corporate political spending harms investors, executives, and stakeholders at large, argue legal experts Dorothy Lund and Leo Strine in a recent article.

To increase accountability to their shareholders and enable their executives to focus on running the company, corporations should scale back or even halt political spending, according to Lund and Strine. They urge companies that continue to spend money on campaigns to improve the legitimacy of their corporate donations. Lune and Strine suggest that providing greater transparency and shareholder input into their political strategies could help create this legitimacy.

Before Citizens United v. Federal Election Commission, a landmark U.S. Supreme Court case decided in 2010, direct corporate contributions to political candidates had been prohibited by federal law. But in Citizens United, the Supreme Court held that corporations could spend unlimited money on elections. As a result, political spending has soared since 2010.

Lund and Strine claim that such corporate political spending harms shareholders because these contributions cannot possibly reflect the diverse views of all investors. Lund and Strine write that the “scholarly consensus has been that the only thing uniting company investors is their desire for a solid return.” Companies gave $282 million to Republican candidates, but only $38 million to Democrats between 2010 and 2020, a discrepancy that likely does not align with shareholder preferences.

Most corporate leaders do not even disclose their contributions, leaving shareholders in the dark about company spending. This has led to increased frustration with the post-Citizens United status quo, emphasize Lund and Strine.

As a result, investors have submitted shareholder proposals demanding greater disclosure of political spending. In 2019, shareholders initiated 33 such proposals, a large increase from the previous year. These proposals received 36 percent of shareholder votes. According to Lund and Strine, support for such proposals increased in 2020.

In addition to harming shareholders, Lund and Strine further describe how corporate donations harm executives. In an era of increased scrutiny over environmental, social and governance (ESG) practices, managers are speaking out about racial and gender diversity, climate change, employee rights, and more. Lund and Strine explain that, after Citizen’s United, managers have also faced pressure to give to candidates who favor the company’s preferred regulatory policies. Yet politicians with favorable regulatory policies often also have practices that can be contrary to a company’s stated ESG goals.

Companies that claim to be concerned with climate change, for example, have donated to political groups that have challenged the U.S. Environmental Protection Agency’s Clean Power Plan. Likewise, companies that claim to protect LGBTQ rights have contributed to campaigns of politicians who supported the 2016 “bathroom bill” which prevented transgender people from using bathrooms that match their gender identity.

According to Lund and Strine, corporations often fund candidates with views antithetical to the company’s publicly stated values. Many corporations increasingly fall into this “hypocrisy trap” and undermine management’s reputation and legitimacy, Lund and Strine explain

Corporate donations also harm society at large, suggest Lund and Strine. Research indicates that companies that spend heavily on politics perform worse than those who do not, which can in turn harm all stakeholders, contend Lund and Strine. They further emphasize that stakeholders do not benefit when companies lobby to reduce regulation that shifts costs from the corporation onto society, such as climate change or hazardous workplaces.

Lund and Strine conclude that the best remedy would be to stop corporate political spending altogether. After the U.S. Capitol Attack on January 6, 2021, Charles Schwab discontinued its political action committee (PAC). Blackrock, among other companies, suspended political contributions. Lund and Strine urge other companies to follow their lead.

Acknowledging that some companies may not want to withdraw fully from the political process, Lund and Strine offer several alternatives.

They suggest that corporations could limit their political involvement to lobbying and speaking up only on issues that the board has claimed are consistent with company values.

If companies insist on donating, companies could commit to giving donations only through a PAC that raises voluntary money from shareholders. And even then, the PAC should only give to candidates whose policies align with those of the company, urge Lund and Strine.

Lund and Strine also recommend that companies, if they must, make political contributions only under a political spending plan approved by a supermajority vote of shareholders at the company’s annual meeting.

Lund and Strine argue that only by making these changes can the world become a better and more transparent place.

One education challenge that is often overlooked is that some students do not speak the same language as their teachers and peers. This problem is especially salient for non-English speaking students studying in the United States.

The number of English learners (ELs) in K-12 schools has grown by more than 1 million since the year 2000, bringing the total number in the United States to an estimated 4.9 million students.

The growth of the EL population in U.S. schools has coincided with a persistent achievement gap between ELs and their non-EL peers. According to some policy experts, one reason for this achievement gap is that U.S. teacher preparation programs have failed to equip many teachers to meet the needs of ELs.

In a recent article, three scholars argue that wide variation exists in teacher credentialing programs across the United States. Christine Montecillo Leider of the University of Massachusetts Boston, Michaela W. Colombo of the University of Massachusetts Lowell, and Erin Nerlino of Boston University suggest that federal standards are needed to guarantee ELs the right to access public education.

Currently, federal regulations governing ELs’ access to an equitable education derive from standards set forth by federal civil rights law and policy. For example, lawmakers have interpreted Title VI of the Civil Rights Act of 1964 to prohibit schools from offering ELs fewer educational opportunities based on their national origin. The U.S. Department of Education’s Office for Civil Rights has clarified school districts’ responsibilities in upholding the requirements of the law and protecting the rights of ELs.

A decade after the passage of Title VI, the Supreme Court ruled in Lau v. Nichols that public school districts receiving federal funds must provide supplemental language instruction to non-English-speaking students. The Court’s subsequent ruling in Castaneda v. Pickard in 1981 bolstered the Lau decision by establishing a three-part test for determining the adequacy of school districts’ bilingual education programs.

Most recently, the Every Student Succeeds Act (ESSA) reaffirmed that states need to ensure equal access for ELs in educational programs. Leider, Colombo, and Nerlino note that the regulations implementing the ESSA and other federal civil rights mandates do not, however, give states specific instructions on how to meet such demands. Although regulations require state education agencies to ensure public school teachers’ training complies with federal law, they have broad autonomy in determining what compliance will look like.

Because states are responsible for developing their own policies for educating ELs, there has been wide variation in state credentialing requirements for teachers of ELs, Leider, Colombo, and Nerlino observe. Furthermore, they argue that the widespread decentralization of teacher-credentialing policies has led to inconsistent interpretations of federal mandates, often meaning that EL teachers are underprepared.

Leider, Colombo, and Nerlino view state education agencies’ requirements as one of many proxies for teacher preparedness and effectiveness. To assess whether state regulations ensure that teachers are adequately prepared to educate ELs, they surveyed teacher-credentialing requirements across all fifty states and the District of Columbia. Their findings suggest that, due to states’ differing policies, EL teachers “likely have vastly different levels of pedagogical content knowledge and expertise for working with ELs.”

A related problem, they argue, is that federal policy fails to specify minimal requirements for the credentialing and preparation of teachers working with ELs. To overcome the political stagnation resulting from changing federal and state administrations, Leider, Columbo, and Nerlino recommend several policy changes the federal government could make to influence states’ teacher-credentialing regulatory schemes.

Leider, Colombo, and Nerlino contend that the federal government should increase funding for bilingual teacher-credentialing programs. Although bilingual education has a positive impact on ELs’ educational outcomes, only 24 states offer bilingual teacher credentialing to prospective educators seeking to teach ELs. Leider, Colombo, and Nerlino argue that an increase in federal funding would encourage greater teacher participation and spur other states to offer similar credentialing opportunities.

Even more, they argue that participating states should go beyond merely requiring bilingual or other specialized teacher credentials for educators seeking to teach ELs. Instead, Leider, Columbo, and Nerlino claim that states should require prospective teachers, before they can become certified, to engage in field experiences specific to working with ELs. They also suggest that states include methodologies specific to teaching ELs in their teaching standards so that all teachers are minimally prepared to work with ELs.

Aside from the lack of standardized EL teacher-credentialing opportunities across states, Leider, Colombo, and Nerlino also find that many state education agencies do not publish teacher-credentialing requirements. Thus, they recommend that state agencies more actively publicize such information. The lack of publicly available credentialing information creates a potential civil rights issue, they argue, because educators may not fully understand their legal responsibilities to ELs.

Ultimately, Leider, Colombo, and Nerlino recommend that the federal government issue a minimal set of guidelines and expectations for EL teacher credentialing across states. Such expectations, they suggest, could reduce nationwide variations in EL teacher credentialing standards and improve teachers’ preparedness to educate ELs.

The stars have served as a canvas for human ambition, guiding explorers across vast oceans and motivating ancient religions. But when people today gaze up at the night sky, they see an increasingly veiled canvas.

Nearly four out of five individuals live in areas where the brightness of human light sources reduces the visibility of the night sky. This “light pollution” has negative consequences for both humans and the natural environment, argues Eric Lystrup in a recent law journal article. Lystrup contends that the United States needs federal regulation to reduce the impacts of light pollution on our population and environment.

Light pollution takes several forms, according to Lystrup. Glare occurs when light shines directly into a person’s eyes, in some cases temporarily blinding them. Light trespass happens when light from one property shines onto another property. And the most pervasive form—skyglow—occurs when atmospheric particles reflect light back toward the ground, brightening the night sky.

All three of these forms of light pollution pose dangers to human health, Lystrup argues. The human body follows a 24-hour circadian rhythm that induces sleep and helps us wake up each day. An increase in nighttime light can upset this rhythm, leading to significant health consequences. These can include fatigue, increased risk of cancer, and even impairment of infants’ ability to develop consistent sleep cycles.

Light pollution also drastically affects wildlife and ecosystems, Lystrup argues. Animals such as birds and sea turtles that depend on the night sky for navigation can become confused by artificial lighting, sometimes causing them to veer off course and die. Light pollution can even interfere with organisms’ basic biological functions. Excessive light can cause animals to have a more difficult time reproducing and prevent trees from becoming dormant in the winter, which can kill them.

In addition, light pollution exacerbates climate change. The International Dark Sky Association estimates that the United States wastes one third of energy used for lighting each year — the equivalent of 30 million barrels of oil and 8.2 million tons of coal.

Given the pervasive negative effects of light pollution, humans have an obligation to reduce its impacts, Lystrup argues.

One avenue to mitigate light pollution would be through state and local regulation. Currently, “dark sky laws” in eighteen states mandate reductions in light pollution, usually by requiring shielding on light fixtures. Many of these laws, however, contain carveouts that exempt lighting from sources such as construction, industry, or even streetlamps.

Lystrup explains that states and communities often have little incentive to enforce strict measures against light pollution when neighboring areas have no regulation. Light pollution can spill across city or even state lines, rendering local regulation ineffective—as evidenced by the skyglow from Las Vegas visible as far away as southern Utah.

Lystrup argues that federal action can best overcome the collective action problem of light pollution by requiring all jurisdictions to adopt measures to reduce glare. One model Lystrup claims that the federal government could emulate is the Noise Control Act of 1972. This federal legislation authorizes the U.S. Environmental Protection Agency (EPA) to set limits on noise from sources such as cars, trains, and construction equipment. Lystrup contends that similar legislation targeted toward light pollution could give the federal government the power to regulate light pollution—perhaps by requiring shielding on all outdoor light sources manufactured within or imported into the United States

Even without new legislation, EPA may hold the power to regulate light pollution, Lystrup claims. The Clean Air Act gives EPA the power to set standards to protect the public from hazardous air pollutants—an authority the agency has used to regulate carbon dioxide emissions. If the EPA were to designate light as a harmful pollutant, Lystrup explains, it could set an upper threshold for acceptable light levels. Any state with areas exceeding these levels would need to create a plan to reduce light pollution.

But Lystrup notes that designating light as a pollutant would be a novel interpretation of the Clean Air Act, as EPA currently only regulates airborne gases under the Act. Furthermore, he argues the state-by-state approach to compliance under the Clean Air Act could lead to inefficiencies as states create different plans for complying with federal standards.

Regardless of which regulatory approach governments adopt, Lystrup contends that regulating light pollution—and saving the stars—is critical to protecting human health and the environment.

The Federal Trade Commission (FTC) has proposed a rule that would ban nearly all employee noncompetition agreements as unfair methods of competition. These agreements prevent an employee from taking a new job in a competing business for a certain period after his or her employment ends. The duration and geographic scope of the agreements varies.

Today, purely vertical noncompete agreements are analyzed under antitrust’s rule of reason and most are lawful under federal law. Several states have enacted stronger laws. The FTC’s proposed rule would apply the FTC Act, a statute that reaches further than the Sherman Antitrust Act but cannot be enforced by private parties.

This essay does not consider the FTC’s power to make and enforce a rule like the one proposed, but rather it addresses the wisdom of the proposed rule itself. Should employee noncompete agreements be invariably unlawful or should the law reach only a subset? If the latter, how should the law distinguish between different agreements?

The effects of employee noncompete agreements vary with the type of job. Recent attention has turned to noncompete agreements covering lower-wage employees in industries such as fast food. These are unjustified and anticompetitive, and there is growing support for prohibiting them. In these situations, employers have not invested a great deal in specific employees. Most of their employment is “at will,” which means that either employer or employee can ordinarily terminate employment on reasonable notice. A noncompete agreement in such situations is nothing more than an anticompetitive restraint on employee mobility, limiting an employee’s right to seek a better job by moving or threatening to move elsewhere.

Other employees are different. They may receive specialized training that is costly to their employer and “portable” in the sense that the training can be carried to a different employer. They might also hold confidential information, trade secrets, customer lists, or other knowledge that would be of value to a different employer. For many of these employees, a noncompete agreement is the only effective way an employer can protect its investment from the risk of “free riding,” which occurs when one person is able to commandeer another person’s investment. For example, although an employer may be able to prohibit an employee from purloining a trade secret, there is no way to prohibit a former employee from using skills provided by the first employer in a second employer’s business. Here, noncompete agreements are socially valuable, provided that they are reasonable in scope and duration. Workers who sign such agreements often receive higher wages than those who do not, because the noncompete agreement protects the employer’s investment. A rule categorically banning them would harm these workers as well as their employers.

A well-designed policy on noncompete agreements should distinguish these situations. The important questions are (1) whether harmful free riding is likely, (2) whether protection requires a noncompete agreement, and (3) whether the particular agreement is no broader than necessary to protect the employer’s legitimate interests. For all these questions, the burden of proof should be on the employer, because it is in the best position to provide evidence showing its own investment and justifications for the agreement.

In its present form, antitrust law’s rule of reason is not effective for addressing this issue. Its requirements are too onerous, including that the employer possess significant market power in the labor market. Today, nearly all plaintiffs lose rule of reason cases.

Considering only antitrust law, one can see why an antitrust enforcer such as the FTC would prefer per se illegality. A per se rule simply condemns noncompete agreements without allowing for justifications or requiring proof of market power. Given the current sad state of antitrust’s rule of reason, policymakers may have no effective choice between per se illegality or de facto legality under the rule of reason.

But FTC rulemaking need not be hitched to that wagon. It should attempt to repair defects in the rule of reason, not simply plow over them.  The FTC can develop its own, more nuanced approach to distinguishing beneficial from harmful noncompete agreements. That approach need not require a showing that an employer possesses market power. But it should also permit defenses that antitrust law’s per se rule does not permit.

Within this framework, any noncompete agreement that operates against a broad range of employees without accounting for these free rider concerns should be struck down without further inquiry. Restraints contained in agreements between upstream parties, such as a franchisor and its numerous franchisees, and then secondarily imposed on employees should also be treated as highly suspicious. A franchisor has no obvious interest in preventing the employees of its various franchisees from inter-franchisee movement. The most likely reason for such arrangements is that the franchisor is responding to what is essentially a cartel—or no-poaching agreement—of its own franchisees, although one that may be technically difficult to prove. These agreements are substantively overbroad and should be condemned as unreasonable restraints on worker mobility.

The FTC rule also applies to noncompete agreements with independent contractors. Such workers do not even receive some of the minimal wage and hours protections that apply to employees. At the same time, such agreements can occupy a position more akin to exclusive dealing in business services, particularly when they involve nonlabor elements, or the hiring firm commits dedicated and specific resources.

One legitimate concern is inter-brand free riding, which might occur when an independent contractor working for a firm can employ an asset or other costly resource in service provided for another firm. Hypothetically, a firm such as Uber might supply its drivers with cars, which the driver then might use to carry passengers for Lyft, a competitor. Independent contractors often use tools, databases, or other assets provided by their hirer. In many such cases, a rule prohibiting sharing of the asset is a reasonable and less restrictive alternative than a noncompete agreement. They should thus be presumptively, not absolutely, unlawful. The proposed FTC rule acknowledges this possibility.

Given the expertise and flexibility that the FTC can apply, one would have hoped for a rule about employee noncompete agreements that appreciates more fully the variety of such agreements, the varying degrees of harm or benefit that they might offer, and weaknesses in the now-existing rule of reason that make it inadequate to evaluate them. Many noncompete agreements offer little or no social benefit, and full rule-of-reason analysis is seriously underdeterrent against these inefficient agreements. Other agreements, though, offer benefits for employees as well as the economy.

The FTC should consider issuing a final rule that will recognize a distinction between these categories of agreements and improve on the process for distinguishing between them, rather than obliterating the distinction altogether.

At the current rate of progression, it will take women decades—until 2054 or later—to reach pay equity with men. In 2021, the U.S. Department of Labor reported that women in the United States were paid, on average, 82 percent of what men were paid. This represents only a slight improvement from 2020, when women earned 81 percent of earnings made by men.

The current gender wage gap contributes to significant losses in earnings for women. In 2021, the average woman earned approximately $12,000 less than the average man.

Pay disparities are even larger for women of color, with Black women being paid only 64 percent of what men are paid and Hispanic women being paid only 57 percent.

The Women’s Bureau of the Labor Department and the U.S. Census Bureau determined that the wage gap cannot be wholly explained through measurable differences between workers, including education level, age, marital status, or hours of work. They say it is “highly likely” that “at least some of this unmeasured portion is the result of discrimination.”

At the federal level, Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, and national origin. More specifically, the Equal Pay Act of 1963 prevents wage discrimination by requiring that employees receive equal pay for equal work, while the National Labor Relations Act outlaws pay secrecy policies that would prohibit employees from discussing salaries.

With the continued persistence of the wage gap, however, local and state legislatures have begun implementing additional safeguards to reduce pay inequities. Recently, seven states have begun to regulate employer transparency, requiring employers to publish salary ranges on job postings or provide pay scales to candidates and current employees. Salary history bans, which prohibit employers from inquiring into a candidate’s pay history, have also been adopted by 28 states, along with Puerto Rico and the District of Columbia.

In this week’s Saturday Seminar, experts evaluate the efficacy of current pay equity regulations and explore alternative regulatory approaches.

• In a policy brief issued by the Institute for Women’s Policy Research, Shengwei Sun of the Institute for Women’s Policy Research, Jake Rosenfeld of Washington University in St. Louis, and Patrick Denice of the University of Western Ontario find that lack of knowledge about coworkers’ pay contributes to the continuation of the gender pay gap. Research suggests that pay transparency reduces this discrepancy. Although the National Labor Relations Act theoretically protects workers’ right to discuss pay, it has limited efficacy because it fails to protect workers from employer retaliation, contend Sun, Rosenfeld, and Denice. The Paycheck Fairness Act, a bill that passed in the U.S. House of Representatives but failed in the U.S. Senate, would better protect workers, explain Sun, Rosenfeld, and Denice. This leaves state and local legislatures responsible for strengthening such protections through workplace transparency regulations, which are most effective when combined with other policies, including salary history bans and pay reporting requirements, argue Sun, Rosenfeld, and Denice.
• In an article published in the Boston University Law Review, Stephanie Bornstein of the University of Florida Levin College of Law critiques the current enforcement mechanisms of workplace discrimination laws. Bornstein explains how the system not only places the burden on aggrieved employees to file charges with a government agency and pursue independent litigation, but also fails to provide sufficient protection from employer retaliation for filing such claims. Bornstein contends that, because government enforcement agencies play a limited role in litigating discrimination lawsuits, underenforcement of antidiscrimination continues. Information-forcing mechanisms, which would compel employers to disclose to the public the pay and promotion of employees by race and sex, could effectively shift the burden of antidiscrimination enforcement onto employers and government agencies, argues
• In a working paper issued by the National Bureau of Economic Research, Morten Bennedsen of Økonomisk Institut and several coauthors find that pay transparency lessens the gender pay gap. The Bennedsen team focused its research on a law enacted in Denmark requiring firms to publicize salary data broken down by gender and notify their employees of any discrepancies. In their analysis, Bennedsen and his coauthors discovered that this policy resulted in a slower growth rate for male wages, while female wages tended to increase, although only slightly. As a result, the overall wage gap diminished as well. When assessing other employment factors, the Bennedsen team noted that firms hire greater numbers of female employees and are also more likely to promote female employees. Because women are statistically less likely to negotiate their wages, pay transparency regulations could provide greater incentive for women to negotiate for equal pay, according to the Bennedsen team.
• Applying an intersectional approach to the pay equity debate, Abigail Coleman, Robyn Dupont, and Nina Rivera argue in an article published by the S. Equal Employment Opportunity Commission that pay disparities should be assessed across protected classes such as race, sex, and national origin. Coleman, Dupont, and Rivera contend that women of color, particularly Black and Latina women, face vast pay discrepancies across fields and receive lower wages and benefits than white women. They recommend that the federal government, as a significant employer in the United States, set an example by tackling pay equity through an intersectional lens. For example, Coleman, Dupont, and Rivera highlight efforts to limit the use of salary history in employment decisions, as such histories often reflect racial and gender biases and could further perpetuate the cycle of pay discrimination.
• Although the COVID-19 pandemic brought structural inequities to the fore, in particular gender pay inequality, progress in closing the gender wage gap has stalled, argue Ariane Hegewisch and Eve Mefferd of the Institute for Women’s Policy Research in an article published in the CESifo Forum. Hegewisch and Mefferd contend that multiple variables contribute to the wage gap in the United States, including gender differences in hours of work, devaluation of “women’s work,” occupational segregation, discrimination, and more. State and local efforts to pass equal pay legislation have found some success, according to Hegewisch and Mefferd. Such successes include regulations that focus specifically on pay transparency, expand worker characteristics that are explicitly protected from discrimination, implement salary history bans in the recruitment process, and strengthen pay data collection, monitoring, and oversight.
• In an article published in the Brooklyn Law Review, Amy H. Soled of Rutgers Law School examines legislation aimed at closing the pay gap and argues that the U.S. Congress should take action. According to Soled, existing legislation is unable to eliminate wage discrimination because there is no single statute that addresses the systemic sexism in the labor market. Soled argues that Congress should follow the Icelandic model, requiring companies to show that their pay practices are nondiscriminatory or pay a penalty. Shifting the burden of proof to the employer through federal legislation, Soled contends, could create consistency across the states and narrow the pay gap.

IN THE NEWS

• The U.S. Supreme Court allowed New York to enforce a firearm law—passed in response to the Court’s decision in Bruen—that adds requirements for obtaining gun licenses and restricts carrying guns in more public places. The Court let the law remain in effect pending an appeal of a federal district court decision blocking the law. Justices Samuel Alito and Clarence Thomas commented that the law “presents novel and serious questions under both the First and Second Amendments,” but emphasized that a federal appellate court should address those issues first.
• The U.S. Food and Drug Administration (FDA) granted accelerated approval of the drug Leqembi to treat Alzheimer’s disease. The accelerated approval process allows FDA to approve conditionally drugs that address unmet needs and have been proven likely to benefit patients. Leqembi removes amyloid, a plaque-like substance whose presence in the brain is indicative of Alzheimer’s. A study found that use of Leqembi for 18 months led to a 27 percent reduction in the decline of patients’ cognitive ability. Maria Carrillo, chief science officer for the Alzheimer’s Association, called the approval a “milestone” for patients and their families, but Joy Snider, a professor at Washington University School of Medicine in St. Louis, cautioned that the drug is “not a cure.”
• The Centers for Medicare and Medicaid Services (CMS) announced its plan to implement a Medicare drug pricing negotiation program, which will set maximum fair price ceilings, as authorized by the Inflation Reduction Act. CMS intends to begin negotiating drug prices in 2023 and implement the new prices in 2026. The agency encouraged public feedback during the negotiating process. U.S. Department of Health and Human Services Secretary Xavier Becerra praised the action, stating that the agency will be “transparent and aggressive in implementation every step of the way.”
• The U.S. Department of Education proposed regulations to lower the cost of federal student loan payments for certain borrowers. The Education Department recommended these reductions to income-driven repayment plans, which tie monthly payment amounts to the borrower’s income level for a set number of years, after which any remaining debt is forgiven. The proposal increases the number of borrowers who will not be required to make any monthly payment and reduces the payment required from borrowers who do not meet this threshold by half. Education Department Secretary Miguel Cardona stated that the proposed regulations will allow borrowers to “focus on building brighter futures for themselves and their families.”
• The Federal Prisons Bureau proposed a rule that would update the inmate financial responsibility program, which encourages inmates to pay financial obligations including court ordered restitution, court fees, and child support while imprisoned. Although the program is voluntary, refusal to participate can result in consequences such as spending restrictions and loss of early release. The proposed rule includes updates such as adopting court-ordered payment plans as an inmate’s financial plan and removing an outdated policy that reserved $75 of the inmate’s funds a month for familial calls, which prisons now ensure are available to inmates without withholding funds from financial planning.
• FDA issued guidance on requirements for foreign food supplier verification programs governing the import of food into the United States. The guidance suggests that food importers should establish a list of approved suppliers by looking at history of FDA compliance and later verify foreign suppliers by auditing and sampling their food before importing it. According to FDA, these suggested guidelines are designed to ensure that any imported food meets federal regulations prohibiting adulteration and requiring accurate allergen labeling.
• The Federal Aviation Administration (FAA) ordered airlines to pause all flights for two hours due to a system outage. The FAA’s system alerts airports and pilots of hazards and changes in the national airspace. The pause caused over 1,000 flight cancellations and thousands of delays. U.S. Department of Transportation Secretary Pete Buttigieg said that a damaged database file caused the outage. Secretary Buttigieg also stated that there was “no evidence of a cyber attack” and that the agency will work to prevent future outages.
• The Department of Homeland Security released notice of a new parole process for Nicaraguan nationals seeking to enter the United States. The new process would provide some eligible Nicaraguan nationals advanced authorization to enter the United States before they undergo an evaluation for parole or temporary admission into the country. Eligibility criteria includes whether they have someone living in the United States who will meet certain national security considerations and provide financial support to them during the evaluation process. The Department designed this process to increase security at the country’s southwest border by allowing Nicaraguans a safer, more orderly passage of travel into the United States.

WHAT WE’RE READING THIS WEEK

• In an article in the Journal of the American Medical Association, Aaron S. Kesselheim, Jerry Avorn, and Arneet Sarpatwari, all professors at Harvard Medical School, argued that the United States’ high drug prices result primarily from FDA granting monopoly rights to manufacturers and posed several reforms. Kesselheim, Acorn, and Sarpatwari claimed that the United States’ drug prices are higher than other industrialized countries because drug manufacturers are able to designate drug prices for their own products. Kesselheim, Avorn, and Sarpatwari also pointed to patent exclusivity and automatic periods of at least 5 years before generics—the main marketplace competition for name-brand drugs—can be produced as causes for high drug prices. Kesselheim, Avorn, and Sarpatwari suggested that the most effective, yet idealistic, reform to the industry would be for the federal government to set drug prices for the marketplace.
• In an article in the Environmental Law Review, Rachael E. Salcido, professor at Pacific McGeorge School of Law, argued that the Clean Water Act provides regulatory tools for the federal government to address plastic pollution. The Act, Salcido explained, authorizes the government to set water quality standards, bolster existing water quality protections for plastic production, and increase pressure on states to strengthen plastic production oversight. Salcido noted that private citizens and environmental groups have filed lawsuits that highlight the remedial actions the government should take under the Act.
• In a forthcoming article in the Emory Law Journal, David A. Simon, Research Fellow at Harvard Law School’s Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics, argued that FDA should end its restrictions on drug manufacturers’ speech about unapproved uses for a drug. The current system, Simon explained, bars all speech discussing off-label uses absent two narrow exceptions. Simon proposed instead a sliding scale system where speech that is well-supported by evidence is subject to few restrictions, while less-supported statements receive more scrutiny. Simon contended that this evidence-based approach allows for a more effective regulatory framework than the current, less flexible model.

EDITOR’S CHOICE

• In an essay in The Regulatory Review, Luke Herrine, now a professor at the University of Alabama School of Law, argued that the Education Department had historically taken a minimalist approach to student debt forgiveness because some officials viewed student loans as a source of government revenue. Herrine explained that this thinking underlied the Education Department’s reluctance to forgive the debt of students defrauded by for-profit colleges even after Congress had provided the Education Department with this authority. Herrine contended that the Education Department needed to begin viewing student loans as a burden on individual borrowers, rather than as a potential revenue source.

What do Facebook, McDonald’s, and Shell all have in common? They, along with thousands of other corporations, have all pledged to achieve net-zero greenhouse gas emissions by 2050.

Many of these corporate pledges, however, are not worth the paper they are written on, worry some environmentalists and scholars. Given this concern, government agencies such as the U.S. Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) should take steps to hold companies accountable for their net-zero carbon emission goals, argues

Albert Lin, a law professor at the University of California Davis School of Law.

Lin recognizes that net-zero goals play an “increasingly important role in the battle against climate change,” yet warns that “indeterminate and varied” commitments will do little to speed up the transition toward renewable energy. A key problem is that net-zero pledges take on many forms—from binding, governmental commitments to aspirational statements of corporate policy. Furthermore, some companies intend to reach net-zero by relying solely on emission-free energy sources, whereas others plan to pay to remove carbon from the atmosphere to offset new emissions.

Lin explains that net-zero pledges face minimal regulatory oversight and companies seldom release public disclosures specifying how they intend to achieve net-zero carbon emissions. He finds it unsurprising that skeptics dismiss corporate net-zero pledges as little more than greenwashing—the making of exaggerated or false claims about climate initiatives.

Some critics go so far as to claim that net-zero pledges actually stymie the transition to renewable energy by allowing companies to deflect criticism and forestall other, more effective forms of regulation.

Lin urges the SEC to increase oversight of climate-related corporate disclosures. Federal securities law already requires publicly held companies to disclose information that a “reasonable shareholder would consider important in deciding how to vote” and separately mandates disclosure of the risks associated with climate change. The existing SEC disclosure requirements, however, do not capture future-oriented objectives such as net-zero goals.

Nonetheless, Lin says that heightened climate-related disclosure requirements could promote follow-through by making it easier for the public to hold companies accountable.

Lin points to a recent SEC proposal that, if adopted, would require companies to disclose their greenhouse gas emissions and emission reduction plans. Although disclosure requirements would not make net-zero pledges legally enforceable, they would facilitate standardized reporting, which in turn could help the public compare corporate pledges and distinguish between genuine commitments and greenwashing, he argues. Furthermore, Lin notes that when the public is aware that a company has not upheld a net-zero pledge, the associated reputational harm may threaten sales revenue or undermine the company’s ability to attract employees.

Lin argues that litigation also has a central role to play in enforcing corporate net-zero pledges. The Securities Exchange Act of 1934 makes it unlawful “to use or employ, in connection with the purchase or sale of any security … any manipulative or deceptive device,” including an untrue statement or omission of a material fact.

Although Lin recognizes that courts may be hesitant to hold companies liable under this statute for predictive or aspirational statements, he says that investors’ increasing interest in climate-related disclosures suggests that courts may start considering net-zero pledges material. Lin also underscores that companies can be held liable for forward-looking statements that were false at the time they were made.

Federal consumer protection laws offer another avenue through which agencies can pressure companies to uphold their net-zero pledges, Lin states. The Federal Trade Commission Act authorizes the FTC to prosecute “unfair or deceptive acts or practices in or affecting commerce.”

Although it remains to be seen how receptive the FTC will be to policing misleading or disingenuous net-zero pledges, Lin says that some environmental groups see consumer protection laws as a promising enforcement mechanism. For instance, environmental nonprofits recently filed a complaint with the FTC alleging that Chevron overstated its commitment to investing in renewable energy and limiting its fossil fuel pollution.

Lin observes that state consumer protection laws that prohibit unfair and deceptive trade practices may also prove effective in holding corporations accountable for their net-zero pledges. Vermont, for example, recently filed a complaint alleging that advertisements produced by multiple oil companies constituted unfair and deceptive trade practices.

Likewise, Massachusetts has alleged that Exxon Mobil’s deceptive greenwashing campaigns violated state consumer protection laws. These lawsuits, Lin contends, could “lay the foundation for future allegations that a company’s net-zero pledge constituted unlawful greenwashing or deceptive marketing.”

Although net-zero pledges have a “pivotal role” to play in accelerating the energy transition and combating climate change, Lin argues that such commitments must “constitute more than vague promises.” Enforcement mechanisms such as disclosure requirements, securities fraud, and consumer protection litigation have the potential to translate voluntary corporate pledges into meaningful emissions reductions, he argues.

Without greater enforcement, Lin warns, corporate pledges may remain mere empty promises.

The U.S. Supreme Court’s major questions doctrine has received a significant amount of both praise and criticism. Although some commentators praise the doctrine as a necessary pushback against executive “power grabs,” others scold it as a “deregulatory cudgel.” But no matter what one thinks of its merits, with the Court’s conservative 6-3 supermajority, the doctrine is here to stay.

Accordingly, scholars such as Christopher J. Walker of the University of Michigan Law School are now asking how best to integrate the doctrine into the system of government. In his recent article, Walker argues that Congress should adopt a new streamlined legislative process that would bypass some of the major obstacles to new legislation. As a result, this new procedure would allow lawmakers to respond swiftly to judicial decisions that invalidate agency rules under the major questions doctrine.

Walker contends that, in doing so, the legislative branch could mitigate the doctrine’s deregulatory effect and encourage Congress to become the decision maker on major policy questions that the Court envisions it to be.

In a series of decisions and most explicitly in West Virginia v. EPA, the U.S. Supreme Court introduced the major questions doctrine to the judicial mainstream. According to this doctrine, in matters with major political or economic significance, an agency can only claim the necessary delegation of rulemaking power if it has a “clear congressional authorization.”

Walker notes that agencies often will not be able to rely on textually broad statutory delegations when they wish to respond to urgent regulatory issues. As a result, many legal scholars expect that the major questions doctrine will significantly limit the federal agencies’ regulatory authority.

Walker points out that this immediate deregulatory effect is not necessarily the only outcome of the new doctrine. By requesting more specific delegations, the U.S. Supreme Court also calls on Congress to make the major policy decisions on its own instead of outsourcing them to the executive branch. He explains that Congress, however, will only be able to assume this role as a more active decision maker if it is capable of passing new legislation more readily.

Walker argues that currently this is not the case because of the many obstacles in the legislative procedure. “Vetogates,” such as the U.S. Senate’s filibuster, essentially require a “supermajority” to pass legislation. Lawmaking has become very time-consuming and difficult.

Walker proposes that Congress should create a new fast-track legislative procedure that would be applied if the courts invalidate administrative rules on the basis of the major questions doctrine. He sees this new concept as allowing Congress to respond quickly, empowering it to make more major policy decisions while it also lessens the deregulatory effect.

In Walker’s envisioned bill, instead of disapproving a new rule, Congress would authorize the agency to enact either a recently invalidated rule or to implement a substantially similar regulatory action by amending the agency’s governing statute. In this way, Congress would delegate powers with the level of specificity that the U.S. Supreme Court asks for.

According to Walker’s proposal, both chambers would pass these new delegations by using the same basic rapid response mechanism that Congress authorized with the CRA. Its streamlined lawmaking process is characterized by considerable procedural changes which remove some of the most notorious roadblocks in the Senate.

In particular, the CRA implements a committee discharge mechanism that prevents a vote from being delayed. In addition, the CRA provides that Senators waive all points of order and are neither allowed to propose amendments nor file delay motions. Finally, debates are limited to 10 hours. The effect is that the Senate becomes a filibuster-free zone.

Walker emphasizes that his proposed new process, modeled on the CRA, is only intended to be a supplement to the regular legislative process. To ensure this, he draws on another feature of the CRA. He proposes that Congress should limit the scope of legislation that can be passed to the specific regulatory issue that triggered the alternative legislative procedure. By doing so, neither party would have to worry that the procedure would be used to circumvent the regular legislative process, since Congress could not introduce additional amendments to the bill.

Walker concludes his paper with some remarks about the likelihood that his idea will get bipartisan support in Congress. After all, only if his CRA-like procedure gets enough bipartisan support could it survive the same roadblocks it seeks to limit.

Although he admits that some Republican legislators may welcome the major questions doctrine’s deregulatory effect that his proposal wants to abate, he makes the case that his idea could still be attractive to conservative lawmakers.

He notes that many Republican lawmakers have declared their support for a Congress that takes on more responsibility for policy setting. He argues that for these legislators, his idea should be appealing as it would empower them to make more of the value judgments needed to guide administrative action.

In addition, Walker reasons that his proposed legislation would give the major questions doctrine some statutory recognition and thereby strengthen its overall legitimacy. In his opinion, this could also be appealing to Republicans.

Whether Walker’s proposal will gain traction on Capitol Hill remains to be seen. If it does, it may have the potential to provide the framework for a legislative response to the new doctrine that seeks to reconcile democratic accountability with regulatory flexibility.

In the recent West Virginia v. EPA decision, the U.S. Supreme Court ruled that the U.S. Environmental Protection Agency (EPA) could not rely upon certain provisions of the Clean Air Act to regulate greenhouse gas emissions. According to some observers, this decision has created a major obstacle for federal climate regulation and set the stage for future conflict between courts and federal regulators.

In a recent article in the Yale Journal on Regulation, Mark Nevitt, a professor at the Emory University School of Law, claims that the federal government can pursue other paths to achieve climate regulation in spite of the Supreme Court’s skepticism of EPA authority under the Clean Air Act.

To avoid the problems posed by the Court’s “nondelegation” doctrine—a legal principle that limits the legislature’s ability to give agencies rulemaking authority—Nevitt suggests that President Joseph R. Biden could exert his powers under Article II of the Constitution to address climate as a matter of foreign affairs and national security.

Nevitt grounds his argument at the outset in recent developments related to the nondelegation doctrine that pose a particular problem for climate regulation. Although courts have not employed the nondelegation doctrine to strike down a regulation since the New Deal era, Nevitt points to Justice Neil Gorsuch’s dissent in Gundy v. United States as evidence that members of the Court may soon revive their use of the nondelegation doctrine.

In his Gundy dissent, Justice Gorsuch proposed doing away with an old test for excessive congressional delegations based on whether legislation contains an “intelligible principle” constraining agency discretion—a standard that gives Congress wide latitude to delegate power to agencies. Nevitt explains that so long as an intelligible principle exists, the Court will find the law and the agency’s ensuing regulation to be constitutional.

Nevitt describes Gorsuch’s new proposed test as creating three guidelines to determine whether Congress’s grant of regulatory authority to the executive branch is constitutional. First, Congress may allow agencies to fill in the details of legislation, provided Congress grants authority that is “sufficiently definite and precise.” Second, Congress can delegate authority contingent upon the executive branch making factual findings necessary to implement laws. Third, Congress may delegate powers that are “non-legislative,” and thus already belong to another branch of government.

Although Gorsuch’s proposed test is not law, Nevitt notes that it could soon be adopted by a majority of the Court. Chief Justice John Roberts and Justice Clarence Thomas joined Gorsuch’s dissent. In addition, Justice Samuel Alito indicated in a separate concurrence in Gundy that he would support overturning the intelligible principle test. Justices Brett Kavanaugh and Amy Coney Barrett—not members of the Court at the time of the Gundy decision—also seem willing to adopt a stricter nondelegation test, thus creating the majority necessary to alter the doctrine.

Nevitt argues that Gorsuch’s concurrence in Gundy, combined with the majority’s opinion in West Virginia, points toward an “uncertain” future for regulatory agencies.

In spite of this uncertainty, Nevitt contends that certain parts of the Clean Air Act give the executive branch the power to regulate emissions that cause cross-border pollution. According to Nevitt, these provisions would provide a more promising outlet for climate action because they relate to the executive branch’s Article II powers over national security and foreign relations—contexts in which the Court has been more deferential to the executive branch.

The primary strategy Nevitt outlines is to use Section 115 of the Clean Air Act to avoid nondelegation challenges. Section 115 grants EPA authority to order U.S. states to reduce their emissions if those emissions cause international air pollution, Nevitt claims. This strategy would differ from the Clean Power Plan, for example, which attempted to regulate emissions under Clean Air Act provisions governing pollutants that cause domestic harms.

Nevitt furthermore contends that Section 115 would better withstand legal challenges on nondelegation grounds because Section 115 invokes the executive branch’s constitutional authority over national security and foreign affairs. Because of the executive branch’s separate authority over foreign affairs, Nevitt reasons that Section 115 would also withstand the third guideline from Justice Gorsuch’s Gundy dissent.

According to Nevitt, using Section 115 for climate regulation would require EPA to take two important steps.

First, EPA would need to make what is called an endangerment finding. Nevitt explains that this finding would require EPA to find that greenhouse gas emissions harm public health or welfare in another country—similar to the endangerment finding that EPA made domestically in 2009 that carbon dioxide pollution threatens the public in the United States.

Following an international endangerment finding, EPA would then need to make a “reciprocity determination.” The reciprocity determination requires EPA to demonstrate that the other country that is threatened by climate change provides the United States with the same rights that the United States provides to other countries via Section 115. In theory, both the Clean Air Act and the Paris Climate Accord provide the necessary foundation for such a reciprocity finding, although Nevitt concedes this conclusion remains untested in the courts.

Following an international endangerment finding and reciprocity determination, EPA would then have the authority to force states to reduce their greenhouse gas emissions, Nevitt contends.

Nevitt also examines some other approaches to justifying climate regulation on foreign affairs and national security grounds. For example, he suggests that the U.S. Department of Homeland Security could use its official Climate Action Plan to take action to address climate change should the agency make the connection between climate change and immigration trends on the southern border.

Nevitt concludes that, in spite of the threat the nondelegation doctrine poses to climate action, linking such action to the President’s authority under Article II of the constitution would provide an alternative roadmap for successfully adopting federal climate policy.