Settlement plays an important role in resolving agency enforcement proceedings, yet settlement agreements are often not easily accessible to the public or regulated entities. There is no online centralized database of settlements in agency proceedings. Furthermore, agency practices vary considerably in making settlements available on their websites.

To address these reporting inconsistencies and help guide agencies in developing policies, the Administrative Conference of the United States (ACUS) last December adopted recommendations that include factors for agencies to consider for posting settlements online and how settlements can be more easily accessible on agency websites.

Federal agencies resolve a vast number of enforcement proceedings through settlements. Settlements allow agencies to resolve disputes more efficiently, conserving agency resources and obtaining more expeditious relief for the public.

Although settlement is a common agency practice, settlements widely differ across agencies with respect to the purposes they serve, the types of settlements agencies enter into, and the counterparties involved. Agencies’ unique enforcement missions and authority contribute to differences in agency settlement practices and their approaches to posting settlements online.

Generally, agencies are not required to proactively post settlement agreements online under the Freedom of Information Act (FOIA) and other disclosure laws. Instead, agency settlements are typically required to be disclosed under FOIA pursuant to a request.

Many agencies, however, choose to proactively provide access to settlements on their websites. Because agencies exercise discretion about whether to proactively post settlements on their websites, agency practices vary considerably in the amount of settlement information they post online.

To better understand agency practices, I visited a representative sample of agency websites to assess what settlement information is available online and how easy it is to find settlements on an agency website and drafted a report of my findings. I found that some agencies provide comprehensive, well-organized information about settlements, while others provide little to no information at all online.

In addition, I conducted interviews with various stakeholders—including individuals from agencies, regulated entities, and the public—to understand different perspectives about making settlements available online. In these interviews, stakeholders identified many important benefits of making settlements available online and others raised concerns about online disclosure.

To guide agencies as they consider policies for posting settlements online, ACUS recently adopted recommendations encouraging agencies to develop policies that recognize the benefits of proactively disclosing settlement agreements on agency websites and balance those benefits with concerns about online disclosure.

ACUS recommends that, when developing their policies, agencies consider the benefits to regulated entities of posting settlements online as well as the value such posting provides to the public interest. Settlements transmit important information about how agencies approach enforcement and their interpretation of the laws and regulations they enforce. Regulated entities rely on agency settlements to guide them in the formulation of their practices and policies. Attorneys who represent clients in agency proceedings consider past settlements in advising their clients and advocating for them in settlement negotiations.

Furthermore, online access to settlements empowers the public to evaluate how agencies enforce the law and use public funds in such enforcement. In addition, transparency about settlements by providing information online guards against potential bias in enforcement.

Other factors in ACUS’s recommendations include considering how to provide information about settlements online when there are privacy interests involved or when disclosure may undermine settlement efforts or require significant agency resources. In those instances, ACUS recommends that agencies consider whether online disclosure, even after redaction or anonymization, would adversely affect sensitive or legally protected interests.

Agencies should also consider whether providing settlements online would impose significant administrative costs on the agency or, conversely, whether doing so would preserve agency resources by reducing the volume of FOIA requests if settlements could be directly accessed online.

The ACUS recommendations guide agencies on how to provide information about settlements online even if the agency chooses not to post every settlement. Agencies should consider, in those circumstances, providing settlement information online through alternative methods. These alternative methods include posting settlement agreement templates, representative samples of settlement agreements, selections of settlements with significant legal or factual issues, settlement summaries, or descriptions of settlement trends. Furthermore, agencies should consider posting a searchable online database that provides information about settlement agreements such as case types, dates, case numbers, parties, and key terms.

Agencies should also consider whether the design and functionality of their websites facilitate easy access to settlement information online. ACUS recommends that agency websites have a webpage dedicated to agency enforcement that is easily accessible from the agency’s homepage through a search engine, menu bar, and site index. Furthermore, agencies should consider creating a webpage for individual enforcement proceedings, such as a docket page, that includes links to any associated enforcement materials.

The ACUS recommendations build upon a long line of guidance calling on agencies to both make more information available to the public and use their websites to facilitate and promote meaningful, ready public access. The ACUS recommendations on the public availability of settlements offer agencies helpful guidance in designing their policies to provide greater public transparency and guidance in a more comprehensive and easily accessible manner online.

Agency appellate review of adjudication decisions by administrative law judges (ALJs) has long been a central feature of federal administrative law. The Administrative Procedure Act of 1946 reflects its centrality by empowering an agency head to decide a case on appeal without deferring to an ALJ’s initial decision. As the Supreme Court suggested two years ago in United States v. Arthrex, appellate review by a presidentially appointed, Senate-confirmed principal officer may, in some adjudication systems, even be a constitutional imperative.

Agencies decide a lot of appeals and, in doing so, they write a lot of appellate decisions—many of them similar in form and length to judicial decisions. A typical agency issues hundreds of decisions each year. Mass adjudication appellate tribunals such as the Board of Immigration Appeals, Social Security Administration’s (SSA) Appeals Council, and the Board of Veterans’ Appeals (BVA) issue tens of thousands. Last year, the BVA issued nearly 100,000. All the U.S. Courts of Appeals, by contrast, decided about 50,000 appeals.

Although agency appellate review can be structured in multiple ways, by statute or regulation, two structures are most prevalent. In the first, agency heads decide appeals of hearing-level decisions themselves. This structure is most common at multi-member boards and commissions. In the second, the agency head delegates review authority to an appellate tribunal, which issues a final decision for the agency, subject to infrequently exercised discretionary review authority by the agency head. This structure is most common in cabinet departments.

Agencies’ appellate decisions prompt numerous questions: What legal status do all these decisions enjoy? Do they bind agency adjudicators in future cases? Are they, in a word, precedential? If not all, which ones? By what criteria do agencies treat only some decisions as precedential? By what procedures? What objectives might precedential decision-making serve?

It turns out that the administrative state, in marked contrast to the federal court system, has never really reckoned with these and related questions in any systematic way.

As a result, the Administrative Conference of the United States (ACUS) engaged us to study precedential decision-making in agency adjudication as a follow-on to an earlier study that two of us (Walker and Wiener) conducted for ACUS on agency appellate systems generally. That earlier study resulted in a 2020 ACUS recommendation, discussed previously in The Regulatory Review.

To study precedential decision-making in agency adjudication, we began with a conventional definition of our subject: A decision is precedential when it announces a decisional rule that binds agency adjudicators in future cases until it is overruled. Lawyers will often call a decisional rule a “holding.” An agency decision can be precedential whether it take the form of a broad policy pronouncement implementing a statute that might have been issued as a regulation, a narrow technical interpretation of a statute or regulation, or something in between.

Bindingness means different things depending on where adjudicators sit in the agency hierarchy. Hearing-level adjudicators must always follow a precedential decision. Those who fail to do so face certain reversal on appeal and even administrative sanctions. The agency itself—that is, usually its head or the head’s delegate—must also follow a precedential decision, but with one important difference: The agency may always overrule or modify the decision so long as it acts consistent with statutory and regulatory law and adequately explains its reasoning.

We conducted in-depth reviews of nearly twenty agency appellate systems. Independent agencies and cabinet departments were represented in roughly equal numbers. Every high-volume adjudication system was included. We reviewed, among other things, each agency’s rules and other publicly available information. We also interviewed, in most cases, the top officials at each system.

What we found, unsurprisingly, is that agencies vary enormously on how they approach precedent. Some agencies treat all of their appellate decisions as precedential. Others follow the model of the U.S. Courts of Appeals and treat some decisions as precedential and other (usually many more) decisions as non-precedential. Two high-volume agencies, the SSA and BVA, treat none of their decisions as precedential; instead, they rely on detailed regulations and guidance documents to supply decisional rules.

Such procedural variation is a common and inevitable, if not desirable, feature of the administrative system.

We also found, surprisingly and less desirably, that many agencies have given little thought to precedential decision-making. Many agencies’ procedural rules say nothing about precedent, and their decisions do not indicate whether they are precedential. The rule-driven practices of U.S. Courts of Appeals offer a stark contrast.

Our study underlies ACUS’s December 2022 recommendation Precedential Decision Making in Agency Adjudication. Directed to all federal agencies, it should help address the shortcomings we identified. It should also help agencies identify exemplary and innovative practices adopted by some agencies.

Like our report, ACUS’s recommendation does not tell agencies whether they should treat any, all, or some of their decisions as precedential. We see no one right answer to this question that could be given confidently at every agency. Adjudicative systems vary too much to expect cross-agency uniformity.

Instead, the ACUS recommendation identifies the considerations that should inform an agency’s answer. These considerations include “the extent to which” an agency writes its decisions in a manner that would make it useful precedent for other adjudicators, decides cases that “mainly concern only case-specific factual determinations” in reliance on well-established policies rather than establishing policies themselves, and decides “such a large volume of decisions that adjudicators cannot reasonably be expected to identify those which should control future decisions.”

For agencies that choose to treat only some of their decisions as precedential, as many do under the model of the U.S. Courts of Appeals, the ACUS recommendation identifies specific criteria to inform agencies’ choice. They include whether a decision addresses an “issue of first impression,” clarifies points of law that have “caused confusion” among adjudicators and practitioners, highlights decisional rules that adjudicators overlook or apply inconsistently, or accounts for changes in statutes or regulations.

Precedential Decision Making also identifies potential processes and procedures for agencies’ consideration. They include soliciting the views of adjudicators who did not participate in a decision as to whether it should be designated as precedential, allowing parties and the public to suggest precedential designation of decisions, and singling out specific issues in cases to address in a precedential decision.

Like other ACUS recommendations, Precedential Decision Making seeks to make agency adjudicative materials more accessible, understandable, and transparent. To this end, it recommends that agency websites and public-facing documents clearly distinguish between precedential and non-precedential decisions and identify when a precedential decision has been overruled or modified. It also recommends, relatedly, that when an agency departs from a precedent, it do so explicitly by overruling or modifying it.

Responding to a key shortcoming we identify above, Precedential Decision Making recommends that agencies disclose several key features of their adjudication systems in procedural rules, such as whether their decisions are precedential. And if only some are precedential, agencies should disclose who designates them as precedential, by what criteria, according to what procedures, with what public input, and to which legal effect. Too many agencies leave these and important matters unaddressed in their procedural rules. Precedential Decision Making is one of several ACUS recommendations that seek to address the lack of transparency over agency adjudication.

As the recommendation’s preamble notes, effective use of precedential decision-making along the lines that ACUS suggests can help “ensure” decisional “consistency, predictability, and uniformity.” It is not, however, the only mechanism for doing so. Rules, quality assurance reviews, and other bureaucratic mechanisms can also help. But precedential decision-making remains the predominant one. Agencies that choose to use a system of precedential decision-making will surely find in ACUS’s recommendation invaluable best practices for making their adjudication systems more efficient, transparent, and consonant with basic norms of administrative justice.

The Administrative Conference of the United States (ACUS) is an independent federal agency that recommends improvements to administrative and regulatory processes. To inform its recommendations, ACUS sponsors research about administrative government and then twice each year convenes experts from the public and private sectors for their input and deliberation

At its most recent plenary session, held last December, ACUS adopted three recommendations. These recommendations address the use of agency precedents in administrative decisions, the public accessibility of agency settlement agreements, and the use and public availability of agency enforcement manuals.

The Regulatory Review invited experts who participated in developing these recommendations to share their insights about each recommendation’s importance for improving administrative government. The three ACUS recommendations highlighted in this series aim to improve public access to agency decision-making and to increase fairness in agency enforcement.

This series features contributions from: Elysa M. Dishman, Brigham Young University; Jordan Lee Perkins, Columbia University; Christopher J. Walker, University of Michigan; Melissa F. Wasserman, University of Texas at Austin; and Matthew Lee Wiener, University of Pennsylvania.

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Precedent in Agency Adjudication

June 5, 2023 | Christopher J. Walker, University of Michigan, Melissa F. Wasserman, University of Texas at Austin, and Matthew Lee Wiener, University of Pennsylvania

Agencies should adopt rules that disclose key features of their adjudication systems, including whether their decisions are precedential.

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Public Availability of Settlement Agreements

June 6, 2023 | Elysa M. Dishman, Brigham Young University

Agencies should consider both the benefits to regulated entities of posting settlements online and the value such posting provides to the public.

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Agency Enforcement Manuals

June 7, 2023 | Jordan Lee Perkins, Columbia University

Agencies can enhance fairness, efficiency, and transparency by improving their enforcement manuals.

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Citing a 69 percent increase in child labor violations by companies since 2018, the U.S. Department of Labor and the U.S. Department of Health and Human Services (HHS) announced in February the creation of an interagency task force to ramp up enforcement of child labor laws. This announcement came days after a report by The New York Times revealed that children, many of whom are immigrants, are being illegally employed in businesses across the country.

Meanwhile, some states have recently signaled interest in rolling back child labor protections by introducing bills that would lift restrictions on hazardous work, apply a subminimum wage to youth, and extend working hours.

These contradictory developments at the federal and state levels of government have ignited a debate about the extent to which child labor laws protect children or, alternatively, impede the right to work and obstruct parental choice.

At the federal level, the Fair Labor Standards Act of 1938 (FLSA) and subsequent Labor Department regulations govern the permissible conditions for child labor. The Wage and Hour Division of the Labor Department enforces these requirements.

Under the FLSA, the minimum age for employment has been set at 16 years. This means that 16-year-olds can work unlimited hours in any occupation, except for those that the Secretary of Labor has declared hazardous. 14- and 15-year-olds, by contrast, may work only outside the school day and for limited hours. Children under 14 may not work in non-agricultural occupations, with exceptions for certain jobs such as acting.

Agricultural occupations face fewer child labor restrictions under federal law, as children as young as age 10 may work on farms.

Proponents of stricter child labor regulations argue that current rules do not deter businesses from employing children. At present, the maximum civil penalty for a violation is $15,138 per child, which Labor Department and HHS argue is “not high enough to be a deterrent for major profitable companies.” Furthermore, the use of third-party staffing agencies allows companies to sidestep accountability.

Some advocates for stronger regulations also criticize the FLSA’s dearth of protections for children working in agriculture, who face risks of musculoskeletal injury, heat stress, and pesticide exposure. Experts emphasize that, under the current regulatory framework, children in both agricultural and non-agricultural occupations face injury, endure exploitation, and experience obstacles to education, including a higher rate of dropping out of school.

Supporters of loosening regulations argue that the greater threat to youth stems from the loss of their economic potential, because work restrictions deprive them of formative experiences and skill development. Some proponents of deregulation also argue for the suspension of regulations, such as work permits, on the grounds that they obstruct parental choice. Furthermore, some commentators view younger workers as a solution to the national labor shortage. Because youth may work for lower pay and be less likely to unionize, employers might favor hiring teenage workers.

Some members of Congress have urged the Labor Department to use the FLSA to block shipments from factories found to violate child labor laws. To reduce or eliminate child labor altogether, experts have proposed implementing social protection programs such as cash transfers, which provide support to economically vulnerable households. Experts have also suggested monitoring supply chains using blockchain.

In this week’s Saturday Seminar, The Regulatory Review summarizes work of scholars and advocates who offer different perspectives on how policymakers should modify child labor regulation in the best interest of children.

• In a report issued by the Economic Policy Institute (EPI), two EPI researchers, Jennifer Sherer and Nina Mast, argue that feeble child labor protections are failing children at both state and federal levels. Sherer and Mast explain that over the past two years at least ten states have even chosen to weaken child labor protections, pushed by the influence of industry groups and in asserted contradiction of federal standards. To protect children from harm and exploitation, Sherer and Mast recommend that Congress and states enact policies that strengthen labor protections by protecting the right to organize, improve enforcement mechanisms through increased funding, reform immigration policy to protect migrant youth, and remove exemptions for employment in agriculture.
• The FLSA should protect children who work in agriculture, explain Taylor J. Arnold of Wake Forest School of Medicine and several coauthors in a study published in 2021 in the journal New Solutions. Drawing on interviews and surveys of Latinx child farmworkers in North Carolina, Arnold and coauthors found that many of the child workers surveyed believed they could “get used to” pain and sickness resulting from workplace hazards such as pesticides, excessive heat, and muscle soreness. The authors advocate regulations that address structural barriers, including harmful immigration policies, that prevent Latinx youth from accessing health care, reporting injuries, and choosing employment.
• In an article in Globalizations, Emily Reid-Musson of St. Francis Xavier University, Kendra Strauss of Simon Fraser University, and Meaghan Mechler of the University of Guelph explore how rural constituent ideologies about work ethic relate to gaps in federal child labor rules for agriculture. Reid-Musson, Strauss, and Mechler argue that geographical imaginations about work ethic are deeply held within agrarian communities. These ideas are sometimes mobilized, Reid-Musson, Strauss, and Mechler explain, to hamper regulatory efforts. Following opposition from the farm sector in 2012, the Labor Department withdrew a proposal to limit hazardous work activities performed by youth in agriculture. As a result, Reid-Musson, Strauss, and Mechler highlight that child agricultural labor rules under the FLSA have remained stagnant since the 1960s.
• In an article published in the University of Pennsylvania Law Review, attorney Marina A. Masterson criticizes the lack of labor protections for child social media entertainers, who she terms “kidfluencers.” Although these children represent an $8 billion industry and generate advertising revenue by creating content on their social media platforms, states have not enacted social-media-specific labor protections. Due to their earning potential, however, kidfluencers risk the loss of privacy, school absences, and financial exploitation, Masterson argues. To ensure that children are protected, Masterson recommends that state policymakers enact financial protections for children, such as by requiring the use of blocked trust accounts where 15 percent of children’s wages would be deposited until they turn 18. In addition, Masterson suggests that regulators should balance protecting children with affording parents the right to raise their children free from government intervention.
• Alli Fick and Haley Holik of the Foundation for Government Accountability (FGA) recommend in a white paper that state regulators should uphold parental decision-making by eliminating youth work permits. Youth work permits require teenagers to obtain permission from a designated officer in their school district before being eligible for employment. Fick and Holik argue that, without the obstacle of these permits, teenagers could help solve the national labor shortage by providing a pool of employees to struggling businesses. Furthermore, Fick and Holik assert that teenagers want to work. In 2021, 32 percent of teenagers were employed, representing a record high. Because existing safety regulations protect teenage workers, parents should be the ultimate deciders of whether their teenager can work, Fick and Holik argue.
• Information campaigns on goods made using child and forced labor can be effective in reducing exports of those goods to developed countries, finds Margaryta Klymak of the University of Oxford. In an article in World Development, Klymak investigates the efficacy of naming-and-shaming as a means to reduce imports of child labor, focusing on the List of Goods Produced by Child Labor or Forced Labor published by the U.S. Labor Department. Klymak examines how the public reacts to information about labor rights violations in the production of goods and how shifts in consumer sentiment can affect aggregate trade flows between countries. She also provides information about child and forced labor violations for specific goods. Klymak’s findings support concerns that the Labor Department’s list yields only statistically significant results for goods produced in the manufacturing sector, with no effects observed for agricultural or mining products. Klymak calls for further research into whether such a campaign reduces the number of child workers in different geographical areas.

IN THE NEWS 

• Minnesota Governor Tim Walz signed a bill into law that legalizes recreational marijuana for adults and automatically removes non-felony cannabis convictions from criminal records. Under the new law, individuals may possess up to two pounds of marijuana at home and two ounces in public without penalty after the bill takes effect on August 1. The bill also creates a new business licensing program for cannabis retailers and establishes a Cannabis Expungement Board to review cannabis-related felonies. Governor Walz emphasized that “expunging or resentencing cannabis convictions will strengthen communities.”

• A South Carolina state trial court temporarily blocked the state’s new abortion law banning most abortions at around six weeks of pregnancy. The judge’s decision was issued a day after South Carolina Governor Henry McMaster signed the bill into law. The judge ordered that the case be transferred and that “the status quo should be preserved while the South Carolina Supreme Court resolves this case.” Although Jenny Black, president of Planned Parenthood South Atlantic, called the decision a “welcome reprieve from this dangerous abortion ban,” Gov. McMaster responded by filing an emergency petition requesting that the state Supreme Court expedite its consideration of the case.

• The Texas House passed a bill authorizing the Texas Secretary of State to impose state “administrative oversight” of Texas counties in response to complaints about purportedly recurring election administration or voter registration issues. Because the legislation would apply solely to counties with populations of over 4 million people, it is expected to impact only Democratic-leaning Harris County. In light of recent voting count controversies in Harris County, Texas GOP Senator Paul Bettencourt, author of the bill, stated that the bill will restore voter trust in Harris County elections. Opponents expressed concerns that this bill will allow Republicans to exert influence over elections for partisan gain. 

• The U.S. Food and Drug Administration (FDA) issued a notice of proposed rulemaking to create a standardized, one-page medication guide entitled “Patient Medication Information” (PMI) for all prescription drugs intended for outpatient use. If the rule is finalized, every patient prescribed medication would receive a PMI document that lists the drug’s name, uses, side effects, safety information, and directions for use. FDA explained that the proposed easy-to-understand format is intended to reduce medication misuse, facilitate translation to other languages, and enable AI to more effectively analyze drug information. FDA Commissioner and physician Robert M. Califf stated that standardized PMI is designed to address one of the agency’s top priorities, which is “to combat our nation’s crisis with health care misinformation and disinformation.”

• The U.S. Department of Energy issued a final rule to raise energy efficiency standards for air conditioners under the Energy Policy and Conservation Act. The standards are estimated to increase overall energy savings by 12 percent and will take effect in 2024 for portable air cleaners and 2026 for room air conditioners. The Energy Department concluded that, over thirty years, the new standards should reduce carbon dioxide emissions by more than 100 million metric tons and generate health benefits worth up to $4.5 billion by reducing air pollutants. The Energy Department expects the rule to save households that purchase new air conditioners about $150 in energy costs over the lifetime of the appliance.

• The Connecticut State Senate passed a bill that aims to strengthen the ability of the state’s Public Utilities Regulatory Authority (PURA) to manage rising utility costs. The bill would switch Connecticut to a performance-based utility state compensating utility providers based upon the quality of the utility service they provide rather than the amount of money they spend in providing the utility. Proponents of the bill argue that it is a necessary measure to prevent the state’s utilities from exploiting consumers and to ensure that the costs of lobbying and marketing are borne by the utility company’s shareholders, not ratepayers. Opponents of the bill argue that the regulatory environment for utilities in Connecticut has “arguably become one of the worst in the United States.”

• The Department of Energy issued an interim final rule that amended the regulations guiding implementation of the loan guarantee provisions established by the Energy Policy Act of 2005. The rule both applies certain provisions of the Inflation Reduction Act of 2022 and establishes new regulations to facilitate loans for the revitalization of existing energy facilities with clean energy or energy efficient technologies as part of the Energy Infrastructure Reinvestment Program. The interim final rule also clarifies guidance around how potential applicants can use the existing loan program to support other project types discussed in the Inflation Reduction Act. The Energy Department explained that the interim final rule, which is now open for public comment, is necessary to facilitate disbursement of $290 billion in loan guarantees before the statutory expiration of 2026.

• The National Highway Transportation Safety Administration (NHTSA) issued a notice of proposed rulemaking that would require automatic emergency braking systems on all light trucks and passenger cars. These braking systems are designed to use sensors to detect when a crash is imminent and apply the brakes if the driver has not done so. NHTSA estimates that the rule may save more than 300 lives and prevent more than 24,000 injuries a year. Transportation Secretary Pete Buttigieg stated that “requiring automatic emergency braking on cars and trucks would keep all of us safer on our roads.” 

WHAT WE’RE READING THIS WEEK

• In a recent working paper, William H. Widen of the University of Miami School of Law and Philip Koopman of Carnegie Mellon University suggested that a new legal category, “computer driver,” should be created to enable the law to respond to the development of automated vehicles without blurring the distinction between areas of federal and state regulation. Widen and Koopman explained that, traditionally, federal regulations covered equipment while state regulations covered drivers. Widen and Koopman argued that by designating automated vehicles as “computer drivers,” these cars would be treated as human drivers under the law, which could both enhance plaintiffs’ ability to make negligence claims against computer drivers and encourage manufacturers to strengthen the safety of their automated vehicles. 

• The Government Accountability Office (GAO) released a report on the widespread use and effects of noncompete agreements, which the Federal Trade Commission recently announced it will seek to ban nationwide. GAO estimated that more than a third of workers nationally have signed noncompetes at some point in their careers. Although GAO found that a substantial majority of workers do so as a condition of employment, few negotiate any terms before signing. GAO concluded that noncompetes reduce job mobility and lower wages for most non-executive employees, even when not enforced. GAO also cited studies finding that strong enforcement of noncompetes may intensify racial and gender wage disparities among lower-wage workers.

• In a Brookings Institution report, Joshua P. Meltzer, a senior fellow in Brookings’ Global Economy and Development Program, argued that the United States must create its own comprehensive system of AI regulation before it can lead international efforts to regulate AI. Meltzer emphasized that, despite recent discussion among world leaders about the need for AI regulation, including at the G7 summit, no coordinated measures have been taken. Meltzer concluded that the United States must establish its own AI regulation framework to provide a model for the rest of the world and to serve effectively as a world leader on AI regulation. 

EDITOR’S CHOICE

• In an essay in The Regulatory Review, Richard Briffault, a professor at Columbia Law School, argued that the increasing politicization of elections in the United States has led states to respond to local voter turnout efforts with restrictive legislation. Briffault noted that, although the role of states in running elections has increased after the 2000 presidential election, the operational success of the 2020 election was due largely to the work of local election officials in their efforts to make voting easier. Briffault also found that these efforts were met by state legislatures’ adoption of state laws that interfere with local election administration, resulting in litigation between state and local officials. 

As artificial intelligence (AI) continues to revolutionize health care, the need to protect personal health data has become increasingly crucial. But intervening attempts to protect personal health data may also slow health care AI development.

Society can establish a new balance between technological progress and data protection to protect personal health data without disrupting innovation. In a recent article, law professor W. Nicholson Price II explores the complex relationship between increased privacy protections and health care AI, offering a unique perspective on achieving a balance that may allow for both AI innovation and personal privacy.

AI-created privacy problems are rapidly evolving. Price discusses a new AI-created privacy issue: AI’s ability to find patterns in seemingly disconnected data may unintentionally reveal information never meant to be revealed. Price illustrates this problem through a real-world example of a large corporation whose AI analyzed shopping habits to infer pregnancy status—an observation unlikely to be made by human analysts.

Price also demonstrates how AI weakens mechanisms, such as deidentification, used to protect medical data to establish AI’s impact on medical privacy. Deidentification, Price points out, is a commonly used method of protecting medical privacy by removing identifiers from private information. The governing legal rule for health data privacy, the Health Insurance Portability and Accountability Act (HIPAA), only oversees identifiable health information and carves out a safe harbor for deidentified information.

By stripping the listed identifiers, users of health data can avoid HIPAA oversight. And AI is capable of doing just that. With enough computing power, AI can reidentify anonymous data. It can also make sophisticated guesses about a person’s non-health data.

AI has reduced the effectiveness of this deidentification, argues Price. He notes that researchers have used AI to reidentify “substantial majorities” of patients using deidentified information.  Even as AI can reduce medical privacy, however, AI can use its ability to process large amounts of data to increase medical privacy by deidentifying highly specific health information that, before AI, was too costly to deidentify—allowing it to be used for research without revealing the patient’s identity.

The competition between increasing and decreasing privacy—and the resulting arms race between stronger privacy protections and AI that can defeat those protections—creates an  “ongoing dysfunction” that informs Price’s recommendation for a new understanding of health privacy.

Even as AI may create problems for medical privacy, medical privacy can cause problems for AI. Price discusses how increased medical privacy can slow down AI development by making health datasets more expensive to use, less accurate, and even more difficult to create.

Many modern health and patient care products, such as telemedicine applications and patient and diagnostic tools, use AI, and the U.S. Food and Drug Administration has approved hundreds of AI-related products in the past few years. Although these products are creating new diagnostic, treatment, and organizational protocols, Price summarizes the privacy hurdles that stymy their more rapid development, such as privacy-protective regulatory burdens, dataset inaccuracies, and trust issues that harm data gathering efforts.

Developing accurate AI requires the use of large volumes of data. But removing identifiers from data to make them HIPAA-compliant decreases its usefulness for AI development because it becomes more difficult to develop accurate models. Sometimes, when long-term health records are required for AI training, privacy regulations make it challenging to connect data points to form a coherent long-term record. Price concludes that these hurdles increase AI development costs, slowing progress.

Biases in AI training datasets are another significant concern for health AI developers. Although some bias is inevitable, Price argues that privacy protections increase bias by raising data gathering costs, leading to less accurate datasets. Increased privacy protections can increase the cost of obtaining patient authorization and consent. As a result, only a small subset of hospitals share their data with health AI developers and other health care researchers.

These hospitals—ones with substantial resources, Price notes—tend to be academic institutions in urban areas and not rural hospitals or community health centers. But when health AI trained only on urban data is applied in a rural setting, the AI can perform worse, such as in the case of IBM’s Watson for Oncology.

Price demonstrates this worsened performance with the example of IBM’s Watson for Oncology, a health AI tool meant to improve cancer care. Watson for Oncology learned from data from the well-resourced Memorial Sloan Kettering Cancer Center in New York. But IBM chose to shelve Watson Health after data audits showed that the AI offered flawed treatment recommendations due to its geographically limited training datasets.

Price discusses a follow-up study that discovered how health AI datasets seemed to be “disproportionately trained on cohorts from California, Massachusetts, and New York, with little to no representation from the remaining 47 states.” AI trained on these datasets reflect the disproportionalities in the flawed data, causing AIs to encounter issues or perform poorly once applied to data from these underrepresented areas.

The data-gathering process itself can also cause bias issues, Price elaborates. Different populations have varying levels of willingness to allow their data to be used for research. Price argues that “the long history of systemic racism and prejudice that exists within the health system” has damaged trust in the health care system. This systemic mistrust increases the difficulty of gathering diverse data. As a result, health-related AI can be demographically unbalanced, leading to further bias.

AI’s ability to identify patterns in datasets can also introduce bias. Price illustrates this ability with an example of smartphones with differing privacy protections. Smartphones with more restrictive privacy protections tend to be more expensive, leading to demographic differences from users of cheaper phones. AI trained on data just from the more expensive smartphones may be less accurate when applied to data collected from users of the cheaper smartphones.

Price finishes his analysis with an argument for legal changes to the regulatory regimes covering health privacy. One way, Price argues, is for regulators to revise HIPAA to mitigate its potentially harmful effects on dataset creation—and the bias that may result from those harmful effects. The less inequality that HIPAA creates, the less it negatively affects health AI development.

Alternatively, Price suggests that individuals can lower their expectations of health privacy and allow their identifiable health data to be used for research—increasing the amount of information in datasets and improving the AI that learns from these datasets. In doing so, people can reap the benefits of better health AI. While balancing the need for health privacy and AI development can be challenging, Price concludes that the rewards of improving their complicated relationship may be great.

Wi-Fi is so central to daily life today that it is difficult to imagine a modern world without it. But in a recent article, Professor John Blevins of the Loyola University New Orleans College of Law argues that without action by the Federal Communications Commission (FCC) in the 1980s, Wi-Fi might not exist at all.

The FCC is responsible for allocating the private use of spectrum—the airwaves over which all wireless communications travel. Spectrum is a limited resource because the laws of physics only allow so many wavelengths to be used at the same time. As a result, the FCC allocates different bands of the spectrum by selling licenses.

In 1985, however, the FCC opened some spectrum bands for unlicensed, common use. During this era of deregulation throughout the 1980s, the FCC’s action challenged the property-rights views previously held by many regulators. The agency’s decision also faced overwhelming opposition from the telecommunications industry. In fact, one the move’s few supporters was the production company behind Star Wars, Lucasfilm, which had been having trouble transmitting C-3PO’s voice.

Blevins contests a common perception that the rise of Wi-Fi was a “happy historical accident.” He argues instead that the FCC deserves substantial credit for its actions from 1985 to the present that carefully nurtured the unlicensed use of the 2.4 and 5 gigahertz (GHz) spectrum bands. It was on these communal bands that Wi-Fi technology first emerged. Indeed, internet routers used today usually feature lights that read “2.4 GHz” and “5 GHz.”

The FCC’s 1985 rule soon led to a renaissance of low-power devices such as garage door openers and remote controls. Blevins attributes this success to simplified technical rules governing the use of the communal spectrum. These simple rules discarded the individualized device-approval process and instead authorized all devices that stay within a low-power limit.

Opponents to the communal approach feared that unlicensed devices would cause interference for licensed devices on the same airwaves. But the FCC proceeded with faith in its power to prevent interference. This approach worked, Blevins argues.

By the late 1990s, after the FCC repeatedly tweaked its technical rules, Wi-Fi emerged, permitting multiple devices to connect to the same internet network in homes and businesses for the first time.

But this advancement came with a catch, notes Blevins. Although the 2.4 GHz band thrived, the 5 GHz band struggled. The 5 GHz spectrum’s technical rules permitted unlicensed use of three separate portions of the band that were not connected to each other, making it difficult for companies to create devices that could use all three bands at once. And even if a company or inventor were to develop such a device, the FCC set different technical rules for each separate portion of the band, which impeded the use of any such technology.

In 2014, the FCC simplified these rules by enabling faster transmissions along the 5 GHz spectrum that could use multiple bands simultaneously. Blevins lauds this innovation, calling it “one of the clearest reflections of the policy design principles that” led to Wi-Fi’s creation in the first place. These principles, Blevins explains, were simplicity, flexibility, and clarity.

Blevins observes that regulatory actions do not always neatly fit into traditional ideological assumptions. And sometimes these actions contradict well-accepted theories of regulation. For example, even though public choice theory generally predicts that policy will benefit powerful private interests rather than the public good, the FCC permitted unlicensed spectrum use despite strong opposition from industry.

Furthermore, the FCC used a “commons” model, which emphasizes communal access to a limited resource, rather than a property-based approach to its Wi-Fi regulation. Property rights often lead to optimal usage, but they can also raise barriers to entry. Blevins argues that the commons-based, light-touch FCC rules achieved the best of both worlds by lowering market barriers for device manufacturers while maximizing productive use of previously unattractive spectrum bands.

Blevins finds that the FCC’s experience regulating the 2.4 and 5 GHz bands has helped the agency tackle other regulatory issues. A recent FCC action, for example, has tried to meet a booming demand for high-speed Wi-Fi, particularly in rural and underserved communities, by opening the 6 GHz band for unlicensed use. The FCC’s 6 GHz rule was based on three lessons learned from its prior experience with 5 GHz: allow unlicensed use, promote unified rather than fragmented bands, and create simple technical rules.

Although industry groups such as AT&T are still concerned about potential interference on unlicensed parts of the spectrum, particularly with public safety technologies using the 6 GHz band, the FCC still refuses to impose stricter technical rules. Rather, its technical rules have limited 6 GHz unlicensed devices to indoor uses within specified power limits.

Blevins warns, however, that the current power limits might be too low and urges the FCC to open the airwaves to more than just indoor devices. The FCC is currently considering whether to eliminate both of these requirements to protect the public safety airwaves from interference.

In sum, Blevins suggests that the FCC deserves more credit for the historic success of Wi-Fi than the agency currently receives. He argues that the FCC acted in the face of strong industry opposition to nurture one of the greatest technological innovations of all time. And, Blevins contends, the agency exercised vigilance over decades to correct problems as they arose. In more ways than one, the rise of Wi-Fi is a case study in successful regulation, Blevins concludes.

Several years ago, Amazon piloted an automated hiring system that, after some time, taught itself to discriminate against women. The company shut down the algorithm after learning that it had downgraded resumes that contained words such as “women’s” or indicated that the candidate had attended two specific all-women’s colleges.

Biased employment systems like the one that Amazon tried are on the rise in the wake of increased use of hiring algorithms, according to Ifeoma Ajunwa of the University of North Carolina School of Law. In a recent article, Ajunwa argues that hiring algorithms may violate antidiscrimination laws and run afoul of equal opportunity principles. Ajunwa further argues that regulators ought to require that employers perform routine audits of these tools.

Hundreds of the largest companies in the United States now use algorithmic hiring systems. These companies frequently defend their use of automated hiring systems by arguing that they are more objective than the human-driven alternatives, explains Ajunwa. But companies have other incentives for supplanting old, human-led decision-making tools: The new systems can cut the costs of recruitment and hiring, promote efficiency, and respond to a “talent scarcity” due to recent low unemployment.

But Ajunwa warns that the trend in using algorithmic hiring systems stems from “a misguided belief in the objectivity of automated decision-making.” The reality is that these algorithmic tools make decisions that resemble the biased inputs they receive from human-designed sources, argues Ajunwa. She states that they cannot be “fully disentangled from human decision-making.”

Ajunwa notes that employers tend to shield the workings and outputs of their automated hiring systems from the public eye. These systems often screen out applicants from backgrounds protected by antidiscrimination laws before even making a record of their application.

A job form, for example, might only allow for the entry of college graduation dates going back to the year 2000, which means that older applicants cannot fully complete online applications. These online forms mean that an employer can effectively reject a candidate on the basis of age—in potential violation of age discrimination laws—without preserving a record of its automated system’s unofficial “decision” on that applicant.

The implications of these discriminatory automated hiring processes for workers are significant, argues Ajunwa. Not only do workers lose out on some jobs due to biased automated decisions, but they also risk becoming “algorithmically blackballed.” That is, because employers retain increasingly large volumes of data from applicants, the same workers may experience repeated hiring discrimination, including by other employers, Ajunwa explains.

She argues that it is challenging for workers to ensure that employers’ hiring systems comply with equal opportunity principles. In particular, workers face obstacles in holding employers legally accountable for such biased decisions because hiring algorithms can often be proprietary and opaque.

As a result, in lawsuits under the U.S. civil rights statute known as Title VII, workers struggle to show their employers’ intent to discriminate, which they must prove to succeed on a disparate treatment argument. And if workers bring disparate impact claims under Title VII, they similarly face, in Ajunwa’s words, “an uphill climb.” Collecting the information from these hiring systems necessary to prove that their employers’ practices disproportionately affect protected groups, such as women and Black job applicants, is difficult.

Ajunwa argues that regulation requiring companies to audit their automated hiring systems to reduce bias and discrimination would be more effective at holding employers accountable than worker-led litigation. Specifically, Ajunwa recommends that legislatures mandate that companies conduct self-audits that confirm that their algorithmic hiring system is making accurate predictions.

Under Ajunwa’s mandatory self-audit proposal, employers would also have to separate demographic information on candidates’ race, gender, and age from the rest of a worker’s job application before passing the application on to the next decision-maker. Retaining this demographic information in a segregated database would allow regulators to measure disparate impact without letting those sensitive datapoints influence employers’ decisions, Ajunwa suggests.

Ajunwa envisions that self-audits would work best if they operated in conjunction with third-party auditors. For this reason, Ajunwa further proposes that a government agency serve as an external auditor of companies’ algorithmic decision-making tools. Ajunwa suggests that the U.S. Equal Employment Opportunity Commission could serve this role, providing its own auditing and certification of automated hiring systems before companies deploy them.

Alternatively, Ajunwa advises the U.S. Congress to relegate oversight of the auditing process to a non-governmental entity that would scrutinize and certify companies’ automated hiring practices. Such a third-party auditor could also help collect information from companies that might reduce some of the asymmetry between what workers and employers know about their automated hiring systems.

In Ajunwa’s view, mandatory auditing would work best with collective bargaining by workers to promote fairness in hiring and data protections that prevent algorithmic blackballing. Negotiations between labor unions and companies would be a valuable alternative to internal and external audits, Ajunwa argues.

Ajunwa concludes that automated hiring is a type of Trojan horse: although it saves employers time and money, “it may conceal amplified bias and replicate unlawful discrimination, all disguised as artificial intelligence.” She recommends self-auditing and third-party oversight as key measures to ensuring equal employment opportunities in an age of hiring by algorithm.

Although regulations can provide important public benefits, overregulation runs the risk of killing innovation and hurting the economy. Even in cases in which all or most regulations seem reasonable in isolation, the cumulative burden can become so crushing that businesses find it difficult to operate.

The problem, of course, is finding a way to roll back regulatory burdens while still preserving necessary public protections. Regulators and even the regulated community have limited incentives to push for eliminating a regulation once it’s in place. Regulators are reluctant to upset their own handiwork, and existing businesses may actually like burdensome regulations if they keep new competitors out of the market.

One approach that multiple governments at the state, federal, and international level have tried is a regulatory budget. The idea is similar to a budget on government spending: agencies can regulate up to a certain amount, but, beyond that level, they need to get rid of old regulations in order to adopt new ones. And although the idea of a regulatory budget has been around for decades, it is only recently that state and national governments have attempted it.

Here are a few examples. For instance, President Donald J. Trump issued an executive order requiring federal agencies to get rid of two existing regulations for each new regulation. President Trump also directed agencies to find one dollar in regulatory savings for each new dollar in regulatory costs.

In addition, for a time, the United Kingdom required agencies to find two pounds in regulatory savings for each new pound in costs. The State of Missouri required agencies to eliminate one-third of all regulations they had on the books. And the State of Idaho allowed all regulations to sunset and required agencies to re-adopt any regulations they wanted to keep.

Each of these approaches is unique, and each raises some challenging questions. As a result, regulatory budget architects have confronted several questions. First, should agencies focus on reducing discrete regulations, requirements within the regulations, or monetary costs that regulations impose? Second, should regulations be capped at a set level, or should they be reduced over time? If the latter, should the reduction involve an ongoing swap out—such as

President Trump’s executive order or Oklahoma’s 2-for-1—or a fixed reduction goal—such as Missouri’s one-third reduction? And third, how can regulators ensure that agencies do not exploit possible loopholes by, for example, swapping two trivial regulations for one massive one?

These questions defy easy answers. The Harvard Journal of Law and Public Policy devoted an entire symposium issue to the topic, and the foremost experts in this space all favor somewhat different approaches. But now that more than a dozen governments have tried out some sort of regulatory budget, some clear patterns are starting to emerge. And the new Virginia Office of Regulatory Management (ORM), created by Governor Glenn Youngkin’s Executive Order 19, embodies an innovative approach that builds on and improves existing best practices.

Like most other states that have adopted budgets, Virginia has chosen to focus on regulatory requirements, seeking to reduce the total number of regulations by 25 percent by the end of the Youngkin Administration. This approach ensures that agencies cannot achieve the goal by focusing on trivial regulations with relatively few requirements and ignoring major ones.

But ORM has also recognized that there are ways to reduce regulatory burdens other than by simply eliminating discrete requirements. For example, reducing the number of training hours for cosmetologists from 1500 to 1000, as a Virginia agency recently proposed, creates significant time savings for practitioners while still ensuring that they receive the necessary training. Eliminating the requirement entirely would be misguided, but right-sizing it balances the need for training against the risk of needlessly restricting market entry.

The challenge is figuring out how to give “credit” toward the 25 percent reduction target for requirements that are modified but not eliminated. There are any number of ways to reduce regulatory burdens: lower fees, reduce training hours, shorten forms, expand exemptions, or provide greater compliance flexibility, among others. This makes coming up with a common denominator difficult. But all of these actions have the common effect of reducing costs.

In its recently issued guide on the subject, ORM has asked agencies to calculate the cost savings associated with any regulatory reduction that does not involve fully eliminating a requirement. ORM then gives “partial credit” for any such savings. For example, using the cosmetologist training regulation, the agency reduced the regulatory burden by 33 percent (from 1500 to 1000 hours), and the requirement therefore will be counted as “0.67 requirements” rather than “1 requirement” going forward. ORM will also calculate the overall monetary cost savings that agencies have achieved and highlight major successes.

ORM’s approach ensures that agencies get rewarded for the full range of approaches to reducing regulatory burdens. And it solves an incentive problem, ensuring that agencies have a reason both to pick low-hanging fruit—reporting requirements that easily can be eliminated completely, for example—and to spend the time necessary to make sure that high-impact regulations are no more burdensome than necessary to achieve their goals.

Although Virginia agencies are just now beginning to implement the ORM framework, they already have achieved some notable successes and will no doubt continue to log major regulatory reductions as they work toward the 25 percent goal in the next three years. And these efforts will go a long way toward advancing Governor Youngkin’s goal of achieving a best-in-class regulatory system and making Virginia a top destination for new citizens and businesses. The regulatory burden is one of the top concerns business leaders cite when deciding where to locate their businesses, and the Virginia approach will help streamline that burden while still ensuring that necessary protections remain in place.

Furthermore, as the process plays out, it is ORM’s hope that other state governments, as well as the federal government and foreign governments, will take note. ORM benefitted enormously from studying past and current regulatory budget initiatives when formulating its approach, and other governments will undoubtedly find useful lessons in Virginia’s experience.

In a recent conversation with The Regulatory Review, former Commissioner of the U.S. Securities and Exchange Commission (SEC) Troy A. Paredes offers his thoughts on the growing environmental, social, and governance (ESG) movement in corporate America. He shares his views on the meaning and consequences of ESG, the developing divisiveness over ESG, and what is referred to as “greenwashing.”

Before joining the SEC, Paredes was a law professor at Washington University in St. Louis School of Law. In 2008, he was appointed to the SEC by President George W. Bush. Serving as an SEC Commissioner for five years, Paredes helped the Commission navigate the Great Recession of 2008 and oversee the implementation of the landmark Dodd-Frank Wall Street Reform and Consumer Protection Act.

After leaving the SEC in 2013, Paredes founded his own consulting practice, Paredes Strategies LLC, where he advises clients on regulatory compliance and strategy, corporate governance, and risk management. He also has served as a Distinguished Scholar in Residence at NYU School of Law and a Distinguished Policy Fellow and Lecturer at the University of Pennsylvania Law School.

The Regulatory Review is pleased to share the following interview we had with former SEC Commissioner Paredes.

TRR: What is ESG investing?

Paredes: The answer isn’t so easy because not everyone agrees on how to define ESG, let alone how to measure it. Setting that aside, the range of factors that investors and companies consider—and how those factors are evaluated—has changed. For example, regulators and the marketplace focus more on climate today. This focus has affected how capital is allocated and how businesses are run. I expect this trend to persist. And, going forward, different considerations will probably become more front and center, such as biodiversity. Whatever its exact contours, ESG is not a static concept.

TRR: The SEC recently issued a rule mandating that certain funds report more information about their proxy votes on ESG matters. The rule also requires these funds to make this information more accessible to investors by categorizing votes in groups such as “corporate governance” or “environment or climate.” Do you believe this type of regulation will affect how companies focus on ESG?

Paredes: These rule changes underscore the emphasis on ESG in finance and corporate governance. To me, though, it’s notable that items that today are characterized as ESG have long been part of the discussion, well before ESG was part of the vernacular. Businesses have always had numerous stakeholders.

A staple of teaching corporate law is to cover the fiduciary duties of directors and officers and the business judgment rule. Although there are nuances, a central takeaway is that boards and the C-suite have substantial discretion in shaping corporate strategy and implementing it. This involves room to consider an array of interests in determining how best to operate the business. A company that does not take care of and invest in its employees, prioritize compliance, think innovatively about emerging risks and opportunities, and contribute to its communities—all while focusing on the business’s financial performance and competitiveness—may not achieve its desired results.

TRR: How important of a problem is ESG fraud—sometimes called greenwashing—for regulators such as the SEC?

Paredes: Disclosure is the centerpiece of securities regulation in the United States. Although there is often genuine disagreement over how to regulate capital markets, there is big-picture consensus that investors need good information to make good decisions. This foundational predicate has guided the SEC and the construction of the U.S. securities law regime for nearly 90 years. Part and parcel of this is not only ensuring that investors have important information—as reflected in the concept of “but also that the information is accurate and not misleading. Not surprisingly, then, the mandatory disclosure requirements that the SEC imposes are buttressed by a range of anti-fraud provisions. Consequently, greenwashing has received the attention it has.

TRR: How might the approach to ESG be different if the responsibility were left to private industry as compared to the SEC looking to regulate and ratchet up oversight in this area?

Paredes: I worry that the term ESG has become divisive, often stirring spirited statements “for” or “against” it. On the other hand, there’s considerable common ground that businesses should be run to achieve long-term success. A viable, thriving company—today and in the future—requires considering a broad array of factors in addition to the immediate “here-and-now” earnings impact. Time horizons matter.

Without question, boards and management teams regularly need to make difficult decisions about strategy, operations, and risk management, and there can be competing considerations. A focus on profitably producing goods and services that consumers want, treating employees well and with respect, complying with regulatory requirements, investing in continuous improvement and growth, and giving back to the community should work to propel a company’s overall performance and value over time. With that said, whether and how the SEC should regulate in the ESG space, and limitations on its authority to do so, are separate questions.

TRR: What trends in the SEC’s enforcement of ESG matters have you witnessed during and since your time as an SEC Commissioner?                                            

Paredes: I have not seen a significant increase in SEC enforcement actions involving ESG; nor have I seen a significant increase in private litigation. The SEC has indicated that this is a focus, so more cases might arise, particularly after the SEC finalizes its climate rule and anticipated human capital management rule requiring companies to make additional disclosures in these areas. Without delving into details, well-developed case law applying “materiality”—an element required to establish fraud under the federal securities laws—could create hurdles for any enforcement action or class action concerning ESG-related disclosures depending on their nature and generality.

TRR: Beyond ESG investments and disclosure issues, what do you see as the most important regulatory issues facing corporate governance and securities law in the coming years?

Paredes: First, the volume, pace, and magnitude of regulatory change will be difficult to manage. It will require extensive development and implementation of policies and procedures, systems, controls, processes, training, oversight, governance, and the like.

Second, emerging technology springs to mind. I am particularly fascinated by how decision-making is evolving. More information is available to us than ever before, and we have more technology, such as artificial intelligence, to assist us in accessing, digesting, and using this information. This combination of data and technology offers a profound one-two punch that changes how decisions are made. I can’t address all aspects of this here, but I do want to acknowledge that it impacts businesses, investors, and regulators. The hope, of course, is that people’s lives will improve as technology expands our capabilities.

IN THE NEWS 

• The U.S. Supreme Court limited the U.S. Environmental Protection Agency’s (EPA) authority to control wetland pollution—the second decision in a year restricting the ability of EPA to combat climate change. Specifically, the Court held that the Clean Water Act does not allow EPA to regulate wetlands near bodies of water unless the wetlands have a “continuous surface connection” to those waters. Although the actual decision was unanimous, four justices argued that the majority’s new test is too narrow and will negatively affect water quality and flood control in the United States. President Joe Biden stated that the decision “upends the legal framework that has protected America’s waters for decades.”
• Nebraska Governor Jim Pillen signed a bill into law that will ban transgender surgeries for minors as well as makes illegal most abortions after 12 weeks. The new law, which will be enforced starting October 1, also calls on the state’s Chief Medical Officer, Timothy Tesmer, to establish criteria under which puberty blockers and hormone therapy may be administered to people younger than 19. Democrats have expressed concerns, however, that Tesmer will establish onerous requirements to access puberty blockers and hormones, effectively resulting in a full ban on these therapies. Nebraska State Senator Machaela Cavanaugh stated that “the only victory in this is that trans people, especially trans youth, are no longer invisible.”
• The Texas House passed a bill aimed at banning diversity, equity and inclusion (DEI) offices in public colleges and universities. If signed into law, the legislation will ban public colleges and universities in Texas from establishing DEI offices, issuing DEI statements, and implementing mandatory DEI training. Black legislators warned that this bill will take resources away from students, halt progress, and jeopardize billions of dollars of research funding. This bill comes as other states, such as Florida, have adopted legislation targeting DEI programs.
• The U.S. Department of Education announced a proposed rule that would deny federal funding to for-profit institutions and certificate programs that leave graduates with unaffordable debt or unimproved earnings. Under the proposed rule, federal funding for these educational programs would depend on whether the programs can demonstrate that their graduates can afford debt payments and that at least half of the graduates have higher earnings than the average high school graduate in the state where the program is located. The proposed rule, which is aimed at creating greater accountability and financial transparency in higher education, is now open for public comment.
• The U.S. Department of Commerce amended export administration regulations by adding 71 entities to the Department’s entity list due to their suspected involvement in activities contrary to U.S. national security interests. When an entity is listed on the Department’s entity list, it is subject to additional license requirements on exports, re-exports, and transfers. The Department added 69 new entities to the list due to business conducted with Russia’s military and defense sector. The additional two entities were added because of conduct that prevented the successful physical verification of their use of goods imported.
• The U.S. Department of Energy proposed new energy conservation standards for dishwashers under the Energy Policy and Conservation Act. The standards, if adopted, would significantly decrease the maximum permissible estimated annual energy use and maximum per-cycle water consumption for dishwashers. The Department estimated that the energy savings associated with these new standards would lead to consumer and social net benefits of between $2 billion and $4 billion, but would likely also increase manufacturers’ costs by between $90 million and $135 million.
• The Massachusetts Cannabis Control Commission (CCC) voted to cancel a pilot program that would have initially limited social consumption establishments—locations where patrons can purchase and use marijuana products—to 12 communities. The CCC instead approved a proposal to craft a regulatory framework awarding licenses for all social consumption sites. CCC Commissioner Nurys Camargo, a member of a working group that recommended the change in approach, said the decision will permit the state to authorize increased access to social consumption of marijuana in Massachusetts “a little quicker.” Nearly seven years ago, Massachusetts citizens voted to legalize recreational marijuana in the state and approve the creation of social consumption establishments.
• Colorado Governor Jared Polis signed a bill to lay the groundwork for a regulatory framework for natural medicine, or psychedelics. Among its provisions, the bill established a natural medicine advisory board and a division of natural medicine within the state’s Department of Revenue. The bill also defined the penalties for infractions, including fines for underage consumption. Supporters of the legislation stated that it will increase access to methods of healing, although some commentators have expressed concern over the new law’s potential exploitative effect on Indigenous culture.
• The U.S. Senate heard calls for AI regulation from tech industry experts and executives, including OpenAI CEO Sam Altman. Altman suggested solutions such as an AI-specific agency to license and audit AI companies. Some experts, including Meredith Broussard, an associate professor at New York University, expressed concern that AI tech executives’ openness to regulation is intended to mislead lawmakers as similar industry positions apparently has with respect to social media regulation. Broussard and other experts emphasized the importance of incorporating non-commercial voices in the ongoing discussions of AI regulation.

WHAT WE’RE READING THIS WEEK

• In a working paper, John A. List, a professor at the University of Chicago, Matthias Rodemeier, a professor at Bocconi University, Sutanuka Roy, a professor at The Australian National University, and Gregory K. Sun, a graduate student at Washington University in St. Louis, compared the effects of “nudges”—policy designs that push individuals to make certain choices—with those of taxes on smoking cessation, flu vaccination, and household energy consumption. List, Rodemeier, Roy, and Sun found that nudges changed behavior in all three settings, but were the most efficient option only with smoking cessation. They suggested that these insights can guide policymakers in choosing the most efficient policy instrument available.
• In a Brookings Institution report, Robert Seamans, a nonresident senior fellow at Brookings, and Sukhi Gulati-Gilbert, a graduate research assistant at the Massachusetts Institute of Technology, argued that policymakers should consider using data portability and interoperability as regulatory tools, especially in technology sectors. Seamans and Gulati-Gilbert defined “data portability” as the ability of customers to maintain possession of some core data about themselves, and they defined “interoperability” as the capacity of systems to exchange data seamlessly. Seamans and Gulati-Gilbert explained that these tools would help reduce the cost customers incur when switching brands or products, encourage new market entrants, and promote competition and innovation.
• In an article in the Columbia Business Law Review, Merritt B. Fox, a professor at Columbia Law School, Lawrence R. Glosten, a professor at Columbia Business School, and Sue S. Guan, an assistant professor at Santa Clara University School of Law, examined the impact of quote-drive manipulation, or spoofing, on securities markets and social welfare. Fox, Glosten, and Guan noted that spoofing, or intentionally placing fake market orders, undesirably affects economic efficiency and causes social harm. Fox, Glosten, and Guan suggested that regulators can target spoofing by treating it as misstatement manipulation.

EDITOR’S CHOICE

• In an essay in The Regulatory Review, Keith Belton, the Senior Director of Policy Analysis and Statistics at the American Chemistry Council, commented on draft artificial intelligence regulation guidance issued by the U.S. Office of Management and Budget (OMB) in 2019. Citing the risk of uncertain or overly stringent regulations impeding innovation, Belton suggested several additions to OMB guidance, such as developing the capacity to investigate instances where AI applications have gone awry. Belton also proposed that OMB report annually to Congress on the regulatory oversight of AI. Belton concluded that these changes could position the United States as a leader in international discussions on regulation of AI.

The post Week in Review first appeared on The Regulatory Review.]]> Fri, 26 May 2023 15:02:12 +0200 https://api.follow.it/track-rss-story-click/v3/4SZ1QvLqN7Fsvtwdon-yg4eLGixeGJZp https://api.follow.it/track-rss-story-click/v3/4SZ1QvLqN7HI5o-vm0LhMAp41t9tiERU

People tend to like the U.S. Postal Service. In fact, a 2020 survey by the Pew Research Center showed that 91 percent of American adults held a favorable view of the Postal Service—a full 10 percent more than reported favorable views of any other agency. Some government officials call the Postal Service the “most trusted agency in the nation.”

Yet for years, counterfeit stamp-makers have been defrauding this agency of the funds it needs to provide public services. In response, the beloved Postal Service has recently changed its rules about mail marked with fake postage.

These rule changes aim to reduce both incidences of fraud and the amount of funds wasted on delivering mail marked with fake postage.

The Postal Service is self-financing, which means it generally receives no federal funds for its operating expenses. Instead, the agency relies on the sale of “postage, products, and services” to fund the processing of over 421 million pieces of mail each day.

So when counterfeit stamp-makers enter the market, they not only deprive the Postal Service of necessary funds, they constrain the Service’s limited resources and, according to Chief Postal Inspector Gary Barksdale, undermine the “sanctity of the mail.” Furthermore, these counterfeiters seek delivery services without payment, which constitutes fraud.

Of course, errors in the mail delivery process occur even without fraud. The Postal Service distinguishes between normal postage errors, such as insufficient or missing postage, which might reflect an honest mistake, and postage curated to fool the Postal Service into delivering mail for free.

Existing rules stipulate that for those normal postage errors, mail should be returned to the sender. But because those who send mail with counterfeit postage often use false names and fictitious return addresses, it can be hard to track counterfeiters down, return the mail to the sender, and charge them with fraud.

Under the recent rule changes, if the Postal Service determines that the postage on any package or envelope in the mail stream is counterfeit, it will label the mail as “abandoned” and dispose of it at its own discretion. In this way, the Postal Service can prevent the crime of seeking delivery without payment by simply refusing to deliver mail marked with counterfeit postage.

Nonetheless, some critics of the amended rule claim that the Postal Service’s refusal to deliver mail with counterfeit postage may have the unintended effect of “punishing the victim.” This harm is especially potent if either the sender or receiver is not aware that the postage used on the parcel was counterfeit.

In response to this concern, the U.S. Postal Inspection Service (USPIS)—the law enforcement branch of the Postal Service—has stated that the new rule place the onus on consumers. USPIS urges consumers to purchase postage only from the Post Office or other licensed vendors.

The Inspection Service also advises consumers to avoid purchasing stamps online or on social media, especially if the price is significantly cheaper than it would be at one’s local Post Office.

“If it sounds too good to be true, it probably is,” said Thomas Noyes, Inspector in Charge of the Fort Worth Division of USPIS, about purchasing stamps online at below-market prices.

Another critique of the rule concerns online shopping. Public comments on the recent rule changes raised concerns that consumers who legally purchase online items will not receive them if the vendor mailed their goods using counterfeit postage. The Postal Service has clarified that such items will indeed be considered abandoned and disposed of, consistent with the rule. The Postal Service notes that, in such cases, consumers would be able to seek private recourse from the vendor.

In the future, enhanced technology may make it easier for customers to know that packages were abandoned due to counterfeit postage. The Postal Service has indicated that it is building on existing tracking and scanning technologies that would be able to alert consumers whose online purchases were not delivered to them due to counterfeit postage, but the existing technology has not been implemented in this manner yet.

In this way, the Postal Service acknowledges that its rule changes cannot, on their own, halt the use of counterfeit postage. Instead, the new rules represent just one part of a multi-pronged, multi-agency approach aimed at raising consumer awareness about the broader dangers of purchasing counterfeit goods online.

Ultimately, the Postal Service hopes that its amended rule, when paired with technological advances and the work of other government agencies, will discourage consumers from taking chances on counterfeit postage. These efforts, if successful, will decrease postage fraud and help retain the high levels of trust that the Postal Service has long enjoyed.

During his first few months in office, President Joseph R. Biden issued two important environmental directives: one aimed to conserve public lands, the other aimed to reduce carbon emissions. In a forthcoming article, two law professors argue that these two presidential directives have created a “green clash.”

Devoting sizeable chunks of public land to renewable energy facilities will displace— or even kill—wildlife and could affect water quality and aquifer levels, argue Sandra Zellmer, a professor at University of Montana Law School, and Robert Glicksman, a professor at George Washington University Law School. They discuss how, to remain faithful to both land conservation and green energy goals, the Bureau of Land Management (BLM) and the U.S. Forest Service must innovate when managing multiple-use, sustained yield land.

The dual environmental aims of biodiversity conservation and carbon dioxide-elimination lie at the heart of this “green clash,” contend Zellmer and Glicksman. With the development of large swathes of federal lands for renewable energy facilities, displacement and death of wildlife occurs through collisions, “destruction of migratory corridors,” and “disruption of foraging, hunting, mating, and other essential behaviors.” These harmful effects are exacerbated because on-shore wind and solar facilities occupy significantly more space on average than their fossil fuel counterparts.

These wind and solar facilities will need to cover 230,000 square miles of federal land—an area larger than the states of Arizona and Colorado combined—by mid-century if President Biden is to achieve his goals of a carbon pollution-free electricity sector by 2035 and net-zero emissions economy-wide by 2050.

By virtue of its sheer magnitude, President Biden’s land conservation directive—known as the “30 by 30” initiative because it calls for the conservation of 30 percent of U.S. land by 2030—contains many of the nation’s intact ecosystems and habitats for endangered and threatened species. These characteristics make public land management indispensable for reaching the “30 by 30” goal.

Zellmer and Glicksman focus on multiple-use, sustained-yield land, which accounts for just over two-thirds of all federally-managed lands, for a few key reasons. Multiple-use land—unlike land found in the National Park System or the National Wildlife Refuge System—is far less restricted for high-impact resource development.

Furthermore, Zellmer and Glicksman emphasize that multiple-use land management principles give the Forest Service and BLM a great deal of discretion. For decades, these agencies have been using that discretion to accommodate non-renewable energy projects and resource extractions. More recently, agencies have begun to approve applications on an unprecedented scale for renewable energy projects on federal lands. As renewable energy development on public lands increases, so will the effects on ecosystems and conservation efforts.

In response to the adverse effects of development, Zellmer and Glicksman cite academic studies showing how environmental harm can be minimized. They contrast renewable energy generation with fossil fuels, noting that renewable projects can operate indefinitely unlike fossil fuels, which need to move to subsequent sites after exhausting the resources in one place. Zellmer and Glicksman also note that the expansion of renewable energy production directly contributes to climate change mitigation by reducing overall greenhouse gas emissions. Climate mitigation enables species conservation and recovery on a wider scale because higher temperatures can damage ecosystems and disrupt things such as reproduction and migration patterns.

Zellmer and Glicksman identify helpful regulatory tools that the Forest Service and BLM possess in managing multiple-use lands that could be used to meet “30 by 30” goals and resolve the “green clash”—including some tools that have been neglected or even wielded to promote land development.

In particular, Zellmer and Glicksman focus on the Forest Service’s forest plans and the rules governing the creation of the plans as key mechanisms to encourage responsible development. Forest plans set the rules for development and conservation at a forest wide scale and must be revised at least every 15 years, enabling conservation values to extend over large swathes of terrain for long periods of time.

Pivoting to BLM, Zellmer and Glicksman delve into ways that the agency can achieve the “30 by 30” target. Among these, BLM can designate “areas of critical environmental concern” (ACEC). By categorizing land as critical in this way, BLM implies that an area needs special management to protect and prevent irreparable harm. In short BLM can proceed with other actions that save the land from development once the agency designates land as an ACEC.

BLM can also act on its statutory duty “to prevent unnecessary or undue degradation,” which would allow the Bureau to prevent energy projects that would hinder conservation. Because this duty has been interpreted to be ambiguous, BLM could use its authority to improve the land beyond its current state.

In addition, BLM can create rights-of-way, sales, and exchanges in pursuit of “the public interest.” The discretion that BLM can apply to define public interest is wide, argue Zellmer and Glicksman. Exchanges and sales, partnered with land acquisitions, could protect ecological integrity through consolidation and formation of wildlife corridors.

After exploring the relative strength of each administrative tool, Zellmer and Glicksman advocate a blended and balanced approach to deal swiftly and effectively with the “green clash.” This approach lies somewhere between “analysis paralysis,” where years can pass and nothing is decided definitively, and free-range approval of any prospective permit. Although Zellmer and Glicksman refer to errors committed by the two agencies in a push to approve renewable projects, they also cite successful turnarounds, such as instances in which land use plans were amended to account for wildlife disturbances.

The agencies’ ability to approve renewable energy development plans and permits rapidly must be tempered by minimizing avoidable adverse environmental impacts and actively pursuing wildlife conservation overall. Zellmer and Glicksman conclude that through the study of past agency pitfalls and successes, the Forest Service and BLM can achieve balance between conservation and renewable energy production, and ultimately accomplish multiple environmental goals.

Would you be comfortable paying for a public service that deployed artificial intelligence (AI) you did not trust? The European Union’s (EU) proposed AI Act assumes the answer is “no.” In adopting the Act, the EU aims to promote technology uptake by addressing risks associated with the deployment of AI.

By regulating AI’s risks, the proposed law seeks to increase trust in this digital technology, which could boost the consumption of goods and services and ultimately foster greater innovation. But in a recent paper, professors Johann Laux, Sandra Watcher, and Brent Mittelstadt of the University of Oxford critique the Act’s approach,  arguing that the AI Act’s risk-based framework will be inadequate to foster necessary trust in AI, especially for government use. The authors recommend that regulators instead adopt a more participatory approach to public accountability for AI use by the public sector.

Through the proposed AI Act,  the EU would establish standards based on whether particular uses of AI are expected to have unacceptable, high, or low risks, based on legal, ethical, and social norms. Based on these categorizations, the Act would prohibit use of the technology for some purposes or allow its use for others with differing degrees of restraint.

Laux, Watcher, and Mittelstadt note that, by classifying AI risks in tiers, the EU seeks to increase trust in AI systems by making certain risks more acceptable. They emphasize, however, that other factors can increase public trust in AI technology, especially when used by government entities. These other factors include promoting government efficiency in delivering services and improving how institutions perform their duty to protect citizens from risks caused by AI systems.

Moreover, the public sector’s use of AI poses other distinct challenges, according to Laux, Watcher, and Mittelstadt. When the government deploys AI in public services, for example, people have little choice but to be exposed to it. In addition, many times governments fund those services with tax revenue, which taxpayers are obliged to pay. Going forward, the authors argue that government actors should provide more clarity around governmental use of AI to foster public trust in the technology it uses to promote its authority and legitimacy.

Creating trust in AI systems, however, is a challenging endeavor. After conducting a systematic review of 71 academic articles on AI and trust, Laux, Watcher, and Mittelstadt conclude that “trust and trustworthy AI” are affected by heterogeneous factors. Furthermore, the authors explain that the underpinnings of public trust in technology vary widely according to the conditions in different markets and sectors, making it challenging to regulate AI effectively through uniform regulation.

To Laux, Watcher, and Mittelstadt, the literature reveals that algorithmic accountability takes many different forms. These include screening for biases, creating a right to challenge decision-making systems and provide redress, promoting transparency, and providing explanations of AI-based decisions. They also suggest that accountability requires a participatory framework “that puts humans in the decision loop” to oversee the technology and ensure control of personal data.

But Laux, Watcher, and Mittelstadt also note that, when it comes to public sector use of AI, equally important are matters such as institutional trust—which they define as the legitimacy of governmental institutions—and interpersonal trust—which they define as the implicit trust invested in those individual stakeholders involved in designing and deploying AI systems.

This latter factor—interpersonal trust—is vital because it also relates to the type of intermediary bodies that regulators could place in the technology’s decision-making loop. On this issue, Laux, Watcher, and Mittelstadt criticize the proposed EU AI Act’s technocratic approach to assessing risk. Under the proposed law, this task would fall on AI developers, who ultimately will determine the trustworthiness of AI.

Regulators’ current reliance on expert judgment conflicts with the more participatory approach recommended by Laux, Watcher, and Mittelstadt. They argue that a participatory approach to AI risk assessment would be more likely to establish citizens’ trustworthiness in AI systems. Putting laypeople on a board charged with AI risk assessment, for example, could be crucial for enhancing trust in the intermediary institutions responsible for this task, contend Laux, Watcher, and Mittelstadt.

Laux, Watcher, and Mittelstadt argue that developing proper regulations will be central to ensuring that the intermediary institutions deliver accountable work. Accountability should mitigate any “capture” of auditors by industry interests, state Laux, Watcher, and Mittelstadt.

Laux, Watcher, and Mittelstadt warn that the approach of bringing trustworthiness to AI by risk assessment outlined in the EU’s AI Act is too simplistic because trust has different dimensions and varies according to different communities, sectors, and circumstances. They conclude that building trust in public sector use of AI will require the European Parliament to develop a framework that goes beyond the minimum requirements of the EU’s AI Act.

IN THE NEWS

• The U.S. Department of Justice and the U.S. Department of Homeland Security issued a final rule responding to the expiration of Title 42, a 2020 order that allowed authorities to turn migrants away at the United States border to mitigate the spread of COVID-19. The agencies anticipated that Title 42’s expiration could result in an influx of migrants at the United States’s southwest border and advised migrants wishing to enter the United States to do so through legal, orderly means. Under the rule, if migrant noncitizens enter the United States illegally, they will be presumed ineligible for asylum, absent “exceptionally compelling circumstances” such as medical emergencies, severe threat, or evidence of human trafficking. The provisions in the new rule—along with potential future expansions of lawful pathways to immigration—are aimed at keeping migration at the border at manageable levels and reducing human smuggling into the United States.
• Montana Governor Greg Gianforte signed a bill into law banning the social media application TikTok in the state. In December, Gianforte had called the application “a significant risk to the security of our state and Montanans’ sensitive data” when he announced a ban on using TikTok on state-owned equipment. But the latest ban, the first of its kind in the United States, will completely prohibit both TikTok users and ByteDance—TikTok’s parent company—from operating the application in the state. Gianforte also announced bans on other applications that provide “personal information or data to foreign adversaries from the state network,” such as the messaging applications WeChat and Telegram.
• Two states advanced bills restricting abortion access. A bill in North Carolina banning abortions after 12 weeks was adopted after the state’s Republican-led legislature overrode Governor Roy Cooper’s veto of the bill. In addition, the South Carolina House of Representatives passed a bill banning abortions after six weeks. Until the South Carolina Senate passes the bill and Governor Henry McMaster signs it, abortion in South Carolina remains legal before 22 weeks. Jamie Lockhart, executive director of Planned Parenthood Advocates of Virginia, contended that these bans will be “devastating for abortion access in the South.”
• The Texas legislature voted to prohibit transgender minors from obtaining puberty blockers, hormone therapies, or transition-related surgeries. If signed by Governor Greg Abbott, the bill would require all transgender minors currently receiving treatment to be “weaned off” of gender-affirming treatment that the American Academy of Pediatrics currently recommends for transgender youth. The majority-Republican legislature passed the bill along party lines, making Texas the largest state to restrict transgender children’s access to medical treatment. After the legislature’s vote, Ash Hall, policy and advocacy strategist for the Texas ACLU, stated that “this legislation is vicious, it’s cruel, and it’s blatantly unconstitutional.”
• The Equal Employment Opportunity Commission (EEOC) updated its technical recommendations for COVID-19 pandemic-related employment accommodations after the U.S. Department of Health and Human Services ended the federal public health emergency declaration on May 11. The EEOC specified that long COVID, a condition distinct from COVID-19, may qualify as a disability under the Americans with Disabilities Act and necessitate accommodations, such as quiet workspaces, rest breaks, flexible schedules, and alternative lighting. The EEOC stressed that employers may not automatically end pandemic-related accommodations without case-by-case considerations, and it encouraged employers to implement low-cost accommodations where possible.
• The U.S. Court of Appeals for the Fifth Circuit issued an administrative stay of a federal district judge’s decision to strike down portions of the Affordable Care Act (ACA) that require insurers to cover preventative care, such as screenings for cancer, diabetes, and HIV. The district judge held that HIV-prevention coverage mandates under the ACA violated freedom of religion protections under the Religious Freedom Restoration Act. Although insurers are unlikely to stop coverage immediately as a result of the Fifth Circuit’s decision, John Cogan of the University of Connecticut School of Law warned that the lawsuit itself implicates concerns of “never-ending litigation” around the ACA.
• A bipartisan group of U.S. lawmakers introduced legislation that would prevent automakers from eliminating AM broadcast radio in new vehicles, citing safety concerns. AM radio—which has typically been provided in all vehicles for free—provides emergency alerts, weather warnings, and news. But many car manufacturers, such as Tesla and Ford, have removed AM radio from new vehicles or placed access to it behind paywalls. The proposed bill would require automakers to keep AM radio in vehicles without charging additional fees. Federal Communications Commission Chair Jessica Rosenworcel contended there is a “clear public safety imperative” to keeping AM radio in cars to ensure that all drivers have access to “emergency alerts and key warnings” while on the road.
• The Fifth Circuit heard arguments over a federal judge’s preliminary ruling that invalidated the approval of the abortion medication mifepristone by the U.S. Food and Drug Administration (FDA). The plaintiffs, an anti-abortion organization called the Alliance for Hippocratic Medicine, argued that mifepristone is unsafe and that FDA failed to follow regulatory procedures when it approved the drug in 2000. Counsel for FDA countered that the suit should be dismissed because plaintiffs brought their suit too late and will not suffer any actual injury if the FDA’s approval of the drug is maintained.

WHAT WE’RE READING THIS WEEK

• In a Brookings Institution report, Brookings’s Sanjay Patnaik, Director of the Center on Regulation and Markets, and Robert E. Litan, Nonresident Senior Fellow, discussed options for regulating TikTok to rein in its negative effects. Patnaik and Litan described those effects, including lower self-esteem in teenagers, threats to U.S. national security, misinformation campaigns to influence voters, and risks to data privacy. Patnaik and Litan called on regulators to audit TikTok’s source code and require social media platforms to develop better age verification practices, among other measures.
• In a European Corporate Governance Institute article, B. Espen Eckbo of Dartmouth College, Knut Nygaard of the University of Sheffield, and Karin S. Thorburn of the The Wharton School of the University of Pennsylvania found that a Norwegian law that requires that women make up at least 40 percent of corporate boards did not reduce the value of publicly traded companies. Eckbo, Nygaard, and Thorburn explained that, on average, the companies’ stock prices remained the same following the implementation of the law in 2005. In addition, Eckbo, Nygaard, and Thorburn noted that the number of female board members in Norway grew from 5 percent to 40 percent two years after the law took effect.
• In a Brookings Institution article, Aaron Klein, a senior fellow at Brookings, argued that the Federal Reserve should not be responsible for regulating banks. Klein explained that the Federal Reserve played a role in recent bank failures such as the collapse of Silicon Valley Bank because it did not intervene when the banks made risky investments. Klein asserted that the Federal Reserve failed to provide adequate oversight because its top priority is monetary policy, not regulation. Klein urged the U.S. Congress to move bank regulation authority from the Federal Reserve to agencies that specialize in regulation, such as the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

EDITOR’S CHOICE

• In an essay in The Regulatory Review, Shoba Sivaprasad Wadhia, associate dean and clinical professor of law at Penn State Law in University Park, discussed the U.S. Supreme Court’s decision to uphold the Biden-Harris Administration’s termination of the “Remain in Mexico” policy. Under the policy, which President Joseph R. Biden moved to terminate in 2021, U.S. immigration officials required certain noncitizens to wait in Mexico until their court dates concerning their immigration status. Wadhia called the Court’s decision “a sound victory for immigration and refugee advocates and the thousands of asylum seekers subject to” the policy. But Wadhia also cautioned that the human toll of the policy has been substantial due to the over 70,000 noncitizens forced to await their hearings without legal representation.

When it comes to the regulation of lab-grown meat, there may be too many cooks in the kitchen. A battle between two federal agencies that both claimed sole authority to regulate cell-cultured meat ended in 2018 as a plan for these agencies to regulate these products jointly. But is this plan the right path forward for the regulation of cultivated meat?

In a recent article, Tammi S. Etheridge of Howard University School of Law argues that the U.S. Food and Drug Administration (FDA) is well equipped to regulate lab-grown or cell-cultured meat independently, and that the 2018 plan issued by FDA and the U.S. Department of Agriculture (USDA) for joint regulation is both unnecessary and inappropriate.

For example, as of November 16, 2022, FDA had Under joint regulation, the producer must now jump through the additional hurdle of seeking USDA approval.

Etheridge first lays out the process of creating cell-cultured meat that FDA and USDA proposed in their joint plan. According to that plan’s first step, scientists would sample tissue from a live cow, extract stem cells from that sample, and place them into a culture of nutrients and hormones. Sampling would occur in an FDA-regulated laboratory, where stem cells could grow into fibers, eventually forming a muscle.

FDA would then oversee cell collection and growth, but would have to report whether harvested cells were suitable for processing into meat to USDA. USDA then would control production, the pre-approval process for meat labeling, and the content of the labels. USDA would also inspect the place where processing happens to ensure proper labeling and safe conditions.

Despite this planned regulatory framework, Etheridge argues that USDA is an inappropriate regulator for cell-cultured meat due to what she sees as its pro-industry bias, lack of applicable expertise, and lack of jurisdiction.

USDA is tasked with maximizing the agricultural industry’s profit and minimizing its losses, according to Etheridge. At the same time, the department also seeks to improve nutritional health. But Etheridge suggests that USDA has long prioritized supporting the agricultural industry over the public’s nutritional health. Etheridge goes one step further, stating that USDA acts as a lobbyist for the livestock lobby.

USDA has expanded the dairy market, for example, in opposition to science supporting that dairy consumption has negative health effects, according to Etheridge. She worries that the same industry support which expanded the dairy market could affect USDA’s regulation by biasing product labeling in favor of industry that could advocate stringent labeling rules that hinder market success for cell-cultured meat producers.

Etheridge asserts that the beef and cattle lobbies would advocate labels that significantly differentiate cell-cultured meat from ordinary meat to protect their share of the meat market. Meanwhile, a Consumer Reports survey found that consumers to show that cell-cultured meat is different than meat without removing the word “meat.” Etheridge explains that USDA would likely prioritize the industry’s input here rather than relying solely on science about cell-cultured meat. Following the industry’s preferences could result in biased labels which turn consumers away from purchasing cell-cultured meat, Etheridge warns.

USDA’s expertise is also largely irrelevant to cell-cultured meat processing, Etheridge argues. USDA ensures that livestock animals are healthy and fit to slaughter and that food is processed under sanitary conditions in meat packing facilities. USDA’s comparative expertise is not in monitoring labs, where cell-cultured meat is created.

Etheridge also cautions that USDA lacks authority to regulate cell-cultured meat. The federal statute USDA would presumably seek to use to regulate cell-cultured meat—the Federal Meat Inspection Act—defines meat food product as made from an animal’s carcass. But cell-cultured meat is derived from cells and falls outside of the statute’s scope, according to Etheridge. USDA considers meat to be muscle from the skeleton of livestock, which also excludes cell-cultured meat.

USDA’s partnership is thus unnecessary to regulate cell-cultured meat, Etheridge argues. She views FDA as a capable and appropriate sole regulator at each step of the process of overseeing the production of lab-grown meat.

Etheridge concedes that USDA will always have authority over cattle before they have their stem cells extracted by scientists. But FDA already inspects facilities that manufacture certain food and drug products and establishes sanitation and safety controls, indicating that it is capable of overseeing the safe manufacturing of cell-cultured meat.

Ultimately, Etheridge argues that FDA has preexisting regulatory processes for other processed foods and drugs that are much more similar to those required for cell-cultured meat than are USDA’s animal-based processes.

A notable difference between USDA inspection and FDA inspection is that USDA conducts real-time inspections by stationing an inspector constantly at a meat manufacturing facility, whereas FDA only conducts periodic inspections of food processing facilities. Etheridge acknowledges that some members of the public may view constant presence more favorably, but she counters that FDA has the authority to inspect a facility at any moment. Because of the constant potential for inspection, facilities currently under FDA regulation are very careful, Etheridge asserts. She does not view this difference as a compromise on safety or quality.

FDA should never have relinquished any oversight authority to USDA, Etheridge concludes. To solve the issue of joint regulation, Etheridge urges either USDA to return authority back to FDA or Congress to grant FDA sole authority over regulating any and all cellular agricultural products. She doing so could ensure that agencies regulating cellular meats allow society to reap the benefits of this new innovation and act in the interest of the people, not the industry.

Nearly a quarter of American homeowners use underground septic tanks to cleanse and dispose of their human waste. These septic systems face the risk of being submerged by more intense storms and floods as climate change worsens and could wreak havoc on habitats, water supplies, and public health.

A significant portion of the nation’s septic infrastructure is not up to the challenges presented by climate change. As of 2003, at least 20 percent of septic systems malfunctioned to some degree, and that figure has likely only increased since. As the effects of climate change exacerbate the already fragile situation, lawmakers must both strengthen regulations and provide financial assistance to homeowners to protect against septic pollution.

Septic tanks function by leaking wastewater into dry soil, which absorbs and naturally decontaminates the liquid. If the septic tank does not have enough dry soil around it, problems arise.

In coastal areas especially, marshy landscapes and porous, sandy soil make it easy for the runoff from septic tanks to reach nearby lakes or rivers. The excess nitrogen from the septic pollution leads to toxic algal blooms, which can choke out beneficial aquatic species, undermine fishing seasons, and damage tourist economies.

Septic pollution can also seep into the groundwater, contaminating drinking water and spreading disease. In some of the poorest counties in Alabama, for example, an intestinal parasite that was once thought to have been eradicated in the United States managed to survive due to poor sanitation and failing septic systems.

These concerns about the public health risks from septic systems are intensified by climate change. Rising sea levels, more severe rainfall, and more frequent flooding all reduce the amount of dry soil that can detoxify the wastewater. These weather events can also submerge and wash out septic tanks, resulting in widespread contamination.

Fortunately, localities across the United States are taking notice—and several are taking action.

Massachusetts proposed regulations that would require homeowners in nitrogen-sensitive areas, starting with those in Cape Cod, to upgrade or replace their septic systems with the “best available, nitrogen-reducing technologies.” Homeowners are allowed to avoid this burden if their community instead develops a long-term wastewater management program to reduce nitrogen loads. The Town Manager of Barnstable, Massachusetts—a Cape Cod community—said that the state’s proposal would be “the biggest regulatory change I’ve seen in my 33-year career.”

Similarly, regulators in Lake George, New York, nestled in the Adirondack Mountains, have proposed new inspections and corrective actions for substandard and failing septic systems. The lake itself, beyond being a tourist destination, serves as the primary source of drinking water for the surrounding communities and has been beset by algal blooms.

Farther south, Virginia’s environmental agency is revisiting its septic regulatory scheme after twenty years of inactivity. The move comes after a 2021 law directed the agency to consider climate change and rising sea levels in its water treatment regulations. And in Florida, Governor Ron DeSantis signed a law that will provide greater oversight by the state environmental agency and greater funding to repair failing septic systems.

Environmentalists in South Carolina are even taking the matter to court. Three environmental groups filed a lawsuit against the state over the development of new homes with septic tanks near a wildlife refuge. In the complainants’ view, state regulators have failed to check the residential septic tank permitting plan for compliance with regulations that apply to coastal areas.

Yet modernizing regulations of septic systems cannot alone solve all the issues with septic tanks. Governments must also provide financial assistance to enable homeowners to meet the hurdles of any new septic tank regulations.

Septic tanks are enormously expensive. And because septic tanks predominate in rural areas, those smaller local governments often lack the resources to cover the costs of repairs and maintenance. When such upgrades fall on the homeowners, some lower-income families cannot afford to make the needed changes.

This economic divide is often racialized. Consider Lowndes County, Alabama, where the population is 70 percent Black and the median income is $30,000. Roughly half of the residents have “a failing or no sewage system.” Attorneys at the U.S. Department of Justice have even recognized that this “disparate burden” on Black residents could merit a violation of federal antidiscrimination laws.

Perhaps the easiest solution would be to address these matters federally, but the Clean Water Act does not empower the U.S. Environmental Protection Agency (EPA) to reach septic systems. Until Congress authorizes EPA to act, the patchwork of state and local regulations remains the only form of governmental oversight of septic tanks.

Federal funding could alleviate some of the difficulty that local governments face. The infrastructure law passed in 2021 provided $150 million dedicated to replacing or repairing home septic systems across the country.

EPA also announced a joint initiative with the U.S. Department of Agriculture that will run pilot projects in eleven low-income, rural communities, including Lowndes County, Alabama. Under the national initiative, officials will assess each area’s current capacity, develop a long-term plan for wastewater treatment, and help the community take advantage of federal funding opportunities, such as those in the infrastructure law.

These financial investments and the progressive actions of local regulators and activists all along the East Coast are steps in the right direction. Yet more policymakers and regulators must join the commitment to updating wastewater regulation in light of climate change. The time has come not only to update public health standards but also to help citizens be able to afford the measures needed to meet those requirements—for the sake of both their health and the planet’s.

Pegasus, the winged horse, could never imagine its name would become synonymous with one of the most potent malicious spyware tools ever created. But in 2020, the Project Pegasus investigation sparked global outrage over the use of commercial spyware by non-democratic governments to surveil journalists and civilians. Foreign governments even used the Pegasus spyware against U.S. government employees.

In a more recent response to Project Pegasus, President Joseph R. Biden signed an executive order banning federal agencies from doing business with vendors that sell spyware that undermines U.S. interests. The order seeks both to promote universal human rights as well as to protect the U.S. government and its personnel from counterintelligence and security threats.

The recent executive order is part of the Biden Administration’s concerted effort to regulate spyware following the Project Pegasus investigation. Through the order, the United States aims to lead the world by example, as it creates new boundaries for use of commercial spyware. According to the Biden Administration, the order complements additional actions to limit the operational use of commercial spyware. It includes identifying commercial entities proliferating spyware that threatens the United States and its interests and enacts more stringent export controls on spyware.

The order directs actions on how U.S. agencies should guarantee that they, and any entity acting on their behalf, use only approved spyware. For example, if relevant information on a prohibited use arises, the order delegates the appropriate U.S. agency to certify that the commercial spyware does not pose a risk to the United States.

Furthermore, the order includes instructions that limit the U.S. government from using any spyware not developed in the United States. In addition, the order prohibits the use of any spyware directly or indirectly owned by a foreign government or person engaged in counterintelligence actions against the United States. It also bans the use of commercial spyware developed by the same vendor if the vendor knew or should have known that an entity used its spyware in violation of the prohibited uses, and if it did not act to remediate the use.

Nevertheless, President Biden’s executive order does not offer a complete ban on commercial spyware. Instead, it provides general guidelines on what are legitimate spyware and the legitimate use of spyware. The exact nature of violations of the order, however, is not explicitly defined and is open to interpretation. This undefined prohibition may lead to the politicized use of the order, worry some experts. The order also only refers to “operational use,” so non-operational procurement and use of prohibited spyware may be permitted.

The order maintains that any commercial spyware not authorized by the U.S. government poses a risk to the United States, and it outlines the commercial spyware authorization process. The order specifies that the responsibility of collecting data on commercial spyware and determining its risks within the U.S. government lies with the U.S. Director of National Intelligence.

The designation of one entity to collect information from the various administrative agencies periodically is essential to avoid cross-agency confusion. Currently, though, the order does not provide that the director will be required to share any information on banned spyware with the public who it aims to protect.

The order leaves room for the temporary bypass of prohibitions on the U.S. government’s use of commercial spyware in “extraordinary circumstances,” where there is no alternative. Moreover, it conditions the waiver on prompt notice to the President by the appropriate agency and a maximum effective period of one year. It does not, however, include any additional oversight or retroactive action following the use of the waiver.

The White House stated that the order will not be limited to domestic use but will “serve as a foundation to deepen international cooperation to promote responsible use of surveillance technology.” In addition, the order may positively deter foreign governments from purchasing prohibited commercial spyware.

Critics of the order worry about its limited nature. Because of its status as an executive order, any future administration could revoke it. Critics also refer to the refusal of U.S. officials to divulge information on commercial spyware currently used by the U.S. government, despite its continued use of spyware.

Critics also note how the requirement for vendor self-regulation consequently places the sole responsibility for permitted use on the vendor and not on the end-user. The order may limit the proliferation of commercial spyware to only the most established U.S. vendors, who possess the most comprehensive supervision powers.

In addition, despite White House statements, the order does not explicitly refer to cooperation with foreign entities to ensure compliance. Furthermore, the order does not mention international bodies with which it could further regulate commercial spyware, not just its proliferation.

Prior to the issuance of the order, the U.S. government determined its regulation of commercial spyware based on the end-users’ identity. The new order’s focus on the use and provision of regulatory tools creates new ways for U.S. agencies to supervise commercial spyware, but it also opens a door for a whole new set of regulatory questions for private actors.

The Regulatory Review would like to extend our great appreciation to all the members of the 2022-2023 editorial board for their many dedicated efforts in leading this publication over the last year. We are delighted to extend to each of them our congratulations on their graduation from law school today!

We are publishing this special feature today in honor and appreciation of the 2022-2023 editorial board for their service and mentorship. They set an outstanding example of teamwork and professionalism and helped make the last year on The Regulatory Review extremely meaningful and educational. We look forward in the years ahead to the positive impact they will continue to make to society through all that they accomplish in their careers.

“Last year’s editorial board displayed tremendous dedication,” said Cary Coglianese, the faculty advisor to The Regulatory Review and the Director of the Penn Program on Regulation, which sponsors The Review. “They published important work on regulatory issues at a tremendous pace—averaging new content every single day of the last year.”

Their accomplishments included the publishing of nearly a dozen online symposia and playing a key role in the development of new features, such as The Regulatory Review In Depth and the Sunday Spotlight, and valuable new internal staff practices.

“I congratulate all the graduating students who served on The Regulatory Review staff and wish them continued success in all that they will achieve in the years ahead,” Coglianese added.

“I also offer my special gratitude for the remarkable dedication demonstrated by The Review’s top leadership team, specifically Soojin Jeong who served as Editor in Chief, Margaret Sturtevant who served as Managing Editor, and Karis Stephen who served as Community Editor.”

Today, as Penn Law celebrates its 2023 graduation, we would like to take this opportunity to celebrate the accomplishments of the 2022-2023 editorial board and share with readers links to selected essays by editorial board members that were published in The Review during their time on staff.

Congratulations and best wishes!

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Soojin Jeong, Editor-in-Chief

August 4, 2022 | Detoxifying Social Media | Expert urges regulators to change incentives for social media to create a healthier digital sphere.

February 16, 2022 | With Great Power Comes Great Loyalty | Expert proposes a new framework of data loyalty to reenergize data privacy regulation.

January 6, 2022 | Tearing Down Terrorist Content Online | Scholar urges policymakers to impose liability on platforms that spread terrorist content. 

December 9, 2021 | Could Biometric Tracking Harm Workers? | Expert urges regulators to restrict how companies can access and use employee health data. 

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Margaret Sturtevant, Managing Editor

August 3, 2022 | The Unintended Consequences of Self-Harm Monitoring Software | Experts call for policies to govern self-harm monitoring technology employed by schools.

January 18, 2022 | Ending the Virtual School-to-Prison Pipeline | Civil rights attorney examines legal issues presented by virtual school disciplinary policies.

December 14, 2021 | Shifting Mandated Reporting Laws From Family Surveillance to Assistance | Scholars advocate revising mandated reporting requirements for school employees.

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Karis Stephen, Community Editor

October 25, 2022 | New California Law Forces Fast Food Restaurants to Think Fast | California governor enacts a law that gives fast food workers greater protections.

June 23, 2022 | Is Fast Fashion Moving Too Fast? | Scholars assess what it will take to support sustainability within the global fashion industry.

May 9, 2022 | Aborting the Right to Abortion | A leaked draft of a Supreme Court opinion turns the national debate over Roe v. Wade on its head.

March 8, 2022 | Using Disability Justice to Reimagine Family Regulation Systems | Advocates call for reform of family regulation systems to achieve fairer outcomes for parents with disabilities.

December 21, 2021 | The Social Responsibility of Social Media Platforms | Scholar weighs options for putting an end to harmful speech on social media platforms.

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Katelynn Catalano, Executive Editor

May 4, 2023 | ERISA’s Power to Protect Abortion | Scholar argues that ERISA limits states’ ability to restrict abortion access.

March 22, 2023 | Leaving Broker Inducements Behind | Scholar presents defenses that the SEC may use to legitimize restrictions on broker inducements.

February 2, 2023 | Assuaging Fears About Boardroom Gender Mandates | Scholars argue that gender-balancing policies will not reduce corporate value.

January 26, 2023 | Changes to ERISA Open Door to ESG Investments | ERISA Fiduciaries may now consider ESG in investment decision making.

November 17, 2022 | Freedom From Compelled Pregnancy and Childbirth | Scholar argues that the First Amendment guarantees the right to abortion.

August 17, 2022 | Regulating Alcohol Out of the Driver’s Seat |  Utah’s reduced blood alcohol concentration limit sees reduction in drunk driving-related deaths.

December 22, 2021 | Regulatory Lessons From the Meme Economy | Scholars review the rise and fall of GameStop stock and urge updates to securities laws.

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Omar Khodor, Executive Editor

April 13, 2023 | Swimming Upstream Amid Climate Change | Scholar discusses possible legal avenues to support salmon conservation during climate change.

November 30, 2022 | Big Oil Fights New Environmental Law in California | The oil and gas industry attempts to quash a California law protecting residents from extraction wells.

November 23, 2022 | Working Together to Solve the Extinction Crisis | Experts encourage federal, private, and state collaboration to create tailored conservation rules.

October 12, 2022 | How Factory Farming Could Cause the Next COVID-19 | The CDC should recommend agricultural reforms to reduce pandemic risks caused by factory farms.

August 10, 2022 | Including Tribal Communities in Conservation Efforts | Authors of recent paper argue that the Bureau of Land Management should heed input from tribes.

August 2, 2022 | Turning a Corner on a Rocky History with ESG | Scholars argue that the SEC has historically resisted creating ESG disclosures but has recently changed course.

January 13, 2022 | What It Means to Support a Waiver of COVID-19 Vaccine Patents | The Biden Administration should exert international and domestic pressure to waive COVID-19 vaccine patents.

December 15, 2021 | Robots Reviewing Agency Rules  | Scholar warns that using artificial intelligence to revise agency rules may compromise democratic ideals.

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Taylor Ross, Executive Editor

January 18, 2023 | Regulating Teacher Credentialing to Benefit English Learners | Scholars argue that the decentralization of teacher credentialing negatively affects learners.

December 1, 2022 | Can Schools Finance Reform Support Reparations? | Scholars advocate reforming and regulating school funding schemes to grant reparations to Black Americans.

October 11, 2022 | Limiting the Power of Police in Schools | A legal scholar advocates the removal—rather than the increased regulation—of police forces from schools.

February 2, 2022 | How Enrollment Algorithms Worsen the Student Debt Crisis | Scholar advocates regulating the use of enrollment management algorithms in higher education.

December 2, 2021 | Paying the Price of Regulating Childcare | Scholars argue that increased regulation in the childcare industry has unintended consequences.

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Sam Wong, Executive Editor

August 11, 2022 | Electric Vehicle Fires Spark Firefighter Safety Concerns | Experts say regulators need to set better electric vehicle standards for emergency responders.

January 25, 2022 | An Electric Solution for Low-Income Residents | Federal programs should better protect low-income residents from rising energy costs.

January 4, 2022 | Closing Gaps in Energy Cybersecurity | GAO finds that the Energy Department needs to do more to address cybersecurity risks.

December 1, 2021 | Navigating Stormy Waters for Offshore Wind Development | Offshore wind developers face regulatory approval challenges.

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Trevor Kirby, Senior Editor

February 1, 2023 | Rescuing Nuclear Reactors to Achieve Net-Zero Future | Biden Administration looks to U.S. fleet of nuclear reactors as a vital source to achieve energy goals.

January 25, 2023 | CFPB Proposes Public Registry of Nonbank Offenders | The CFPB has proposed the creation of a public registry to monitor agency and court orders against nonbank financial firms.

January 3, 2022 | The Consequences of a Subminimum Wage | Debate ensues over the consequences of eliminating an exemption to the federal minimum wage for tipped employees.

October 26, 2022 | Regulating LGBTQ+ Inclusive Boardrooms | Legislators and regulators respond to absence of LGBTQ+ individuals in boardroom diversity efforts and recruitment.

October 13, 2022 | Negotiating Prices with Drug Manufacturers | The Inflation Reduction Act aims to constrain rapidly increasing drug prices in the United States.

September 27, 2022 | International Condemnation of Russian Nuclear Occupation | International nuclear oversight body condemns Russia for occupation of nuclear power plant and demands immediate withdrawal.

March 15, 2022 | DNA Testing in Immigration Control | Scholars caution against increasing use of biometric testing by immigration authorities.

February 9, 2022 | Piercing the Lawyers’ Monopoly | Scholars argue that state trial judges should lead efforts to deregulate legal representation.

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Andrew Kliewer, Senior Editor

January 25, 2023 | Illuminating Discrimination Against Small Businesses | Proposed rule would target discrimination in small business lending by requiring disclosure of demographic data.

January 17, 2023 | Let There Be Darkness | Scholar argues for federal action to tamp down on increasing light pollution.

January 4, 2023 | The Inequality of Fintech | Scholar argues that regulators should act now to prevent fintech from exacerbating wealth inequality.

November 9, 2022 | Consumer Protection on the Chopping Block? | Recent court decision may threaten the future existence of the U.S. Consumer Protection Bureau.

September 1, 2022 | The P2P Fraud Conundrum | Regulators must strike a difficult balance in tamping down increased fraud on peer-to-peer payment platforms.

June 15, 2022 | The Financial System’s Pandemic Shield | Scholars argue that Basel III Accords limited economic fallout from COVID-19.

April 14, 2022 | Ending the Racial Housing Gap | Regulators should require banks to lend to Black homebuyers to remedy centuries of discrimination.

February 10, 2022 | The Data Revolutionizing Credit Scoring | Scholar argues that new data sources will expand credit access and raise issues of privacy and equity.

December 7, 2021 | Vaccinating the Skies | Advocates say a vaccine mandate for domestic flights could help keep travelers safe.

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Henry Miller, Senior Editor

May 3, 2023 | Solving the Pedestrian Safety Crisis | Scholar explains how NHTSA can regulate to ensure pedestrian safety.

January 10, 2023 | How to Delegate Authority for Climate Action | Scholar advocates the use of foreign policy for executive branch climate action.

January 5, 2023 | Conserving the Conservation Tax Break | A tax break for charitable donations of land needs updating to achieve its purpose of cost-effective conservation.

October 19, 2022 | New York Clean Energy Goals Finally Show Promise | Modifications to new York State’s clean energy laws cleaned up the New York City grid.

June 21, 2022 | Drilling Approvals are Not the Reason for High Oil Prices | Despite criticism, the Biden Administration’s drilling approvals have had little impact on current prices.

March 16, 2022 | How the Current Siting Regime Stifles Renewable Energy | Scholar argues for changes to siting regulations to speed up renewable energy deployment.

January 13, 2022 | Changing Federal Land Policy Can Encourage Carbon Capture Projects | Scholar argues for land management policy to encourage carbon capture projects on federal land.

November 17, 2021 | Toxic Floods Create Pressing Regulatory Needs | Scholar argues that existing chemical safety regulations fail to prevent hazardous material spills during floods.

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Jillian Moss, Senior Editor

January 24, 2023 | The Ticketing Industry Cannot Shake It Off | The Taylor Swift Eras Tour ticket controversy prompts lawmaker action.

September 15, 2022 | The Podcast Problem | The U.S. government should do more to prevent the spread of disinformation via podcasts.

June 14, 2022 | The Regulatory Challenges of FinTech | Scholar sketches the current regulatory landscape for financial technologies in the United States.

June 7, 2022 | A New Approach to Regulating Credit-Scoring AI | Scholar presents regulatory solutions to problems posed by using AI to determine credit scores.

March 9, 2022 | Americans Shortchanged in Pandemic Coin Dearth | The Federal Reserve’s response to coin circulation disruptions has created a coin shortage.

February 17, 2022 | Assessing the Frequency of Quarterly Earning Reports | Two camps emerge in a heated regulatory debate over the frequency of earnings reports.

November 9, 2021 | Stomping Out the Spotted Lanternfly | The battle against the spotted lanternfly is hobbled by regulatory challenges.

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Elizabeth Penava, Senior Editor

January 31, 2023 | New Technology Will Raise New Legal Questions | Scholars worry that regulating new technologies will be more difficult after recent Supreme Court decision.

January 24, 2022 | AI Art Is in Legal Greyscale | The legal ambiguity of art created by artificial intelligence adds confusion to controversy.

October 20, 2022 | Refocusing Deportation Law | Scholar argues that prioritizing noncitizens convicted of crimes for deportation is unjustified.

February 23, 2022 | Arguments Against a “Statutory Second Amendment” | Scholar argues that state laws preempting local gun regulation hinder progress.

January 19, 2022 | Threatening Chevron Deference Threatens Government as a Whole | Scholar argues that overruling deference to agencies will constrain U.S. government action.

December 23, 2021 | “Rollback Whiplash” and a Two-Year Presidency | Scholars argue that rollback tools mean Presidents must act fast to implement lasting policy.

Last month, the Biden Administration released a landmark set of proposed reforms to the regulatory review process. While the headlines often focus on substantive policy proposals and debates—such as climate change, immigration, and safety net programs—the behind-the-scenes regulatory process is central to how these policies are formulated and shaped.

For all significant regulatory actions, the Office of Information and Regulatory Affairs (OIRA) coordinates a review process in which regulatory actions are evaluated for their underlying policy analysis, and where other components of the White House—notably, West Wing policy staff—and the other departments of the executive branch review the proposed action. OIRA then coordinates the resolution of any disagreements to arrive at a consensus approach to the policy that meets with legal and analytical standards as well as alignment with presidential priorities.

Regulatory review has become a well-established process in the executive branch across administrations of both parties. But at the same time, the regulatory review process has faced a range of important critiques. Scholars and practitioners have challenged the ways in which agencies’ use of cost-benefit analysis might be flawed or poorly attuned to the nuances of policy, especially when it comes to issues like climate change, inequality and more. Others have raised questions about the tensions arising from strong presidential oversight of the regulatory process, balancing the need for coordination and accountability on the one hand with concerns about undue interference with agency expertise and evidence.

Over the last few years, I had the opportunity to serve in the Biden-Harris Administration leading OIRA, during which time the office engaged in the intensive work of reviewing and clearing major regulations across the range of presidential priorities from climate to competition to economic recovery. But during this time, OIRA also began the work of reconsidering the process and technical analytic best practices for regulatory review. The reforms that were ultimately published last month provide a window into how the regulatory review process might be updated to help advance an approach to good governance that is effective, evidence-based, and is up to the task of tackling deeper structural challenges such as inequality or climate. At the same time, these efforts are but one step in a much larger project of reimagining administration and regulatory policy for the years ahead.

In this essay, I highlight several of the most notable interventions contained in the recent reforms.

Process reforms for efficiency and inclusion. One important set of changes are to the process of regulatory review. The President last month issued Executive Order 14,094 which kicked off this regulatory reform effort. The executive order operationalizes some of the directives first put forth in President Biden’s Day One memorandum on “modernizing regulatory review.” In particular, the process reforms implemented by this new executive order are notable, not least because they are now already in effect.

First, Executive Order 14,094 raises the “significance threshold” which triggers the most formal type of OIRA review. This is an important update that will make the review process more timely and efficient, particularly from a capacity standpoint. Agencies—including in White House—have limited staff and time; it is important to focus the most intensive deployment of that person power on the rules and actions that need the most attention. Since President Clinton’s Executive Order 12,866 in 1993, the significance threshold had been set at $100 million, meaning that rules with an estimated impact of over $100 million would require OIRA review and a more thorough regulatory impact analysis to secure clearance for final publication. Yet even as the economy has grown and the real value of such a nominal threshold has changed, this figure has never been updated. As a result, what had initially been a measure aimed at prioritizing intensive investment in analysis and review has over time swept in more actions that have less real-world impact. The new executive order updates this number to $200 million and provides that OIRA will automatically update the threshold every three years, indexed to GDP growth. This process improvement echoes other efforts the Biden Administration has taken to balance analytic and review requirements with the need for speed and efficiency in the policymaking process itself—such as by committing in the spring of 2021 to the rapid review and clearance of regulations implementing the American Rescue Plan, at a time where the pandemic-driven economic freefall was at its worst and relief needed to be delivered as rapidly as possible.

Second, Executive Order 14,094 provides for several interventions that collectively attempt to broaden the regulatory review and policymaking process to be more participatory and inclusive. Most notably, the executive order includes an affirmative call for agencies to be more proactive in engaging impacted communities, particularly from communities historically underserved or overlooked by government. This complements nicely the Administration’s broader emphasis on equity and participation as noted in the President’s recent executive order on equity and as reflected in the Office of Management and Budget’s (OMB) report to the President on equity. In both cases, the call for more proactive outreach and engagement applies, not just to individual regulations but to the more upstream formulation of agency strategies and regulatory agendas, which could lead to more holistic and meaningful engagements. Executive Order 14,094 also tasks agencies with developing greater clarity and structure around how they solicit and respond to petitions from communities for regulatory actions or responses. The executive order also tasks OIRA itself with developing improvements to the notice-and-comment process and to improve its own approach to hearing the views of interested parties. OIRA has already put out a draft guidance for public comment and scheduled a listening session to hear input on how best to improve its own process for hearing from the public.

Improved analysis and evidence. Perhaps the biggest piece of the reform package comes in the realm of regulatory analysis. One of OIRA’s central functions is to review significant regulations for the underlying impact analysis that agencies use to develop and justify their proposals. The current approach to regulatory impact analysis is shaped around OMB Circular A-4, which was issued in 2003 and has not been updated since. OIRA has now proposed a thorough redraft of Circular A-4, and it has put these proposed revisions out for public comment and peer review. There is a great deal in the rewrite, much of it very technical. As I have noted elsewhere, a few central shifts are worth noting up front, as notable changes that also may occasion feedback or recommendations from experts and interested parties during the comment period.

• Agencies are tasked with evaluating the impact of their proposals against a “no-action” baseline. The new Circular A-4 proposal provides for some circumstances where agencies are simply executing a statutory command and have little discretion to employ a “post-statutory” baseline rather than a “pre-statutory” baseline. The upshot of this is that there may be circumstances where agencies have little scope for discretion in a self-executing statute; in those instances, it would not make sense to assume a baseline scenario where the statute does not exist. Rather, the relevant comparison should focus on what the statute requires as a floor and then on comparing the agency’s proposed approach to that statutory floor.
• Global effects. Circular A-4 had always included some mention of global impacts, but the new proposal provides a clearer description of this dimension of impact analysis, tasking agencies with assessing whether there are significant global impacts which would warrant additional discussion on top of the agency’s primary focus on the domestic impacts of rules.
• Uncertainty and risk aversion. There are a number of sections in the proposed new Circular A-4 that update the basic economic theory and analytical best practices to more closely follow developments in the field. One example is its expanded discussion of modeling uncertainty around projected costs, benefits, and other impacts. Another example is its discussion of risk aversion, which would encourage agencies to take better account of how individuals are often likely to value arrangements that protect against future risks.
• Discount rates. One of the most important parameters in regulatory analysis is the discount rate used to compute long-term costs and benefits to allow for an assessment of intergenerational impacts. This is particularly essential in climate regulations. The old Circular A-4 provided for a default discount rate of 3 percent. The new proposal updates the calculation of this parameter, using more recent data to arrive at a 1.7 percent figure. The proposal also seeks comment and input on whether the broader methodology of assessing discount rates should be updated.
• Market competition and business cycles. One challenge with impact analysis is that regulations viewed in a microcosm may miss important broader implications when considering broader economic dynamics. The proposed revision to Circular A-4 includes some expanded guidance on how agencies might consider the impacts of rules on market concentration, market power, and competition. It also provides for a discussion of how the benefits and costs of a rule might be better understood in context of business cycles, where for example a safety net policy might be fruitfully designed to kick into a higher gear during recessions.
• Distributional analysis. While distributional analysis has been included in prior regulatory review directives, including Executive Order 13,563 from the Obama Administration and the original Circular A-4, the new proposed A-4 revisions include much more developed and concrete suggestions for how agencies might go about including distributional analysis. These recommendations include an important, though optional, suggestion for agencies to consider “weighting” of impacts to account for the ways in which benefits or costs impacting working-class Americans may be more important in some instances than those impacting the ultra-wealthy. With these additional tools, it seems possible that agencies could, in the future, be more effective at analyzing distributional impacts and developing policies that take unequal concentrations of burdens or benefits into account more effectively.
• Qualitative and hard-to-quantify impacts. A long-running critique of cost-benefit analysis revolves around the way conventional approaches undercount or overlook qualitative impacts, values, or hard-to-quantify issues, from human dignity and civil liberties. The proposed revision to Circular A-4 includes a much more robust statement that such qualitative and hard-to-quantify impacts are legitimate grounds for justifying regulations and essential for agencies to take into account. The proposal provides some additional tools and approaches agencies might consider in tackling these topics.

A common thread throughout these changes is both modernization and flexibility. The revised Circular A-4 reflects important trends and improvements in social science and evidence; it also provides agencies with more tools and approaches with which to design an appropriate analytical approach to a particular rule. This is especially important for a regulatory apparatus that has to tackle a wide range of social and economic issues, where one-size-fits-all analytic methods are simply not going to be adequate for providing useful, evidence-based foundations for policy design.

Towards the future of the regulatory state. The summary of changes I have offered here is necessarily brief and incomplete. But it provides a sense of what kinds of new possibilities for regulatory policy design may be enabled by the changes the Biden Administration is making. These reforms themselves will depend greatly on feedback and input from the public, including from practitioners and scholars, as OIRA looks to finalize the new Circular A-4 in the coming year.

At the same time, these reforms themselves are part of a much larger and urgent debate about the future of the regulatory state itself. Much about the regulatory state remains in the crosshairs, particularly as recent Supreme Court cases threaten to undercut the capacity of agencies to follow-through on their obligations to address public problems and execute the mandates provided by Congress.

Despite these attacks, it remains the case that a robust, effective, and creative regulatory apparatus will be essential for addressing the challenges the public faces from climate change, inequality, and emerging technologies. The Biden Administration’s recent regulatory reforms represent one modest but significant step towards a regulatory state better equipped to tackle these crises.

By updating the process and the analytical foundations for regulatory analysis and review, the recent reforms can help make the regulatory process more inclusive and can improve the evidence and analytical inputs into policy design. But these reforms should also be read in context of a range of other important efforts to modernize regulation. The Administration has in parallel pursued major initiatives on improving customer experience and service delivery, focusing on high-volume benefits and services that agencies provide to Americans, such as in cases of disaster relief or safety net programs. Similarly, the Administration’s focus on equity has spurred agency-by-agency action plans that aim to improve both policy outcomes and the internal agency process around policy design.

If government is to adequately address the challenges ahead, it will be important for scholars, practitioners, and future policymakers to build on these initial efforts.