Confused Merger Policy at the FTC

May 25, 2023 Richard Pierce1 comment

Richard Pierce

In these two articles, Professor Sokol and his co-authors analyze recent changes in the methods the Federal Trade Commission (FTC) uses to review proposed mergers. Their findings are startling. The articles are required reading for anyone who is interested in antitrust law, administrative law, government regulation, or corporate law.

In his short essay Antitrust Merger as a Regulatory Sandbox, Sokol praises the antitrust merger control system under the Hart-Scott-Rodino Act as “an early attempt at a ‘regulatory sandbox,’” and criticizes developments of the Biden administration that reduce innovation and chill mergers. In Antitrust Mergers and Uncertainty, Sokol and his co-authors asked lawyers and economists who regularly advise firms about prospective mergers a series of questions about the ways in which the process has changed in the two years in which Chair Khan has headed the FTC.

By way of background, in 1976, Congress enacted the Hart-Scott-Rodino Act (HSR), which created a new system for determining whether a proposed merger or acquisition violates Section 7 of the Clayton Act.

Under the HSR, a firm that intends to merge with or acquire another firm must make a filing with the Justice Department and the FTC at least 30 days before the date of the proposed merger or acquisition. The Justice Department and the FTC meet periodically to allocate responsibility to implement the HSR between the agencies by sector of the economy. The agencies have 30 days in which to decide whether the proposed transaction would violate the Clayton Act. The statute authorizes extensions of the decisional deadline up to 30 days, but the parties to the proposed transaction often acquiesce in much longer extensions of the decisional deadline when the Justice Department or the FTC ask for additional time to evaluate a proposed transaction.

The HSR created a system of agency adjudication that is unlike any other. In other similar administrative contexts, an agency adjudication closely resembles a trial. The agency provides notice of its position and the reasons why it believes that a firm is violating the law. The firm then has an opportunity to respond. The agency and the firm present their conflicting evidence in a hearing conducted by an administrative law judge (ALJ). The parties file briefs, and the ALJ issues an opinion in which she explains her decision. Either party can appeal to the head of the agency. After considering the briefs of the parties on appeal, the agency head can either adopt the decision and reasoning of the ALJ or replace it with the agency’s contrary decision, along with a statement of the agency’s reasoning in support of its decision.

Each step in the normal process of agency adjudication is completely transparent. Every firm that is potentially affected by the agency’s decision and every potentially affected member of the public has complete access to the pleadings, the evidence, and the reasoning of the ALJ and the agency.

The HSR system of agency adjudication differs completely from the normal. Every step in the HSR decision-making process takes place behind closed doors. The process is completely opaque. The public has no way of knowing what transpired, except in the rare case in which the firm that proposes to engage in the transaction decides to complete the transaction after the agency has notified the firm of its decision that the transaction is illegal. In those few cases, the ensuing litigation creates a public record that provides the public with a window into the agency decision-making process that gave rise to the litigation.

Many scholars have long been critical of the opacity of the HSR adjudication process. Professor Sokol is not among those critics. In his words: “HSR combined with merger guidelines created a system of ex ante review with predictable rules and negotiation between merging parties and enforcers.” He emphasizes the role that merger guidelines have played in creating a healthy decision-making process: “Merger guidelines create transparency and greater predictability by identifying the core concepts that motivate the merger control system as well as to explain the legal and economic analytical framework that gets applied within merger control by the agencies.”

The merger guidelines are extremely detailed. They describe every step that the agency takes in the process of deciding whether a proposed transaction has the potential to reduce consumer welfare by reducing competition between firms in a market. According to Sokol, guidelines serve two valuable purposes.

First, they allow firms to predict with a high degree of confidence which of three actions the agencies will take with respect to a transaction the firm is considering. The FTC or the Justice Department determines that most of the thousands of proposed transactions are unlikely to have adverse effects on competition. In those cases, the agency quickly terminates the review process and notifies the firm of its decision to acquiesce in the transaction. In a much smaller number of cases, the agency notifies the firm that it needs additional data and must engage in detailed analysis of the proposed transaction to determine whether it is likely to have an adverse effect on competition.

In some fraction of those cases, the agency determines that the transaction is likely to have an adverse effect on competition and notifies the firm that it will seek an injunction to preclude the firm from completing the proposed transaction if the firm decides to attempt to complete the transaction. Until recently, the FTC prevailed in most of the cases in which it sought to stop a transaction that it found to be a violation of Section 7 of the Clayton Act.

Second, the guidelines provide a detailed description of the data that a firm must collect and the analyses that the firm must complete and submit to the agencies to allow them to decide whether to acquiesce in the transaction, to engage in a more detailed analysis of the transaction, or to disapprove of the transaction.

Sokol observes that the status quo is undergoing dramatic change. As he explains, “[t]he current regulatory antitrust sandbox system is under attack by the Biden antitrust agencies as part of a broader push to reduce total merger activity.” In January 2022, the new leadership at FTC and DOJ Antitrust, FTC Chair Lina Khan and Assistant Attorney General Jonathan Kanter, announced their intent to publish new guidelines that would significantly reduce the number of permissible mergers. Khan and Kanter have not yet taken that action, but it is obvious to all participants in the HSR decision-making process at FTC that it is not acting in ways that are consistent with the existing merger guidelines.

Khan has made it clear that she disagrees with virtually every characteristic of the guidelines, including the guidelines’ goals. She rejects the goal of maximizing consumer welfare, which the Justice Department and the FTC have pursued for the last 50 years. Instead, she has emphasized the need to protect competitors from large firms that charge low prices—a goal that the enforcement agencies and the Supreme Court disavowed 50 years ago. Khan cannot further her stated goals by applying the 2010 guidelines.

The conflict between Khan’s policy goals and the guidelines raises a critically important question. How does the FTC interpret Section 7 of the Clayton Act under Khan’s leadership, and what analytical steps will the FTC take to determine whether a proposed transaction is legal? That is the question that Professor Sokol attempted to answer, but his efforts were unsuccessful. The experienced lawyers and economists who regularly assist firms in navigating the HSR decision-making process at FTC had no difficulty determining that the FTC is not applying the guidelines, but they have no idea what goals the agency is attempting to further, what theories of harm it is attempting to explore, or why it is asking for the additional data that it requests.

Moreover, their experience with the process during the past two years causes them to believe that the FTC staff that participate in the HSR decision-making process also lack an understanding of the agency’s goals, theories of harm, or reasons for requesting additional data. When they ask staff members those questions the typical response is an apologetic admission of ignorance. The goals, theories of harm, and reasons for the requests for additional data may be known to the political leaders of the agency, but they have not been effectively communicated to the staff.

Here are two of the many concerns that Professor Sokol expresses as a result of his study:

When there is lack of clarity in the merger control process because the goals, process, and substantive analysis of merger control are not clear, this may delay or even undermine certain proposed mergers that benefit society, thereby creating economy wide problems.

[A] merger system that lacks intellectual clarity as to substance, transparency, and clear procedural rules also taxes the limited resources of antitrust enforcers that need to focus on actual problems that merger control identifies . . . .

I am confident that anyone who reads Professor Sokol’s articles will find ample evidence to support the concerns that he expresses.

Harm Egalitarianism

Apr 26, 2023 Michael E HerzAdd a Comment

Michael E Herz

In the last few years, law schools and law professors have given new attention to how questions of race can be interwoven into courses that are not explicitly about race. Much has been written about how to do so in both first-year and upper-level courses, and, from all reports, the law school classroom has meaningfully changed. My sense, though it is completely impressionistic and unscientific, is that the typical Administrative Law course may have changed less than many others. It seems fair to say, at least, that there has not developed a standard suite of topics that a professor wanting to integrate questions of race and racism might include. (Though for those interested, the 2020 Symposium on Racism in Administrative Law on the Notice & Comment blog is a very useful place to start.)

Daniel Farber’s Inequality and Regulation will be of enormous value to those looking for an entrée for discussing race and Administrative Law. Moreover, wholly apart from its relevance to the classroom, it is an important substantive contribution regarding the role of race, and of poverty, in regulatory policymaking. And it tackles these thorny topics in a highly readable fashion, with a minimum of jargon, obfuscation, and, relatively speaking, citations. (Were it in a student-edited Law Review, the editors would have been pretty grumpy about the above-the-line to below-the-line ratio. It may be one advantage of faculty-edited journals is a refreshing rejection of the citation addiction (or fetish).)

Farber sets the scene with a familiar descriptive account of the central role of cost-benefit analysis (CBA) in regulatory policymaking since the Reagan Administration, with some attention to the (in the grand scheme of things relatively minor) variations from president to president and Executive Order to Executive Order (EO). He then focuses in particular on the differing ways in which the EOs have treated unquantified benefits, equity, and distributional impacts. Since Bush II these have been acknowledged as legitimate considerations, receiving particular emphasis from Presidents Obama and Biden. But in practice they have received rather scant attention. Farber recounts a similar story with regard to Environmental Justice: formal attention, including in EO 12898 and Plan EJ 2014, with a much more modest actual policy impact.

Part III then addresses the role of economic inequality in regulatory policy. Farber joins others in rejecting the view held by “economic purists” that regulation should do nothing other than maximize net regulatory benefits, leaving issues of income distribution entirely to tax and spending programs. Indeed, he emphasizes that CBA as practiced by federal agencies reflects several equity-enhancing features. The most notable is the universal practice of quantifying benefits on the basis of an aggregate willingness to pay (WTP) figure. Given enormous differences in WTP based on age, race, and, most importantly, wealth, the value of a poor person’s life “should be” lower than that of rich person’s. But every agency uses a single number for the Value of a Statistical Life (VSL); all lives are of equal monetary value in a cost-benefit analysis, just like all lives are of equal value in a moral analysis. Farber attributes this approach to what he terms “harm egalitarianism”: “equal protection against equal harms.”

Having identified the core principle, Farber considers an alternative approach to accounting for economic inequality in regulatory policymaking. That would be to disaggregate WTP but, at the same time, more fully account for distributional impacts and the incidence of regulatory burdens. One method for doing would be “equity weighting,” i.e. assigning greater weight to dollars held by poorer people. Drawing on recent work by Daniel Hemel, among others, Farber rejects this approach. He does so primarily on practical grounds, but also because he is disconcerted by taking a powerful, but hidden, redistributive approach in regulatory analysis when the actual redistributive system (taxes and benefits) is not so aggressive.

So harm egalitarianism is the central concept of the article. Farber offers it as both descriptively accurate and normatively attractive. The principle of devoting equal resources to prevent equal harms is “implicit in current regulatory practice”; it “should play a central role in regulation”; and it is a requirement of “justice.” He would make it the dominant principle by which regulation takes account of equity and distributional concerns. Dominant, but not exclusive. Farber leaves the door open to a direct consideration of redistributive concerns, which might in some cases still be a “soft factor” in decision making.

Mentioning this possibility but not fully exploring it strikes me as a gap. Here is the problem. It is possible that a uniform VSL may harm poor people more than it helps them. It all depends on the incidence of costs and benefits. To the extent the costs of regulations using the uniform (and thus, for poor people, high) VSL are borne by poor people themselves, that compelled payment of more than the benefit is worth to them likely makes them worse off. As Cass Sunstein has put it, pithily: “Requiring poor people to buy Volvos is not the most sensible means of assisting them.” Farber’s redistributive “soft factor” suggests he is open to requiring “too much” safety but then subsidizing poor people’s purchase of that safety and/or taxing rich people to pay for it. But how, when, and how much that should happen are left unexplored.

The article then takes a doctrinal turn. Harm egalitarianism involves taking account of, and acting to avoid, the disparate impact (often racially disparate impact) of government policies that are facially neutral. Might doing so violate the equal protection clause? So far, the Supreme Court has not so held, and Farber concludes that such a result is imaginable but not likely. He also thinks most agencies most of the time have the statutory authority to take such concerns into account.

(Here let me diverge from the article briefly, like the workshop questioner who wants to discuss the article the presenter did not write. Farber does not investigate or assert the converse argument: that “equal protection against equal harms” might be not just permitted but required. At least three theories come to mind. First, it obviously resonates with equal protection principles. Indeed, as Farber’s use of the very term “equal protection” indicates, this constraint more clearly implicates equal protection than do many classifications subject to review under that clause. On the other hand, the intent requirement keeps us in rational-basis land; the “one step at a time” cases cut against grounding harm egalitarianism in the equal protection clause. Second, in relevant settings failure to take disparate impact on the poor and people of color would violate the Clinton Environmental Justice Executive Order. However, the EO, of course, is not judicially enforceable. Third, and most promising, there is a plausible argument that promulgating a regulation with a racially disparate negative impact would be arbitrary and capricious because the agency had failed to “consider the relevant factors.” What factors are “relevant” for purposes of arbitrary and capricious review is remarkably underexamined, but this seems like a potentially fruitful line of argument.)

Having defended agency consideration of the disparate impact of its own regulations, Farber acknowledges that it would raise different concerns if an agency designed regulations to remedy historical or structural injustices (an approach that would seem to go beyond “equal protection from equal harms”). Here, Farber anticipates more robust judicial and constitutional objections. Farber’s discussion is tentative. Such an action might be seen as, and swept aside with, affirmative action programs, which rest on a similar remedial theory. Yet the settings are different. Unlike, say, affirmative action in college admissions, this sort of agency action does not favor, or disadvantage, any individuals, is not zero sum, and would itself be facially neutral. The constitutional objection is “nonnegligible,” but would probably (and should) fail. Statutory objections might also arise. Their validity will depend on the statute, but clearly an agency would be on stronger statutory ground when levelling up protection of communities especially burdened by the regulated risks than it would if explicitly opting to reduce risk in communities of color rather than in white communities as a response to structural racism.

That last point leads into the final, and most concrete, section of the article, which discusses the ways in which risk modeling often already incorporates concerns over inequality and might do so more extensively. Here the “equivalent protection from equivalent harms” principle is operationalized. A risk assessment requires knowing not just the extent of exposure but the vulnerability of the exposed population. Vulnerability is a function of some factors having nothing to do with race and wealth, such as age. But it also turns on other exposures, poverty, poor health, and even, in some circumstances, race itself. All of these factors may make population A more vulnerable than population B, meaning that the risk (the harm) of an identical exposure is greater for the former than the latter. In such circumstances, “equivalent protection from equivalent harms” means prioritizing regulation to protect population A and/or regulating to ensure a lower exposure for population A than for population B. Current risk analyses do this to some extent, but the inputs, including in particular the size of the geographic units considered, could and should be more granular. With more reliable and fine-grained data on exposure and careful attention to differential exposures and vulnerability, regulatory analysis would avoid the potential legal pitfalls of explicit attention to economic and racial inequality while still achieving appropriately targeted protection for poor communities and communities of color.

Armageddon, but with OIRA Instead of Bruce Willis

Mar 23, 2023 Richard MurphyAdd a Comment

Richard Murphy

Dan [Billy Bob Thornton]: Well, our object collision budget’s a million dollars, that allows us to track about 3% of the sky, and beg’n your pardon sir, but it’s a big-*** sky. ***

President [Stanley Anderson]: What kind of damage are we…

Dan: Damage? Total, sir. It’s what we call a global killer. The end of mankind. Doesn’t matter where it hits. Nothing would survive, not even bacteria.

President: My God. What do we do?

In the 1998 disaster film, Armageddon, a Texas-sized asteroid is on track to smash into the Earth, finishing the job started by the asteroid that did in the dinosaurs. Fortunately, a NASA official, Billy Bob Thornton, finds an oil driller, Bruce Willis, who (SPOILER ALERTS!) digs a deep hole in the asteroid and blows it up, sacrificing his life but only after giving his blessing for his daughter, Liv Tyler, to marry Ben Affleck, whom Bruce Willis loves like a son.

Professor Michael Livermore’s thought-provoking essay, Catastrophic Risk Review, makes the case that there is a better way than killing Bruce Willis to avoid massive death and destruction from asteroid strikes: Put the Office of Information and Regulatory Affairs (OIRA) on the job.

Professor Livermore starts from the premise that our government does a poor job marshaling its resources to address catastrophic risks, “including those arising from advanced artificial intelligence, asteroid impacts, pandemics, weapons of mass destruction, and bioengineering.” (P. 6.) This unhappy state persists in part because a complex set of legal, political, and psychological reasons prevents control of low probability events carrying catastrophic risks from rising to the top of agency agendas. In setting these agendas, agencies must respond to the competing demands of Congress, the White House, the courts, and influential outside interests (e.g., Chamber of Commerce, Sierra Club). Agencies also tend to follow grooves established by internal agency culture. There is always something more pressing in the moment than responding to a one-in-a-million chance that an asteroid will in the next year or so vaporize a continent or that super-smart artificial intelligence might come to the realization that it doesn’t like people much.

Other factors that discourage agencies from tackling catastrophic risks include: Some catastrophic risks implicate the functions of many agencies, muddling lines of authority and discouraging action. Agencies with a finger in the climate change pie include EPA, DOE, DOA, FERC, NRC, NASA, and FEMA. (Pp. 16-17.) Some catastrophic risks, by contrast, are orphaned as no agency has clear authority over them. Professor Livermore cites artificial intelligence and bioengineering as examples. (P. 17.) Electoral politics presents a problem as American politicians and voters tend to ignore global costs incurred outside the United States. (Id.) Temporally speaking, they also are much more sensitive to immediate concerns rather than those that are unlikely to eventuate for thousands of years. And, let’s face it, the many billions yet unborn do not vote. (Pp. 18-19.) In addition, humans are not psychologically equipped to handle consideration of low probability events very well—which isn’t terribly surprising for a species that has spent most of its time on Earth wandering over savannah, hunting, gathering, and avoiding predators.

Professor Livermore believes that application of formal cost-benefit analysis (CBA) would identify means for mitigating catastrophic risks that create net benefits. This process, he readily admits, would raise methodological problems as formal CBA has trouble addressing harms that are unlikely to occur until far in the future. He notes, for instance, that “a trillion-dollar harm five hundred years from now, discounting to present value at a five percent discount rate, is a bit over twenty-five dollars.” (P. 5 n.2.)

In Professor Livermore’s view, however, the real barrier to applying formal CBA to mitigate catastrophic risks is institutional. Agencies need somebody—or some entity—to push control of catastrophic risks onto their agendas. Ideally, this entity would both have expertise in formal CBA and a measure of power, perhaps derived from an executive order and a close connection to the White House, to coordinate action across many agencies.

In other words, we need OIRA to help save us from asteroids (and pandemics, super-smart AI, bioengineering, etc.).

To this end, Professor Livermore proposes a draft executive order that charges OIRA with convening “a Catastrophic Risk Review Working Group to develop and initiate a government-wide assessment and review of catastrophic risks.” (P. 3.) Agencies would submit preliminary plans for addressing catastrophic risks to the Working Group, these plans would be subjected to public comment, and then the Working Group would issue recommendations for cost-beneficial legislative or regulatory actions designed to mitigate catastrophic risks. (Id.)

Allow me to confess that, in a half-educated way, I approach the topic of formal CBA with some skepticism. Its efforts to monetize are sometimes extremely strained (e.g., placing a value on reducing the incidence of prison rape). Discounting costs and benefits that will accrue far in the future presents difficult technical and ethical problems. The numbers that formal CBA generates create a scientistic appearance that tends to cover underlying value judgments. Of course, there is a huge literature that addresses these and many other controversies relating to formal CBA and centralized review by OIRA. A good-sized chunk of this literature has been written by Professor Livermore, a leading expert and proponent of the view that progressives, rather than run from CBA, should use it to support positive environmental, health, and safety protections.

I mention this skepticism only to throw into sharper relief that I think Professor Livermore’s proposal sounds terrific. I am sure that a survey of agency activity would reveal that many are taking positive actions to reduce catastrophic risks. In September 2022, for instance, NASA, as part of an effort to develop a planetary defense, slammed its DART vehicle into the asteroid Dimorphos, altering its orbit—which is awesome. But Professor Livermore’s essay makes a strong case that, given the incentives and constraints facing agencies, it is likely that they are leaving cost-beneficial mitigation strategies on the table. (A recent pandemic may be influencing my intuition here.) He also makes a strong case that OIRA is well positioned to play a coordinating role that could help solve this problem. Using formal CBA to identify strong candidates for catastrophic risk mitigation would, as Professor Livermore concedes, raise methodological problems. Still, it seems plausible that the best strategies might prove so obviously beneficial that methodological problems might fall by the wayside. Also, many progressives find formal CBA objectionable because they see it as a tool for blocking agency actions that, properly understood, are in fact beneficial for society. Use of formal CBA as Professor Livermore proposes would, by contrast, prompt positive actions rather than constrain them.

I think we should try it.

Tough movie pitch, though.

Outsourcing Agency Rulemaking

Feb 14, 2023 Christopher WalkerAdd a Comment

Christopher Walker

When it comes to understanding the political dynamics of agency rulemaking, the place to start is Rachel Potter’s book Bending the Rules: Procedural Politicking in the Bureaucracy, about which the Yale Journal on Regulation published a blog symposium in 2019. Through a mix of qualitative and quantitative methods, Potter explores how agency officials—both career civil servants and political appointees—play a role in the rulemaking process and leverage procedural rules to help advance their preferred policy outcomes.

It turns out, however, that this depiction of agency rulemaking omits an important category of rule drafters: government contractors. Fortunately for the field of administrative law, the Administrative Conference of the United States engaged Potter and Bridget Dooling to conduct a study of the role of private contractors in federal agency rulemaking. They interviewed some forty-five agency officials, contractors, and other experts. Rulemaking by Contract, which is forthcoming in the Administrative Law Review, presents the descriptive findings of their study and is well worth a close read. Here, however, I focus on their follow-up article, Regulatory Body Shops, which explores the normative implications of their findings in creative and important ways.

In Regulatory Body Shops, Dooling and Potter divide the world of rulemaking contractor relationships into three categories: “ministerial contractors, who perform administrative work; expertise contractors, who provide discrete scientific and technical inputs; and regulatory body shops, which are embedded into agencies, functioning like staff and encompassing many functions.” In Part II, they describe these three categories in detail and provide a helpful table (reproduced with permission) that summarizes the key characteristics of each type of contracting arrangement:

Dooling and Potter are less concerned about the problems inherent in the former two categories. As the title suggests, they focus on the much more problematic category of “regulatory body shops.” In Part III, they explore the potential risks of regulatory body shops (and the other two categories) regarding ethics, agency reasoned decisionmaking, and administrative capacity.

On the ethical front, they draw on Kathleen Clark’s work to emphasize the potential personal conflicts of interests, especially as private contractors are often not subject to the same extensive disclosure rules as federal government employees. As Dooling and Potter observe, “In the body shop, the embedded nature of the contractors gives them special access not only to the folkways and culture of the agency—something that our interviews suggest agencies value very much because it helps the contractors be effective—but also to inside knowledge about the agency and its planned actions.”

On the reasoned-decisionmaking front, they draw on Jon Michael’s book Constitutional Coup to underscore that some contractors might approach the deliberative process differently than career civil servants. Unlike civil servants, contractors might be, in Michaels’s words (Constitutional Coup at 117), “motivated to be hired, anxious to be retained, and eager to be assigned additional fee-generating responsibilities. They thus have every reason to internalize the agency chiefs’ political priorities.” The risk of less-engaged reasoning potentially affects both expertise contractors and regulatory body shops, but Dooling and Potter argue that the risks are much greater in regulatory body shops because “maintaining the contract and keeping ‘the boss’ (i.e., the agency) happy is likely to be a highly salient concern.”

On the administrative capacity front, Dooling and Potter see little short-term risk in using ministerial or expertise contractors to assist with discrete regulatory activities. Indeed, it often makes financial and practical sense on time-limited projects to outsource to experts and ministers instead of investing more in internal capacity that is only needed for a short period of time. But longer-term reliance on contractors, especially in a regulatory body shop manner, poses serious risks. It could reduce incentives for innovation within the agency as to longer-term improvements to agency processes and infrastructure. Relying on Suzanne Mettler’s book The Submerged State, Dooling and Potter argue that such long-term reliance could also undermine democratic principles, by communicating to the public the private firm’s involvement in the project but perhaps obscuring the federal agency’s role (or vice versa).

Not only are there transparency and accountability concerns. As Dooling and Potter explain, agency reliance on regulatory body shops “can also result in what we call a doom loop, where rather than using contractors as a short-term bridging strategy, agency reliance on contractors morphs into the de facto status quo. Using regulatory body shops may enable an agency to keep up appearances; to top agency leaders and congressional overseers the agency appears to be performing well and producing steady regulatory output. But, because the bureaucrat-contractor equilibrium is not always visible—even to overseers—what began as a capacity deficit within the agency becomes a self-fulfilling prophecy.”

After flagging some doctrinal risks of regulatory body shops in Part IV of the article (in particular, compromising procedural responsibilities and undermining claims for judicial deference), Part V explores how we should respond to the phenomenon of regulatory body shops. Dooling and Potter suggest that Congress or the Office of Management and Budget (OMB) could consider designating rule drafting as “inherently governmental,” which would limit participation to agency staff. OMB has already done so with respect to legislative drafting. They suggest that there should be additional contracting transparency, and they briefly suggest other ways that agencies can build capacity without having to rely on regulatory body shops. This article already covers so much ground in categorizing the contractor types and exploring the risks of each type, so it is understandable that Part V only begins the reform conversation. But hopefully their study for the Administrative Conference of the United States and these two articles will spark much more scholarly and real-world attention to the potential harms of regulatory body shops.

Regulatory Body Shops makes an important contribution to the literatures on agency rulemaking and privatization. Perhaps the most important contribution is that Dooling and Potter further complicate our understanding of privatization in administrative governance. Not all private contracting is inherently bad, and the risks vary across agencies and contractors. Disaggregating contractors into three categories with different functions, time horizons, and risk levels helps us identify and understand the risks and potential solutions. Their ability to disaggregate private contracting arrangements, to diagnosis risks, and to identify potential reforms no doubt benefits from their combined experience working in the federal government, including as policy analysts at the Office of Information and Regulatory Affairs.

There is so much to like (lots) about Regulatory Body Shops. I look forward to seeing how Dooling and Potter’s work in this space sparks further development in the field.

Form And Substance In The New Major Questions Doctrine

Jan 12, 2023 Mila SohoniAdd a Comment

Mila Sohoni

Readers of Jotwell’s administrative law section need no introduction to the major questions doctrine—either in its older forms, or in its new and more muscular incarnation as a clear statement rule that requires that Congress speak in pellucid terms in order to authorize an agency to regulate a question of “major” significance. What some readers may not have noticed is that the stream of commentary on the new major questions doctrine has already burgeoned to such an extent that simply keeping up with it all is no small challenge. In his own recent contribution to this growing corpus, Professor Chris Walker recalled Justice Scalia’s Brand X dissent, which sardonically saluted the Court for creating “a wonderful new world … full of promise for administrative-law professors in need of tenure articles and, of course, for litigators.” But that list is far too short. The new major questions doctrine is also evidently “a wonderful new world” for podcasters, bloggers, essayists, and op-ed commentators—not to mention quite a few administrative law professors who already have tenure (including me).

Professors Daniel Deacon and Leah Litman, in their impressive article The New Major Questions Doctrine, presented an early assessment of the doctrine within mere weeks (!) of the Term’s end. They begin by situating the doctrine against other tools available to courts to constrain the exercise of authority by administrative agencies: statutory interpretation and nondelegation doctrine. (Pp. 8-12.) They correctly detect an “evolution” (P. 13) in the Court’s approach to the major questions doctrine beginning with the Court’s decision in the case challenging the CDC’s imposition of a nationwide eviction moratorium. In that decision, in the subsequent challenge to the OSHA vaccine mandate, and in West Virginia v. EPA, the Court gradually shifted its application of the major questions doctrine, ultimately shaping it into a rule that “frames—and alters—the entire enterprise of statutory interpretation.” (P. 23.) As the Court left matters at the close of the last Term, the new major questions doctrine requires that statutory authorization to address a major question “jump off the page.” (P. 25.)

Can this doctrine be justified on the grounds that the doctrine serves to enforce the “values underlying the nondelegation doctrine?” (P. 29.) Not really: as they note, “the major questions doctrine, again at least as articulated thus far, does not itself prohibit agencies from exercising delegated authority under open-ended guidelines. It just requires Congress to specifically list potentially major things an agency might do pursuant to those open-ended guidelines.” (P. 30.) Thus, while the new major questions doctrine imposes “a significant practical limit on agencies’ authority,” it “does not avoid constitutional issues with broad or open-ended delegations to agencies.” (P. 30.) The authors tease out various ways in which the Court departed from textualism in the cases articulating the doctrine, ultimately likening its effects to a diluted variant of the absurdity doctrine that allows for a “resort to purposivism.” (Pp. 30-32.)

Many commentators on the new major questions doctrine have focused on the doctrine’s indeterminacy and its susceptibility to manipulation by courts. Deacon and Litman, however, devote considerable attention to its manipulability by entities other than courts—notably, by political parties and special interest groups. They contend that because the new major questions doctrine regards politically controversial rules as “major” rules, the doctrine permits “a motivated political party to functionally amend a statute through political opposition rather than through the legislative process.” (P. 38.) They make the provocative argument that this result sits uneasily with the structural constitutional principles enforced in INS v. Chadha and Clinton v. City of New York, both of which pivoted on the proposition that laws may not be amended without passing the hurdles of bicameralism and presentment. (Pp. 39-40.) They also stress that the new major questions cases have relied on Congress’s failure to enact legislation as a reason to reject regulatory measures that resemble the failed legislation. (Pp. 45-46.) This reliance, they argue, means that a party that controls just one house of Congress can block legislation and thereby increase the odds that a similar regulatory policy will be deemed “major.” Indeed, a minority party that controls only enough votes to filibuster legislation in the Senate may wield that power “to effectively amend existing legislation.” (P. 47.) And special interest groups that were on the losing end of the political process when a statute such as the Clean Air Act was enacted can now leverage the new major questions doctrine to get another bite at the apple in the courts. (P. 48.)

The paper does a lovely job of connecting the new major questions doctrine to broader debates about constitutional doctrine and its methodology. Building on Litman’s prior scholarship critiquing the “anti-novelty principle” at work in constitutional law cases, the authors argue that “regulatory novelty does not signal an agency’s (or anyone’s) views about the meaning of a statute,” for regulatory novelty may simply be a necessary response when an agency is faced with, and has to tackle, novel problems—such as, for example, a global pandemic or climate change. Similarly, they show, the slippery-slope-style reasoning that underpinned cases such as NFIB v. Sebelius and United States v. Lopez has now come to roost in the new major questions cases. (Pp. 51-52.) The odd consequence, they argue, is that the legality of what an agency is doing today will be measured not by the yardstick of the statutory text as written, but rather by the reach of what an agency might claim it wants to do in the future. The substantive consequence of the doctrine, predict the authors, will be to produce a kind of selective judicial deregulation of important subjects rather than to enhance Congressional resolution of major regulatory questions. The doctrine, they therefore charge, is “faux judicial minimalism” (P. 58), rather than genuine judicial modesty.

Throughout their wide-ranging paper, Deacon and Litman remind us that a doctrine that in form purports to be accomplishing one task—keeping agencies within the bounds of their statutory ambit—may, in substance, be doing something quite different: selectively deregulating private conduct, exacerbating political polarization, empowering minority rule, and inviting courts to engage in ad hoc determinations of political salience that they are ill-suited to adjudicate dispassionately. In articulating a clear statement rule ostensibly linked to “separation of powers principles,” the Court set out what seems to be a simple formal rule. But in its functional operation, and in its substantive effects, the doctrine wires together politics and ideology with law in a complex and combustible combination. Of course, the veneer of a formal rule has its benefits—at least to the institution applying the veneer. As Duncan Kennedy once reminded us in an entirely different context, “there will often be a great tactical advantage, for a court which wants to expand its power at the expense of another institution, in casting the norms it wants to impose in the rule form.” On reflection, maybe it’s not such a “wonderful new world,” after all.

Against Government’s Reification of Business Secrecy

Dec 1, 2022 Margaret KwokaAdd a Comment

Margaret Kwoka

There has long been great debate about the extent to which the public should have access to government-held information that concerns private businesses. Primarily sought through requests made under the Freedom of Information Act (FOIA), this type of information is often claimed exempt from mandatory disclosure under FOIA’s Exemption 4, which covers trade secrets and confidential commercial or financial information obtained from a third party. But the state of the law has been evolving in an unsatisfactory way. For example, Sonia Katyal and Charles Graves have a recent searing critique of the over-application of the trade secrets doctrine generally, and as I reviewed a couple of years ago, Deepa Varadarajan brilliantly takes apart the justifications for the sweeping expanse of Exemption 4 specifically. Both pieces, and others, have pointed out the expansion of commercial secrecy beyond the traditional justification to protect competitive innovations. Calls for reform, such as this recently proposed legislation, have typically centered on cabining the trade secrets protections to apply more narrowly, thus rebalancing the interests in public transparency against those of business secrecy.

This line of scholarship is rich and worthy, but Christopher Morten’s outstanding forthcoming article, Publishing Corporate Secrets, finds a fresh third angle to the problem, rejecting the idea that line drawing is even necessary and embracing as a solution a middle ground between full disclosure and guarded secret keeping. Are you intrigued by the idea that the government might be able to publish important information without first deciding whether it constitutes a trade secret? Or that there is a way to publish trade secrets for the social good without competitors profiting from it? So was I. Read on.

To begin, Professor Morten does a particularly cogent job at describing a complex backdrop for the current problems related to government held corporate secrets. First, drawing on a rich literature on the day to day work of the administrative state (including Rory Van Loo’s terrific piece that I also previously reviewed!), Professor Morten explains how government’s regular functions necessarily involve the collection of business information. Even more so, he details how agencies have sweeping powers to force businesses to produce information. Agencies need not rely on voluntary compliance, cooperative agreements, or close relationships with business. Inspections, monitoring, enforcement, and premarket approval procedures provide avenues for agencies to require the production of information by the private market. Second, Professor Morten describes how very few agencies proactively publish or otherwise provide information gleaned from private business, even when it poses grave threat to public health or safety (think software information related to the Boeing 737 MAX after the first of two deadly airline accidents). And third, he efficiently and effectively documents why FOIA requests are failing to fill the necessary gap, the sweeping interpretations of Exemption 4 as well as the more mundane problems of FOIA administration.

But it is in his proposed solutions and their legal justifications that Morten breaks exciting new ground. He documents how agencies already largely have the power to disclose information even when it is admittedly at the core of protected information under the trade secrets doctrine. FOIA itself authorizes withholding of protected commercial information, but does not require its withholding. Similarly, while the Trade Secrets Act does criminalize the disclosure of protected information, it does so only when disclosure is not “authorized by law.” And the “law” that might authorize disclosure includes legislative rules issued by an agency. Thus, through its regulatory power, an agency can designate what commercial information it intends to publish. In some sense this workaround to the Trade Secrets Act has been hiding in plain sight. Chrysler Corp. v. Brown—the Supreme Court’s seminal case authorizing so-called “reverse FOIA” cases (suits to prohibit an agency from disclosing records)—itself analyzed whether a particular regulation overcame the Trade Secrets Act’s presumption of confidentiality. Morten rounds out the analysis by demonstrating why neither agencies’ enabling acts nor the Takings Clause of the Constitution typically present significant hurdles to publication, either.

So if the government can publish trade secrets, assuming appropriate procedural steps have been taken, should it? Here Morten’s answer gets even more interesting. It’s a qualified “yes.” Morten proposes that agencies create information “bounded gardens,” or selective disclosure regimes that allow certain users or uses to be granted access to otherwise secret information without that information being published to all if such publication would harm competitive interests. These gardens would be bounded by techniques such as information use applications, information use agreements, and technical limits on access. Morten usefully provides examples of extant government databases that implement these very strategies—albeit more often in the case where privacy interests, rather than corporate interests, are at stake—as evidence of their success.

I love that this article represents a fresh take on an old seemingly zero-sum game that pits the public interest against competitive injury. This moves the conversation out of that playing field and proposes in some ways a radically different approach, and yet grounded in extant law and practice. Moreover, it contributes to the literature on the importance of and strategies for increasing proactive disclosure by government agencies, a topic I explored in my recent book, Saving the Freedom of Information Act. As information overload increases, and FOIA backlogs abound, the government using its platform to provide information that it knows serves the public interest is increasingly important. Of course, Morten’s strategy is not an alternative to the sensible strategies to limit the overreach of trade secrets doctrine—we should absolutely do both. But in a quest to ensure government does not ratify harmful corporate secrecy, Morten’s proposal represents an innovative path forward.

The Role of Departments in the Design of the Federal Government

Nov 1, 2022 Jack BeermannAdd a Comment

Jack Beermann

Adherents to the unitary executive theory, which posits that the Constitution grants the President complete and absolute control over the execution of the law, claim that their view is required by the text of the Constitution, especially Article II’s vesting clause which proclaims that the “Executive Power shall be vested in a President of the United States of America.” As Justice Scalia put it, “this does not mean some of the executive power, but all of the executive power.” In Scalia’s view, the separation of powers demands that the President must have the power even to prevent the prosecution of Executive Branch officials, including those who have engaged in serious job-related criminal misconduct that threatens to undermine the accountability of the Executive Branch. Adherents to the theory on the Supreme Court may be in the process of dismantling all checks Congress has placed on presidential control over the administration of the law, including, among others, limitations on removal of Officers of the United States, the discretion of agency experts, and the independence of independent agencies.

Even assuming that Justice Scalia’s heavily textualist form of originalism is an appropriate methodology for applying the Constitution, the unitary executive theory has never successfully accounted for what, in light of the theory, must be puzzling constitutional text. Examples include, the provision that grants the President the right to “require the Opinion, in writing, of the principal Officer in each of the executive Department,” the Constitution’s expression of the President’s role in carrying out federal law as a duty (not a power) to “take Care that the Laws be faithfully executed” and the Constitution’s assignment to Congress of the power “[t]o make all Laws which shall be necessary and proper for carrying into Execution…all other powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.” As one of many possible examples of how this language undercuts the absolutist claims underlying the unitary executive theory, if the Constitution already establishes that the President personally possesses all possible executive power, why would we need a clause granting the President the power to compel department heads to answer his queries? Enter Blake Emerson’s excellent article The Departmental Structure of Executive Power: Subordinate Checks from Madison to Mueller.

In this article, Emerson demonstrates that the Constitution contemplates a departmentalized Executive Branch that “enable[s] but also channel[s] and constrain[s] the discretionary authority wielded by the President, as well as that of the principal officers he appoints.” His analysis is based on the premise that checks and balances are vital to preserving the rule of law and enabling just and responsive governance. We have been hearing for some time now about the virtues of the “internal separation of powers” as checks on arbitrary action by federal agencies, but Emerson’s article, in my view, provides the firmest constitutional grounding for tempering the President’s authority over the execution of the laws from within the Executive Branch. As Emerson puts it, “[d]epartments establish ‘subordinate distributions of power’ that internalize the checks and balances that exists between the legislative, executive, and judicial branches.”

While the emerging scholarly work on the internal separation of powers has focused largely on how agency structure creates checks and balances within agencies that ameliorate the potential consequences of the combination of governmental functions in a single entity, Emerson takes a step back and looks at the “constitutional architecture” that posits a role for departments as centers of power that can check the President and even the departments’ own principal (and political) officers. In a sense, Emerson’s analysis provides support for understanding that the “deep state” that President Donald Trump and his allies railed against as standing in the way of their efforts to remake the federal government is actually a feature of the constitutional design and a highly valuable one at that.

Beyond formalist, originalist understandings of the departmental design, Emerson explains the value that the departmental understanding provides in supporting the rule of law and rational, non-capricious government. As he puts it:

Though departments are created by statute and led by political appointees, they are not best understood as obedient servants of either Congress or of the President. Departments do not merely follow orders, they make orders orderly. They help to ensure that we are governed not by the will of particular officials but by fairly predictable, minimally rational, and suitably general norms.

While I find the normative aspect of the analysis more attractive and persuasive, I recognize that in the current legal/constitutional environment that fetishizes textualism and other forms of originalism, an argument’s power depends at least in part on its connection to a plausible originalist account, which Emerson ably provides. He understands that, in his words, “if a department is an empty placeholder, then the President and other officers’ discretion under the applicable legal norms would remain fully intact.” On the other hand, “if these departmental constraints originate from Congress or from some other actor or agency, then the President’s power is hemmed in by those actors, rather than by any form of self-limitation. Emerson provides a convincing account of a “Founding-era discourse” within which the Constitution’s references to departments, in both Article II and Article I’s Necessary and Proper Clause, signify departments as independent centers of normative power and discretion that would check abuses by other governmental actors, including the President and officials appointed to positions created and structured by Congress. In other words, departments were not understood to be devoid of independent significance in the governmental structure created by the Constitution. The so-called “headless fourth branch” of government is a feature, not a bug.

In a more normative vein, Emerson’s understanding is vital in light of the abuses of the Trump administration and the potential that a future populist insurgency might succeed in inflicting serious damage to our constitutional system. In what I think was a surprise to many of us, a significant segment of the people of the United States appear ready to accept severe limits on democracy and rational governance in exchange for government policies more to their liking on matters such as immigration, environmental protection, women’s right to choose, and foreign relations. Through his examination of history and contemporary struggles, Emerson reassures us that the Constitution provides tools, including the departmental structure of government, to resist this potential catastrophe. He cautions, however, that this bulwark against authoritarian government is not self-activating. Rather, it requires a commitment by government officials, judges, and the people, among others, to maintain it and protect the political system of the United States from those who would subvert it to their own ends. In the end, in a democratic nation, it’s the people, not the parchment, that produces results, for better or for worse.

Legalizing the Politics of Care: The Search for the Moral Foundations of Administrative Law

Sep 30, 2022 Jodi ShortAdd a Comment

Jodi Short

A “politics of care” has gained prominence in policy advocacy responses to the pandemic and the broad social and economic displacements and inequities it has caused and revealed. Policies such as universal preschool, funding for childcare facilities, tax credits for child and elder care, criminal justice reform, addressing systemic racism, and rebuilding of public infrastructure have been justified as ways to recognize that caregiving, which allows us all to survive, grow, and flourish, is a primary public value. Indeed, on the precipice of winning the presidency, Joe Biden embraced a vision of the President’s responsibility that includes a “duty of care for all Americans.”

In Public Care in Public Law: Structure, Procedure, and Purpose, Blake Emerson seeks to translate the growing resonance of the “politics of care” into an animating principle of public law, grounding U.S. statutory, administrative, and constitutional law in a legal principle of public care that obligates public officials to attend to the needs and values of those they govern. Emerson’s account is both descriptive and normative. He makes the case that the public care principle can be found in existing statutory, administrative, and constitutional law. And his project in this piece is to foreground that principle and claim its essential primacy.

First, Emerson argues that public care is a dominant purpose of statutory regulation, in that regulation is a primary vehicle by which the state provides the goods and services necessary for citizens to exercise moral and political agency. Emerson locates this purpose in the political theory of Progressive Era reformers who shaped the American welfare state. He then shows how the public care norm threads through the subsequent enactment of major regulatory programs such as Social Security, Medicare, Medicaid, and the Affordable Care Act (albeit unevenly).

Second, Emerson maintains that public care is a foundational procedural principle in administrative law. He interprets entrenched procedural requirements such as public participation, reasonableness, and reason-giving as obliging federal agencies to act with proper consideration of the interests of affected parties: “Administrative law, at bottom, aims to ensure that government action is attentive and responsive to human concerns. Agencies must care—and show that they care—about the people their policies impact.”

Finally, Emerson reads the Take Care Clause to require that the President consider the views of subordinate officials delegated specific legal authority or acting pursuant to relevant professional or expert authority. He anchors this conception of structural-constitutional care in Article II of the Constitution, which provides that the President “shall take Care that the Laws be faithfully executed.” He argues that this clause confers a “caretaking obligation” on the President that entails “a responsibility to defer to and respect the reasonable judgments of other officials while maintaining the integrity of law-administration as a whole.” In Emerson’s conception, structural-constitutional care is a crucial element of the general principle of public care not only because it requires one particular official—the President—to take into account the interest, viewpoints, and values of other officeholders, but more importantly because it models for the public an ethic of respectful, deliberative, and mutually responsive decision-making that can help advance more broadly public care values.

Emerson certainly recognizes the limitations of his descriptive account. Although the big statutory welfare programs he discusses provide support, benefits, and services that enable human flourishing, they embody an ethic of individual choice and responsibility that tends to efface rather than advance the ethic of public care. His account of administrative procedure as a vehicle for dialogue that is meaningfully attentive to the human cares and concerns of all affected parties is belied by empirical accounts of administrative participation and impeded in concept by significant structural inequalities across regulatory constituencies and procedural constraints on agencies. And, of course, his understanding of the Take Care clause is highly contested, not least by a majority of sitting Supreme Court justices.

To be frank, I am not sure that I am persuaded by Emerson’s descriptive or normative case for the public care principle. But I deeply appreciate his project for the questions it explicitly raises and the questions it provokes. He is confronting vexing questions about the moral content of law that have long been elided in administrative law scholarship: Do administrative and structural constitutional law have some irreducible moral content? If so, what is it? How do we know? Where should we look for it? In this sense, Emerson’s article is an important contribution to what I am coming to see as a moral turn in administrative and constitutional law, exemplified by works like Adrian Vermeule’s Common Good Constitutionalism and Alan Rozenshtein’s The Virtuous Executive.

Emerson has distinctive answers to these questions that can serve as a generative springboard for dialogue across perspectives. For instance, he looks to positive law to supply the moral content that comprises the public care principle. This is in stark contrast to Vermeule, who insists that the moral content of the law lies beyond positive law. Similarly, in contrast to Vermeule’s embrace of hierarchy as an essential basis of natural law, Emerson’s public care principle depends on an ethic of anti-hierarchy grounded in feminist theory. To be clear, Emerson does not frame his project as a critique or extension of Vermeule’s work. But, for me, it illuminates the potential to leverage the contrasts across different conceptions to think more comprehensively about the moral content of law. For instance, while anti-hierarchical values might be necessary to construct Emerson’s ethic of public care, it is not clear that his vision of public care can be executed as a principle of law and governance without hierarchy. Are there types of hierarchy that are consistent with the public care principle? I am grateful for Emerson’s contribution to these conversations, and I look forward to watching them evolve.

Embracing Conflict and Instability: A New Theory for the Administrative State

Aug 17, 2022 Wendy Wagner1 comment

Wendy Wagner

What are the key ingredients for a more democratically-grounded administrative state? The answers vary, but most scholars advocate for some type of agency decision-making that resolves Congress’ mandates expeditiously, while also providing “reasons” for those decisions that draw on the best scientific advice, solicit views from all affected groups, and follow accountable procedures. Whatever specific theory one adopts for the “democracy question,” (P. 5) however, most scholars seem to agree that the end goal for agencies is to resolve an issue and then move on.

Daniel Walters turns that conventional thinking on its head in his provocative piece forthcoming in the Yale Law Journal, The Administrative Agon: A Democratic Theory for a Conflictual Regulatory State. A primary goal for administrative decision-making, Walters argues, is not to reach closure on the issues agencies are asked to resolve, but rather the opposite. Agencies should strive to nurture and maintain deliberation and even disagreement, without worrying so much about whether there is a clear path out of the conflict.

Walters supports his argument by summoning a political theory that is likely unfamiliar to most legal scholars (or at least it was to me), called Agonistic Democratic Theory (or Agon for short). Agon accepts existing irresolvable differences of opinion as a given and endeavors to find a democratic way to resolve society’s problems incrementally, despite sharp disagreements. Agon is thus distinctive in “emphasiz[ing] the inevitability of political conflict and build[ing] democratic legitimacy around that conflict rather than attempting to elide it by achieving or declaring a settlement.” (P. 9.)

After providing a stunning synopsis of how Agon is situated against the other leading democratic theories for the administrative state, Walters explains how Agon offers a completely different framework for thinking about administrative legitimacy. Agon finds legitimacy in the “‘unsettlement’ of the law” rather than the converse. (P. 9.) Agencies, in other words, should be judged by whether they engage diverse interests meaningfully and review past decisions for needed changes, not on how swiftly and effortlessly they forge policies despite this disagreement. Walters acknowledges that Agon is not the only or necessarily the best theory for administrative governance; there inevitably will be cycling among theories. His point instead is that an Agon approach has been largely ignored, and yet in our divided government, this paradigm-shifting theory provides a way to reconceptualize and even redesign the much-maligned administrative state.

Agon also aligns much more closely with today’s bureaucratic realities. Rather than complain about the unsettled state of divisive regulatory decisions like Biden’s vaccine mandate, Agon helps us understand and even appreciate that a “winner-take-all” approach is not the best one for democracy. Perhaps OSHA should have initiated a more incremental approach at the outset rather than allow the courts to seize control, but regardless, the end goal for value-laden regulatory decisions must be an inclusive process that provides dissenters with an opportunity to contest the results.

The novelty of this new theory for administrative law is reason enough to celebrate The Administrative Agon. But more impactful is Walters’ ability to challenge our old assumptions in ways that are bound to spark rethinking about the regulatory state. For example, Walters itemizes a number of institutional problems that can now be moved from the “liability” to the “attribute” column, including agencies’ use of guidances and “regulatory sandboxes” as opposed to final rulemakings; civil disobedience by agency staff; overlapping and sometimes conflicting agency powers and responsibilities; agency nonacquiescence in judicial rulings; and circuit splits. Even coordination problems and messy interagency conflicts within the Executive Branch should be celebrated. Indeed, rather than simply serving as a transmission belt that fills in the statutory gaps with facts and details (ala Justice Neil Gorsuch), agencies can provide a forum for democratic dialogue that is otherwise missing in our separation of powers system.

On the flip side, Agon exposes even more serious problems with the administrative state than we previously realized. If the goal is to “celebrate political conflict and seek to foster it and sustain it,” (P. 10) then many agencies may be flunking the Agon test. EPA, for example, often strives to negotiate rules with industry and slip them into the Federal Register to get the job done. Agon tells us that this is exactly the wrong way for agencies to conduct their business. Similarly, Agon tells us that centralized presidential control and an obsession with interagency coordination undermine the values of Agon. Rather, Agon counsels that we should multiply “the sites at which political contestation and democratic mobilization can occur.” (P. 58.)

Agon also raises new worries for existing problems that Walters does not (yet) explore. Foremost in my own area is how to reconcile this intriguing new theory with the development of protective rules. In setting health and environmental rules, industry typically overpowers public interest groups during the first round of pre-NPRM and notice and comment. A dynamic, never-ending approach—no matter how subsidized the diverse interests—seems poised to tip still more power in industry’s favor due to the combined beneficial effects of delay and the inevitable exhaustion of thinly financed public advocates over time.

An Agon theory will also need to be more fully reconciled with the beloved “expertise” goal of agency decision-making. Under Agon, the agency would presumably enjoy greater judicial deference as long as the agency adopts a meaningful Agon-styled deliberation and provides political reasons for its decision. Yet this added deference on scientific issues could afford agencies with too much discretionary space in settings where vigorous participants and perhaps even agency staff are inclined to bend the science to their preferred ends. Distrust of the civil service could get worse rather than better if agencies are allowed to reach interim solutions based on political preferences that run afoul of established facts.

Agon even puts added pressure on administrative architects to consider the agency’s role in educating and informing the public, since agencies may sometimes exert an oversized role in influencing lay understandings of regulatory problems.

Perhaps the best response to these and other worries is to consider a narrower role for Agon, focused on agency decisions in which the public itself is deeply divided on moral grounds, like vaccine mandates or the role of critical race theory in administrative law. (P. 68.) Indeed, Walters gestures towards this possibly narrower conception himself by suggesting that Agon may not make sense for “technical areas” (P. 65), which could reach a large set of agency activities depending on the definition. In this narrower application, Agon provides two particularly valuable pay-offs for politically contentious decisions. The first, as discussed, is to unsettle our own thinking about the long-held assumption that consensus is the ideal end for all agency decisions. Second is to provide a valuable institutional blueprint for the agencies’ role in addressing decisions that are distinctive because of the seemingly unresolvable conflicts they raise among the general public. What fits in this new bucket of Agon-styled rules and what falls out is unclear. But Walters provides the needed theory and institutional architecture for designing a space for agencies to become vital institutional players in moving what might otherwise seem like hopeless public deliberations forward at a time when we are very much in need of exactly that kind of help. In Walter’s own words, “[i]f we cannot anytime soon change the fact that there are foundational disagreements in society about what administration and regulation should look like, then the only democratic theory that can provide a source of legitimacy in administrative action is one that acknowledges those disagreements and makes a place for them.” (P. 68.)

The Administrative State As Seen Through a Chevron Lens

Jul 19, 2022 Richard PierceAdd a Comment

Richard Pierce

Thomas Merrill’s book, The Chevron Doctrine: Its Rise and Fall, and the Future of the Administrative State, is timely in several ways. First, it arrives immediately after he was named one of the fifty most important legal scholars of all time. Second, it tells the story of the Supreme Court’s 1984 opinion in Chevron v. NRDC, the most frequently cited administrative law opinion in history, at a time when the Chevron doctrine is in severe jeopardy. Third, Merrill uses the history of the Chevron doctrine as a lens through which he explains and defends the administrative state at a time when it is under attack as illegitimate and unconstitutional.

Merrill begins by describing the Chevron opinion and its effects. The opinion was long, complicated, and nuanced, but many circuit courts ignored the rest of the opinion and applied only the famous two-part test that the Court announced:

When a court reviews an agency’s construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.

As interpreted and applied by circuit courts, the Chevron test had the effect of increasing by ten to fifteen per cent the proportion of agency actions that courts upheld.¹ More importantly, it encouraged agencies to stretch their statutory authority in ways that allowed them to take actions with major effects with greater confidence that courts would uphold the actions. (Pp. 3-4.)

After Merrill describes the Chevron opinion and its direct effects, he identifies and describes four values that he uses throughout the book to evaluate the Chevron doctrine as it evolved in substance and scope. The four are rule of law values, constitutional values, accountability values, and the quest for better agency decisions. Each value is complicated and multi-faceted. Merrill explains why the original version of the Chevron doctrine, as it was understood and applied by circuit courts, furthered some of the four values but ignored or discounted others.

He then devotes one chapter each to detailed descriptions of the major changes in the doctrine that the Supreme Court has made and to the ways in which each of those changes furthered each of the four values that he identified and discussed at the beginning of the book. He concludes his analysis of the 35 years of opinions in which the Supreme Court has clarified and qualified the Chevron test on an optimistic note:

Notwithstanding all these qualifications and corrections, the central lesson of the Chevron opinion—and of the entire era of jurisprudence that it eventually spawned—is that the agency, rather than the reviewing court, is the preferred institution for filling in the space that Congress has left for future interpretation in the statute under which the agency operates. This, as Chevron explained, is because the agency is more accountable to elected officials than the reviewing court, and the agency has more expertise in understanding the way the statute operates in its contemporary incarnation. (Pp. 243-45.)

Merrill then turns to what he characterizes as the important question that remains: “whether the mandate to accept agency interpretations that fall within the discretionary space left by Congress can be structured in such a way as to improve the quality of agency interpretations designed to fill this space.” He answers that question with a twelve-page discussion of the virtues of the notice and comment process.

Merrill concludes the book by describing ways in which the Court might restate the Chevron doctrine that would further the four values that he identifies at the beginning of the book. As restated, the doctrine would consist of the original two steps, restated to reflect the many qualifications that the Court has added, plus a third step—whether the agency has adopted the interpretation through use of the notice and comment process. If the agency did not use the notice and comment process, the agency interpretation should be entitled only to the court’s respectful consideration, with emphasis on the persuasiveness of the agency’s reasoning and on whether the interpretation comports with settled expectations created by prior interpretations. Like Aaron Nielson and Kristin Hickman, Merrill would not accord deference to interpretations that  are announced in adjudications. (P. 264.)

Thus, Merrill’s preferred review regime would consist of two tests. The first can be summarized as a version of the Chevron test that reflects the many qualifications that the Court referred to in its 2019 opinion in Kisor v. Wilkie. Courts would apply that test only to statutory interpretations that agencies develop through use of the notice and comment process. The second test is a version of the test that the Court announced in its 1944 opinion in Skidmore v. Swift & Co. Courts would apply it to all agency interpretations that were not developed through use of the notice and comment process.

This book is a must-read for all administrative law scholars. Even if you do not agree with Merrill’s conclusions, you will learn a lot from the careful ways in which he explains and supports his conclusions.

1. Kent Barnett & Chris Walker, Chevron in Circuit Courts, 116 Mich. L. Rev. 1 (2017).