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The State Farm Case and the Promotion of Deregulation

One of the objectives of people who favor deregulation is to design legal institutions that can promote deregulation.  I have mentioned one such method in prior scholarship: Congress should establish an agency with the mission of identifying regulations that should be eliminated and the authority to repeal those regulations.  For a discussion of this idea, see here.

Another idea, however, is to establish more lenient procedures for enacting deregulations than for enacting regulations. For example, one might require agency actions that impose regulations to satisfy the full requirements of notice and comment rulemaking, but to impose less procedural requirements on deregulations.  This procedure would promote deregulations.

A different but related idea is to change the degree of judicial review that is imposed on agency deregulatory actions.  Under this idea, the agency would have to provide a stronger case to justify its regulatory actions than to defend its deregulatory actions.  While this different standard of review would have to be established by Congress, that might not have been necessary if the Supreme Court had decided the famous “hard look” State Farm case differently.

In State Farm, the National Highway Traffic Safety Administration under Jimmy Carter had adopted a passive restraints regulation that required automobiles to have either air bags or automatic seat belts.  The Reagan Administration sought to repeal that regulation.  The repeal was challenged in court and the Supreme Court applied a strict version of hard look review, concluding that the agency had not supplied an adequate explanation for its repeal of the regulation.  While hard look review supported regulation in this case, it almost certainly operates in general to deter regulation.  So opponents of excessive regulation have reason to praise State Farm.

But another aspect of the case might have been even more beneficial to deregulation if it had been decided differently.  The agency argued that its decision to repeal a regulation should not be subjected to the same scrutiny as a decision to impose a regulation.  There were policy reasons to support such an approach.  First, an agency that regulates is coercing the public, whereas an agency that deregulates is withdrawing such coercive power.  Second, one might argue that the structure of administrative agencies promotes excessive regulation for a variety of reasons, including that such regulation generally benefits agencies.  (As a matter of the original meaning of the APA, I am not sure what the correct answer is because I have not researched the question.)

But the Supreme Court held otherwise.  It concluded that any change in the regulatory posture of the agency required the same degree of justification.  If an agency was going from a situation where there was no regulation to one where there would be a regulation, the same level of justification would be needed as if the agency was going from a situation where there was a regulation to one where there would be no regulation.

From the perspective of promoting deregulation, at least, State Farm was a lost opportunity – one that Congress could still correct at any time.

Reader Discussion

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on November 16, 2017 at 11:49:25 am

Interesting discussion. Might it be, that a potentially awkward outcome of requiring lessor review for deregulation, in a sense would be calling into question not only the original wisdom and decision making process behind the agencies original decision to regulate, but also that of the judicial body that subsequently gave the regulation a hard look review and concurred with the agency; especially if the case for deregulation came before the same seated judicial body, where with a concurrence to now deregulate, the court may appear to be contradicting its earlier findings? In this event, the public's loss of confidence in the agency (which likely is deserved) might be less detrimental than the potential loss of confidence in the judiciary.

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Paul Binotto
on November 16, 2017 at 12:41:14 pm

For the most part, regulations are promulgated because Something Bad Happened™. They shouldn't be removed unless there is a reasonable assurance that it won't happen again.

Remember Gramm-Leach-Bliley? Glass-Steagall was initiated to prevent crashes, and when it was repealed, another crash became inevitable. Senator Dorgan predicted it to the year.

Human nature is a constant. Congress should leave well enough alone.

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Trevor Chase
on November 16, 2017 at 20:35:18 pm

"Congress should leave well enough alone."

And would that be deemed doing only that which is *necessary and proper*

What if the regulation met neither of the two conditions? would you still say that the Legislative should leave well enough alone? or that SCOTUS should?

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gabe
on November 17, 2017 at 11:42:14 am

Ah, a classic argument of libertarianism!

The agency argued that its decision to repeal a regulation should not be subjected to the same scrutiny as a decision to impose a regulation. There were policy reasons to support such an approach. First, an agency that regulates is coercing the public, whereas an agency that deregulates is withdrawing such coercive power….

What does “coercion” mean, and why should I regard it as the greatest threat to guard against?

• The 13th Amendment outlawed slavery. Slave-owners regarded it as coercive.

• Trespass laws bar trespass. Trespassers regard it as coercive.

• Property laws variously prohibit builders from digging out so much land as to cause the neighbor’s land to subside, or building in such a manner as to block all sunlight from reaching a neighbor’s land, or from prohibiting neighbors from being about to access their land. Builders find these laws coercive.

• Zoning laws prohibit Walmart from building on the lot next to your house. Walmart finds this law coercive.

• Water laws prohibit any one person from sucking up all the water in the river/aquifer. Really thirsty firms find these laws coercive.

• Endangered species laws seek to ensure that certain species endure for the benefit of future generations by banning the hunting of those species. Hunters find these laws coercive.

• Intellectual property rights laws bar restrict the use of intellectual property without the consent of the people holding the rights. Movie pirates regard it as coercive.

• Clean air laws limit the amount of particulate matter you can emit, thereby reducing the number of people with asthma you can kill. Polluters regard it as coercive.

• Animal and child welfare laws limit the kinds of things you can do to animals and kids. Abusive people regard these laws as coercive.

• Civil rights and anti-discrimination laws limit the kinds of discrimination people can engage in. Discriminators regard these laws as coercive.

• Arms control laws prohibit private citizens from owning nuclear weapons. Private citizens who would like to own nuclear weapons regard these laws as coercive.

• Welfare laws keep poor people from starving. Taxpayers regard these laws as coercive.

• Etc.

I suspect we might eventually come to the conclusion that, whatever definition you devise for “coercion,” you might conclude that government policies are NOT necessarily the greatest source of it, and that often those policies help to alleviate it. Given this insight, we would have cause to doubt the proposition that deregulation is inevitably a path to reducing “coercion.”

Bottom line: There are LOTS of individual interests. Government policies help draw the boundaries between these interests. To characterize shifting the boundary to the left as “coercion” and shifting the boundary to the right as “freedom” is kinda facile.

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nobody.really
on November 17, 2017 at 11:47:59 am

For the most part, regulations are promulgated because Something Bad Happened™. They shouldn’t be removed unless there is a reasonable assurance that it won’t happen again.

"In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, 'I don’t see the use of this; let us clear it away.' To which the more intelligent type of reformer will do well to answer: 'If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.'"

G. K. Chesterton

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nobody.really
on November 19, 2017 at 09:47:35 am

Chesterton elsewhere observes, about hedgerows, natural fences, if you like:

"[I}f you have noticed; some things, in fact, which others know by pictures or current speech; if you know, for instance, that most roadside hedges are taller and denser than they look, and that even the largest man lying just behind them, takes up far less room than you would suppose; if you know that many natural sounds are much more like each other than the enlightened ear can believe..."

G. K. Chesterton. The Flying Inn (Illustrated) (p. 25). Aeterna Press. Kindle Edition.

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Paul Binotto
on November 19, 2017 at 10:13:36 am

You make good & valid points,

"Given this insight, we would have cause to doubt the proposition that deregulation is inevitably a path to reducing “coercion.” - then again, might it also not be concluded that deregulation may be the best way yet to ensure the least coercion, ether from the left or from the right.

In an earlier posting, about so-called internet monopolies, we considered the appropriateness of government regulating them to better protect freedom of speech; it should be observed, that in most of these instances, after enough users have pushed back (perhaps with the support of the government's "voice" but not of its "command"), against attempts to censure unpopular content, these companies almost always relent and permit what they first sought to exclude; and with each subsequent case of censorship followed by backlash, the companies gradually learn it is not in their best interest to continue this practice if for no other reason than to avoid the aggravation. And, in the end, free speech is on a stronger footing, because a behavior has been changed by natural process and not by forced compliance.

Now obviously, there are some "wrong behaviors" though they may be corrected by this natural process in the long run, are so egregious that immediate (government) action is the best and necessary response, but these, in my view, should always be the exception than the rule.

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Paul Binotto
on January 25, 2018 at 06:46:38 am

[…] Rappoport writing at Law and Liberty lately on such topics as reconfiguring administrative law to promote deregulation, a reformed REINS Act, insisting on stricter separation of powers within agencies including […]

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Administrative law roundup – John Culbreath
on January 25, 2018 at 21:26:21 pm

[…] Rappoport writing at Law and Liberty lately on such topics as reconfiguring administrative law to promote deregulation, a reformed REINS Act, insisting on stricter separation of powers within agencies including […]

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Image of Administrative law roundup – Kedis
Administrative law roundup – Kedis

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.