United States: When Regulatory Policy Sounds Like An Ad

Last Updated: August 17 2017
Article by Fred Wagner

Ask anyone in my family, and they'll tell you to hide my cellphone when I'm watching late-night TV. I absolutely love advertisements for products promising better this or faster that, and with unbelievably low prices in three convenient payments to boot. As a result of my purchases, I have enjoyed juicier chicken, fresher vegetables, and easier kitchen clean-up.

This week in D.C. federal district court, arguments will be presented on a challenge to the Trump administration's version of a regulatory infomercial – Executive Order (EO) 13771, telling agencies that they have to repeal or eliminate two existing regulations for every new one that they propose to make final. Sort of like a "Buy One Get Two Free" deal, but without the steak knives.

The Executive Order goes further, by allowing agencies to promulgate only regulations that have combined incremental costs that do not exceed a certain cost cap, once the cost savings of the rescinded regulations is taken into account.

Of all the legislative and policy initiatives laid out by the new administration, regulatory reform has probably advanced more quickly, and with more consequence, than any other. As we've written here, this aggressive posture delaying or rescinding literally dozens of rules across the federal government has triggered numerous cases brought by public interest groups and states under the Administrative Procedure Act (APA). While those challenges tend to focus on arcane APA requirements of notice and comment or the justification supporting any agency action, the "two for one" Executive Order case cuts more directly to certain fundamental constitutional principles.

In Public Citizen, Inc., et al., v. Trump, the judge will be confronted with the basic definition of executive authority requiring the President to "take Care that the Laws be faithfully executed." Of course, the Constitution grants solely to Congress the authority to make those laws. The Plaintiffs assert that numerous Supreme Court cases expressly limit executive authority to act only within the strictures set by Congress. Perhaps the most memorable recent example of a decision reinforcing this conclusion was the 1998 Court decision ruling that the Line Item Veto Act was unconstitutional because it allowed the President to amend acts of Congress (in that instance, the budget) by vetoing parts of them.

The Executive Order runs afoul of this constitutional provision, Plaintiffs argue, because there is no direct congressional authorization allowing the executive to make this regulatory "one time only, order now" offer. Certain statutes have been passed ordering agencies to issue regulations to address one problem or another. Withholding or delaying action on those regulations until other (likely unrelated) regulations are repealed would improperly substitute the executive agency's judgment for that of Congress.

"Nonsense," says the government in its summary judgment briefing. The President and his delegates in the federal agencies take the costs and benefits of regulations into account all the time, and that authority has never been challenged. In addition, both Democratic and Republican administrations have routinely ordered a review of old and outdated regulations that should be repealed. Beyond the President's inherent authority to manage the executive branch, the government argues that the EO itself states that it applies only "to the extent permitted by law," so if a particular statute requires regulatory action to be taken, nothing in the EO would alter that obligation.

From a constitutional perspective, the government probably has the better argument here. In the abstract, the executive branch is granted broad authority to issue rules that implement the will of Congress. Repealing or updating regulations would appear to be central to that authority. If Congress passes a law telling the President to issue a regulation and the pertinent agency refuses, that inaction could be properly challenged. But simply mandating that the agency consider the costs and benefits of its regulatory actions would not appear to be an abuse of executive power or a violation of the separation of powers. (All of this assumes that Plaintiffs can show actual harm from issuance of the EO, giving them standing to be in court.)

The strength of Plaintiffs' arguments lies less with the facial constitutional challenge raised in the pending case than it does with how the EO will be applied in the context of a specific final rule. For example, the U.S. Department of Transportation wants to issue a final safety rule dealing with autonomous vehicles. There's no doubt such a rule will cost millions, if not billions, to implement over time. What two rules would the DOT choose to repeal, and would the agency also calculate the potential safety risks if those rules were no longer in place? For a significant rule like one addressing driverless cars, where in the world would the DOT find other rules to repeal that would come anywhere near the incremental cost of that single proposal?

It makes sense that environmental and other public interest groups would take offense at the EO and the subsequent implementation guidance issued by the Office of Management & Budget. The administration's two for one regulatory policy appears to mandate agency decision-making that could be viewed as divorced from case-specific analysis supporting an individual rule. Once any federal agency repeals rules pursuant to the EO, that action will likely be subject to an "arbitrary and capricious" APA challenge. From my perspective, the court will likely find that the President has authority to take these costs into account when finalizing specific rules. But the Plaintiffs may ultimately be able to get their money back (minus shipping and handling, of course) if, when that authority is applied to a specific regulation, the EO fails to live up to its promises.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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