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[TOTM: The following is part of a digital symposium by TOTM guests and authors on the legal and regulatory issues that arose during Ajit Pai’s tenure as chairman of the Federal Communications Commission. The entire series of posts is available here.

Geoffrey A. Manne is the president and founder of the International Center for Law and Economics.]

I’m delighted to add my comments to the chorus of voices honoring Ajit Pai’s remarkable tenure at the Federal Communications Commission. I’ve known Ajit longer than most. We were classmates in law school … let’s just say “many” years ago. Among the other symposium contributors I know of only one—fellow classmate, Tom Nachbar—who can make a similar claim. I wish I could say this gives me special insight into his motivations, his actions, and the significance of his accomplishments, but really it means only that I have endured his dad jokes and interminable pop-culture references longer than most. 

But I can say this: Ajit has always stood out as a genuinely humble, unfailingly gregarious, relentlessly curious, and remarkably intelligent human being, and he deployed these characteristics to great success at the FCC.   

Ajit’s tenure at the FCC was marked by an abiding appreciation for the importance of competition, both as a guiding principle for new regulations and as a touchstone to determine when to challenge existing ones. As others have noted (and as we have written elsewhere), that approach was reflected significantly in the commission’s Restoring Internet Freedom Order, which made competition—and competition enforcement by the antitrust agencies—the centerpiece of the agency’s approach to net neutrality. But I would argue that perhaps Chairman Pai’s greatest contribution to bringing competition to the forefront of the FCC’s mandate came in his work on media modernization.

Fairly early in his tenure at the commission, Ajit raised concerns with the FCC’s failure to modernize its media-ownership rules. In response to the FCC’s belated effort to initiate the required 2010 and 2014 Quadrennial Reviews of those rules, then-Commissioner Pai noted that the commission had abdicated its responsibility under the statute to promote competition. Not only was the FCC proposing to maintain a host of outdated existing rules, but it was also moving to impose further constraints (through new limitations on the use of Joint Sales Agreements (JSAs)). As Ajit noted, such an approach was antithetical to competition:

In smaller markets, the choice is not between two stations entering into a JSA and those same two stations flourishing while operating completely independently. Rather, the choice is between two stations entering into a JSA and at least one of those stations’ viability being threatened. If stations in these smaller markets are to survive and provide many of the same services as television stations in larger markets, they must cut costs. And JSAs are a vital mechanism for doing that.

The efficiencies created by JSAs are not a luxury in today’s digital age. They are necessary, as local broadcasters face fierce competition for viewers and advertisers.

Under then-Chairman Tom Wheeler, the commission voted to adopt the Quadrennial Review in 2016, issuing rules that largely maintained the status quo and, at best, paid tepid lip service to the massive changes in the competitive landscape. As Ajit wrote in dissent:

The changes to the media marketplace since the FCC adopted the Newspaper-Broadcast Cross-Ownership Rule in 1975 have been revolutionary…. Yet, instead of repealing the Newspaper-Broadcast Cross-Ownership Rule to account for the massive changes in how Americans receive news and information, we cling to it.

And over the near-decade since the FCC last finished a “quadrennial” review, the video marketplace has transformed dramatically…. Yet, instead of loosening the Local Television Ownership Rule to account for the increasing competition to broadcast television stations, we actually tighten that regulation.

And instead of updating the Local Radio Ownership Rule, the Radio-Television Cross-Ownership Rule, and the Dual Network Rule, we merely rubber-stamp them.

The more the media marketplace changes, the more the FCC’s media regulations stay the same.

As Ajit also accurately noted at the time:

Soon, I expect outside parties to deliver us to the denouement: a decisive round of judicial review. I hope that the court that reviews this sad and total abdication of the administrative function finds, once and for all, that our media ownership rules can no longer stay stuck in the 1970s consistent with the Administrative Procedure Act, the Communications Act, and common sense. The regulations discussed above are as timely as “rabbit ears,” and it’s about time they go the way of those relics of the broadcast world. I am hopeful that the intervention of the judicial branch will bring us into the digital age.

And, indeed, just this week the case was argued before the Supreme Court.

In the interim, however, Ajit became Chairman of the FCC. And in his first year in that capacity, he took up a reconsideration of the 2016 Order. This 2017 Order on Reconsideration is the one that finally came before the Supreme Court. 

Consistent with his unwavering commitment to promote media competition—and no longer a minority commissioner shouting into the wind—Chairman Pai put forward a proposal substantially updating the media-ownership rules to reflect the dramatically changed market realities facing traditional broadcasters and newspapers:

Today we end the 2010/2014 Quadrennial Review proceeding. In doing so, the Commission not only acknowledges the dynamic nature of the media marketplace, but takes concrete steps to update its broadcast ownership rules to reflect reality…. In this Order on Reconsideration, we refuse to ignore the changed landscape and the mandates of Section 202(h), and we deliver on the Commission’s promise to adopt broadcast ownership rules that reflect the present, not the past. Because of our actions today to relax and eliminate outdated rules, broadcasters and local newspapers will at last be given a greater opportunity to compete and thrive in the vibrant and fast-changing media marketplace. And in the end, it is consumers that will benefit, as broadcast stations and newspapers—those media outlets most committed to serving their local communities—will be better able to invest in local news and public interest programming and improve their overall service to those communities.

Ajit’s approach was certainly deregulatory. But more importantly, it was realistic, well-reasoned, and responsive to changing economic circumstances. Unlike most of his predecessors, Ajit was unwilling to accede to the torpor of repeated judicial remands (on dubious legal grounds, as we noted in our amicus brief urging the Court to grant certiorari in the case), permitting facially and wildly outdated rules to persist in the face of massive and obvious economic change. 

Like Ajit, I am not one to advocate regulatory action lightly, especially in the (all-too-rare) face of judicial review that suggests an agency has exceeded its discretion. But in this case, the need for dramatic rule change—here, to deregulate—was undeniable. The only abuse of discretion was on the part of the court, not the agency. As we put it in our amicus brief:

[T]he panel vacated these vital reforms based on mere speculation that they would hinder minority and female ownership, rather than grounding its action on any record evidence of such an effect. In fact, the 2017 Reconsideration Order makes clear that the FCC found no evidence in the record supporting the court’s speculative concern.

…In rejecting the FCC’s stated reasons for repealing or modifying the rules, absent any evidence in the record to the contrary, the panel substituted its own speculative concerns for the judgment of the FCC, notwithstanding the FCC’s decades of experience regulating the broadcast and newspaper industries. By so doing, the panel exceeded the bounds of its judicial review powers under the APA.

Key to Ajit’s conclusion that competition in local media markets could be furthered by permitting more concentration was his awareness that the relevant market for analysis couldn’t be limited to traditional media outlets like broadcasters and newspapers; it must include the likes of cable networks, streaming video providers, and social-media platforms, as well. As Ajit put it in a recent speech:

The problem is a fundamental refusal to grapple with today’s marketplace: what the service market is, who the competitors are, and the like. When assessing competition, some in Washington are so obsessed with the numerator, so to speak—the size of a particular company, for instance—that they’ve completely ignored the explosion of the denominator—the full range of alternatives in media today, many of which didn’t exist a few years ago.

When determining a particular company’s market share, a candid assessment of the denominator should include far more than just broadcast networks or cable channels. From any perspective (economic, legal, or policy), it should include any kinds of media consumption that consumers consider to be substitutes. That could be TV. It could be radio. It could be cable. It could be streaming. It could be social media. It could be gaming. It could be still something else. The touchstone of that denominator should be “what content do people choose today?”, not “what content did people choose in 1975 or 1992, and how can we artificially constrict our inquiry today to match that?”

For some reason, this simple and seemingly undeniable conception of the market escapes virtually all critics of Ajit’s media-modernization agenda. Indeed, even Justice Stephen Breyer in this week’s oral argument seemed baffled by the notion that more concentration could entail more competition:

JUSTICE BREYER: I’m thinking of it solely as a — the anti-merger part, in — in anti-merger law, merger law generally, I think, has a theory, and the theory is, beyond a certain point and other things being equal, you have fewer companies in a market, the harder it is to enter, and it’s particularly harder for smaller firms. And, here, smaller firms are heavily correlated or more likely to be correlated with women and minorities. All right?

The opposite view, which is what the FCC has now chosen, is — is they want to move or allow to be moved towards more concentration. So what’s the theory that that wouldn’t hurt the minorities and women or smaller businesses? What’s the theory the opposite way, in other words? I’m not asking for data. I’m asking for a theory.

Of course, as Justice Breyer should surely know—and as I know Ajit Pai knows—counting the number of firms in a market is a horrible way to determine its competitiveness. In this case, the competition from internet media platforms, particularly for advertising dollars, is immense. A regulatory regime that prohibits traditional local-media outlets from forging efficient joint ventures or from obtaining the scale necessary to compete with those platforms does not further competition. Even if such a rule might temporarily result in more media outlets, eventually it would result in no media outlets, other than the large online platforms. The basic theory behind the Reconsideration Order—to answer Justice Breyer—is that outdated government regulation imposes artificial constraints on the ability of local media to adopt the organizational structures necessary to compete. Removing those constraints may not prove a magic bullet that saves local broadcasters and newspapers, but allowing the rules to remain absolutely ensures their demise. 

Ajit’s commitment to furthering competition in telecommunications markets remained steadfast throughout his tenure at the FCC. From opposing restrictive revisions to the agency’s spectrum screen to dissenting from the effort to impose a poorly conceived and retrograde regulatory regime on set-top boxes, to challenging the agency’s abuse of its merger review authority to impose ultra vires regulations, to, of course, rolling back his predecessor’s unsupportable Title II approach to net neutrality—and on virtually every issue in between—Ajit sought at every turn to create a regulatory backdrop conducive to competition.

Tom Wheeler, Pai’s predecessor at the FCC, claimed that his personal mantra was “competition, competition, competition.” His greatest legacy, in that regard, was in turning over the agency to Ajit.

[TOTM: The following is part of a digital symposium by TOTM guests and authors on the legal and regulatory issues that arose during Ajit Pai’s tenure as chairman of the Federal Communications Commission. The entire series of posts is available here.

Jerry Ellig was a research professor at The George Washington University Regulatory Studies Center and served as chief economist at the Federal Communications Commission from 2017 to 2018. Tragically, he passed away Jan. 20, 2021. TOTM is honored to publish his contribution to this symposium.]

One significant aspect of Chairman Ajit Pai’s legacy is not a policy change, but an organizational one: establishment of the Federal Communications Commission’s (FCC’s) Office of Economics and Analytics (OEA) in 2018.

Prior to OEA, most of the FCC’s economists were assigned to the various policy bureaus, such as Wireless, Wireline Competition, Public Safety, Media, and International. Each of these bureaus had its own chief economist, but the rank-and-file economists reported to the managers who ran the bureaus – usually attorneys who also developed policy and wrote regulations. In the words of former FCC Chief Economist Thomas Hazlett, the FCC had “no location anywhere in the organizational structure devoted primarily to economic analysis.”

Establishment of OEA involved four significant changes. First, most of the FCC’s economists (along with data strategists and auction specialists) are now grouped together into an organization separate from the policy bureaus, and they are managed by other economists. Second, the FCC rules establishing the new office tasked OEA with reviewing every rulemaking, reviewing every other item with economic content that comes before the commission for a vote, and preparing a full benefit-cost analysis for any regulation with $100 million or more in annual economic impact. Third, a joint memo from the FCC’s Office of General Counsel and OEA specifies that economists are to be involved in the early stages of all rulemakings. Fourth, the memo also indicates that FCC regulatory analysis should follow the principles articulated in Executive Order 12866 and Office of Management and Budget Circular A-4 (while specifying that the FCC, as an independent agency, is not bound by the executive order).

While this structure for managing economists was new for the FCC, it is hardly uncommon in federal regulatory agencies. Numerous independent agencies that deal with economic regulation house their economists in a separate bureau or office, including the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Surface Transportation Board, the Office of Comptroller of the Currency, and the Federal Trade Commission. The SEC displays even more parallels with the FCC. A guidance memo adopted in 2012 by the SEC’s Office of General Counsel and Division of Risk, Strategy and Financial Innovation (the name of the division where economists and other analysts were located) specifies that economists are to be involved in the early stages of all rulemakings and articulates best analytical practices based on Executive Order 12866 and Circular A-4.

A separate economics office offers several advantages over the FCC’s prior approach. It gives the economists greater freedom to offer frank advice, enables them to conduct higher-quality analysis more consistent with the norms of their profession, and may ultimately make it easier to uphold FCC rules that are challenged in court.

Independence.  When I served as chief economist at the FCC in 2017-2018, I gathered from conversations that the most common practice in the past was for attorneys who wrote rules to turn to economists for supporting analysis after key decisions had already been made. This was not always the process, but it often occurred. The internal working group of senior FCC career staff who drafted the plan for OEA reached similar conclusions. After the establishment of OEA, an FCC economist I interviewed noted how his role had changed: “My job used to be to support the policy decisions made in the chairman’s office. Now I’m much freer to speak my own mind.”

Ensuring economists’ independence is not a problem unique to the FCC. In a 2017 study, Stuart Shapiro found that most of the high-level economists he interviewed who worked on regulatory impact analyses in federal agencies perceive that economists can be more objective if they are located outside the program office that develops the regulations they are analyzing. As one put it, “It’s very difficult to conduct a BCA [benefit-cost analysis] if our boss wrote what you are analyzing.” Interviews with senior economists and non-economists who work on regulation that I conducted for an Administrative Conference of the United States project in 2019 revealed similar conclusions across federal agencies. Economists located in organizations separate from the program office said that structure gave them greater independence and ability to develop better analytical methodologies. On the other hand, economists located in program offices said they experienced or knew of instances where they were pressured or told to produce an analysis with the results decision-makers wanted.

The FTC provides an informative case study. From 1955-1961, many of the FTC’s economists reported to the attorneys who conducted antitrust cases; in 1961, they were moved into a separate Bureau of Economics. Fritz Mueller, the FTC chief economist responsible for moving the antitrust economists back into the Bureau of Economics, noted that they were originally placed under the antitrust attorneys because the attorneys wanted more control over the economic analysis. A 2015 evaluation by the FTC’s Inspector General concluded that the Bureau of Economics’ existence as a separate organization improves its ability to offer “unbiased and sound economic analysis to support decision-making.”

Higher-quality analysis. An issue closely related to economists’ independence is the quality of the economic analysis. Executive branch regulatory economists interviewed by Richard Williams expressed concern that the economic analysis was more likely to be changed to support decisions when the economists are located in the program office that writes the regulations. More generally, a study that Catherine Konieczny and I conducted while we were at the FCC found that executive branch agencies are more likely to produce higher-quality regulatory impact analyses if the economists responsible for the analysis are in an independent economics office rather than the program office.

Upholding regulations in court. In Michigan v. EPA, the Supreme Court held that it is unreasonable for agencies to refuse to consider regulatory costs if the authorizing statute does not prohibit them from doing so. This precedent will likely increase judicial expectations that agencies will consider economic issues when they issue regulations. The FCC’s OGC-OEA memo cites examples of cases where the quality of the FCC’s economic analysis either helped or harmed the commission’s ability to survive legal challenge under the Administrative Procedure Act’s “arbitrary and capricious” standard. More systematically, a recent Regulatory Studies Center working paper finds that a higher-quality economic analysis accompanying a regulation reduces the likelihood that courts will strike down the regulation, provided that the agency explains how it used the analysis in decisions.

Two potential disadvantages of a separate economics office are that it may make the economists easier to ignore (what former FCC Chief Economist Tim Brennan calls the “Siberia effect”) and may lead the economists to produce research that is less relevant to the practical policy concerns of the policymaking bureaus. The FCC’s reorganization plan took these disadvantages seriously.

To ensure that the ultimate decision-makers—the commissioners—have access to the economists’ analysis and recommendations, the rules establishing the office give OEA explicit responsibility for reviewing all items with economic content that come before the commission. Each item is accompanied by a cover memo that indicates whether OEA believes there are any significant issues, and whether they have been dealt with adequately. To ensure that economists and policy bureaus work together from the outset of regulatory initiatives, the OGC-OEA memo instructs:

Bureaus and Offices should, to the extent practicable, coordinate with OEA in the early stages of all Commission-level and major Bureau-level proceedings that are likely to draw scrutiny due to their economic impact. Such coordination will help promote productive communication and avoid delays from the need to incorporate additional analysis or other content late in the drafting process. In the earliest stages of the rulemaking process, economists and related staff will work with programmatic staff to help frame key questions, which may include drafting options memos with the lead Bureau or Office.

While presiding over his final commission meeting on Jan. 13, Pai commented, “It’s second nature now for all of us to ask, ‘What do the economists think?’” The real test of this institutional innovation will be whether that practice continues under a new chair in the next administration.

[TOTM: The following is part of a digital symposium by TOTM guests and authors on the legal and regulatory issues that arose during Ajit Pai’s tenure as chairman of the Federal Communications Commission. The entire series of posts is available here.

Daniel Lyons is a professor of law at Boston College Law School and a visiting fellow at the American Enterprise Institute.]

For many, the chairmanship of Ajit Pai is notable for its many headline-grabbing substantive achievements, including the Restoring Internet Freedom order, 5G deployment, and rural buildout—many of which have been or will be discussed in this symposium. But that conversation is incomplete without also acknowledging Pai’s careful attention to the basic blocking and tackling of running a telecom agency. The last four years at the Federal Communications Commission were marked by small but significant improvements in how the commission functions, and few are more important than the chairman’s commitment to transparency.

Draft Orders: The Dark Ages Before 2017

This commitment is most notable in Pai’s revisions to the open meeting process. From time immemorial, the FCC chairman would set the agenda for the agency’s monthly meeting by circulating draft orders to the other commissioners three weeks in advance. But the public was deliberately excluded from that distribution list. During this period, the commissioners would read proposals, negotiate revisions behind the scenes, then meet publicly to vote on final agency action. But only after the meeting—often several days later—would the actual text of the order be made public.

The opacity of this process had several adverse consequences. Most obviously, the public lacked details about the substance of the commission’s deliberations. The Government in the Sunshine Act requires the agency’s meetings to be made public so the American people know what their government is doing. But without the text of the orders under consideration, the public had only a superficial understanding of what was happening each month. The process was reminiscent of House Speaker Nancy Pelosi’s famous gaffe that Congress needed to “pass the [Affordable Care Act] bill so that you can find out what’s in it.” During the high-profile deliberations over the Open Internet Order in 2015, then-Commissioner Pai made significant hay over this secrecy, repeatedly posting pictures of himself with the 300-plus-page order on Twitter with captions such as “I wish the public could see what’s inside” and “the public still can’t see it.”

Other consequences were less apparent, but more detrimental. Because the public lacked detail about key initiatives, the telecom media cycle could be manipulated by strategic leaks designed to shape the final vote. As then-Commissioner Pai testified to Congress in 2016:

[T]he public gets to see only what the Chairman’s Office deigns to release, so controversial policy proposals can be (and typically are) hidden in a wave of media adulation. That happened just last month when the agency proposed changes to its set-top-box rules but tried to mislead content producers and the public about whether set-top box manufacturers would be permitted to insert their own advertisements into programming streams.

Sometimes, this secrecy backfired on the chairman, such as when net-neutrality advocates used media pressure to shape the 2014 Open Internet NPRM. Then-Chairman Tom Wheeler’s proposed order sought to follow the roadmap laid out by the D.C. Circuit’s Verizon decision, which relied on Title I to prevent ISPs from blocking content or acting in a “commercially unreasonable manner.” Proponents of a more aggressive Title II approach leaked these details to the media in a negative light, prompting tech journalists and advocates to unleash a wave of criticism alleging the chairman was “killing off net neutrality to…let the big broadband providers double charge.” In full damage control mode, Wheeler attempted to “set the record straight” about “a great deal of misinformation that has recently surfaced regarding” the draft order. But the tempest created by these leaks continued, pressuring Wheeler into adding a Title II option to the NPRM—which, of course, became the basis of the 2015 final rule.

This secrecy also harmed agency bipartisanship, as minority commissioners sometimes felt as much in the dark as the general public. As Wheeler scrambled to address Title II advocates’ concerns, he reportedly shared revised drafts with fellow Democrats but did not circulate the final draft to Republicans until less than 48 hours before the vote—leading Pai to remark cheekily that “when it comes to the Chairman’s latest net neutrality proposal, the Democratic Commissioners are in the fast lane and the Republican Commissioners apparently are being throttled.” Similarly, Pai complained during the 2014 spectrum screen proceeding that “I was not provided a final version of the item until 11:50 p.m. the night before the vote and it was a substantially different document with substantively revised reasoning than the one that was previously circulated.”

Letting the Sunshine In

Eliminating this culture of secrecy was one of Pai’s first decisions as chairman. Less than a month after assuming the reins at the agency, he announced that the FCC would publish all draft items at the same time they are circulated to commissioners, typically three weeks before each monthly meeting. While this move was largely applauded, some were concerned that this transparency would hamper the agency’s operations. One critic suggested that pre-meeting publication would hamper negotiations among commissioners: “Usually, drafts created negotiating room…Now the chairman’s negotiating position looks like a final position, which undercuts negotiating ability.” Another, while supportive of the change, was concerned that the need to put a draft order in final form well before a meeting might add “a month or more to the FCC’s rulemaking adoption process.”

Fortunately, these concerns proved to be unfounded. The Pai era proved to be the most productive in recent memory, averaging just over six items per month, which is double the average number under Pai’s immediate predecessors. Moreover, deliberations were more bipartisan than in years past: Nathan Leamer notes that 61.4% of the items adopted by the Pai FCC were unanimous and 92.1% were bipartisan—compared to 33% and 69.9%, respectively, under Chairman Wheeler. 

This increased transparency also improved the overall quality of the agency’s work product. In a 2018 speech before the Free State Foundation, Commissioner Mike O’Rielly explained that “drafts are now more complete and more polished prior to the public reveal, so edits prior to the meeting are coming from Commissioners, as opposed to there being last minute changes—or rewrites—from staff or the Office of General Counsel.” Publishing draft orders in advance allows the public to flag potential issues for revision before the meeting, which improves the quality of the final draft and reduces the risk of successful post-meeting challenges via motions for reconsideration or petitions for judicial review. O’Rielly went on to note that the agency seemed to be running more efficiently as well, as “[m]eetings are targeted to specific issues, unnecessary discussions of non-existent issues have been eliminated, [and] conversations are more productive.”

Other Reforms

While pre-meeting publication was the most visible improvement to agency transparency, there are other initiatives also worth mentioning.

  • Limiting Editorial Privileges: Chairman Pai dramatically limited “editorial privileges,” a longtime tradition that allowed agency staff to make changes to an order’s text even after the final vote. Under Pai, editorial privileges were limited to technical and conforming edits only; substantive changes were not permitted unless they were proposed directly by a commissioner and only in response to new arguments offered by a dissenting commissioner. This reduces the likelihood of a significant change being introduced outside the public eye.
  • Fact Sheet: Adopting a suggestion of Commissioner Mignon Clyburn, Pai made it a practice to preface each published draft order with a one-page fact sheet that summarized the item in lay terms, as much as possible. This made the agency’s monthly work more accessible and transparent to members of the public who lacked the time to wade through the full text of each draft order.
  • Online Transparency Dashboard: Pai also launched an online dashboard on the agency’s website. This dashboard offers metrics on the number of items currently pending at the commission by category, as well as quarterly trends over time.
  • Restricting Comment on Upcoming Items: As a gesture of respect to fellow commissioners, Pai committed that the chairman’s office would not brief the press or members of the public, or publish a blog, about an upcoming matter before it was shared with other commissioners. This was another step toward reducing the strategic use of leaks or selective access to guide the tech media news cycle.

And while it’s technically not a transparency reform, Pai also deserves credit for his willingness to engage the public as the face of the agency. He was the first FCC commissioner to join Twitter, and throughout his chairmanship he maintained an active social media presence that helped personalize the agency and make it more accessible. His commitment to this channel is all the more impressive when one considers the way some opponents used these platforms to hurl a steady stream of hateful, often violent and racist invective at him during his tenure.

Pai deserves tremendous credit for spearheading these efforts to bring the agency out of the shadows and into the sunlight. Of course, he was not working alone. Pai shares credit with other commissioners and staff who supported transparency and worked to bring these policies to fruition, most notably former Commissioner O’Rielly, who beat a steady drum for process reform throughout his tenure.

We do not yet know who President Joe Biden will appoint as Pai’s successor. It is fair to assume that whomever is chosen will seek to put his or her own stamp on the agency. But let’s hope that enhanced transparency and the other process reforms enacted over the past four years remain a staple of agency practice moving forward. They may not be flashy, but they may prove to be the most significant and long-lasting impact of the Pai chairmanship.

[TOTM: The following is part of a digital symposium by TOTM guests and authors on the legal and regulatory issues that arose during Ajit Pai’s tenure as chairman of the Federal Communications Commission. The entire series of posts is available here.

Seth L. Cooper is director of policy studies and a senior fellow at the Free State Foundation.]

During Chairman Ajit Pai’s tenure, the Federal Communications Commission adopted key reforms that improved the agency’s processes. No less important than process reform is process integrity. The commission’s L-Band Order and the process that produced it will be the focus here. In that proceeding, Chairman Pai led a careful and deliberative process that resulted in a clearly reasoned and substantively supportable decision to put unused valuable L-Band spectrum into commercial use for wireless services.

Thanks to one of Chairman Pai’s most successful process reforms, the FCC now publicly posts draft items to be voted on three weeks in advance of the commission’s public meetings. During his chairmanship, the commission adopted reforms to help expedite the regulatory-adjudication process by specifying deadlines and facilitating written administrative law judge (ALJ) decisions rather than in-person hearings. The “Team Telecom” process also was reformed to promote faster agency determinations on matters involving foreign ownership.

Along with his process-reform achievements, Chairman Pai deserves credit for ensuring that the FCC’s proceedings were conducted in a lawful and sound manner. For example, the commission’s courtroom track record was notably better during Chairman Pai’s tenure than during the tenures of his immediate predecessors. Moreover, Chairman Pai deserves high marks for the agency process that preceded the L-Band Order – a process that was perhaps subject to more scrutiny than the process of any other proceeding during his chairmanship. The public record supports the integrity of that process, as well as the order’s merits.

In April 2020, the FCC unanimously approved an order authorizing Ligado Networks to deploy a next-generation mixed mobile-satellite network using licensed spectrum in the L-Band. This action is critical to alleviating the shortage of commercial spectrum in the United States and to ensuring our nation’s economic competitiveness. Ligado’s proposed network will provide industrial Internet-of-Things (IoT) services, and its L-Band spectrum has been identified as capable of pairing with C-Band and other mid-band spectrum for delivering future 5G services. According to the L-Band Order, Ligado plans to invest up to $800 million in network capabilities, which could create over 8,000 jobs. Economist Coleman Bazelon estimated that Ligado’s network could help create up to 3 million jobs and contribute up to $500 billion to the U.S. economy.

Opponents of the L-Band Order have claimed that Ligado’s proposed network would create signal interference with GPS services in adjacent spectrum. Moreover, in attempts to delay or undo implementation of the L-Band Order, several opponents lodged harsh but baseless attacks against the FCC’s process. Some of those process criticisms were made at a May 2020 Senate Armed Services Committee hearing that failed to include any Ligado representatives or any FCC commissioners for their viewpoints. And in a May 2020 floor speech, Sen. James Inhofe (R-Okla.) repeatedly criticized the commission’s process as sudden, hurried, and taking place “in the darkness of a weekend.”

But those process criticisms fail in the face of easily verifiable facts. Under Chairman Pai’s leadership, the FCC acted within its conceded authority, consistent with its lawful procedures, and with careful—even lengthy—deliberation.

The FCC’s proceeding concerning Ligado’s license applications dates back to 2011. It included public notice and comment periods in 2016 and 2018. An August 2019 National Telecommunications and Information Administration (NTIA) report noted the commission’s forthcoming decision. In the fall of 2019, the commission shared a draft of its order with NTIA. Publicly stated opposition to Ligado’s proposed network by GPS operators and Defense Secretary Mark Esper, as well as publicly stated support for the network by Attorney General William Barr and Secretary of State Mike Pompeo, ensured that the proceeding received ongoing attention. Claims of “surprise” when the commission finalized its order in April 2020 are impossible to credit.

Importantly, the result of the deliberative agency process helmed by Chairman Pai was a substantively supportable decision. The FCC applied its experience in adjudicating competing technical claims to make commercial spectrum policy decisions. It was persuaded in part by signal testing conducted by the National Advanced Spectrum and Communications Test Network, as well as testing by technology consultants Roberson and Associates. By contrast, the commission found unpersuasive reports of alleged signal interference involving military devices operating outside of their assigned spectrum band.

The FCC also applied its expertise in addressing potential harmful signal interference to incumbent operations in adjacent spectrum bands by imposing several conditions on Ligado’s operations. For example, the L-Band Order requires Ligado to adhere to its agreements with major GPS equipment manufacturers for resolving signal interference concerns. Ligado must dedicate 23 megahertz of its own licensed spectrum as a guard-band from neighboring spectrum and also reduce its base station power levels 99% compared to what Ligado proposed in 2015. The commission requires Ligado to expeditiously replace or repair any U.S. government GPS devices that experience harmful interference from its network. And Ligado must maintain “stop buzzer” capability to halt its network within 15 minutes of any request by the commission.

From a process standpoint, the L-Band Order is a commendable example of Chairman Pai’s perseverance in leading the FCC to a much-needed decision on an economically momentous matter in the face of conflicting government agency and market provider viewpoints. Following a careful and deliberative process, the commission persevered to make a decision that is amply supported by the record and poised to benefit America’s economic welfare.

[TOTM: The following is part of a digital symposium by TOTM guests and authors on the legal and regulatory issues that arose during Ajit Pai’s tenure as chairman of the Federal Communications Commission. The entire series of posts is available here.

Mark Jamison is the Gerald L. Gunter Memorial Professor and director of the Public Utility Research Center at the University of Florida’s Warrington College of Business. He’s also a visiting scholar at the American Enterprise Institute.]

Chairman Ajit Pai will be remembered as one of the most consequential Federal Communications Commission chairmen in history. His policy accomplishments are numerous, including the repeal of Title II regulation of the internet, rural broadband development, increased spectrum for 5G, decreasing waste in universal service funding, and better controlling robocalls.

Less will be said about the important work he has done rebuilding the FCC’s independence. It is rare for a new FCC chairman to devote resources to building the institution. Most focus on their policy agendas, because policies and regulations make up their legacies that the media notices, and because time and resources are limited. Chairman Pai did what few have even attempted to do: both build the organization and make significant regulatory reforms.

Independence is the ability of a regulatory institution to operate at arm’s length from the special interests of industry, politicians, and the like. The pressures to bias actions to benefit favored stakeholders can be tremendous; the FCC greatly influences who gets how much of the billions of dollars that are at stake in FCC decisions. But resisting those pressures is critical because investment and services suffer when a weak FCC is directed by political winds or industry pressures rather than law and hard analysis.

Chairman Pai inherited a politicized FCC. Research by Scott Wallsten showed that commission votes had been unusually partisan under the previous chairman (November 2013 through January 2017). From the beginning of Reed Hundt’s term as chairman until November 2013, only 4% of commission votes had divided along party lines. By contrast, 26% of votes divided along party lines from November 2013 until Chairman Pai took over. This division was also reflected in a sharp decline in unanimous votes under the previous administration. Only 47% of FCC votes on orders were unanimous, as opposed to an average of 60% from Hundt through the brief term of Mignon Clyburn.

Chairman Pai and his fellow commissioners worked to heal this divide. According to the FCC’s data, under Chairman Pai, over 80% of items on the monthly meeting agenda had bipartisan support and over 70% were adopted without dissent. This was hard, as Democrats in general were deeply against President Donald Trump and some members of Congress found a divided FCC convenient.

The political orientation of the FCC prior to Chairman Pai was made clear in the management of controversial issues. The agency’s work on net neutrality in 2015 pivoted strongly toward heavy regulation when President Barack Obama released his video supporting Title II regulation of the internet. And there is evidence that the net-neutrality decision was made in the White House, not at the FCC. Agency economists were cut out of internal discussions once the political decision had been made to side with the president, causing the FCC’s chief economist to quip that the decision was an economics-free zone.

On other issues, a vote on Lifeline was delayed several hours so that people on Capitol Hill could lobby a Democratic commissioner to align with fellow Democrats and against the Republican commissioners. And an initiative to regulate set-top boxes was buoyed, not by analyses by FCC staff, but by faulty data and analyses from Democratic senators.

Chairman Pai recognized the danger of politically driven decision-making and noted that it was enabled in part by the agency’s lack of a champion for economic analyses. To remedy this situation, Chairman Pai proposed forming an Office of Economics and Analytics (OEA). The commission adopted his proposal, but unfortunately it was with one of the rare party-line votes. Hopefully, Democratic commissioners have learned the value of the OEA.

The OEA has several responsibilities, but those most closely aligned with supporting the agency’s independence are that it: (a) provides economic analysis, including cost-benefit analysis, for commission actions; (b) develops policies and strategies on data resources and best practices for data use; and (c) conducts long-term research. The work of the OEA makes it hard for a politically driven chairman to pretend that his or her initiatives are somehow substantive.

Another institutional weakness at the FCC was a lack of transparency. Prior to Chairman Pai, the public was not allowed to view the text of commission decisions until after they were adopted. Even worse, sometimes the text that the commissioners saw when voting was not the text in the final decision. Wallsten described in his research a situation where the meaning of a vote actually changed from the time of the vote to the release of the text:

On February 9, 2011 the Federal Communications Commission (FCC) released a proposed rule that included, among many other provisions, capping the Universal Service Fund at $4.5 billion. The FCC voted to approve a final order on October 27, 2011. But when the order was finally released on November 18, 2011, the $4.5 billion ceiling had effectively become a floor, with the order requiring the agency to forever estimate demand at no less than $4.5 billion. Because payments from the fund had been decreasing steadily, this floor means that the FCC is now collecting hundreds of billions of dollars more in taxes than it is spending on the program. [footnotes omitted]

The lack of transparency led many to not trust the FCC and encouraged stakeholders with inside access to bypass the legitimate public process for lobbying the agency. This would have encouraged corruption had not Chairman Pai changed the system. He required that decision texts be released to the public at the same time they were released to commissioners. This allows the public to see what the commissioners are voting on. And it ensures that orders do not change after they are voted on.

The FCC demonstrated its independence under Chairman Pai. In the case of net neutrality, the three Republican commissioners withstood personal threats, mocking from congressional Democrats, and pressure from Big Tech to restore light-handed regulation. About a year later, Chairman Pai was strongly criticized by President Trump for rejecting the Sinclair-Tribune merger. And despite the president’s support of the merger, he apparently had sufficient respect for the FCC’s independence that the White House never contacted the FCC about the issue. In the case of Ligado Networks’ use of its radio spectrum license, the FCC stood up to intense pressure from the U.S. Department of Defense and from members of Congress who wanted to substitute their technical judgement for the FCC’s research on the impacts of Ligado’s proposal.

It is possible that a new FCC could undo this new independence. Commissioners could marginalize their economists, take their directions from partisans, and reintroduce the practice of hiding information from the public. But Chairman Pai foresaw this and carefully made his changes part of the institutional structure of the FCC, making any steps backward visible to all concerned.

[TOTM: The following is part of a digital symposium by TOTM guests and authors on the legal and regulatory issues that arose during Ajit Pai’s tenure as chairman of the Federal Communications Commission. The entire series of posts is available here.

Kristian Stout is director of innovation policy for the International Center for Law & Economics.]

Ajit Pai will step down from his position as chairman of the Federal Communications Commission (FCC) effective Jan. 20. Beginning Jan. 15, Truth on the Market will host a symposium exploring Pai’s tenure, with contributions from a range of scholars and practitioners.

As we ponder the changes to FCC policy that may arise with the next administration, it’s also a timely opportunity to reflect on the chairman’s leadership at the agency and his influence on telecommunications policy more broadly. Indeed, the FCC has faced numerous challenges and opportunities over the past four years, with implications for a wide range of federal policy and law. Our symposium will offer insights into numerous legal, economic, and policy matters of ongoing importance.

Under Pai’s leadership, the FCC took on key telecommunications issues involving spectrum policy, net neutrality, 5G, broadband deployment, the digital divide, and media ownership and modernization. Broader issues faced by the commission include agency process reform, including a greater reliance on economic analysis; administrative law; federal preemption of state laws; national security; competition; consumer protection; and innovation, including the encouragement of burgeoning space industries.

This symposium asks contributors for their thoughts on these and related issues. We will explore a rich legacy, with many important improvements that will guide the FCC for some time to come.

Truth on the Market thanks all of these excellent authors for agreeing to participate in this interesting and timely symposium.

Look for the first posts starting Jan. 15.

The Eleventh Circuit’s LabMD opinion came out last week and has been something of a rorschach test for those of us who study consumer protection law.

Neil Chilson found the result to be a disturbing sign of slippage in Congress’s command that the FTC refrain from basing enforcement on “public policy.” Berin Szóka, on the other hand, saw the ruling as a long-awaited rebuke against the FTC’s expansive notion of its “unfairness” authority. Whereas Daniel Solove and Woodrow Hartzog described the decision as “quite narrow and… far from crippling,” in part, because “[t]he opinion says very little about the FTC’s general power to enforce Section 5 unfairness.” Even among the ICLE crew, our understandings of the opinion reflect our priors, from it being best understood as expressing due process concerns about injury-based enforcement of Section 5, on the one hand, to being about the meaning of Section 5(n)’s causation requirement, on the other.

You can expect to hear lots more about these and other LabMD-related issues from us soon, but for now we want to write about the only thing more exciting than dueling histories of the FTC’s 1980 Unfairness Statement: administrative law.

While most of those watching the LabMD case come from some nexus of FTC watchers, data security specialists, and privacy lawyers, the reality is that the case itself is mostly about administrative law (the law that governs how federal agencies are given and use their power). And the court’s opinion is best understood from a primarily administrative law perspective.

From that perspective, the case should lead to some significant introspection at the Commission. While the FTC may find ways to comply with the letter of the opinion without substantially altering its approach to data security cases, it will likely face difficulty defending that approach before the courts. True compliance with this decision will require the FTC to define what makes certain data security practices unfair in a more-coherent and far-more-readily ascertainable fashion.

The devil is in the (well-specified) details

The actual holding in the case comes in Part III of the 11th Circuit’s opinion, where the court finds for LabMD on the ground that, owing to a fatal lack of specificity in the FTC’s proposed order, “the Commission’s cease and desist order is itself unenforceable.”  This is the punchline of the opinion, to which we will return. But it is worth spending some time on the path that the court takes to get there.

It should be stressed at the outset that Part II of the opinion — in which the Court walks through the conceptual and statutory framework that supports an “unfairness” claim — is surprisingly unimportant to the court’s ultimate holding. This was the meat of the case for FTC watchers and privacy and data security lawyers, and it is a fascinating exposition. Doubtless it will be the focus of most analysis of the opinion.

But, for purposes of the court’s disposition of the case, it’s of (perhaps-frustratingly) scant importance. In short, the court assumes, arguendo, that the FTC has sufficient basis to make out an unfairness claim against LabMD before moving on to Part III of the opinion analyzing the FTC’s order given that assumption.

It’s not clear why the court took this approach — and it is dangerous to assume any particular explanation (although it is and will continue to be the subject of much debate). There are several reasonable explanations for the approach, ranging from the court thinking it obvious that the FTC’s unfairness analysis was correct, to it side-stepping the thorny question of how to define injury under Section 5, to the court avoiding writing a decision that could call into question the fundamental constitutionality of a significant portion of the FTC’s legal portfolio. Regardless — and regardless of its relative lack of importance to the ultimate holding — the analysis offered in Part II bears, and will receive, significant attention.

The FTC has two basic forms of consumer protection authority: It can take action against 1) unfair acts or practices and 2) deceptive acts or practices. The FTC’s case against LabMD was framed in terms of unfairness. Unsurprisingly, “unfairness” is a broad, ambiguous concept — one that can easily grow into an amorphous blob of ill-defined enforcement authority.

As discussed by the court (as well as by us, ad nauseum), in the 1970s the FTC made very aggressive use of its unfairness authority to regulate the advertising industry, effectively usurping Congress’ authority to legislate in that area. This over-aggressive enforcement didn’t sit well with Congress, of course, and led it to shut down the FTC for a period of time until the agency adopted a more constrained understanding of the meaning of its unfairness authority. This understanding was communicated to Congress in the FTC’s 1980 Unfairness Statement. That statement was subsequently codified by Congress, in slightly modified form, as Section 5(n) of the FTC Act.

Section 5(n) states that

The Commission shall have no authority under this section or section 57a of this title to declare unlawful an act or practice on the grounds that such act or practice is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition. In determining whether an act or practice is unfair, the Commission may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination.

The meaning of Section 5(n) has been the subject of intense debate for years (for example, here, here and here). In particular, it is unclear whether Section 5(n) defines a test for what constitutes unfair conduct (that which “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition”) or whether instead imposes a necessary, but not necessarily sufficient, condition on the extent of the FTC’s authority to bring cases. The meaning of “cause” under 5(n) is also unclear because, unlike causation in traditional legal contexts, Section 5(n) also targets conduct that is “likely to cause” harm.

Section 5(n) concludes with an important, but also somewhat inscrutable, discussion of the role of “public policy” in the Commission’s unfairness enforcement, indicating that that Commission is free to consider “established public policies” as evidence of unfair conduct, but may not use such considerations “as a primary basis” for its unfairness enforcement.

Just say no to public policy

Section 5 empowers and directs the FTC to police unfair business practices, and there is little reason to think that bad data security practices cannot sometimes fall under its purview. But the FTC’s efforts with respect to data security (and, for that matter, privacy) over the past nearly two decades have focused extensively on developing what it considers to be a comprehensive jurisprudence to address data security concerns. This creates a distinct impression that the FTC has been using its unfairness authority to develop a new area of public policy — to legislate data security standards, in other words — as opposed to policing data security practices that are unfair under established principles of unfairness.

This is a subtle distinction — and there is frankly little guidance for understanding when the agency is acting on the basis of public policy versus when it is proscribing conduct that falls within the meaning of unfairness.

But it is an important distinction. If it is the case — or, more precisely, if the courts think that it is the case — that the FTC is acting on the basis of public policy, then the FTC’s data security efforts are clearly problematic under Section 5(n)’s prohibition on the use of public policy as the primary basis for unfairness actions.

And this is where the Commission gets itself into trouble. The Commission’s efforts to develop its data security enforcement program looks an awful lot like something being driven by public policy, and not so much as merely enforcing existing policy as captured by, in the LabMD court’s words (echoing the FTC’s pre-Section 5(n) unfairness factors), “well-established legal standard[s], whether grounded in statute, the common law, or the Constitution.”

The distinction between effecting public policy and enforcing legal norms is… not very clear. Nonetheless, exploring and respecting that distinction is an important task for courts and agencies.

Unfortunately, this case does not well describe how to make that distinction. The opinion is more than a bit muddled and difficult to clearly interpret. Nonetheless, reading the court’s dicta in Part II is instructive. It’s clearly the case that some bad security practices, in some contexts, can be unfair practices. So the proper task for the FTC is to discover how to police “unfairness” within data security cases rather than setting out to become a first-order data security enforcement agency.

How does public policy become well-established law?

Part II of the Eleventh Circuit’s opinion — even if dicta — is important for future interpretations of Section 5 cases. The court goes to great lengths to demonstrate, based on the FTC’s enforcement history and related Congressional rebukes, that the Commission may not rely upon vague “public policy” standards for bringing “unfairness” actions.

But this raises a critical question about the nature of the FTC’s unfairness authority. The Commission was created largely to police conduct that could not readily be proscribed by statute or simple rules. In some cases this means conduct that is hard to label or describe in text with any degree of precision — “I know it when I see it” kinds of acts and practices. In other cases, it may refer to novel or otherwise unpredictable conduct that could not be foreseen by legislators or regulators. In either case, the very purpose of the FTC is to be able to protect consumers from conduct that is not necessarily proscribed elsewhere.

This means that the Commission must have some ability to take action against “unfair” conduct that has not previously been enshrined as “unfair” in “well-established legal standard[s], whether grounded in statute, the common law, or the Constitution.” But that ability is not unbounded, of course.

The court explained that the Commission could expound upon what acts fall within the meaning of “unfair” in one of two ways: It could use its rulemaking authority to issue Congressionally reviewable rules, or it could proceed on a case-by-case basis.

In either case, the court’s discussion of how the Commission is to determine what is “unfair” within the constraints of Section 5(n) is frustratingly vague. The earlier parts of the opinion tell us that unfairness is to be adjudged based upon “well-established legal standards,” but here the court tells us that the scope of unfairness can be altered — that is, those well-established legal standards can be changed — through adjudication. It is difficult to square what the court means by this. Regardless, it is the guidance that we have been given by the court.

This is Admin Law 101

And yet perhaps there is some resolution to this conundrum in administrative law. For administrative law scholars, the 11th Circuit’s discussion of the permissibility of agencies developing binding legal norms using either rulemaking or adjudication procedures, is straight out of Chenery II.

Chenery II is a bedrock case of American administrative law, standing broadly for the proposition (as echoed by the 11th Circuit) that agencies can generally develop legal rules through either rulemaking or adjudication, that there may be good reasons to use either in any given case, and that (assuming Congress has empowered the agency to use both) it is primarily up to the agency to determine which approach is preferable in any given case.

But, while Chenery II certainly allows agencies to proceed on a case-by-case basis, that permission is not a broad license to eschew the development of determinate legal standards. And the reason is fairly obvious: if an agency develops rules that are difficult to know ex ante, they can hardly provide guidance for private parties as they order their affairs.

Chenery II places an important caveat on the use of case-by-case adjudication. Much like the judges in the LabMD opinion, the Chenery II court was concerned with specificity and clarity, and tells us that agencies may not rely on vague bases for their rules or enforcement actions and expect courts to “chisel” out the details. Rather:

If the administrative action is to be tested by the basis upon which it purports to rest, that basis must be set forth with such clarity as to be understandable. It will not do for a court to be compelled to guess at the theory underlying the agency’s action; nor can a court be expected to chisel that which must be precise from what the agency has left vague and indecisive. In other words, ‘We must know what a decision means before the duty becomes ours to say whether it is right or wrong.’ (emphasis added)

The parallels between the 11th Circuit’s opinion in LabMD and the Supreme Court’s opinion in Chenery II 70 years earlier are uncanny. It is also not very surprising that the 11th Circuit opinion would reflect the principles discussed in Chenery II, nor that it would do so without reference to Chenery II: these are, after all, bedrock principles of administrative law.  

The principles set out in Chenery II, of course, do not answer the data-security law question whether the FTC properly exercised its authority in this (or any) case under Section 5. But they do provide an intelligible basis for the court sidestepping this question, and asking whether the FTC sufficiently defined what it was doing in the first place.  

Conclusion

The FTC’s data security mission has been, in essence, a voyage of public policy exploration. Its method of case-by-case adjudication, based on ill-defined consent decrees, non-binding guidance documents, and broadly-worded complaints creates the vagueness that the Court in Chenery II rejected, and that the 11th Circuit held results in unenforceable remedies.

Even in its best light, the Commission’s public materials are woefully deficient as sources of useful (and legally-binding) guidance. In its complaints the FTC does typically mention some of the facts that led it to investigate, and presents some rudimentary details of how those facts relate to its Section 5 authority. Yet the FTC issues complaints based merely on its “reason to believe” that an unfair act has taken place. This is a far different standard than that faced in district court, and undoubtedly leads the Commission to construe facts liberally in its own favor.

Moreover, targets of complaints settle for myriad reasons, and no outside authority need review the sufficiency of a complaint as part of a settlement. And the consent orders themselves are largely devoid of legal and even factual specificity. As a result, the FTC’s authority to initiate an enforcement action  is effectively based on an ill-defined series of hunches — hardly a sufficient basis for defining a clear legal standard.

So, while the court’s opinion in this case was narrowly focused on the FTC’s proposed order, the underlying legal analysis that supports its holding should be troubling to the Commission.

The specificity the 11th Circuit demands in the remedial order must exist no less in the theories of harm the Commission alleges against targets. And those theories cannot be based on mere public policy preferences. Courts that follow the Eleventh Circuit’s approach — which indeed Section 5(n) reasonably seems to require — will look more deeply into the Commission’s allegations of “unreasonable” data security in order to determine if it is actually attempting to pursue harms by proving something like negligence, or is instead simply ascribing “unfairness” to certain conduct that the Commission deems harmful.

The FTC may find ways to comply with the letter of this particular opinion without substantially altering its overall approach — but that seems unlikely. True compliance with this decision will require the FTC to respect real limits on its authority and to develop ascertainable data security requirements out of much more than mere consent decrees and kitchen-sink complaints.

A recent exchange between Chris Walker and Philip Hamburger about Walker’s ongoing empirical work on the Chevron doctrine (the idea that judges must defer to reasonable agency interpretations of ambiguous statutes) gives me a long-sought opportunity to discuss what I view as the greatest practical problem with the Chevron doctrine: it increases both politicization and polarization of law and policy. In the interest of being provocative, I will frame the discussion below by saying that both Walker & Hamburger are wrong (though actually I believe both are quite correct in their respective critiques). In particular, I argue that Walker is wrong that Chevron decreases politicization (it actually increases it, vice his empirics); and I argue Hamburger is wrong that judicial independence is, on its own, a virtue that demands preservation. Rather, I argue, Chevron increases overall politicization across the government; and judicial independence can and should play an important role in checking legislative abdication of its role as a politically-accountable legislature in a way that would moderate that overall politicization.

Walker, along with co-authors Kent Barnett and Christina Boyd, has done some of the most important and interesting work on Chevron in recent years, empirically studying how the Chevron doctrine has affected judicial behavior (see here and here) as well as that of agencies (and, I would argue, through them the Executive) (see here). But the more important question, in my mind, is how it affects the behavior of Congress. (Walker has explored this somewhat in his own work, albeit focusing less on Chevron than on how the role agencies play in the legislative process implicitly transfers Congress’s legislative functions to the Executive).

My intuition is that Chevron dramatically exacerbates Congress’s worst tendencies, encouraging Congress to push its legislative functions to the executive and to do so in a way that increases the politicization and polarization of American law and policy. I fear that Chevron effectively allows, and indeed encourages, Congress to abdicate its role as the most politically-accountable branch by deferring politically difficult questions to agencies in ambiguous terms.

One of, and possibly the, best ways to remedy this situation is to reestablish the role of judge as independent decisionmaker, as Hamburger argues. But the virtue of judicial independence is not endogenous to the judiciary. Rather, judicial independence has an instrumental virtue, at least in the context of Chevron. Where Congress has problematically abdicated its role as a politically-accountable decisionmaker by deferring important political decisions to the executive, judicial refusal to defer to executive and agency interpretations of ambiguous statutes can force Congress to remedy problematic ambiguities. This, in turn, can return the responsibility for making politically-important decisions to the most politically-accountable branch, as envisioned by the Constitution’s framers.

A refresher on the Chevron debate

Chevron is one of the defining doctrines of administrative law, both as a central concept and focal debate. It stands generally for the proposition that when Congress gives agencies ambiguous statutory instructions, it falls to the agencies, not the courts, to resolve those ambiguities. Thus, if a statute is ambiguous (the question at “step one” of the standard Chevron analysis) and the agency offers a reasonable interpretation of that ambiguity (“step two”), courts are to defer to the agency’s interpretation of the statute instead of supplying their own.

This judicially-crafted doctrine of deference is typically justified on several grounds. For instance, agencies generally have greater subject-matter expertise than courts so are more likely to offer substantively better constructions of ambiguous statutes. They have more resources that they can dedicate to evaluating alternative constructions. They generally have a longer history of implementing relevant Congressional instructions so are more likely attuned to Congressional intent – both of the statute’s enacting and present Congresses. And they are subject to more direct Congressional oversight in their day-to-day operations and exercise of statutory authority than the courts so are more likely concerned with and responsive to Congressional direction.

Chief among the justifications for Chevron deference is, as Walker says, “the need to reserve political (or policy) judgments for the more politically accountable agencies.” This is at core a separation-of-powers justification: the legislative process is fundamentally a political process, so the Constitution assigns responsibility for it to the most politically-accountable branch (the legislature) instead of the least politically-accountable branch (the judiciary). In turn, the act of interpreting statutory ambiguity is an inherently legislative process – the underlying theory being that Congress intended to leave such ambiguity in the statute in order to empower the agency to interpret it in a quasi-legislative manner. Thus, under this view, courts should defer both to this Congressional intent that the agency be empowered to interpret its statute (and, should this prove problematic, it is up to Congress to change the statute or to face political ramifications), and the courts should defer to the agency interpretation of that statute because agencies, like Congress, are more politically accountable than the courts.

Chevron has always been an intensively studied and debated doctrine. This debate has grown more heated in recent years, to the point that there is regularly scholarly discussion about whether Chevron should be repealed or narrowed and what would replace it if it were somehow curtailed – and discussion of the ongoing vitality of Chevron has entered into Supreme Court opinions and the appointments process with increasing frequency. These debates generally focus on a few issues. A first issue is that Chevron amounts to a transfer of the legislature’s Constitutional powers and responsibilities over creating the law to the executive, where the law ordinarily is only meant to be carried out. This has, the underlying concern is, contributed to the increase in the power of the executive compared to the legislature. A second, related, issue is that Chevron contributes to the (over)empowerment of independent agencies – agencies that are already out of favor with many of Chevron’s critics as Constitutionally-infirm entities whose already-specious power is dramatically increased when Chevron limits the judiciary’s ability to check their use of already-broad Congressionally-delegated authority.

A third concern about Chevron, following on these first two, is that it strips the judiciary of its role as independent arbiter of judicial questions. That is, it has historically been the purview of judges to answer statutory ambiguities and fill in legislative interstices.

Chevron is also a focal point for more generalized concerns about the power of the modern administrative state. In this context, Chevron stands as a representative of a broader class of cases – State Farm, Auer, Seminole Rock, Fox v. FCC, and the like – that have been criticized as centralizing legislative, executive, and judicial powers in agencies, allowing Congress to abdicate its role as politically-accountable legislator, abdicating the judiciary’s role in interpreting the law, as well as raising due process concerns for those subject to rules promulgated by federal agencies..

Walker and his co-authors have empirically explored the effects of Chevron in recent years, using robust surveys of federal agencies and judicial decisions to understand how the doctrine has affected the work of agencies and the courts. His most recent work (with Kent Barnett and Christina Boyd) has explored how Chevron affects judicial decisionmaking. Framing the question by explaining that “Chevron deference strives to remove politics from judicial decisionmaking,” they ask whether “Chevron deference achieve[s] this goal of removing politics from judicial decisionmaking?” They find that, empirically speaking, “the Chevron Court’s objective to reduce partisan judicial decision-making has been quite effective.” By instructing judges to defer to the political judgments (or just statutory interpretations) of agencies, judges are less political in their own decisionmaking.

Hamburger responds to this finding somewhat dismissively – and, indeed, the finding is almost tautological: “of course, judges disagree less when the Supreme Court bars them from exercising their independent judgment about what the law is.” (While a fair critique, I would temper it by arguing that it is nonetheless an important empirical finding – empirics that confirm important theory are as important as empirics that refute it, and are too often dismissed.)

Rather than focus on concerns about politicized decisionmaking by judges, Hamburger focuses instead on the importance of judicial independence – on it being “emphatically the duty of the Judicial Department to say what the law is” (quoting Marbury v. Madison). He reframes Walker’s results, arguing that “deference” to agencies is really “bias” in favor of the executive. “Rather than reveal diminished politicization, Walker’s numbers provide strong evidence of diminished judicial independence and even of institutionalized judicial bias.”

So which is it? Does Chevron reduce bias by de-politicizing judicial decisionmaking? Or does it introduce new bias in favor of the (inherently political) executive? The answer is probably that it does both. The more important answer, however, is that neither is the right question to ask.

What’s the correct measure of politicization? (or, You get what you measure)

Walker frames his study of the effects of Chevron on judicial decisionmaking by explaining that “Chevron deference strives to remove politics from judicial decisionmaking. Such deference to the political branches has long been a bedrock principle for at least some judicial conservatives.” Based on this understanding, his project is to ask whether “Chevron deference achieve[s] this goal of removing politics from judicial decisionmaking?”

This framing, that one of Chevron’s goals is to remove politics from judicial decisionmaking, is not wrong. But this goal may be more accurately stated as being to prevent the judiciary from encroaching upon the political purposes assigned to the executive and legislative branches. This restatement offers an important change in focus. It emphasizes the concern about politicizing judicial decisionmaking as a separation of powers issue. This is in apposition to concern that, on consequentialist grounds, judges should not make politicized decisions – that is, judges should avoid political decisions because it leads to substantively worse outcomes.

It is of course true that, as unelected officials with lifetime appointments, judges are the least politically accountable to the polity of any government officials. Judges’ decisions, therefore, can reasonably be expected to be less representative of, or responsive to, the concerns of the voting public than decisions of other government officials. But not all political decisions need to be directly politically accountable in order to be effectively politically accountable. A judicial interpretation of an ambiguous law, for instance, can be interpreted as a request, or even a demand, that Congress be held to political account. And where Congress is failing to perform its constitutionally-defined role as a politically-accountable decisionmaker, it may do less harm to the separation of powers for the judiciary to make political decisions that force politically-accountable responses by Congress than for the judiciary to respect its constitutional role while the Congress ignores its role.

Before going too far down this road, I should pause to label the reframing of the debate that I have impliedly proposed. To my mind, the question isn’t whether Chevron reduces political decisionmaking by judges; the question is how Chevron affects the politicization of, and ultimately accountability to the people for, the law. Critically, there is no “conservation of politicization” principle. Institutional design matters. One could imagine a model of government where Congress exercises very direct oversight over what the law is and how it is implemented, with frequent elections and a Constitutional prohibition on all but the most express and limited forms of delegation. One can also imagine a more complicated form of government in which responsibilities for making law, executing law, and interpreting law, are spread across multiple branches (possibly including myriad agencies governed by rules that even many members of those agencies do not understand). And one can reasonably expect greater politicization of decisions in the latter compared to the former – because there are more opportunities for saying that the responsibility for any decision lies with someone else (and therefore for politicization) in the latter than in the “the buck stops here” model of the former.

In the common-law tradition, judges exercised an important degree of independence because their job was, necessarily and largely, to “say what the law is.” For better or worse, we no longer live in a world where judges are expected to routinely exercise that level of discretion, and therefore to have that level of independence. Nor do I believe that “independence” is necessarily or inherently a criteria for the judiciary, at least in principle. I therefore somewhat disagree with Hamburger’s assertion that Chevron necessarily amounts to a problematic diminution in judicial independence.

Again, I return to a consequentialist understanding of the purposes of judicial independence. In my mind, we should consider the need for judicial independence in terms of whether “independent” judicial decisionmaking tends to lead to better or worse social outcomes. And here I do find myself sympathetic to Hamburger’s concerns about judicial independence. The judiciary is intended to serve as a check on the other branches. Hamburger’s concern about judicial independence is, in my mind, driven by an overwhelmingly correct intuition that the structure envisioned by the Constitution is one in which the independence of judges is an important check on the other branches. With respect to the Congress, this means, in part, ensuring that Congress is held to political account when it does legislative tasks poorly or fails to do them at all.

The courts abdicate this role when they allow agencies to save poorly drafted statutes through interpretation of ambiguity.

Judicial independence moderates politicization

Hamburger tells us that “Judges (and academics) need to wrestle with the realities of how Chevron bias and other administrative power is rapidly delegitimizing our government and creating a profound alienation.” Huzzah. Amen. I couldn’t agree more. Preach! Hear-hear!

Allow me to present my personal theory of how Chevron affects our political discourse. In the vernacular, I call this Chevron Step Three. At Step Three, Congress corrects any mistakes made by the executive or independent agencies in implementing the law or made by the courts in interpreting it. The subtle thing about Step Three is that it doesn’t exist – and, knowing this, Congress never bothers with the politically costly and practically difficult process of clarifying legislation.

To the contrary, Chevron encourages the legislature expressly not to legislate. The more expedient approach for a legislator who disagrees with a Chevron-backed agency action is to campaign on the disagreement – that is, to politicize it. If the EPA interprets the Clean Air Act too broadly, we need to retake the White House to get a new administrator in there to straighten out the EPA’s interpretation of the law. If the FCC interprets the Communications Act too narrowly, we need to retake the White House to change the chair so that we can straighten out that mess! And on the other side, we need to keep the White House so that we can protect these right-thinking agency interpretations from reversal by the loons on the other side that want to throw out all of our accomplishments. The campaign slogans write themselves.

So long as most agencies’ governing statutes are broad enough that those agencies can keep the ship of state afloat, even if drifting rudderless, legislators have little incentive to turn inward to engage in the business of government with their legislative peers. Rather, they are freed to turn outward towards their next campaign, vilifying or deifying the administrative decisions of the current government as best suits their electoral prospects.

The sharp-eyed observer will note that I’ve added a piece to the Chevron puzzle: the process described above assumes that a new administration can come in after an election and simply rewrite all of the rules adopted by the previous administration. Not to put too fine a point on the matter, but this is exactly what administrative law allows (see Fox v. FCC and State Farm). The underlying logic, which is really nothing more than an expansion of Chevron, is that statutory ambiguity delegates to agencies a “policy space” within which they are free to operate. So long as agency action stays within that space – which often allows for diametrically-opposed substantive interpretations – the courts say that it is up to Congress, not the Judiciary, to provide course corrections. Anything else would amount to politically unaccountable judges substituting their policy judgments (this is, acting independently) for those of politically-accountable legislators and administrators.

In other words, the politicization of law seen in our current political moment is largely a function of deference and a lack of stare decisis combined. A virtue of stare decisis is that it forces Congress to act to directly address politically undesirable opinions. Because agencies are not bound by stare decisis, an alternative, and politically preferable, way for Congress to remedy problematic agency decisions is to politicize the issue – instead of addressing the substantive policy issue through legislation, individual members of Congress can campaign on it. (Regular readers of this blog will be familiar with one contemporary example of this: the recent net neutrality CRA vote, which is widely recognized as having very little chance of ultimate success but is being championed by its proponents as a way to influence the 2018 elections.) This is more directly aligned with the individual member of Congress’s own incentives, because, by keeping and placing more members of her party in Congress, her party will be able to control the leadership of the agency which will thus control the shape of that agency’s policy. In other words, instead of channeling the attention of individual Congressional actors inwards to work together to develop law and policy, it channels it outwards towards campaigning on the ills and evils of the opposing administration and party vice the virtues of their own party.

The virtue of judicial independence, of judges saying what they think the law is – or even what they think the law should be – is that it forces a politically-accountable decision. Congress can either agree, or disagree; but Congress must do something. Merely waiting for the next administration to come along will not be sufficient to alter the course set by the judicial interpretation of the law. Where Congress has abdicated its responsibility to make politically-accountable decisions by deferring those decisions to the executive or agencies, the political-accountability justification for Chevron deference fails. In such cases, the better course for the courts may well be to enforce Congress’s role under the separation of powers by refusing deference and returning the question to Congress.

 

At this point, only the most masochistic and cynical among DC’s policy elite actually desire for the net neutrality conflict to continue. And yet, despite claims that net neutrality principles are critical to protecting consumers, passage of the current Congressional Review Act (“CRA”) disapproval resolution in Congress would undermine consumer protection and promise only to drag out the fight even longer.

The CRA resolution is primarily intended to roll back the FCC’s re-re-classification of broadband as a Title I service under the Communications Act in the Restoring Internet Freedom Order (“RIFO”). The CRA allows Congress to vote to repeal rules recently adopted by federal agencies; upon a successful CRA vote, the rules are rescinded and the agency is prohibited from adopting substantially similar rules in the future.

But, as TechFreedom has noted, it’s not completely clear that a CRA on a regulatory classification decision will work quite the way Congress intends it and could just trigger more litigation cycles, largely because it is unclear what parts of the RIFO are actually “rules” subject to the CRA. Harold Feld has written a critique of TechFreedom’s position, arguing, in effect, that of course the RIFO is a rule; TechFreedom responded with a pretty devastating rejoinder.

But this exchange really demonstrates TechFreedom’s central argument: It is sufficiently unclear how or whether the CRA will apply to the various provisions of the RIFO, such that the only things the CRA is guaranteed to do are 1) to strip consumers of certain important protections — it would take away the FCC’s transparency requirements for ISPs, and imperil privacy protections currently ensured by the FTC — while 2) prolonging the already interminable litigation and political back-and-forth over net neutrality.

The CRA is political theater

The CRA resolution effort is not about good Internet regulatory policy; rather, it’s pure political opportunism ahead of the midterms. Democrats have recognized net neutrality as a good wedge issue because of its low political opportunity cost. The highest-impact costs of over-regulating broadband through classification decisions are hard to see: Rather than bad things happening, the costs arrive in the form of good things not happening. Eventually those costs work their way to customers through higher access prices or less service — especially in rural areas most in need of it — but even these effects take time to show up and, when they do, are difficult to pin on any particular net neutrality decision, including the CRA resolution. Thus, measured in electoral time scales, prolonging net neutrality as a painful political issue — even though actual resolution of the process by legislation would be the sensible course — offers tremendous upside for political challengers and little cost.  

The truth is, there is widespread agreement that net neutrality issues need to be addressed by Congress: A constant back and forth between the FCC (and across its own administrations) and the courts runs counter to the interests of consumers, broadband companies, and edge providers alike. Virtually whatever that legislative solution ends up looking like, it would be an improvement over the unstable status quo.

There have been various proposals from Republicans and Democrats — many of which contain provisions that are likely bad ideas — but in the end, a bill passed with bipartisan input should have the virtue of capturing an open public debate on the issue. Legislation won’t be perfect, but it will be tremendously better than the advocacy playground that net neutrality has become.

What would the CRA accomplish?

Regardless of what one thinks of the substantive merits of TechFreedom’s arguments on the CRA and the arcana of legislative language distinguishing between agency “rules” and “orders,” if the CRA resolution is successful (a prospect that is a bit more likely following the Senate vote to pass it) what follows is pretty clear.

The only certain result of the the CRA resolution becoming law would be to void the transparency provisions that the FCC introduced in the RIFO — the one part of the Order that is pretty clearly a “rule” subject to CRA review — and it would disable the FCC from offering another transparency rule in its place. Everything else is going to end up — surprise! — before the courts, which would serve only to keep the issues surrounding net neutrality unsettled for another several years. (A cynic might suggest that this is, in fact, the goal of net neutrality proponents, for whom net neutrality has been and continues to have important political valence.)

And if the CRA resolution withstands the inevitable legal challenge to its rescision of the rest of the RIFO, it would also (once again) remove broadband privacy from the FTC’s purview, placing it back into the FCC’s lap — which is already prohibited from adopting privacy rules following last year’s successful CRA resolution undoing the Wheeler FCC’s broadband privacy regulations. The result is that we could be left without any broadband privacy regulator at all — presumably not the outcome strong net neutrality proponents want — but they persevere nonetheless.

Moreover, TechFreedom’s argument that the CRA may not apply to all parts of the RIFO could have a major effect on whether or not Congress is even accomplishing anything at all (other than scoring political points) with this vote. It could be the case that the CRA applies only to “rules” and not “orders,” or it could be the case that even if the CRA does apply to the RIFO, its passage would not force the FCC to revive the abrogated 2015 Open Internet Order, as proponents of the CRA vote hope.

Whatever one thinks of these arguments, however, they are based on a sound reading of the law and present substantial enough questions to sustain lengthy court challenges. Thus, far from a CRA vote actually putting to rest the net neutrality issue, it is likely to spawn litigation that will drag out the classification uncertainty question for at least another year (and probably more, with appeals).

Stop playing net neutrality games — they aren’t fun

Congress needs to stop trying to score easy political points on this issue while avoiding the hard and divisive work of reaching a compromise on actual net neutrality legislation. Despite how the CRA is presented in the popular media, a CRA vote is the furthest thing from a simple vote for net neutrality: It’s a political calculation to avoid accountability.

Today the International Center for Law & Economics (ICLE) submitted an amicus brief urging the Supreme Court to review the DC Circuit’s 2016 decision upholding the FCC’s 2015 Open Internet Order. The brief was authored by Geoffrey A. Manne, Executive Director of ICLE, and Justin (Gus) Hurwitz, Assistant Professor of Law at the University of Nebraska College of Law and ICLE affiliate, with able assistance from Kristian Stout and Allen Gibby of ICLE. Jeffrey A. Mandell of the Wisconsin law firm of Stafford Rosenbaum collaborated in drafting the brief and provided invaluable pro bono legal assistance, for which we are enormously grateful. Laura Lamansky of Stafford Rosenbaum also assisted. 

The following post discussing the brief was written by Jeff Mandell (originally posted here).

Courts generally defer to agency expertise when reviewing administrative rules that regulate conduct in areas where Congress has delegated authority to specialized executive-branch actors. An entire body of law—administrative law—governs agency actions and judicial review of those actions. And at the federal level, courts grant agencies varying degrees of deference, depending on what kind of function the agency is performing, how much authority Congress delegated, and the process by which the agency adopts or enforces policies.

Should courts be more skeptical when an agency changes a policy position, especially if the agency is reversing prior policy without a corresponding change to the governing statute? Daniel Berninger v. Federal Communications Commission, No. 17-498 (U.S.), raises these questions. And this week Stafford Rosenbaum was honored to serve as counsel of record for the International Center for Law & Economics (“ICLE”) in filing an amicus curiae brief urging the U.S. Supreme Court to hear the case and to answer these questions.

ICLE’s amicus brief highlights new academic research suggesting that systematic problems undermine judicial review of agency changes in policy. The brief also points out that judicial review is complicated by conflicting signals from the Supreme Court about the degree of deference that courts should accord agencies in reviewing reversals of prior policy. And the brief argues that the specific policy change at issue in this case lacks a sufficient basis but was affirmed by the court below as the result of a review that was, but should not have been, “particularly deferential.”

In 2015, the Federal Communications Commission (“FCC”) issued the Open Internet Order (“OIO”), which required Internet Service Providers to abide by a series of regulations popularly referred to as net neutrality. To support these regulations, the FCC interpreted the Communications Act of 1934 to grant it authority to heavily regulate broadband internet service. This interpretation reversed a long-standing agency understanding of the statute as permitting only limited regulation of broadband service.

The FCC ostensibly based the OIO on factual and legal analysis. However, ICLE argues, the OIO is actually based on questionable factual reinterpretations and misunderstanding of statutory interpretation adopted more in order to support radical changes in FCC policy than for their descriptive accuracy. When a variety of interested parties challenged the OIO, the U.S. Court of Appeals for the D.C. Circuit affirmed the regulations. In doing so, the court afforded substantial deference to the FCC—so much that the D.C. Circuit never addressed the reasonableness of the FCC’s decisionmaking process in reversing prior policy.

ICLE’s amicus brief argues that the D.C. Circuit’s decision “is both in tension with [the Supreme] Court’s precedents and, more, raises exceptionally important and previously unaddressed questions about th[e] Court’s precedents on judicial review of agency changes of policy.” Without further guidance from the Supreme Court, the brief argues, “there is every reason to believe” the FCC will again reverse its position on broadband regulation, such that “the process will become an endless feedback loop—in the case of this regulation and others—at great cost not only to regulated entities and their consumers, but also to the integrity of the regulatory process.”

The ramifications of the Supreme Court accepting this case would be twofold. First, administrative agencies would gain guidance for their decisionmaking processes in considering changes to existing policies. Second, lower courts would gain clarity on agency deference issues, making judicial review more uniform and appropriate where agencies reverse prior policy positions.

Read the full brief here.

There must have been a great gnashing of teeth in Chairman Wheeler’s office this morning as the FCC announced that it was pulling the Chairman’s latest modifications to the set-top box proposal from its voting agenda. This is surely but a bump in the road for the Chairman; he will undoubtedly press ever onward in his quest to “fix” a market that is flooded with competition and consumer choice. But, as we stop to take a breath for a moment while this latest FCC adventure is temporarily paused, there is a larger issue worth considering: the lack of transparency at the FCC.

Although the Commission has an unfortunate tradition of non-disclosure surrounding many of its regulatory proposals, the problem has seemingly been exacerbated by Chairman Wheeler’s aggressive agenda and his intransigence in the face of overwhelming and rigorous criticism.

Perhaps nowhere was this attitude more apparent than with his handling of the Open Internet Order, which was plagued with enough process problems to elicit a call for a delay of the Commission’s vote on the initial rules from Democratic Commissioner Rosenworcel, and a strong rebuke from the Chairman of the House Oversight Committee prior to the Commission’s vote on the final rules (which were not disclosed to the public until after the vote).

But the same cavalier dismissal of public and stakeholder input has plagued the Chairman’s beleaguered set-top box proposal, as well.

As Commissioner Pai noted before Congress in March:

The FCC continues to choose opacity over transparency. The decisions we make impact hundreds of millions of Americans and thousands of small businesses. And yet to the public, to Congress, and even to the Commissioners at the FCC, the agency’s work remains a black box.

Take this simple proposition: The public should be able to see what we’re voting on before we vote on it. That’s how Congress works, as you know. Anyone can look up any pending bill right now by going to congress.gov. And that’s how many state commissions work too. But not the FCC.

Exhibit A in Commissioner Pai’s lament was the set-top box proceeding:

Instead, the public gets to see only what the Chairman’s Office deigns to release, so controversial policy proposals can be (and typically are) hidden in a wave of media adulation. That happened just last month when the agency proposed changes to its set-top-box rules but tried to mislead content producers and the public about whether set-top box manufacturers would be permitted to insert their own advertisements into programming streams.

Now, although the Chairman’s initial proposal was eventually released, we have only a fact sheet and an op-ed by Chairman Wheeler on which to judge the purportedly substantial changes embodied in his latest version.

Even Democrats in Congress have recognized the process problems that have plagued this proceeding. As Senator Feinstein (D-CA) urged in a recent letter to Chairman Wheeler:

Given the significance of this proceeding, I ask that you make public the new proposal under consideration by the Commission, so that all interested stakeholders, members of Congress, copyright experts, and others can comment on the potential copyright implications of the new proposal before the Commission votes on it.

And as Senator Heller (R-NV) wrote in a letter to Chairman Wheeler this week:

I believe it is unacceptable that the FCC has not released the text of this proposal before Thursday’s vote. A three-page fact sheet does not provide enough details for Congress to conduct proper oversight of this rulemaking that will significantly impact both consumers and industry…. I encourage you to release the text immediately so that the American public has a full understanding of what is being considered by the Commission….

Of course, this isn’t a new problem at the FCC. In fact, before he supported Chairman Wheeler’s efforts to impose Open Internet rules without sufficient public disclosure, then-Senator Obama decried then-Chairman Martin’s efforts to enact new media ownership rules with insufficient process in 2007:

Repealing the cross ownership rules and retaining the rest of our existing regulations is not a proposal that has been put out for public comment; the proper process for vetting it is not in closed door meetings with lobbyists or in selective leaks to the New York Times.

Although such a proposal may pass the muster of a federal court, Congress and the public have the right to review any specific proposal and decide whether or not it constitutes sound policy. And the Commission has the responsibility to defend any new proposal in public discourse and debate.

And although you won’t find them complaining this time (because this time they want the excessive intervention that the NPRM seems to contemplate), regulatory advocates lamented just exactly this sort of secrecy at the Commission when Chairman Genachowski proposed his media ownership rules in 2012. At that time Free Press angrily wrote:

[T]he Commission still has not made public its actual media ownership order…. Furthermore, it’s disingenuous for the FCC to suggest that its process now is more transparent than the one former Chairman Martin used to adopt similar rules. Genachowski’s FCC has yet to publish any details of its final proposal, offering only vague snippets in press releases… despite the president’s instruction to rulemaking agencies to conduct any significant business in open meetings with opportunities for members of the public to have their voices heard.

As Free Press noted, President Obama did indeed instruct “agencies to conduct any significant business in open meetings with opportunities for members of the public to have their voices heard.” In his Memorandum on Transparency and Open Government, his first executive action, the president urged that:

Public engagement enhances the Government’s effectiveness and improves the quality of its decisions. Knowledge is widely dispersed in society, and public officials benefit from having access to that dispersed knowledge. Executive departments and agencies should offer Americans increased opportunities to participate in policymaking and to provide their Government with the benefits of their collective expertise and information.

The resulting Open Government Directive calls on executive agencies to

take prompt steps to expand access to information by making it available online in open formats. With respect to information, the presumption shall be in favor of openness….

The FCC is not an “executive agency,” and so is not directly subject to the Directive. But the Chairman’s willingness to stray so far from basic principles of transparency is woefully inconsistent with the basic principles of good government and the ideals of heightened transparency claimed by this administration.

Last week the International Center for Law & Economics and I filed an amicus brief in the DC Circuit in support of en banc review of the court’s decision to uphold the FCC’s 2015 Open Internet Order.

In our previous amicus brief before the panel that initially reviewed the OIO, we argued, among other things, that

In order to justify its Order, the Commission makes questionable use of important facts. For instance, the Order’s ban on paid prioritization ignores and mischaracterizes relevant record evidence and relies on irrelevant evidence. The Order also omits any substantial consideration of costs. The apparent necessity of the Commission’s aggressive treatment of the Order’s factual basis demonstrates the lengths to which the Commission must go in its attempt to fit the Order within its statutory authority.

Our brief supporting en banc review builds on these points to argue that

By reflexively affording substantial deference to the FCC in affirming the Open Internet Order (“OIO”), the panel majority’s opinion is in tension with recent Supreme Court precedent….

The panel majority need not have, and arguably should not have, afforded the FCC the level of deference that it did. The Supreme Court’s decisions in State Farm, Fox, and Encino all require a more thorough vetting of the reasons underlying an agency change in policy than is otherwise required under the familiar Chevron framework. Similarly, Brown and Williamson, Utility Air Regulatory Group, and King all indicate circumstances in which an agency construction of an otherwise ambiguous statute is not due deference, including when the agency interpretation is a departure from longstanding agency understandings of a statute or when the agency is not acting in an expert capacity (e.g., its decision is based on changing policy preferences, not changing factual or technical considerations).

In effect, the panel majority based its decision whether to afford the FCC deference upon deference to the agency’s poorly supported assertions that it was due deference. We argue that this is wholly inappropriate in light of recent Supreme Court cases.

Moreover,

The panel majority failed to appreciate the importance of granting Chevron deference to the FCC. That importance is most clearly seen at an aggregate level. In a large-scale study of every Court of Appeals decision between 2003 and 2013, Professors Kent Barnett and Christopher Walker found that a court’s decision to defer to agency action is uniquely determinative in cases where, as here, an agency is changing established policy.

Kent Barnett & Christopher J. Walker, Chevron In the Circuit Courts 61, Figure 14 (2016), available at ssrn.com/abstract=2808848.

Figure 14 from Barnett & Walker, as reproduced in our brief.

As  that study demonstrates,

agency decisions to change established policy tend to present serious, systematic defects — and [thus that] it is incumbent upon this court to review the panel majority’s decision to reflexively grant Chevron deference. Further, the data underscore the importance of the Supreme Court’s command in Fox and Encino that agencies show good reason for a change in policy; its recognition in Brown & Williamson and UARG that departures from existing policy may fall outside of the Chevron regime; and its command in King that policies not made by agencies acting in their capacity as technical experts may fall outside of the Chevron regime. In such cases, the Court essentially holds that reflexive application of Chevron deference may not be appropriate because these circumstances may tend toward agency action that is arbitrary, capricious, in excess of statutory authority, or otherwise not in accordance with law.

As we conclude:

The present case is a clear example where greater scrutiny of an agency’s decision-making process is both warranted and necessary. The panel majority all too readily afforded the FCC great deference, despite the clear and unaddressed evidence of serious flaws in the agency’s decision-making process. As we argued in our brief before the panel, and as Judge Williams recognized in his partial dissent, the OIO was based on factually inaccurate, contradicted, and irrelevant record evidence.

Read our full — and very short — amicus brief here.