[governance] Fwd: US regulatory failure? Blame the US court of appeals DC circuit

[Riaz K Tayob]

[While views may differ, this is an interesting take from the Washington 
Post]

Regulatory failure? Blame the D.C. Circuit. By Steven Pearlstein Friday, 
April 9, 2010; A14

There's a lot of talk these days about how Washington has become 
dysfunctional. While most of the focus has been on Congress, the 
inability to perform even basic functions also extends to the agencies 
that are charged with protecting workers, consumers and investors. 
Unfortunately, it often takes a global financial crisis or a deadly coal 
mine explosion to remind us of the serious consequences of regulatory 
failure.

Much of the blame belongs with regulators who have been captured by the 
industries they are meant to oversee or have been swept up in the 
general political drift toward deregulation. But, as we were reminded by 
a case this week involving the Federal Communications Commission, 
another big culprit is the U.S. Court of Appeals for the District of 
Columbia Circuit, which over the past decade has intimidated, undermined 
and demoralized the regulatory apparatus.

Many of the D.C. Circuit judges have long since stopped pretending to 
defer to the factual determinations and policy judgments of duly 
appointed regulators, as the law requires. Deference has now given way 
to skepticism, hostility and contempt that can easily be read between 
the lines of overly legalistic opinions that routinely ignore the plain 
language of statute and the clear intent of Congress. It's gotten so bad 
that top regulators told me privately this week that they routinely put 
aside consideration of needed new initiatives because they assume they 
will be foiled by the hostile appeals court.

Driving the court's regulatory bias are judges such as Brett Kavanaugh, 
Laurence Silberman and Stephen Williams, Republican appointees who bring 
to the bench an abiding skepticism about the value of bureaucratic 
rulemaking. Their cramped view is that regulators can take only those 
actions specifically and explicitly authorized by statutes, ignoring the 
fact that many laws are so old that they never could have anticipated 
the dramatic changes in technology and the economy.

Even the court's more liberal members betray an attitude that regulators 
are a well-meaning but overzealous bunch who, like teenagers, need 
constant adult supervision from judges who are smarter and wiser. Their 
decisions frequently scold agencies for failing to dot their i's and 
cross their t's in justifying new regulations, sending the regulators 
back to try again and again.

It was one of those liberal members, David Tatel, who wrote this week's 
opinion finding that the FCC has no business regulating Internet 
providers. The case was brought by Comcast, which had been slapped on 
the wrist by the FCC for managing its Internet service in a way that 
slowed bandwidth-hogging activities such as file-sharing when its 
network became congested. Comcast appealed, knowing that the agency's 
action was but the first step toward a policy of "net neutrality" that 
could prevent broadband providers from one day favoring their own 
content over that of their competitors.

A long line of Supreme Court cases essentially made it possible for the 
FCC to broaden the scope of its activity as communication technology 
evolved from radios and copper-wire telephones. These cases often relied 
on the commission's broad mandate to "expand service" at "reasonable 
charges" with "fair and efficient networks." More recently, the 
Telecommunications Act of 1996 declared Congress's desire "to promote 
the continued development of the Internet" and "encourage the 
development of technologies which maximize user control over what 
information is received."

But this did not impress Tatel, who simply dismissed it as mere 
"congressional statements of policy" and criticized the agency for 
failing to find specific statutory authorization for interfering in this 
way in Comcast's business. The irony of his decision is that it has now 
undermined the FCC's "light touch" approach to Internet regulation, 
begun under the Bush administration, and will probably force the agency 
to declare broadband providers to be "common carriers," triggering far 
more intrusive rulemaking. That, in turn, will surely lead to a another 
decade-long legal war as the industry challenges each rule at the court 
of appeals.

That is just what happened in the 1990s, when the FCC -- on the 
instruction of Congress -- moved to force the old local Bell telephone 
monopolies to share their lines with upstart competitors. Time and 
again, the FCC formulated rules to govern how that access would be 
provided and how much the upstarts would pay for the "unbundled 
elements," and time and again, the D.C. Circuit struck down the ruling. 
*The fight went on so long that, by the time the court was finally 
satisfied, virtually all the upstart carriers had been driven out of 
business, the technology had moved on, and the whole issue was moot. *

But it's not just the FCC.

Last month, the court of appeals gave its trademark treatment to the 
Food and Drug Administration, which had the temerity to try to meet 
Congress's clearly stated desire to speed the introduction of generic 
drugs into the market once the original patents expire.

And last year, Judge Williams went through 24 pages of hair-splitting 
logic to explain why the Federal Trade Commission was out of bounds when 
it tried to discipline a tech company for enhancing its monopoly in a 
certain chipmaking process by deceiving an industry standard-setting 
body.* According to Williams, the fact that its deceit "merely" enabled 
a monopolist to charge higher prices doesn't constitute illegal 
anti-competitive behavior. *

*Surely no decisions were more ludicrous, or did more to undercut 
sensible regulation, than a pair of rulings in 2005 and 2006* in which 
the D.C. Circuit overturned a rule promulgated by the Securities and 
Exchange Commission requiring that 75 percent of the directors of a 
mutual fund be independent of the company chosen to manage the fund's 
investments. It's hard to imagine that Congress didn't mean to protect 
small investors from self-dealing by mutual fund companies when it wrote 
the Investment Company Act of 1940. But Judge Judith Rogers overturned 
the rule anyway after finding flaws in the agency's estimate of how much 
the rule would cost each mutual fund to implement -- by any estimate, a 
trifling sum compared with the tens of millions of dollars managed by 
even the smallest mutual funds.

None of these is the sort of case that makes big headlines or causes the 
public to rise up in outrage, but they are the means by which a new 
breed of judicial activist is quietly undermining the reach and the 
effectiveness of government. It's all well and good for Congress to go 
through the process of hammering out new laws on financial regulation or 
mine safety. But thanks to the U.S. Court of Appeals for the District of 
Columbia Circuit, there's a good chance they'll never be implemented. © 
2010 The Washington Post Company

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