Thursday, July 21, 2016

Notes for NARUC

I have been privileged to speak at many previous NARUC meetings, and I am pleased I was invited to speak on two separate panels at the upcoming NARUC Summer Committee Meetings in Nashville. The two panels are “Internet Privacy: The Rules of Engagement” and “Perspectives on Chevron Deference.” The complete agenda is here.

The state regulatory commissions play an important role with regard to communications law and policy, so many of of the NARUC meeting attendees are “subject matter experts” on the topics discussed. That’s why I have found many of the NARUC panels on which I’ve participated, along with the audience’s comments and questions, useful in informing my own thinking.

What I want to do here is just offer a few thoughts – perhaps more in the nature of “thinking out loud” – as I prepare for the two panels. By no means do I intend what follows to be comprehensive in any way. Rather, it’s intended to help organize my own thinking, at least in a preliminary high-level “macro” way, and perhaps provoke your thinking too.

The FCC’s Privacy Proposal

Much has been written concerning how the FCC’s proposal, with more stringent restrictions on the collection and sharing of consumers’ data than those that apply to the so-called edge providers, would place the Internet service providers (ISPs) subject to the FCC’s jurisdiction at a competitive disadvantage. This is true, and it is not an outcome to be preferred when a sound rationale for such a disparate regulatory regime is lacking.

But I am not so much concerned about the ISPs’ competitive position as I am about overall consumer welfare. It is in this realm that I find the FCC’s proposal troubling. I think a close reading of the Commission’s Notice will leave you with the sense the agency insufficiently takes into account the value that consumers place on receiving relevant information made possible by targeted advertising which, itself, is made possible by the collection and use of consumer data.

Of course, it is true, as the Commission claims, that consumers value privacy. And they may have certain preferences regarding the privacy of certain personally identifiable information that may be collected by ISPs. But this is only one side of the two-sided equation. Consumers also value receiving targeted information that they want enabled by the collection and use of their personal data. And they value receiving such information without any payment of money or subscription fee. Stated differently, but to the same effect, consumers may prefer that the payment they make not be in the form of money, but in the exchange of information about themselves.

Here’s the nub of the matter: The reason the FCC’s proposal is so problematical is that it presumes, as the default position, that consumers prefer to broadly restrict the collection and use of their personal data, rather than to more narrowly restrict such use (sensitive information such as medical or financial information is subject to higher privacy expectations). To effect such a presumption, the FCC – flying in the face of the FTC’s substantial experience and expertise regarding consumer preferences and expectations – proposes an “opt-in” requirement for most consumer data, no matter the lack of sensitivity. This is why the FTC staff filed comments advising the FCC, politely, that its proposal may harm consumers.

Here’s what FTC Commissioner Maureen Ohlhausen, more straight-forwardly, had to say on this fundamental point in a June 8, 2016, address:

Consumers who wish to receive targeted advertising or to benefit from services funded by advertising are harmed by regulation that increases the difficulty of using information. As a result, if a regulation imposes defaults that do not match consumer preferences, it forces unnecessary costs on consumers without improving consumer outcomes. The burdens imposed by overly restrictive privacy regulation, such as broad opt-in requirements for non-sensitive data, may also slow innovation and growth, harming all consumers.

There is much more to discuss with regard to the FCC’s proposal. But what I’ve said here does seem to get to the core of one of its overarching defects.

Perspectives on Chevron Deference

As most readers know, the central holding of the landmark 1984 decision in Chevron U.S.A. v. Natural Res. Def. Council is this: When a statutory provision is ambiguous, if the agency's interpretation is "based on a permissible construction of the statute," the agency's interpretation is to be given "controlling weight." Chevron is one of the Supreme Court’s most widely cited cases and most widely discussed in law reviews. Given the Chevron doctrine’s importance to the administrative state, I’ve written a lot about Chevron myself. In other words, I’ve contributed my fair share to the diminishment of our forestry resources resulting from endless Chevron commentaries.

In one sense the doctrine is important because, as it is often argued, it facilitates the expansion of the administrative state by conferring considerable power on unelected agency officials. Remember: If a statutory provision is ambiguous, and the agency’s interpretation of the statute is “permissible” (or “reasonable” as stated elsewhere in Chevron,) then the agency’s interpretation is to be given “controlling weight” – not “due” weight, or “considerable” weight, or “lots of” weight, but controlling weight. Thus, when Chevron deference is applied, as it was throughout the D.C. Circuit’s recent Open Internet Order decision, it generally is outcome-determinative.

But Chevron is important in a more fundamental sense: It goes to the very core of the separation of powers embedded in the structure of the Constitution – in other words, the allocation of powers among the three branches, Congress, the Executive, and the Judiciary. As administrative law scholar Cynthia Farina stated in an early article, “recognizing that the choice of interpretative model is part of the large problem of reconciling agencies and regulatory power with the constitutional scheme, Chevron invoked the principles of separation of powers and legitimacy.”

Here’s the nub of what the Supreme Court said in justifying Chevron:

Judges are not experts in the field, and are not part of either political branch of the Government.…[A]n agency to which Congress has delegated policymaking responsibilities may, within the limits of that delegation, properly rely upon the incumbent administration's views of wise policy to inform its judgments. While agencies are not directly accountable to the people, the Chief Executive is, and it is entirely appropriate for this political branch of the Government to make such policy choices -- resolving the competing interests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities.

In other words, the Court said, when Congress enacts an ambiguous statue, it implicitly delegates primary interpretive authority to the Executive Branch because the Chief Executive is politically accountable and judges are not. And, as the above quote from Chevron indicates, the Court gave a nod, as a secondary matter, to agency expertise.

Teaser Alert: At the NARUC panel, I am going to suggest why I think Chevron deference should be constrained, either by the Supreme Court revisiting the decision or by Congress adopting legislation regarding the review of agency decisions that alters the scope of the current doctrine. Perhaps, as an initial matter, to spur your thinking along lines receptive to what I intend to suggest, please consider the following points:

·      In Federalist No. 78, Alexander Hamilton said: “The interpretation of the laws is the proper and peculiar province of the courts.”
·      In Marbury v. Madison, Chief Justice John Marshall famously proclaimed: “It is emphatically the province and duty of the judicial department to say what the law is.”
·      The Administrative Procedure Act (APA), called the “constitution” of the modern regulatory state, provides that a reviewing court “shall decide all relevant questions of law, interpret . . . statutory provisions, and determine the meaning and applicability of the terms of agency action.” The APA also provides that the reviewing court shall hold unlawful agency action found to be “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” Curiously, Chevron, a decision that has had a profound effect on the scope and operation of the modern regulatory state, did not cite or discuss the Administrative Procedure Act.

Consider how Chevron squares with the dictates of the Constitution’s separation of powers principles – at least as suggested by Hamilton and Marshall in the above quotes – and by Congress when it adopted the APA.

And, finally, because the Chevron doctrine is based primarily on a political accountability rationale, consider whether it makes sense for the deference doctrine to apply to multi-member bipartisan independent agencies like the FCC to the same extent as Executive Branch agencies like EPA – which, by the way, is the agency whose statutory interpretation was the subject of Chevron. I’ve suggested in two law review articles that Chevron should not apply, or apply with the same controlling force, to the independent agencies: “Defining Deference Down: Independent Agencies and Chevron Deference” and “Defining Deference Down, Again: Independent Agencies, Chevron Deference, and Fox.
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Well, this “thinking out loud” exercise has helped me organize my thoughts for the upcoming NARUC Summer Committee Meetings. Perhaps it will provoke your thinking – either out loud or completely silently – as well.

If you’re headed to Nashville, I hope to see you there!