Bring back John Q. Public’s voice in federal rulemaking

Early in the Donald Trump administration, a scandal erupted at the Federal Communications Commission when it was discovered that many of the public comments received on the agency’s controversial “Restoring Internet Freedom” regulation were compromised, submitted either with fake names or multiple times electronically. This raised alarm bells. The public commenting process is considered sacrosanct within the rulemaking world — a critical opportunity for the public to participate in the process — and technology should facilitate, not jeopardize, that.

However, it’s important not to miss a bigger picture here: Technology could well create some challenges for commenting on regulations. But the process has never been nearly as open nor as democratic as its supporters make it out to be.

The public commenting process was established by the Administrative Procedure Act of 1946. Prior to the APA, there was no system-wide process for creating regulations, so rules were sometimes crafted in secret and without public input. It ensured regulatory agencies would have to follow a predictable process, and it tried to pave a way for public involvement.

The APA actually created two separate tracks for producing new regulations. The first was called “formal rulemaking” and involved trial-like procedures where agencies would have to present evidence and witnesses in support of a regulation and meet certain burdens of proof. Witnesses could even be cross-examined by interested parties to provide some counterbalance to the government’s perspective.

The drafters of the APA also set up a process for more routine regulatory actions called “informal rulemaking.” Here, agencies simply propose a regulation, notify the public about it, and seek comments before finalizing it.

Things got muddled in the aftermath of a Supreme Court ruling in 1973 called United States v. Florida East Coast Railway, which established that regulatory agencies could use either formal or informal rulemaking for most regulatory actions, including their most economically significant ones. Formal rulemaking is almost never used now, as informal rulemaking is easier and therefore preferred by regulators. But this is not at all what the drafters of the APA intended.

This is a huge problem because the public commenting process under informal rulemaking has never been very democratic. In fact, one study found that a whopping 52 percent of regulations from 1995 to 2012 avoided the notice-and-comment process altogether.

Even when regulators can be bothered to seek comments, the comments tend not to be representative of the views of the American people. Comments tend to come from industry lobbyists or from advocacy groups — in other words, from parties with a financial or ideological stake in the outcomes of regulations. Comments also generally need to be fairly sophisticated, technically or legally, in order for agencies to take them seriously, which often rules out those from John Q. Public.

The commenting process certainly offers big business an opportunity to get in its say. Regulators will inevitably listen to businesses that have the resources and legal standing to sue agencies in court. But an ordinary person off the street won’t have nearly this much influence, if any.

When regulatory agencies start serving the interests of the entities they are tasked with regulating — rather than the broader public — economists refer to this as “regulatory capture.” Real-life examples abound, and the commenting process is a perfect opportunity for regulatory capture to occur.

Soliciting comments gives the appearance that the public has an opportunity to meaningfully participate in rulemaking, but it’s just that: a kind of song and dance that an agency has to go through to get its rule implemented. This is why administrative lawyers often compare the commenting process to Japanese “Kabuki Theater.” It’s kind of a charade.

Fortunately, a simple reform could help correct the anti-democratic nature of the rulemaking process: return to “formal” rulemaking in some cases.

This could start for a subset of regulations, like those deemed as having a significant impact on small businesses. Small businesses — which often lack legal departments and massive corporate resources or influence and can be disproportionately burdened by regulations — are just the kind of group easily shut out under the current system.

There could even be a small business advocate involved at every hearing. The government already has an Office of Advocacy within the Small Business Administration that is perfectly positioned to take on this role. If formal rulemaking works well in this area, it could be expanded to other domains.

The public commenting process looks good on paper, but too often it is just an opportunity for big business or ideological activist groups to hijack rulemaking in their favor. Formal rulemaking won’t solve all our problems, but it could start making regulators more accountable to the people, not special interests. 

James Broughel is a senior research fellow with the Mercatus Center at George Mason University.