Agency Lumping and Splitting
Regulations, like other legal instruments, often arrive in lumps. An agency, for example, can issue a rule addressing many different subjects, each of which could be split off and issued as a separate regulation. Take, for example, a recently finalized proposed rule issued by the Environmental Protection Agency (EPA). In the agency’s own words, the rule combined “three distinct actions.” Its most high-profile action revised the agency’s Clean Power Plan, an effort by the Obama Administration to reduce carbon dioxide emissions from coal-burning power plants. The rule also proposed new requirements regarding state-level emissions and a pre-construction air permitting program. Some of these measures had previously been issued separately, but were now combined by the agency into one rule.
This form of power—the power to “configure”—is the subject of Lee Fennell’s insightful new book Slices and Lumps. Across a range of legal issues (and spheres of life!), Fennell convincingly demonstrates the central role of division and aggregation. Technological advances, she argues, have only increased the topic’s urgency. Indeed, as new tools have reconfigured traditional goods and services—think ride-sharing, pet-walking, and room-renting—agencies have also adapted with novel regulatory approaches. For instance, agencies have considered the unorthodox use of temporary regulations to mitigate uncertainties associated with technical innovation.
In this Essay, I will apply some of Fennell’s ideas to the regulatory state and identify potential areas of future research. In particular, I will focus on the implications her analysis has for the practice of cost-benefit analysis. The first section will survey some of the ways the administrative law literature currently addresses the theme of lumping and splitting. The second will then suggest new lumps and splits suggested by Fennell’s analysis.
I. Extant Perspectives
Administrative agencies can aggregate and disaggregate their policy choices in myriad ways. Agencies, for example, can choose their forms of action: they can adjudicate orders, bring enforcement actions, or pass legislative rules through notice-and-comment. More recently, scholars have also focused on the ways in which these forms can be aggregated and disaggregated. Start with adjudication. Here, Michael Sant’Ambrogio and Adam Zimmerman have advocated for the use of administrative class actions. In their words:
[D]esignated ALJs would decide, just like Article III judges, whether or not common questions of law or fact exist and whether class adjudication materially advances a fair resolution more than individualized adjudication. When the answer is “yes,” the administrative judge could coordinate common discovery and prehearing motions, resolve factual or legal issues common to the class, and oversee any potential settlement, in a single proceeding. Individual class members then need only show they were part of the same class—and offer proof of their injury—to qualify for the relief sought.
In this manner, agencies and litigants could lump together adjudications involving common legal or factual issues. This innovative procedure, modeled after traditional class actions, could provide a more efficient means of adjudicating common claims.
Turning from adjudication to enforcement, Mila Sohoni has analyzed the various ways in which agencies can aggregate enforcement actions through “crackdowns.” In her words, the “crackdown is a type of enforcement policy decision: a conscious and voluntary policy of heightened enforcement vis-à-vis a specified class of offenders or offenses.” In other words, crackdowns occur when a prosecutor decides to aggregate enforcement actions all at once over an identified group of individuals or crimes. Finally, turning to rulemaking, Jed Stiglitz and I have found that agencies appear to be lumping more than they did in the past. That is, they seem to be aggregating more and more subjects together in the context of a single regulation. These dynamics differ across agencies. The EPA and the Department of Veterans Affairs (VA), for instance, issue a larger number of bundled rules on average. By contrast, the Departments of Defense (DOD) and Commerce tend to list much fewer.
While the Administrative Procedure Act appears to allow agencies this discretion, other political actors have sought to limit it. The President through the Office of Information and Regulatory Affairs (OIRA), for example, has issued guidance warning agencies not to “artificially bundl[e] provisions that are not logically connected in a single regulatory action.” Agencies are on notice not to arbitrarily aggregate rules together. Similarly, OIRA has sometimes asked agencies to send rules costing a certain amount to see if they should be lumped with others. Doing so would then render the bundled rule “economically significant,” and thus subject to more rigorous review.
Courts, too, have bundled and split rules under judicial review. During litigation, parties can move to consolidate or coordinate judicial review of separate regulations, or courts can sua sponte issue orders to do so. These “batching” decisions are an exercise of judicial powers to manage multiple lawsuits sharing common questions of law or fact. In effect, they amount to the judicial ability to bundle or split rules under the auspices of a single case to review. In the remedial phase, courts can also vacate rules as a whole or simply sever individual provisions found to be illegal. In other words, they can nullify entire rules or their component parts.
Congress, for its part, appears to have limited itself to veto rules in their entirety. The Congressional Review Act only allows for up-or-down votes on rules; there is no line-item veto. Moreover, the joint resolution disapproval procedure prohibits any amendments, foreclosing the possibility that the rule could be split on the floor. At the same time, legislators are unable to bundle multiple rules into the same joint resolution of disapproval, so promulgated rules must be considered separately. As a result, Congress must either take lumped rules or leave them.
II. New Lumps, New Slices
Against this backdrop, Fennell’s analysis offers many lessons for approaching administrative lumping and splitting in novel ways. Indeed, one of Fennell’s key insights is the need to rethink the relevant unit of analysis in many arenas, which have often been constructed originally to serve some “doctrinal purpose.” Indeed, as discussed, much of administrative law scholarship currently focuses on units (adjudication, enforcement, and rulemaking) with roots in the Administrative Procedure Act and its associated doctrines. Doing so, however, arguably fails to grapple with the units of analysis that really matter to regulators and the regulated—what Fennell refers to as the “real object[s] of interest.”
A. Aggregate costs and benefits
What are the administrative state’s “real” stakes? There are multiple responses, but an important one focuses on the consequences of agency decisions, as manifested in cost-benefit analysis. Simply stated, cost-benefit analysis attempts to state the anticipated burdens and benefits of a regulatory decision transparently. In this sense, traditional cost-benefit analysis consists of little more than ex ante predictions about regulatory impacts. Fennell’s analysis, however, helps to underscore the value of retrospective cost-benefit analysis, which instead asks: What are the actual costs and benefits of an agency action post-implementation? After all, what regulated entities arguably care about are the costs and benefits that are actually imposed, not the hypothetical ones forecast by agencies. Thus, a study of how agencies lump and split costs and benefits should arguably focus on cost-benefit analyses conducted after the regulation’s effective date.
Of course, one of the many reasons such analyses are difficult to do is that regulations on the books are not the same as how they are applied. In other words, a regulation’s actual costs and benefits will depend in part on the regulation’s enforcement, whether vigorous or lax. Similarly, a regulation’s impact will also depend on how legal issues are adjudicated on the ground. So yet another insight to be gained from Fennell is that retrospective cost-benefit analysis could also be conducted on administrative class actions. We should know the actual impacts, that is, of aggregate adjudications—not just rules. (Indeed, Sant’Ambrogio & Zimmerman point out the ways in which class actions have rule-like features by settling legal issues across a class of individuals.) Viewing agency lumping and splitting in this light encourages us to ask: How do and how should agencies configure actual costs and benefits, regardless of the form their actions take?
B. Cumulative cost-benefit analysis
In addition to reconsidering the relevant units of analysis, Fennell also urges us to consider their complementarities. A complementary good, of course, is a good whose demand increases with the demand of another good—its complement. A perfect complement is a good that must be consumed with another good, like left- and right-hand shoes (to use Fennell’s example). However, complementarity can also be understood as a matter of degree. In this sense, many regulations serve as complements. Take, for example, a regulation requiring new reporting requirements regarding employment discrimination complaints. Such a rule would complement another rule lowering the substantive standard for employment discrimination. As reports increased, so too would potential enforcement actions.
This insight also has implications for the cost-benefit analysis of regulations. In particular, it endorses an approach that studies the cumulative effects of regulations—how a new regulation will interact with those already on the books. As a recent OIRA guidance memo encourages, agencies should coordinate the “timing, content, and requirements of multiple rulemakings that are contemplated for a particular industry or sector, so as to increase net benefits.” Moreover, they should consider “the interactive and cumulative effects of multiple regulations affecting individual sectors as part of agencies’ retrospective analysis of existing rules.” In this manner, understanding the complementarities between the real units of analysis can help to sharpen our understanding of actual regulatory impact. Instead of analyzing consequences rule by rule, a better approach would consider how the incremental rule interacts with those already in existence.
Relatedly, adopting Fennell’s frame of mind also helps to disrupt another common perspective, which is to treat the agency as the appropriate unit of analysis. Many agencies, however, complement the work done by other agencies. The Department of Interior’s Bureau of Land Management, for example, often issues regulations that impact the jurisdiction of the Environmental Protection Agency. So, too, the Department of Transportation. The U.S. Department of Agriculture regulates food in ways that complement the work of the Food and Drug Administration (FDA). As a result, it may be more fruitful to consider particular groups of agencies together when conducting cost-benefit analysis—lumping together those that complement each other rather than splitting them in the ways that Congress has chosen, sometimes for political rather than analytical reasons. Doing so may ultimately help agencies to design more socially efficient regulations. Relatedly, this perspective helps to highlight the valuable role of inter-agency coordination and deliberation.
C. “Identify Interactions”
Finally, another important lesson that Fennell’s analysis offers is the value of identifying interactions between different arenas of law or traditional fields of study. As it stands, Congress is often analyzed as a separate institution from the bureaucracy (sometimes for good reason); however, understanding the interactions between them when it comes to lumping and splitting regulatory decisions can also yield fresh insights. Congress, for example, legislates agency jurisdictions—that is, splits up different subject areas to be tackled by single agencies. However, these agencies then effectively reconfigure these splitting decisions through interagency memoranda and agreements of their own.
To use an illustration provided by Bijal Shah (who has written much on the topic): The Department of Treasury is charged by Congress with, among other things, adjudicating the legality of pharmaceutical imports and exports. Treasury has since transferred this authority to the U.S. Customs and Border Patrol through an interagency agreement. That agency then transferred this authority once again to the FDA with yet another interagency agreement. In this manner, agencies can reconfigure jurisdictional decisions made by Congress. More attention should thus be paid by congressional scholars to the incentives that Congress has to limit these transfers of authority ex ante, whether by statute or other means of congressional oversight. While the traditional view assumes that jurisdictional decisions are fixed, they are reconfigured within the executive branch in practice.
Further afield, it may also be fruitful to consider the interaction of agency configuration decisions with the kinds of decisions studied more frequently in corporate law or in business schools more generally. When an agency decides to regulate one segment of an industry at a time, for instance, there may be unintended spillover effects on other parts of the industry due to the lumpy nature of the underlying goods and services. Take recent efforts by the Consumer Product Safety Commission to recall inclined sleepers for infants. The recalls are likely to have unintended effects on other products that were designed to be used with the sleepers, such as attachable mobiles. Because mobiles and sleepers are often sold and lumped together, the sleeper recall is likely to impact the mobile market as well. Thus, businesses must be aware of the lumpy nature of their goods when monitoring the administrative state. Any cost-benefit analyses of the recall decision, in turn, must also take these consumer consequences into account.
Conclusion
If Slices and Lumps shows us anything, it is that configuration decisions are everywhere and they are inescapable. This brief Essay has considered just a few ways in which adopting the book’s mindset helps us see new ways of looking at old regulatory debates. Future research questions abound: To what extent are agency configuration decisions strategic or sincere? What about those of litigants or political overseers? What regulatory opportunities are missed because of the blinders placed on mission-focused agencies? Is inefficient configuration a reason to increase presidential control over independent agencies? These are just some of the questions raised by Fennell’s incisive analysis. More, no doubt, await.