NSR Tech Policy: Supreme Court decision may throw up more barriers on the road to tech reform

Last week, our New Street Research Policy colleague, Blair forecasted the potential impact of the Supreme Court’s upcoming decision in West Virginia v. EPA on rulemaking by administrative agencies (LINK). He wrote that “every current act delegating authority to an expert agency, and every rule that was adopted pursuant to that delegation, is now likely to be subject to new legal challenges.” Judges will likely have more power to shape agency rules, and Congress, to achieve their goals, will likely have to craft statutes more specifically to seek to avoid conflicting interpretations by judges.

The focus of that note was principally on the telecom sector, so we highlight additional points below on the impact this decision could have on the tech sector specifically.

  • More headwinds for FTC rulemaking. In recent years, some scholars and advocates have made the case that the FTC should issue rules to govern the tech sector in areas like privacy and artificial intelligence. The calls for administrative rules have increased as tech reform efforts in Congress have stalled. FTC Chair Lina Khan has attempted to initiate rulemaking procedures in line with this view. But the path to FTC rulemaking for the tech sector is not easy, as some argue that the FTC does not have broad rulemaking authority, and any FTC rule for the tech sector will likely be challenged in court. Although West Virginia v. EPA does not address the question of FTC rulemaking authority, it will make it more difficult for any rulemaking in the tech sector to survive judicial review. To survive a challenge in court, the FTC would not only need to prevail on the question of whether Congress intended to delegate to the FTC the authority to issue the rule in question, but also whether the FTC has properly used authority in the case at hand. After West Virginia v. EPA, the FTC would receive no deference on that question, which increases the chances a district court judge could strike down any rule.
  • More headwinds for tech reform in Congress. It is typical for Congress to avoid difficult, detailed questions about how a statute will apply in practice by deferring these issues to the rulemaking process at an administrative agency. The likely decision in West Virginia v. EPA will make it more difficult for Congress to delegate this decision-making authority to agencies. As Blair wrote last week, “unless Congress enacts laws that have one and only one meaning when applied to all situations and never requires rules to change as science or economics may evolve, then the judiciary will now make the laws and regulations” (LINK). The pressure on Congress to include more detailed language in statutes will make tech reform even more challenging, since many of the most prominent proposals have been able to build support in part by punting challenging questions to agencies. If every proposal must now either specify how a particular issue must be resolved or risk administrative rules that could be easily overturned by any district court in the country, the prospects for meaningful tech reform diminish even further.
  • States and the EU continue to take the lead in tech reform. With increasing headwinds for both FTC rulemaking and Congressional action in the tech sector, it is likely that we will continue to see the states and the European Union play the lead role in developing and implementing tech reform, a point we made in both our Q1 (LINK) and Q2 (LINK) presentations on regulatory risk in the tech sector.

Full 12-month historical recommendation changes are available on request

Reports produced by New Street Research LLP, 18th Floor, 100 Bishopsgate, London, EC2N 4AG. Tel: +44 20 7375 9111.

New Street Research LLP is authorised and regulated in the UK by the Financial Conduct Authority and is registered in the United States with the Securities and Exchange Commission as a foreign investment adviser.

Regulatory Disclosures: This research is directed only at persons classified as Professional Clients under the rules of the Financial Conduct Authority (‘FCA’), and must not be re-distributed to Retail Clients as defined in the rules of the FCA.

This research is for our clients only. It is based on current public information which we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Most of our reports are published at irregular intervals as appropriate in the analyst's judgment. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients.

All our research reports are disseminated and available to all clients simultaneously through electronic publication to our website.

New Street Research LLC is neither a registered investment advisor nor a broker/dealer. Subscribers and/or readers are advised that the information contained in this report is not to be construed or relied upon as investment, tax planning, accounting and/or legal advice, nor is it to be construed in any way as a recommendation to buy or sell any security or any other form of investment. All opinions, analyses and information contained herein is based upon sources believed to be reliable and is written in good faith, but no representation or warranty of any kind, express or implied, is made herein concerning any investment, tax, accounting and/or legal matter or the accuracy, completeness, correctness, timeliness and/or appropriateness of any of the information contained herein. Subscribers and/or readers are further advised that the Company does not necessarily update the information and/or opinions set forth in this and/or any subsequent version of this report. Readers are urged to consult with their own independent professional advisors with respect to any matter herein. All information contained herein and/or this website should be independently verified.

All research is issued under the regulatory oversight of New Street Research LLP.

Copyright © New Street Research LLP

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of New Street Research LLP.