Topic: Regulatory Studies

How ADA-for-the-Web Regulations Menace Online Freedom

By
Walter Olson

Were I asked to pick the most significant developing story about federal regulation that the press has not really caught onto yet, I might nominate the Obama administration’s apparent intent to publish new interpretations of the Americans with Disabilities Act (ADA) requiring that website operators make their sites “accessible” to users who are blind, deaf, intellectually disabled, or lacking in motor skills, to name but a few categories. While disabled advocates have been pursuing such interpretations of the ADA for more than a decade, several adverse federal court decisions greatly slowed down their momentum; now, those precedents notwithstanding, the administration seems to have decided to throw its weight behind the proposition that websites, like brick-and-mortar restaurants or movie theaters, are “public accommodations” under an obligation to provide the online equivalent of ramps, rails, sign-language translators, captioning, and much, much, more.

I’ve been on this issue for a long time, and the other day at Overlawyered I assembled a few links on the re-emerging story. Now our friend Hans Bader of the Competitive Enterprise Institute has published an excellent write-up at CEI’s “Open Market” (also Examiner):

Can websites be forced to change to accommodate the disabled — by using “simpler language” to appeal to the “intellectually disabled,” or by making them accessible to the blind and deaf at considerable expense?

Generally, the First Amendment gives you the right to choose who to talk to and how, without government interference. There is no obligation to make your message accessible to the whole world, and the government can’t force you to make your speech accessible to everyone, much less appealing to them. The government couldn’t require you to give speeches in English rather than Spanish …

But now, the Obama administration appears to be planning to use the Americans with Disabilities Act (ADA) to force many web sites to either accommodate the disabled, or shut down.

When the regs come out, the associated public advocacy campaign will no doubt focus on very large web vendors (Wal-Mart, airlines, Amazon, Netflix, and so forth), who (it will be argued) can well afford to bring their e-commerce operations into line with accessibility prescriptions. But as the law is written, the same principles will be applied to smaller businesses’ websites and indeed to many small private sites whose primary purpose is writing, persuasion, or communication, at least where there is a commercial nexus such as ad revenue or an affiliate bookstore.

If you think this is an extremely bad idea, as I do, the time to educate yourself on the issue is now.

Topics: 
Regulatory Studies

Regulator to the World? Not the SEC…

By
Louise C. Bennetts

I don’t often commend regulators, but for those interested in preserving national sovereignty, new SEC chairwomen, Mary Jo White, is off to a good start if yesterday’s New York Times’ editorial is anything to go by. The Times criticized White for approving new SEC derivatives regulations that defer oversight of foreign security-based swap transactions, including those relating to the foreign subsidiaries of U.S. banks, to foreign regulators. The Times also derided White for approving rules that were “weaker” than the similar rules released by the Commodity Futures Trading Association.

Like the CFTC, the Times’ editorial board has clearly not heard of the concept of international comity, which it seems to confuse with “weakness”. In particular, it is not clear why the Times believes that unelected U.S. regulators should have the right to be self-appointed derivatives tsars to the rest of the world. The Times also appears to have overlooked the recent letter, signed by the finance ministers of nine of the United States’ largest trading partners and addressed to their U.S. counterpart Jack Lew. The letter was a thinly-veiled attack on the CFTC’s so called “extra-territorial” application of its cross-border swap rules and noted that an approach “in which jurisdictions require that their own domestic regulatory rules be applied to their firms’ derivatives transactions taking place in broadly equivalent regulatory regimes abroad is not sustainable.”

Of course, the Times does raise one important point: that it is undesirable to have two agencies releasing different rules on what amounts to the same topic. But the arbitrary distinction in the oversight of security-based swaps (regulated by the SEC) and OTC derivatives (regulated by the CFTC) is just one of Dodd-Frank’s many design flaws. Moreover, the SEC is under no obligation, pursuant to Dodd-Frank or otherwise, to follow the CFTC’s approach just because the CFTC released its regulations first. Especially as those regulations have proven to be so contentious (and not just with U.S. banks who legitimately fear being shut of international derivatives markets, but, more importantly, the foreign regulators on whom the U.S. may have to rely in a crisis).

It has become an unwelcome trend for U.S. regulatory agencies to overreach their jurisdictional and geographical boundaries. This began with the IRS’ FATCA implementation and has continued in the financial regulatory space. That White does not wish to follow her CFTC counterpart, Gary Gensler, down the rabbit hole and alienate the U.S.’s trading partners and allies is commendable, even if the Times is disappointed.

Topics: 
Finance, Banking & Monetary Policy, International Economics and Development, Regulatory Studies

The Myth of a Manufacturing Renaissance

By
Daniel J. Ikenson

Have you heard all the banter about a U.S. manufacturing renaissance? Numerous media reports in recent months have breathlessly described a return of manufacturing investment from foreign shores, mostly attributing the trend to rising wages in China and the natural gas boom in the United States, both of which have rendered manufacturing state-side more competitive. Today’s Washington Post includes a whole feature section titled “U.S. Manufacturing: A Special Report,” devoted entirely to the proposition that the manufacturing sector is back!

The myth of manufacturing decline begets the myth of manufacturing renaissance. This new mantra raises a question: How can there be a manufacturing renaissance if there was never a manufacturing “Dark Ages”?

Contrary to countless tales of its demise, U.S. manufacturing has always been strong relative to its own past and relative to other countries’ manufacturing sectors. With the exception of a handful of post-WWII recession years, U.S. manufacturing has achieved new records, year after year, with respect to output, value-added, revenues, return on investment, exports, imports, profits (usually), and numerous other metrics appropriate for evaluating the performance of the sector. The notion of U.S. manufacturing decline is simply one of the most pervasive economic myths of our time, sold to you by those who might benefit from manufacturing-friendly industrial policies with the abiding assistance of a media that sometimes struggles to distill fact from K Street speak.

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Topics: 
Regulatory Studies, Trade and Immigration

The Constitution Protects Even Old-Timey Property Rights

By
Ilya Shapiro and Trevor Burrus

In the 19th Century, when railroads were being built across the West, the federal government granted significant land and benefits to the railroad companies. The Great Railroad Right-of-Way Act of 1875 allowed the government to give railroad companies easements to build tracks — that is, a right to use sections of another’s property without legally owning it. The Brandt family eventually acquired land in Wyoming that came with pre-existing railroad easements.

In 2001, the owner of the easement formally abandoned all claims to it, presumably returning the property to the Brandts. But the government wanted that land. In 2006, it sued for title to the former easement land on the theory that the government retained a residual claim to it after the railroad abandoned it. The Brandts argue that the government has no such right and that taking their land requires just compensation under the Fifth Amendment’s Takings Clause.

Although this may seem like a small, unique problem, the scope of the Old West’s railway system was huge and those old easements criss-cross the land of thousands of property owners. In 1983, Congress amended the National Trails System Act to allow the government to take abandoned railroad easements and turn them into land for public recreation and “railroad banking.” Landowners have been fighting the taking of their property under the Trails Act ever since, claiming, as here, that the government’s original grant to the railroads contained no residual right of possession for the government.

Indeed, two federal courts of appeals, the Seventh and Federal Circuits, have held that the government didn’t retain any residuary rights. In the Brandts’ case, however, the Tenth Circuit held otherwise. This circuit split is untenable. Over 5,000 miles of abandoned track has been taken by the government since the Trails Act, and about 10,000 property owners are currently fighting in federal courts to hold onto their property.

Of course, given the possible benefits of not having to pay compensation to landowners, the government has responded to these claims by being aggressively litigious, reaching into its endless war-chest of taxpayer-provided resources to challenge the landowners on every tiny point. As the Federal Circuit said, the government’s behavior is “puzzling” in that it is “foregoing the opportunity to minimize the waste both of its own and plaintiffs’ litigation resources, not to mention that of scarce judicial resources,” but also by advancing arguments “so thin as to border on the frivolous.”

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Topics: 
Law and Civil Liberties, Regulatory Studies

Brown-Vitter: More Hot Air

By
Louise C. Bennetts

Today’s New York Times article by Senators Brown and Vitter (the preview of their much-touted “bank break-up” bill) starts with a very encouraging line: “governments shouldn’t pick economic winners and losers.”

Senator Brown, in particular, seems to have learned this important lesson fairly recently (auto bailout, anyone?). But putting this aside (and also ignoring the ongoing debate about the purported subsidy to large banking organizations, which should be eliminated, if it indeed exists), Senators Brown and Vitter display some disturbing, though not uncommon, misconceptions about U.S. and global banking. And, as is always the case, poorly understood and inaccurate facts create bad policy suggestions.

The first problem is the implicit assumption that large size and diversity of operations are negative traits. In fact, diversity is the key to managing risk in banking. Part of the reason why US banking has had such a checkered history relative to many other countries is because of its historical lack of geographical and product diversity – a result of the long-standing prohibitions on inter-state banking and branch banking and limitations on combining investment and commercial banking activities. One of the single biggest causes of the banking crisis in the late 1920s was a lack of geographical diversity (and, as congressional records show, States that prohibited branch banking fared the worst). Similarly, one of the primary causes of the 2008 financial crisis was a lack of asset diversity - too many banks holding too many securitized sub-prime mortgages.

Second, is the implicit assumption that investment banking and underwriting activity are inherently more risky than loan activities. Certainly, imprudent investment banking can be disastrous. So can making risky loans. And the 2008 crisis was, at its core, a loan origination problem (a fact largely ignored by Congress because of the uncomfortable questions it raises about the two GSE’s - Fannie and Freddie).

Third, is the belief that the 2008 bank bailouts were somehow linked to the FDIC deposit insurance scheme and that if we ‘narrow’ the safety net, all future bailouts will be avoided. I am no fan of federal deposit insurance, but the bailouts were unrelated to it. TARP was a Treasury creation, passed by Members of Congress under extraordinary circumstances. The only way to ensure it doesn’t happen in future is to rein in Congress and limit their ability to (in the words of Brown and Vitter) “pick economic winners and losers”.

As it turns out, the Brown-Vitter Bill is less about bank ‘break-up’ and more a U.S. variant of the FSB’s G-SIFI surcharge – which raises the question why it is necessary at all, except to put the U.S.’s global banks at a disadvantage, even though they are already disproportionately affected by the surcharge. Brown and Vitter’s calls for higher capital requirements are not objectionable per se, but as the ongoing problems with the Basel Accord shows, the devil is always in the details. And if you get it wrong, you risk creating exactly the systemic problems – such as an excessive reliance on sovereign bonds or mortgage-backed securities – that you were trying to avoid.

Essentially, the only way to end the perception of a government backstop is to put in place a credible system to allow large firms to fail if they make poor decisions. To this end, the Brown-Vitter Bill doesn’t add anything except more confusion.

Topics: 
Finance, Banking & Monetary Policy, Regulatory Studies

International Trade in Online Medical Services

By
Simon Lester

The hard-working Cato interns pointed me to this article discussing a constitutional challenge to restrictions on the online provision of veterinary services:

A retired Texas veterinarian has filed a federal lawsuit challenging state regulations that bar him from evaluating animals and giving veterinary advice over the Internet.

Since 2002, Ronald Hines, 69, of Brownsville, Tex., has used his website to provide veterinary advice—sometimes for free and sometimes for a flat $58 fee. Sometimes his clients are overseas with limited access to veterinary services. He gets lots of questions from people who find wounded birds and want to nurse them to health. Over the course of his career, he developed an expertise with monkeys, and said he still gets a lot of monkey questions.

…

Last month, the Texas veterinary board suspended Hines’ license for a year after finding that his Internet practice violates state laws. Texas regulations require a vet to establish a “veterinarian-client-patient relationship,” and they explicitly state that such a relationship cannot be established solely through the telephone or Internet.

Hines’ lawyers at the Arlington, Va.-based Institute for Justice say the rule infringes on their client’s free-speech rights and is an unreasonable restriction on the profession.

Jeff Rowes, an attorney with the institute, said the case could set a precedent in fields that extend well beyond veterinary medicine. He noted that telemedicine continues to be an emerging field and that regulations restricting Internet speech could affect a number of professions, including law, psychology and investment advice.

More details here, here and here.

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Topics: 
International Economics and Development, Law and Civil Liberties, Regulatory Studies

Do New Cybersecurity Restrictions Amount to Regulatory Protectionism?

By
Daniel J. Ikenson

Protectionism masquerading as regulation in the public interest is the subject of an excellent new paper by my colleagues Bill Watson and Sallie James.  As tariffs and other border barriers to trade have declined, rent-seeking domestic interests have turned increasingly to regulations with noble sounding purposes – protecting Flipper from the indiscriminating nets of tuna fishermen, fighting the tobacco industry’s efforts to entice children with grape-flavored cigarettes, keeping U.S. highways safe from recklessly-driven, dilapidated, smoke-emitting Mexican trucks, and so on – in order to reduce competition and secure artificial market advantages over you, the consumer.

The paper documents numerous examples of this “bootleggers and Baptists” phenomenon, where the causes of perhaps well-intentioned advocates of health and safety regulation were infiltrated or commandeered by domestic producer interests with more nefarious, protectionist motives, and advises policymakers to:

be skeptical of regulatory proposals backed by the target domestic industry and of proposals that lack a plausible theory of market failure. These are red flags that the proposal is the product of privilege-seeking special interests disguised as altruistic consumer advocates.

After reading this incisive paper, you might consider whether a new law restricting U.S. government purchases of Chinese-produced information technology systems in the name of cybersecurity fits the profile of regulatory protectionism.  A two paragraph section of the 574-page “Consolidated and Further Continuing Appropriations Act of 2013,” signed into law last week, prohibits federal agency purchases of IT equipment “produced, manufactured or assembled” by entities “owned, directed, or subsidized by the People’s Republic of China” unless the head of the purchasing agency consults with the FBI and determines that the purchase is “in the national interest of the United States” and then conveys that determination in writing to the House and Senate Appropriations Committees.

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Topics: 
Regulatory Studies, Telecom, Internet & Information Policy, Trade and Immigration

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