Empowering stakeholders; limits on collaboration as the basis for flexible regulation.

• Author: Seidenfeld, Mark

INTRODUCTION

By many accounts, the United States regulatory system is at a crossroads. Federal regulation is lambasted as pervasive, unduly burdensome, and inefficient, even as the American public clamors for increased protection against threats from sources such as toxic substances, bacterially tainted meat, and airplane crashes. Politicians,(1) academics,(2) and popularizers of criticism of the regulatory states(3) tell us that if the federal administrative government is to serve the interests of the public effectively, we must reinvent that government.

According to proponents of "reinvention," the key to effective reform is empowering all stakeholders--regulated entities, administrators, and intended beneficiaries alike--in a collaborative regulatory endeavor.(4) As part of that tripartite endeavor, the very entities subject to regulatory compulsion should engage in the design of rules that will dictate their conduct, self-monitoring for compliance with those rules, and self-enforcement when the entity discovers a violation of those rules. In addition, groups of individuals who share more diffuse interests in the regulatory endeavor than do regulated entities--public interest groups representing purported beneficiaries of the statutes authorizing regulation--must be given equal power in the regulatory mechanism. Allowing public interest groups to assert appropriate institutional checks can reinforce cooperative interaction, rather than adversarial behavior, between such groups, regulated entities, and the agency charged with implementing the regulatory statute.(5)

In essence, those calling for collaborative regulation see a need to restructure the fundamental regulatory institutions of the United States. Since the New Deal, government's role in regulation has been to exercise informed discretion in setting and applying standards in order to achieve some conception of the public interest.(6) Reinventors would alter the role of government from dictator of rules to facilitator of accords by stakeholders in particular regulatory matters. Government would be one of many interested groups, and would be discouraged from exercising independent judgment about what the public interest entails and how best to achieve it. Thus, reinventors of government seek a fundamental change in the very nature of the regulatory state.

I have always been skeptical, however, of claims that collaboration can provide a workable structure for the regulatory state outside of particular regulatory contexts that may be conducive to such collaboration. This Article evaluates the potential for reinvention to empower stakeholders to cure the regulatory ills of the country by borrowing institutional sociological understandings of interest group structures and dynamics. It concludes that the proponents of regulatory reinvention have overstated that potential. This Article does not advocate the elimination of efforts to experiment with collaborative approaches, but rather suggests that such experimentation should occur on a facility-by-facility basis, in situations characterized by participants who form a community of individuals with some common interests, and in which those participants who represent the interests of stakeholders in the regulatory process are accountable to those stakeholders.

The Article begins by reviewing the impetus for the stakeholder empowerment movement, noting along the way some weaknesses in the mechanisms reformers propose to encourage collaborative decision making. Next, it describes the structure and dynamics of various interest group typologies and proceeds to discuss pathologies of those internal dynamics that threaten to disable collaborative regulatory processes. The Article next evaluates the extent to which three collaborative mechanisms that the federal government recently created--negotiated regulation, citizen suits for penalties for rule violations, and the Environmental Protection Agency's Project XL--have successfully overcome the disabilities threatened by interest group dynamics. Despite finding overwhelming praise for each of these empowering mechanisms, my analysis indicates that none of them implement what I term a "truly collaborative regulatory process"--one in which (1) the participants seek true consensus as a means of resolving issues, rather than using the process to create strategic advantages vis-a-vis other stakeholders in a larger or longer-lasting interactive process; and (2) representatives of every interest shared by a significantly affected group of similarly situated stakeholders are included. Moreover, I conclude that these programs are unlikely to be panaceas for the problems that plague the current administrative state because they can succeed in overcoming the adversarial propensities of at least some stakeholders only within narrow regulatory environments. Finally, the Article relies on its abstract description of interest group dynamics, and the lessons from those collaborative mechanisms that have been tried, to identify the particular conditions under which stakeholder empowerment is likely to result in stable and constructive regulatory collaboration. At a minimum, these conditions require that the collaborative regulatory endeavor involve issues of a local nature, and that it occur within a community of interest groups willing to cooperate. In addition, the process must allow the mainstream of regulatory beneficiaries to exclude participation by fringe groups who may have an ideological as well as organizational interest in subverting the process. These conditions for success impose significant barriers to the use of collaborative regulation, and hence reinforce my conclusion that, although collaborative regulation is a useful arrow in the quiver of regulatory reform, its potential to cure current regulatory ills is more confined than proponents suggest.

1. THE ROOTS OF THE EMPOWERMENT MOVEMENT

   With the collapse of belief in the disinterested expertise of administrative agencies,(7) administrative law recognized a need to allow putative beneficiaries of regulation access to administrative proceedings to protect their interests.(8) The administrative state became an arena within which representatives of various interests battle for regulation that serves individuals sharing those interests.(9) The purpose of the regulatory process is not to implement a government-defined conception of the public good, but rather to supply benefits demanded by groups on behalf of their members' private interests.(10) One weapon in this battle entails, at the day-to-day level, the ability to tie-up agency resources needed to respond to comments and petitions, which demand such response because they are backed up by threats of judicial review.(11) When necessary, interest groups can threaten use of the ultimate weapon--their ability to mobilize political support in Congress for the group's position. The theory of interest group representation asserts that if the battlefield is level, the pressures each interest group bring to bear on a regulatory issue, and hence the ultimate outcome, will be proportional to the collective importance various stakeholders in the debate placed on the particular issue before the implementing agency.(12)

   Traditionally, regulated entities, whose property or contract rights were affected directly by regulatory actions, had access to agency proceedings and the right to seek judicial review of agency decisions.(13) In order to level the field of administrative confrontation, representatives of so-called public interest groups, acting on behalf of individuals for whom Congress purported to have enacted regulatory statutes, had to be given a similar ability to provide input to agencies in a manner that the agency was not free to ignore.(14) During the development of the interest group understanding of the regulatory state,(15) courts relaxed access requirements to agency proceedings and to judicial review of agency decisions.(16) At the same time, Congress authorized members of the public to obtain almost any information in agency files and opened agency meetings to public scrutiny.(17)

   Satisfaction with the interest group model of the administrative state has never been universal. Public choice economists accept the model's descriptive accuracy but note that government regulators essentially control a monopoly on regulation, which they can use to generate and distribute rents to those who continue to support them.(18) Many public choice theorists conclude therefore that the inevitability of self-interested political behavior counsels severely constraining state regulatory authority.(19) Other scholars have questioned the normative theory of democracy from which the model derived--pluralistic democracy--because an uneven distribution of resources in society would bias the outcome in the political arena toward those who already have wealth and power regardless of the rules governing access to proceedings and information.(20) Scholars in diverse fields are also skeptical of the model's assumptions that interest groups pursue members' private interests narrow-mindedly and exclusively.(21) They cite examples of political behavior that cannot be explained if one assumes that individuals acting in their political capacity rationally maximize their utility.(22) Finally, communitarian critics assail pluralism because of its assumption that political conduct should be self-interested.(23) These critics fear that the interest group model legitimates conduct aimed at securing private benefits and dismisses concerns about conceptions of the public good and the moral fabric of the political community.(24) For these critics, the interest group model encourages adversarial proceedings, and thereby forfeits the opportunity for more cooperative and consensus based regulation.

   One can view many of the recent proposals for altering the empowerment of regulatory...