Rulemaking without rules: an empirical study of direct final rulemaking.

• Author: Kolber, Michael

ABSTRACT

In an effort to improve efficiency, several administrative agencies have adopted a procedure known as "direct final rulemaking" (DFR). Some academics have debated whether DFR violates the Administrative Procedure Act (APA), but none have studied how DFR has functioned in practice. This paper, which examines the first decade of DFR at the Food and Drug Administration (FDA), is the first of this kind. The results are surprising, and suggest DFR deserves more attention than it has received. Intended for noncontroversial rules that are expected to receive no significant comments in a notice-and-comment rulemaking, the FDA has often used direct final rulemaking for the opposite: regulations that may be expected to be controversial. Far from generating few comments, forty percent of DFRs have had to be withdrawn due to significant opposition. These findings suggest greater limits should be placed on the use of direct final rulemaking and that its legality be reevaluated in light of how the procedure is actually used. As it is presently practiced, direct final rulemaking could increase cynicism about government.

INTRODUCTION

Frustrated with the pace of even the most minor rulemaking, federal agencies have experimented with streamlined regulatory practices over the past several decades. (1) One such innovation, "direct final rulemaking," allows an agency to dispense with some amount of procedure for rules that it expects to be uncontroversial. (2) This paper is the first case study to evaluate the implications of direct final rulemaking in practice--an evaluation of direct final rulemaking by the FDA over the past decade. The FDA example raises real concerns about the value and wisdom of the innovation. The FDA has a remarkably poor record at predicting which of its regulations will truly be noncontroversial, and this study suggests that it has been classifying certain proposed regulations as "noncontroversial" in hopes, most frequently misplaced, that they will go unnoticed. Proponents of DFR argue that even if DFR is producing few efficiency gains, the possibility of such gains make DFR worthwhile because it is, at worst, harmless. (3) The experience of DFR at the FDA belies this view. Failed direct final rulemaking, as the practice at the FDA must be called, may reduce the efficiency of agency rulemaking, can cause confusion about the state of the currently effective law, and erodes public confidence in the rulemaking process.

Under the model of American administrative rulemaking predominant since the late twentieth century, (4) the FDA--or any other agency--has a straightforward path for enacting a regulation: it publishes a notice of proposed rulemaking in the Federal Register, solicits comments on the rule for a fixed period of time, and then publishes a final rule in the Federal Register, incorporating responses to all significant comments. (5) Nowhere in notice-and-comment informal rulemaking does the agency make a determination about whether a rule will be controversial or not. Whether or not an agency receives adverse comments in the rulemaking, it may still proceed to publish a final rule, as long as the final rule adequately responds to the comments. (6)

However, since 1997 the FDA has conducted abbreviated informal rulemaking, called "direct final rulemaking," which requires the agency to determine at the outset whether a rule is expected to be "noncontroversial" and thus unlikely to generate significant adverse comments. (7) If a rulemaking is expected to be noncontroversial, the FDA issues a proposed rule and a direct final rule on the same day. Both solicit comments, typically for a seventy-five-day comment period. If the FDA receives no significant adverse comments, as would be expected for a truly noncontroversial rule, then the direct final rule becomes effective, typically sixty days after the close of the comment period. If the agency receives even a single significant adverse comment, it withdraws the direct final rule, and--assuming it still wishes to promulgate the rule--issues a new final rule, on the basis of the comments and the proposed rule that was published the same day as the now-withdrawn direct final rule. (8)

DFR has received scant academic attention. The limited discussion has understandably focused on whether DFR amounts to a violation of the Administrative Procedure Act, or if it would prevent judicial review of agency action. (9) At the outset of DFR, academic inattention was anticipated. Professor Ronald Levin, who has written two of the three extant articles, (10) wrote in 1999: "frankly, I doubted that anyone would ever write another article about the subject." (11) Since he wrote those words, no one has. Professor Levin's vision of direct final rulemaking--relevant because he was a key player in its promotion--was that minor, ministerial changes could be made with less procedure than informal rulemaking requires. (12) Virtually all of these would sail through with no comments and those that received some would undergo a rulemaking process substantially identical to the one required by the APA. At the outset some expressed concern that substantial compliance with the APA was not good enough. (13) Perhaps assuaged by the belief that direct final rulemaking only affects noncontroversial rules, no court has considered the legality of direct final rulemaking. (14) Had direct final rulemaking played out as Professor Levin expected it to, there would be little reason to revisit the issue now.

But, it has not--at least not at the FDA. Since 1997, the FDA has proposed direct final rulemaking for thirty-eight rules. (15) Fifteen of these--or forty percent--received significant adverse comments that resulted in withdrawal of the direct final rule in part or in whole. In the abstract, this is a high number. Forty percent is not a rare outcome. But what limited reference points we have make the number startling. The EPA has used direct final rulemaking to approve state implementation plans since 1981. (16) In a trial period, the EPA needed to withdraw fewer than five percent of the ninety direct final rules it issued. (17) Other experiences with direct final rulemaking at the EPA, the Federal Aviation Administration and elsewhere have produced withdrawal rates of less than ten or twenty percent. (18) A withdrawal rate of forty percent is shocking. It suggests either the FDA is dramatically off when predicting which of its rules are likely to be controversial or the FDA is using direct final rulemaking for purposes it was not intended. An examination of the direct final rules that are being withdrawn suggests both factors are at play.

At the dawn of the administrative age, then-professor Felix Frankfurter warned against theorizing administrative law without reference to its practice: "[h]ere we must be especially wary against the danger of premature synthesis, of sterile generalization unnourished by the realities of 'law in action.'" (19) A similar wariness is appropriate about this new chapter in administrative law, direct final rulemaking, now no longer in its infancy but still quite unnoticed.

Part I briefly sketches the development of notice-and-comment rulemaking as the dominant mode of American regulation, laying the groundwork for why some believe direct final rulemaking is a useful innovation. Part II describes the development of direct final rulemaking in the United States and the particular characteristics of the procedure as it was implemented at the FDA. Part III describes the methodology of this study and its findings, including a categorization of the rules promulgated via direct final rulemaking and those withdrawn. Part IV discusses the implications of these findings and, given the experience at the FDA, challenges the wisdom of this procedural innovation.

1. THE SUCCESSES AND FAILURES OF NOTICE-AND-COMMENT RULEMAKING

   Though regulatory activity was present in the "earliest days of the Republic," (20) modern regulatory agencies typically trace their history to the late nineteenth century. (21) The period saw the rise of modern national corporations, and the spirit of the Progressive Era demanded that government, too, should grow to police the excesses of unchecked capitalism. (22) The Interstate Commerce Commission was the most visible regulatory agency of the era. The first half of the twentieth century, including the New Deal, saw a dramatic expansion of regulatory agencies and their involvement in nearly every aspect of American commerce. (23) The nation was unsatisfied with the laissez faire approach to regulating commerce that had preceded the New Deal. (24) Transportation, consumer products, communications, and other industries had become too complex and large for Congress to be able to address through specific legislation. (25) Instead, Congress created regulatory agencies and delegated to them broad legislative authority to regulate in the public interest. The delegations were so broad and so vague that America soon feared not the corporations, but the regulators who had been created to check those corporations. (26) After years of debate, Congress enacted the Administrative Procedure Act of 1946, the constitution of the administrative state. (27) The U.S. Constitution provides few real limits on administrative discretion. (28) Instead, the APA provides the most significant safeguard against an authoritarian bureaucracy. (29)

   The APA divides all agency action into two categories, adjudication and rulemaking, and establishes particular procedures to govern each sort of action. (30) In the early years of the APA, adjudication and formal rulemaking--so formal that it shared many of the features of adjudication--were the predominant modes of regulatory action. (31) "The New Deal agencies viewed themselves as akin to special purpose courts." (32) But trial-like adjudication and formal rulemaking were slow and, in the case of adjudication...