Should Conscription of State Attorneys General Be a Recognized Fourth Form of Federal Agency Action? How Federal Agencies Are Using the States to Expand Their Regulatory Reach and Advance Their Missions

• Jurisdiction: United States,Federal
• Citation: Vol. 1 No. 1
• Publication year: 2023

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Ryan J. Strasser, Timothy L. McHugh, Abigail D. Hylton, and William H. Smith III ^*

In this article, the authors discuss whether federal agencies' considerable reliance on state attorneys general to execute and operationalize federal initiatives constitutes a fourth type of federal agency action.

It is axiomatic that there are three recognized forms of federal agency action:

1. Notice-and-comment rulemaking,
2. Administrative adjudications, and
3. Investigations.

But should a fourth type now be recognized?

In recent years, federal agencies have sought to expand their reach and broaden their capabilities by utilizing state attorneys' general ("state AGs") enforcement powers to accomplish federal regulatory goals. For example, commentators note that federal agencies "have enjoyed a synergistic relationship . . . working on privacy and data security issues" in recent years. ¹ For their part, state AGs have recognized that there is a particularly "critical role State Attorneys General play" in the federal regulatory context and argued "for increased partnerships between federal enforcers and the states." ² And while federal agency reliance on state AGs is not entirely new, its recent growth in the face of real and perceived limitations of federal law presents evolving opportunities

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and challenges. How regulators resolve these issues will affect the regulatory landscape for countless industries, in innumerable ways, and shift the balance of power between federal and state governments for years to come.

This article examines whether federal agencies' considerable reliance on state AGs to execute and operationalize federal initiatives constitutes a fourth type of federal agency action—different and distinct from the three forms traditionally recited. To that end, the next section of this article discusses many of the ways—new and old—that federal agencies deputize state AGs and the reasons why they choose to do so. This article then identifies some of the significant challenges federal agencies face because of their reliance on state AGs. Finally, it concludes with a series of predictions about where the trend of federal agency reliance on state AGs is likely to head in the coming years.

Methods and Benefits of Conscripting State AGs

Federal agencies use numerous methods to deputize state AGs, depending on competing regulatory goals. Some of these methods are tried and true; others are recent innovations that permit federal agencies to conscript state AGs in furtherance of federal objectives.

First, federal agencies provide earmarked funding to state AGs for key enforcement initiatives. Federal agencies utilize this tool when states approach regulation differently, and the agency wants to promote uniformity between state and federal law.

Second, federal agencies utilize documents known as "information-sharing agreements" when federal and state regulators have a shared regulatory goal that is so pervasive and widespread it requires rapid dissemination of information.

Third, federal agencies and state AGs may share enforcement authority. This approach allows federal agencies to regulate indirectly through the states, leveraging local expertise while also avoiding a federal investigation.

As discussed further below, each of these tools provides unique opportunities for federal agencies hoping to harness the power and resources of state AGs, a practice that is becoming more prevalent as federal agencies recognize the related benefits and influence of state AG enforcement efforts.

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Conscription Through Funding

One action that federal agencies take to coax state AGs into carrying out federal regulatory objectives is to provide state AGs with conditional federal funding. Typically, federal agencies require state AGs to spend these funds enforcing laws and regulations that align with the federal government's policy goals.

This arrangement provides many benefits. For instance, from a federal agency's perspective, providing federal funding has the practical effect of enlisting state AG support in federal enforcement priorities that, whether because of politics, lack of funding, or other reasons, may not otherwise be forthcoming on their own. Consequently, federal agencies and state AGs will often "speak with one voice," thereby ensuring federal priorities are addressed consistently.

An additional benefit to federal agencies is that state AGs can leverage their unique experience and local expertise when operationalizing regulation. Such provincial knowledge allows state AGs to implement federal goals more efficiently than federal agencies could otherwise accomplish on their own. For example, in the antitrust context, state AGs can use federal funds to pursue investigations and enforcement of state competition laws against those industries disfavored by a state for whatever reason, thus optimizing the beneficial impact of such enforcement efforts.

State AGs also benefit from collaboration with federal agencies through funding. With additional financial resources, state AGs are empowered to enforce state regulations without fear of depleting their office's enforcement resources, which may be needed for other competing or preferred priorities. This action, in turn, enables state AGs to pass enforcement benefits along to their constituents, such as through lowered costs, stronger protections, and fewer societal harms.

A recent example is illustrative. In September 2022, the U.S. Department of Agriculture ("USDA") announced a new partnership with state AGs to "ramp up enforcement on the competition laws," using up to $15 million from the Consolidated Appropriations Act to "tackle anticompetitive practices in the agricultural sector and related industries." ³ Industry watchdogs, federal agencies, and the White House have argued that the meat and poultry industries have consolidated too rapidly, harming small farmers and employees alike. ⁴ For example, the White House claims that large meat and

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poultry companies produce the inputs upon which farmers rely to bring livestock to market, such as certain grains, and a lack of competition in the industry allows these corporations to raise prices on the inputs, squeezing profits from smaller farmers. ⁵ But, until the recent announcement, the USDA has not effectively coordinated with state authorities to create "more rigorous enforcement of the competition laws."

Accordingly, the USDA initiative will bring significant benefits to the federal government. Through provision of federal funding to the state AGs, the USDA has effectively goaded states into enforcing a high-priority item on the Biden administration's agenda. What is more is that state AGs will be able to employ their local expertise to regulate the industries more efficiently, while still fully in accordance with federal objectives.

Conscription Through Information-Sharing Agreements

While funding may incentivize state AGs to enforce state law in accordance with federal priorities, information sharing between the federal government and state AGs seeks to address problems so widespread that the only effective response is for regulators to amalgamate and distribute their information with each other. ⁶ Particularly, the federal government benefits by taking advantage of information gathered from the individual states. When the federal government uses intelligence it receives from the states, it is better able to implement policies and regulations that effectively address the problem. State AGs also benefit by sharing investigatory findings and preventing redundancies in enforcement. ⁷

An example of a current federal enforcement priority addressed through information-sharing agreements with state AGs is robocalling. Robocalls are automated calls, many of which originate from outside the United States, typically via international gateways to the American telephone network. ⁸ To make the calls appear legitimate, foreign robocallers allegedly spoof caller IDs with legitimate American phone numbers, making the call appear as if it originated within the United States. Robocalls can negatively impact consumers, telecommunications providers, and law enforcement efforts alike. Between enforcement costs, costs to telecommunications providers, and financial losses incurred by victims of

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fraud, estimates place the societal cost of robocalls at $13.5 billion annually. ⁹

More than 40 states have agreed to provide information to the Federal Communications Commission ("FCC") in an effort to prevent foreign robocallers from contacting Americans. ¹⁰ These agreements, many of which have been formalized in memoranda of understanding, have helped federal regulators take critical steps toward building a record against alleged bad actors without exclusive reliance on their own investigatory resources. ¹¹

Moreover, information-sharing agreements have allowed both the "FCC's Enforcement Bureau and state investigators [to] seek records, talk to witnesses, interview targets, examine consumer complaints, and take other critical steps to build a record against possible bad actors." ¹² Faster distribution of information between the states and the federal agencies thus creates a network effect in regulatory actions, resulting in increased efficiency and decreased duplication of resources.

Conscription Through Shared Enforcement Authority

Federal agencies often share enforcement authority with states to extend their regulatory capacity and ensure enforcers at both levels of government obtain a favorable outcome. This shared authority stems primarily from two sources.

First, certain federal-enabling statutes grant enforcement authority not only to a federal agency but also to the states.

Second, state and federal agencies often regulate the same industries and practices under separate state and federal regulatory schemes.

Both necessitate significant buy-in from federal and state actors. In recent years, some...