Moving Public Law Out of the Deference Trap in Regulated Industries

Abstract:     
This Article argues that public law has fallen into what I call a deference trap in addressing conflicts in deregulated industries, such as telecommunications and electric power. The deference trap describes a judicial reluctance to intervene in disputes involving political institutions, such as regulatory agencies and states. By reassessing the deference trap across the legal doctrines that are effecting emerging telecommunications and electric power markets, public law can deliver much more for deregulated markets. The deference trap poses a particular cost as markets are deregulated, one that may not have been present during previous regulatory eras in which public and private interests in regulatory bargaining were more likely to converge. In expanding the range and degree of potential divergence between public and private interests, deregulation challenges policy makers and courts to reevaluate many of the traditional public law doctrines that frame the process for defining and implementing the rules in competitive markets. This Article sets out to advance this project in the context of three vignettes. In doing so, I draw on a bargaining account of regulation, supplemented with a comparative institutional analysis. The approach evaluates the institutional setting for governance of deregulated markets; it does not limit its analysis to the decisions of a single regulator but pays attention to alternative (and often competing) institutions, including courts, Congress and state legislatures, and state versus federal regulation.

Part I illustrates that public law has fallen into a deference trap in the context of the filed tariff doctrine and suggests that, by focusing on bargaining conditions in tariffing, courts could minimize strategic forum shopping in regulatory enforcement. Part II warns against public law falling into a deference trap in the context of judicial review of state regulation under the dormant commerce clause and state action immunity to antitrust enforcement, suggesting that courts correct for this by taking into account private firm incentives in the state lawmaking process. Part III suggests that federal preemption, as currently construed, also invites a deference trap which can create regulatory commons problems and recommends that courts reformulate preemption principles to realign incentive to facilitate regulatory coordination between the federal government and states. By isolating ex ante and ex post incentives and stressing the institutional context for institutional bargaining in the regulatory process, together these examples reveal weaknesses in traditional doctrines of regulatory law in deregulated markets and suggest ways courts might correct for them.

Keywords: Deregulation, judicial review, antitrust law, federalism, dormant commerce clause

Accepted Paper Series