Concepts, Categories, and Compliance in the Regulatory State
Minnesota Law Review, Vol. 94, p. 1151, 2010
51 Pages Posted: 2 Apr 2010 Last revised: 24 May 2010
Date Written: March 31, 2010
Law is, of course, always a product of its history. But for some regimes, history matters both more and differently than for others. In some instances, the requirements and scope of a regulatory regime’s coverage are sufficiently attenuated from statutory text and purpose that they can only be explained or understood by reference to history. At its (perhaps caricatured) extreme, such a regime is one in which regulated parties expend significant efforts attempting to comply with the law and often succeed in complying at the most minimal level possible, to the point that compliance is perceived as optional and, to some non-trivial extent, is indeed so. Some set of activities the regime manages to sanction or constrain is perceived as, and to some non-trivial extent is, unanchored to any reasonable conception of the regime’s purpose. Indeed, under such a regime, activities that might seem to warrant the same treatment are sometimes treated differently, and activities that might seem to warrant different treatment are treated the same. This happens frequently enough that the regime’s coverage is difficult to justify in any principled manner, compromising its efficacy and legitimacy.
What does a regime that is so importantly shaped by its trajectory look like, and how does a regime get to that state? In articulating its requirements and prohibitions, law often starts with a prototype, a paradigmatic case of what it wants to regulate. Ideally, where it is unclear whether particular actions resemble the prototype sufficiently to warrant sanction, the interactions between regulated parties, regulators, and other interested parties would not only resolve those cases but also refine and elaborate the regime’s goals and means for achieving them. Sometimes, however, the trajectory goes awry, and the similarity assessment yields results that depart appreciably from any reasonable conception of the regime’s text or purpose. Compounding the difficulty further, law often emphasizes certainty and encourages planning by providing detailed roadmaps of necessary and sufficient conditions for achieving particular legal consequences. Such rules are susceptible to formalistic interpretation. Law typically seeks to avoid the potentially absurd extremes of rules or formalistic interpretations of statutory text through the use of ex post standards, which often take the form of what we call goal-derived categories. Yet, given the role of precedent and predictability, at a certain point, we may just be stuck with unintended, spirit-violative results. In a regime that relies strongly on its trajectory in articulating its requirements, many rules will permit considerable spirit-violative behavior, the standards ostensibly available to address such behavior will find themselves foreclosed, and the overall coverage of the regime will reflect its history far better than its substance and purpose.
In our Article, we describe a basic theory by which minimalist compliance and regulator reactions thereto may lead to a regime that is far better explained by its trajectory than by statutory or regulatory text or purpose, establishing a foundation for future work in which we will elaborate the theory in more detail and apply it comparatively across a broad range of regulatory regimes such as tax, campaign finance, antitrust, environmental law, and securities law.
Keywords: compliance, categories, statutory interpretation, regulation, tax shelters
JEL Classification: K2, K20, K21, K22, K23, K29, K39, K42, H11, H26
Suggested Citation: Suggested Citation