Market Corrective Rulemaking: Drawing on EU Insights to Rationalize U.S. Regulation

Abstract

This article offers a new approach to regulation designed to correct market failures. It proposes a new, optional track for rulemakings aimed at remedying perceived market flaws, dubbed “market corrective rulemaking.” In developing the proposal, the article calls upon several innovations adopted by the European Union. Given the significant differences between the U.S. and EU regulatory regimes, the article adapts these procedures for a U.S. context, drawing from the comparative strengths of both systems. Under market corrective rulemaking procedures, Congress would delegate sweeping powers to agencies to correct certain market flaws, but it would impose certain procedural requirements, including pre-NPRM outreach to relevant stakeholders and comprehensive retrospective review, and would require the rulemaking agencies to assess both economic costs and benefits and disruption to existing market forces. Though Congress would possess complete discretion in determining whether to direct agencies to undertake market corrective rulemaking or instead to rely on the informal rulemaking default, the existence of such an alternative could help resolve much of the prevailing gridlock, offering an opportunity for narrowly tailored market interventions that can be readjusted over time.

Keywords: rulemaking, european union law, retrospective review, proportionality, cost-benefit analysis, market failure