The Sovereign in Commerce

Abstract

The federal government is increasingly a commercial actor, providing
retail services directly through its own agencies and indirectly through private sector
contractors. Government involvement with and in the private sector is
intended to capitalize on the expertise and efficiency of businesses, benefit taxpayers,
and promote public ends. Yet this involvement also confers advantages that benefit
the executive branch and its contractor allies at the expense of consumers and states.
Our prior work in these pages examined how a muddle of doctrines that form a
sovereign shield can be exploited by contractors and the executive branch to evade
civil liability and regulatory oversight. It tied the expansion of this sovereign shield
to the relative empowerment of the federal government at the expense of the states,
the executive branch at the expense of the legislative branch, and the private sector
at the expense of consumers. In developing a doctrinal response to the risks
identified, this Article draws on the insights of scholars who have studied federal–
state relations, contractor–agency relations, and business–consumer relations, and it
bridges the gaps between these literatures into which the sovereign-shield
phenomenon falls.

This Article argues that the solution to the sovereign-shield problem lies in
redefining the question. In determining whether an actor enjoys the sovereign
shield’s protection from liability and regulation, this Article proposes that the
analysis should turn on the nature of the activity performed, not the identity of the
actor performing it. If the activity is fundamentally commercial, the actor—whether
a government agency acting on its own or through its contractor—should not be
protected. This Article outlines a protocol for courts to implement such a proposal, drawing on well-established doctrines dating back to Supreme Court decisions from
the early nineteenth century. Shifting to this activity-based approach would help
preserve balances of power between states and the federal government, between the
executive and legislative branches, and between businesses and consumers.