Regulatory Policy

Biden’s Executive Order Moves the U.S. One Step Closer to Rule by Decree

President Joe Biden hands a pen to FTC chair Lina Khan as he signs an executive order on “promoting competition in the American economy” in the State Dining Room at the White House, July 9, 2021. (Evelyn Hockstein/Reuters)
This executive order appears to have been drafted in a way that treats the independence of these agencies as something that is purely nominal.

President Biden’s sweeping executive order on competition is a strange beast. It lurches from lofty claims about encouraging competition to niggling complaints about undisclosed airline checked-bag fees. The order has the force of law but also tries to direct agencies that are supposedly independent of presidential control. Most important, it’s a further step toward presidential usurpation of legislative and judicial power.

Yes, technically everything in the order is already authorized in one way or another by current law. However, the president is also constrained on how he directs officials by “rules about rules” such as the Administrative Procedure Act (APA.) The Trump administration, to its credit, tried to strengthen rules about rules by issuing what my colleague Wayne Crews calls “final rules on guidance,” or FROGs, that restricted the use of guidance documents to get around the APA. One of Biden’s early executive orders stomped on these FROGs to make it easier for his officials to issue de facto rules without notice and comment, as required by the APA. The president is prejudging the results of the rulemaking process. That may be the least of the problems with this order.

Indeed, in the case of many actions demanded by President Biden in this order, the rules proposed have already been through a process of notice and comment in either or both the Obama and Trump administrations but were not finalized because objections raised by affected parties were recognized as substantive enough to stop the rule from being issued. The president’s rule on airline-fee disclosures is a case in point. The Obama Department of Transportation admitted that the rule failed the all-important cost-benefit test, with costs outweighing benefits, but tried to claim that unquantifiable benefits such as “goodwill to ticket counter clerks” were enough to tip the balance. Good sense prevailed, however.

Yet those attempts at rulemaking did not have the force of a presidential executive order behind them. In some cases, the president is pushing officials essentially to rewrite the law. A good example is the requirement to write rules that will force railroad companies to offer below-market rates to shippers. Known as “reciprocal switching,” the president’s proposal will empower the Surface Transportation Board to compel railroads to hand over traffic to competitors, driving rates for shippers down at the cost of the railroads. This completely upends the purpose of 1980’s Staggers Act, a deregulatory measure passed under Jimmy Carter thanks in no small part to the efforts of Senator Ted Kennedy, who realized that the similar micromanagement of shipping rates by bureaucrats in place then was killing America’s freight railroads. Reimposing those rules will reduce investment in freight rail infrastructure and in the end increase delivery times and costs for end consumers. This is why successive administrations have refrained from making this mistake. Yet the president is asking officials to do it.

The president also “urges” officials nominally not under his control to take certain actions. The Federal Trade Commission, Federal Communications Commission, Surface Transportation Board, and others are supposedly independent agencies, which exercise the functions delegated to them by Congress independent of presidential control. Indeed, the case that validated the existence of these agencies, Humphreys’ Executor (1935), did so on the basis that the commissions exercised quasi-judicial and quasi-legislative functions. Yet here we have the president treating them as if they were arms of the White House, acting under his authority.

The heads of the various independent agencies would be at liberty to refuse to act as the president wishes, which is why the order carefully “urges” them rather than directs them. Yet the chairs of the agencies have been appointed by this president and have so far shown no signs of breaking from his administration’s policy. Indeed, the chairman of the FTC was appointed to the post after being approved by the Senate as a simple commissioner, in breach of long-standing protocol. The acting chairwoman of the FCC has already welcomed the president’s order.

Moreover, as Dan Bosch of the American Action Forum points out, while previous presidents urged independent agencies to take a look at particular topics, this executive order demands specific policy outcomes. The FCC, for instance, is asked not examine net-neutrality issues but specifically to restore the Obama-era rules on the issue, regardless of what experience has shown (that none of the threats foreseen by the Obama-era rules manifested once they were rescinded). This may well call into question the legality of any decisions to go along with the president’s wishes.

This executive order appears to have been drafted in a way that treats the independence of these agencies as something that is purely nominal. It therefore brings quasi-judicial and quasi-legislative powers under the de facto if not de jure oversight of the president. This cannot be what either the Congress or the Supreme Court intended.

America has separation of powers for a very good reason, and part of that is to avoid monarchical-style rule by decree. With this overreaching executive order, America has moved one step closer to that unfortunate state.

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