June 24, 2013

Advisory group recommends cost/benefit analysis for CPSC regulations

Editor’s Note:  The ACUS project page for Benefit-Cost Analysis at Independent Regulatory Agencies is available here.

By: Sean Wajert/Shook Hardy & Bacon LLP

We have posted before about the impact of regulations on clients and indirectly on product litigation. Earlier this month the Administrative Conference of the United States, a federal advisory council, gave its approval to a policy recommendation encouraging independent regulatory agencies to apply formal cost-benefit analysis to their rule-making efforts. One affected agency would be the Consumer Product Safety Commission.

Readers may know that the ACUS is an independent federal agency dedicated to improving the administrative process through consensus-driven applied research, providing nonpartisan expert advice and recommendations for improvement of federal agency procedures. Its membership is composed of federal officials and experts with diverse views and backgrounds from both the private sector and academia.

Several independent regulatory agencies are not subject to the benefit-cost analysis requirements of various Executive Orders or legislation.  The ACUS undertook a project to examine the possible use of benefit-cost analysis at independent regulatory agencies and to highlight any innovative practices those agencies could use. The group adopted a recommendation encouraging agencies to voluntarily adopt certain practices that other agencies have developed when conducting regulatory analyses for major rules. The recommendation, first, identifies various policies and practices used in several regulatory agencies and offers a series of proposals to encourage their use in other agencies. For example, it recommends that each independent regulatory agency develop written guidance on the preparation of benefit-cost and other types of regulatory analyses.

Second, the recommendation highlights a series of analytical practices that OMB has promulgated in the past. For example, it recommends that agencies’ analyses be as transparent and reproducible as practicable, subject to the limitations of law and applicable policies (including preventing the disclosure of proprietary information or trade secrets, or other confidential information). The recommendation does not seek to establish a one-size-fits-all approach to regulatory analysis, and recognizes that each agency must tailor the analyses it conducts to accord with relevant statutory requirements, its own regulatory priorities, and the potential impact of the analysis on regulatory decision-making to ensure proper use of limited agency resources.

Note that during the debate on the measure, at least one CPSC commissioner argued against requiring a cost-benefit analysis.

Following the report, Senate Bill 1173 was introduced to require independent agencies to analyze the costs and benefits of new regulations and to tailor new rules to minimize unnecessary burdens on the economy. “The Independent Agency Regulatory Analysis Act of 2013” would apply to any proposed new rule with an economic impact of $100 million or more annually. Sponsors argue there is no good reason the independent agencies should not conduct the same important review other executive agencies must.

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