Monday, June 13, 2011


The heart of the modern regulatory state is prior restraint. Prior restraint, not only of speech but of action, is the common means by which regulators appease large, well-established firms (those capable of hiring them and supporting them when they leave government). Lobbyists for industry spend much time encouraging the politically appointed heads of regulatory agencies to adopt prior restraints that will benefit their firms. They do so not for that overt reason but to “serve the public interest.” This public interest veneer masks their true intentions which are almost always anti-competitive.
Lawyers for large firms identify instances of alleged abuse in the market. Sometimes the abuses are imaginary. Most often they are real but occur only among a minority of firms. The lawyers then engage in a lobbying campaign orchestrated to make the abuse appear significant. They aim to induce the agency to adopt prophylactic regulations that forbid all in the industry from taking certain actions allegedly to reduce the occurrence of the abuse. That constriction of liberty will either block lucrative opportunities for competitive entry or increase the costs of competition, all to the benefit of large established firms and the detriment to small market entrants.
Prior restraints bar otherwise lawful activity and/or impose compliance requirements, usually recordkeeping or reporting obligations. The rules are costly and create traps for the unwary. They add to the expense of doing business in ways that reduce funding for competitive enterprise. As a young lawyer in Washington, D.C. I watched as attorneys creatively engineered rules or defended rules that violated rights to liberty and property on the predicate of ever more ingenious alleged ties between the rules and an ever elusive “public interest.” Justifications were either created out of whole cloth or drawn from individual instances in the market without any attempt to prove that the alleged abusive actions were commonplace or likely to recur. With a wink and a nod leading regulators would accept the justifications, embellish them, and cause anti-competitive rules to be adopted all for the sake of serving the “public interest.”
For example, two uncommonly principled Federal Communications Commission Chairmen Mark Fowler and Dennis Patrick struggled valiantly (and ultimately succeeded) in eliminating the so-called Fairness Doctrine, whereby government regulators would second-guess the editorial judgments broadcast journalists made in airing single views on controversial issues of public importance. Fowler and Patrick knew the rule to violate the First Amendment and had the ear of President Reagan who, like them, wanted the rule eliminated. As an attorney with only seven months of experience in administrative and constitutional law, I watched as certain major broadcast interests positioned themselves to oppose elimination of a rule that restrained the editorial discretion of their own broadcast journalists. At first perplexed by that move, I soon realized the reason for it. Certain large broadcast interests favored the rule because it created a reliable anti-competitive burden on small and independent broadcasters, the ones that could least afford the Washington communications counsel needed to defend against a Fairness Doctrine complaint. Moreover, once the Fairness Doctrine bit the dust on First Amendment grounds, other content (and even structural) prior restraints at the FCC were highly vulnerable to attack. The entire anti-competitive complex of content and structural rules would be fair game and their demise would increase competition in broadcasting, invite controversy in talk radio and television (thereby increasing competition) and diminish the need for reliance on costly Washington communications counsel.
Prior restraints are misleading on many levels. The restraints dissuade the law abiding from acting in certain ways but have little, if any, affect on arresting the actions of the minority of law violators that form the essential justification for the rules. Those already predisposed to violate the law continue with their illegal activity unconstrained by yet another rule declaring their presently unlawful activity unlawful. Only those who respect the law by using their freedom in lawful ways suffer the burden of the restraint, its constriction on their liberty.
Prior restraints are evil, not solely because they censor speech when that is their object or forbid even actions that cause no one to suffer tortious or criminal injury, but also because they reduce the freedom of all and restrict consumer choice. The restraints rest on the false premise that they reduce or eliminate an abuse. In reality, they do not arrest the abuses, they simply achieve the anti-competitive objective of constricting freedom, to the benefit of industry incumbents and the detriment of consumers.
Underlying almost every prior restraint is a presumption that limits on everyone’s freedom are justified to reduce abusive activity arising from a small group. To appreciate the construct, it would be as if we were all forbidden by law from driving on certain highways where accidents have been frequent because those causing the accidents have driven while intoxicated, while text messaging, or while otherwise distracted. Under a classic criminal law approach where each person is presumed innocent until proven guilty, the law would be applied only against the specific violators (the drunk driver, the text-messaging driver, or the otherwise distracted driver) and all others would remain free. Under a system of prior restraint, all are presumed guilty of the harms identified to justify the rule if they transgress the restraint (even when on the facts of an individual case there is no proof of those harms). The presumption of innocence and the right to be left unmolested by government if not proven to have engaged in conduct harmful to others are eliminated by the prior restraint. The necessity of proving actual harm no longer exists for the state. Proof need only consist of the presence of the restraint and proof that the restraint was violated.
The downsizing of the federal government should proceed on sound philosophical principles. Because prior restraint is an evil antithetical to a rights based republic in which defense of individual liberty is supposed to be (and should be) the paramount objective, Congress should pass legislation forbidding the regulatory agencies from promulgating or enforcing prior restraints.
Instead of this evil form of regulation, the agencies should be required to rely on a case by case approach, where the party accused is presumed innocent until proven not only to have engaged in unlawful acts but also to have done so in ways that have caused others to suffer tortious or criminal injury. When an alleged unlawful act produces no victims, the agency’s prosecution should fail for want of essential proof.
Elimination of the federal regulatory agency’s reliance on prior restraint would do much to reduce regulatory costs, diminish the unseemly rent seeking by industry with the happy cooperation of the political appointees mindful of their future private sector employment prospects who run the agencies, and restore protection for the exercise of freedom limited only by the equal rights to life, liberty, and property of others.

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