Regulating by Reference

Most people think that regulation comes from government:  Congress makes law and the President and executive branch implement it.   Of course, when authorized by Congress, federal regulatory agencies also make binding rules.  Many of these regulatory agencies have familiar names: the Department of Commerce, Food and Drug Administration, Occupational Safety and Health Administration, and so forth.

It may be surprising to learn that some legally binding rules also originate within private organizations – not the government.  Although the impact of some of these privately created rules can be profound, the names of the private standard-setting bodies that create them are probably less familiar: the American Society for Testing and Materials (ASTM), American National Standards Institute (ANSI), American Society of Mechanical Engineers (ASME), and Society of Automotive Engineers (SAE).

But by what legal authority are private organizations like ASTM, ANSI, ASME, and SAE allowed to make rules that are binding on other private entities and individuals?  Their standards can become legally binding when government agencies formally adopt private standards by reference.  “Incorporation by reference,” as the process is called, occurs when a federal agency adopts a government rule that, in effect, says that it is borrowing the private standard, and making it legally binding.

Regulating by reference can make great sense in some cases.  Private standard-setting organizations are often made up of representatives from the industry being regulated, so they may have better information about what would make for an effective rule.  And of course, there’s also the old aphorism about not reinventing the wheel.  For these reasons, Congress passed a law in 1995 requiring government agencies to incorporate private standards by reference whenever practical and otherwise consistent with their mission.

Although Congress has authorized incorporation by reference, the practice bumps up against norms of open government because standards adopted by private organizations are private property. When the standards are copyrighted, they cannot be posted on agency websites or Regulations.gov, nor simply reproduced in the Federal Register.  As a result, the private standards are not always publicly available, at least not without paying an access fee.  When agencies regulate by reference, the public is often denied the same level of transparency that they would normally have for any other rule adopted through the notice-and-comment rulemaking process.

As PPR Director, Cary Coglianese, has written, “The ability of members of the public to read and understand rules imposed by their government has long been a hallmark of democracy.”  To promote better transparency of incorporated rules, Professor Peter Strauss of the Columbia University Law School has petitioned the Office of the Federal Register seeking reform of the incorporation process.  In an earlier The Regulatory Review essay, he explained why agencies should be required to pay for any copyright fees associated with private standards that they incorporate by reference.  In addition, the Administrative Conference of the United States (ACUS) has adopted recommendations that, among other things, call for government agencies to “work with” private standard-setting bodies to make available copyrighted rules when they are incorporated by reference.

This week, Americans will pause for an annual celebration of the adoption in Philadelphia on July 4, 1776 of the Declaration of Independence, with its statement that government obtains its “just powers from the consent of the governed.”  The Regulatory Review is pleased to mark this commemoration with this series on Regulating by Reference.  We not only reproduce Professor Strauss’s earlier essay, but we also feature two new essays by Professor Nina Mendelson of the University of Michigan Law School and one by Emily Bremer, Attorney Advisor with ACUS.

 Collaboration is the Key to Making the Law Free