President Obama Orders Regulatory Review, Federal Agencies React

January 21, 2011

On Tuesday, January 18, 2011, President Obama signed a sweeping Executive Order, designed to improve federal regulation and review existing agency regulations that may be overly burdensome, outmoded, or ineffective. Executive Order 13,563, Improving Regulation and Regulatory Review, instructs federal regulators to: coordinate across agencies to reduce duplicative regulation; increased participation of industry, experts, and the public in the rulemaking process; an emphasis on disclosure regulations as an alternative to rules that restrict consumer choice; and, significantly, a government-wide review of "rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive." The President authored an editorial published in the same day's Wall Street Journal in which he explained his rationale for the Executive Order.

Government-Wide Review of Existing Rules

In his editorial, the President stressed that his administration was committed to striking the correct balance of protecting public health and safety while not interfering with economic growth. The Executive Order, he wrote, "makes clear that this is the operating principle of our government." In an effort to identify conflicting or outdated rules, the President ordered federal agencies to develop a plan within 120 days to periodically review significant regulations to determine if they should be modified, streamlined, expanded, or repealed in order to improve their effectiveness or reduce their burden. This cost-benefit analysis, along with the data used to reach that conclusion, is to be made publicly available as soon as possible. The Executive Order also emphasizes disclosure as a guiding principle, focusing on offering consumers informed choice rather than restricting access to products.

Simplification and Harmonization of Regulation Across Agencies

The Executive Order also instructs federal agencies to work cooperatively in order to simplify and harmonize rules that may be overlapping, inconsistent, or redundant. The President cited the example of the inconsistent treatment of saccharin, the artificial sweetener, as a case in point. Despite the fact that the Food and Drug Administration ("FDA") has long considered saccharin safe for human consumption, until last month, Environmental Protection Agency regulations required companies to treat saccharin as a regulated chemical. The Executive Order emphasizes harmonized regulations based on science and outside input as central to the administration's broader "competitiveness" agenda. The Executive Order also calls upon agencies to cooperate in order to simplify redundant and overlapping requirements into consolidated standards as well as pursue regulatory goals designed to promote innovation.

Changes to Rulemaking Process Going Forward

The President's Executive Order also makes significant changes to the federal rulemaking process on a prospective basis. When considering a new rule, agencies are now required to determine whether the present and future benefits of the proposed regulation justify its potential costs, taking into account both quantitative and qualitative factors. Regulations are now required to be adopted through a process that takes into account the feedback of industry members, experts, and the public as a whole.

Before a proposed rulemaking is issued, each agency is instructed, where feasible and appropriate, to obtain input from those parties potentially subject to the proposed rules as well as those likely to benefit from the rulemaking. As a general rule, proposed regulations must be held open for public comment for at least 60 days and be driven by objective scientific and technological evidence. Referencing and reaffirming the principles of President Clinton's Executive Order 12,866 of September 30, 1993, (the "Clinton Executive Order") the Executive Order states that, to the extent feasible, rules should specify performance objectives for affected parties rather than mandate the behavior or type of compliance that regulated entities must adopt. Finally, the Executive Order also includes the instruction of the Clinton Executive Order that agencies consider alternatives to direct regulation, including the use of economic incentives, such as user fees or marketable permits, or providing the public with relevant information upon which to base their choices through enhanced disclosure regimes.

Agencies Quick to React

While it is unclear whether certain agency actions already were in the pipeline or taken in response to the Executive Order, several federal agencies immediately took steps that are consistent with the stated objectives of the President's new directive. On Wednesday, January 19, 2011, the US Department of Labor announced that it was withdrawing a proposal that would have forced manufacturers to install noise-reducing equipment in the workplace. Similarly, the FDA scuttled plans to heighten medical device approval requirements that would have given the agency the power to order additional post-market clinical trials for some devices or require others to go through a longer approval pathway. The FDA simultaneously released plans to speed the path to market for medical devices, streamlining the review for low-risk devices and clarifying when clinical data should be submitted.

Analysis

Taken together, the Executive Order and the subsequent agency reaction represents a pivot by the President in his administration's approach and tone towards the business community. Notably, the Executive Order was released in the context of the administration's focus on global American competitiveness in the midst of the visit of Chinese President Hu Jintao, and ahead of an expected series of oversight hearing on the Administration's policies spearheaded by the Republican majority in the US House of Representatives. As the Administration seeks to set its agenda for the balance of its first term, its regulatory posture towards the business community is a key part of the political landscape ahead of the 2012 elections.

Please contact any of the individuals listed above or your regular SNR Denton attorney or professional for additional information or if you have any questions regarding the Executive Order.