West Virginia vs. EPA: Opportunities for Independent Industry Self-Regulation

Regardless of where one stands on whether the U.S. Supreme Court decided West Virginia v. EPA correctly, the decision provides an opportunity for business to play a meaningful role in finding solutions to relevant public policy issues through the exploration – and potential widespread adoption – of independent industry self-regulation.  

Summer 2022 was bookended by one of the most significant endings to a U.S. Supreme Court term in recent memory, and one of the most far-reaching student loan policy shifts in history.

But as fall begins, those bookends may soon be collapsing inward, as the June 20, 2022 West Virginia vs. EPA U.S. Supreme Court decision may call into question President Biden’s August 24, 2022 plan to have the U.S. Department of Education forgive and cancel certain student loan debt.

Twenty-two Republican governors seemingly agree, writing in a letter to Biden, “As president, you lack the authority to wield unilateral action to usher in a sweeping student loan cancellation plan.”

The Wall Street Journal dug further into this issue on Monday, Sept. 19, reporting that “The Biden administration and Republican opponents of mass student debt cancellation appear headed for a legal confrontation with hundreds of billions of dollars at stake just weeks before the November midterm elections.”

As has been widely reported, the conservative majority in the West Virginia case leaned heavily on the major questions doctrine to strike down the EPA’s regulatory scheme. This doctrine says that explicit authorization from Congress is necessary if executive agencies are taking “major actions.” 

While West Virginia vs. EPA created a new standard for “major actions,” the justices did not lay out a specific test to apply it. Experts predict that the Biden loan forgiveness plan may be the first application. The twenty-two governors opposing the plan certainly hope so.

The concept behind West Virginia v. EPA covers both sides of the same coin: If Congress wants something significant to be done by federal regulators, the authorizing words written into law must be explicit. And if federal agencies want to write rules, Congress must provide them the express power to do so.

While the debate over the limits of executive power is painted with vivid contrast in this timely conflict over student loans, what the West Virginia vs. EPA decision will mean more generally for business in the long run is another matter worth scrutiny.

One assumption is that, with much regulation curtailed unless specifically called for by law, Congress will remain gridlocked and the “Administrative State” will decline, leaving a Wild West of opportunity for business.

But will that really happen? After all, there has been a recent flurry of legislative activity, some partisan but also with bipartisan bills passed in areas such as climate change, veterans’ health benefits, and incentives for US-based chip manufacturing.

Most congressional observers believe legislative initiatives will stall over the next two years, leading into the 2024 election. Future Congresses are, of course, unpredictable – they may become prescriptive and far-reaching or take a lighter touch if they can be convinced that independent industry self-regulation works.

What is independent industry self-regulation? It is not a CEO of a company testifying before Congress saying: “We’ve got this. Just leave us alone and we’ll do the right thing.” Nor is it a trade association policing its own members, though such efforts are often laudable.

Independent industry self-regulation consists of two key components, each equally important. It is “independent,” meaning it is operated by a third party with no personal stake in the guidelines it writes, the rules it sets, or the decisions it renders. And it is meant not just for one company, but for an entire “industry,” thereby removing any worry of competitive advantage if the rules are not followed.

There are many models of industry self-regulation, adaptable to various situations and even new platforms, such as the metaverse. Most models have a prescriptive element: follow the rules and you will not run into trouble. But all workable models have teeth, so that if a company does not follow the rules, its actions are called into account through a published case decision or via a referral to a government agency, such as the Federal Trade Commission.

This adjacency to government is one of the less-recognized aspects of independent industry self-regulation. Meaningful self-regulation does not occur in a vacuum; instead, independent programs develop policies and procedures that often mesh with existing laws and applicable regulations.

As an example, look at the National Advertising Division, the U.S. system of independent self-regulation for the advertising industry for the last 50 years. The National Advertising Division decides cases in advertising disputes, but it does not write the laws itself. Rather, the National Advertising Division follows advertising law precedent, as decided by courts and regulatory authorities. 

Regardless of where one stands on whether the Court decided West Virginia v. EPA correctly, the decision provides an opportunity for business to play a meaningful role in finding solutions to relevant public policy issues through the exploration – and potential widespread adoption – of independent industry self-regulation.