Are Mandated Environmental, Health and Safety Risk Disclosures Really as Bad as iTunes License Agreements?

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Commentator highlights where mandatory disclosure remains valuable.

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In More Than You Wanted to Know: The Failure of Mandated Disclosure, authors Omri Ben-Shahar and Carl E. Schneider declare their goal early on: to silence the “siren song” of government mandated information disclosure, whose “incontinent use,” they argue, make it what “may be the most common and least successful regulatory technique in American law.”

Ben-Shahar and Schneider argue that government mandated disclosure of information, no matter how well-intentioned, inevitably fails. Among other defects they allege, disclosure typically involves complex issues that the average consumer is not equipped to address. Disclosure also generally reflects a naive view of how people use information to make choices, they say, and perhaps most damningly, it allows governments to avoid the hard regulatory choices demanded of a more prescriptive form of regulation.

When focused on issues of mandated disclosure in consumer transactions and health law, the two areas that apparently first drew Ben-Shahar and Schneider to this topic in a jointly written article, their critique seems dead on. The reader of their book will nod in knowing irritation as Ben-Shahar and Schneider survey the bewildering reams of information confronting us daily as we apply for mortgages, make personal healthcare decisions, download software, and otherwise make our way in a world of myriad, complex consumer choices. Does anyone really read the 32-page (in 8 point font) End User License Agreement (EULA) before clicking “Accept” when we install the latest version of iTunes? Plainly Ben-Shahar and Schneider are advancing a thesis of of more than academic interest when a topic as arcane as the efficacy of a particular regulatory tool has become a recurring skit on Saturday Night Live.

However, Ben-Shahar and Schneider’s arguments against mandated disclosure become less surefooted when they direct their critique to examples in the environmental, health, and safety realms. Outside of product safety warnings (which actually are typically drafted by defense-minded company counsel fearing tort liability, not government regulators), many of their critiques fall short.

Consider just three examples of compelled disclosure in environmental law. First, the Toxic Release Inventory (TRI) provisions of the federal Emergency Preparedness and Community Right to Know Act compel certain industries to disclose information about their use of toxic chemicals. Second, the Risk Management Plan (RMP) requirements of the federal Clean Air Act mandate that specified categories of industrial plants prepare and publish emergency response plans. Third, the annual Consumer Confidence Reports (CCR) that the federal Safe Drinking Water Act requires every public water supplier to make available to its customers.

Environmental disclosure laws such as TRI, RMP, and CCR are typically adjuncts to comprehensive “command and control” regulatory schemes, filling in gaps and addressing some of the inadequacies of the latter without displacing them. While some might not agree, these adjunct laws are not examples of regulators “failing to make hard choices,” as Ben-Shahar and Schneider put it. (But for those who suggest doing away with command and control regulations entirely, relying entirely on mandated disclosure to achieve health and safety goals, perhaps More than You Wanted to Know should be required reading.)

Additionally, although not everyone has the necessary expertise to understand TRI, RMP, and CCR information, those less familiar with chemical risks can turn for advice to NGOs or other experts who are. And contrary to one of the arguments in More than You Wanted to Know – that consumer demand alone can be enough to induce the disclosure of information — companies were generally unwilling to reveal this information before mandatory disclosure requirements and, perhaps more importantly, for whatever reason many companies did not do the work necessary to gather, organize, and learn from such information internally.

Finally, there is a principal difference between disclosure laws like TRI, RMP, and CCR and most of the examples cited in More than You Wanted to Know. The former involve situations of little or no consumer choice. Apart from moving away from a neighborhood chemical plant or switching to much more expensive bottled water, people can’t do much about many of the chemicals they encounter in their daily lives. But thanks to TRI, RMP, CCR, and similar federal and state environmental disclosure laws, and more recent ‘Next Generation’ enforcement efforts that further encourage environmental performance transparency by the regulator as well as the regulated, we can learn about chemicals, and encourage their better use and minimization of their release into the environment.

Leaving aside their thin treatment of environmental disclosure laws, Ben-Shahar and Schneider do offer many fresh examples of the false promises and adverse consequences of government-compelled information disclosure in other contexts, adding to a debate that is hardly new. Indeed, the core of what became the Federal Securities Act of 1933 (FSA) was compelled disclosure of material information surrounding newly issued securities. The FSA’s authors were in part inspired by Louis Brandeis’s 1914 Other People’s Money, a famous quote from which opens More Than You Wanted To Know: “Publicity is justly commended as a remedy for social and industrial disease. Sunlight is said to be the best of disinfectants. . . .”

Taking an opposing view, then-law professor (and Justice Brandeis’s eventual successor on the Supreme Court) William O. Douglas, believed that compelled disclosure was an insufficient regulatory response to the sharp practices exposed in the stock market, because investors “either lack the training or intelligence to assimilate and find useful the balance sheets, contracts or other data in the registration statement, or are so concerned with a speculative profit as to consider them irrelevant.” Perhaps apart from the Internet, Justice Douglas would find little surprising, and much to support, in More than You Wanted to Know.

This essay is part three of a seven-part series on The Regulatory Review entitled, Is Mandatory Disclosure Helping Consumers?

Charles Howland

Charles Howland is senior assistant regional counsel at the U.S. Environmental Protection Agency, Mid Atlantic Region. He also co-teaches a course in energy law at Villanova Law School and has taught environmental law and policy at other colleges and universities in the U.S. and abroad. This material is solely the work of the author and does not necessarily reflect the views of the U.S. Environmental Protection Agency.