Business Intimidation in the Rulemaking Process

Font Size:

Scholars reveal how businesses lobbying can intimidate agencies and influence rulemaking.

Font Size:

Federal regulators are taking a more aggressive stance to technology companies, blocking mergers that may harm future competition and seeking to address harmful data practices. In response to increased government scrutiny, tech companies’ spending on lobbying has surged. Five tech giants spent nearly $69 million on lobbying the federal government in 2022.

How might all this business lobbying influence the rulemaking process?

To understand the extent of business influence over agency regulations, political scientists have traditionally looked for differences between proposed and final rules, seeking to identify the extent to which comments from businesses may have led to changes in the rules. Past studies have tended to find business comments linked to at most only a little meaningful change from proposed rule to final rule, sometimes softening the content to make regulation more business friendly.

A new study, however, investigates the power of business lobbying even earlier in the rulemaking process—before agencies have even proposed a rule. In a new article, Alex Acs, a professor at Ohio State University, and Cary Coglianese, a professor at the University of Pennsylvania Carey Law School, demonstrate that businesses can exert significant political influence over agencies’ agendas. Specifically, Acs and Coglianese studied how businesses can influence agencies’ decisions to withdraw proposed rules or never issue them at all.

Acs and Coglianese’s new research shows that persistent business lobbying can be inherently intimidating because it signals business groups’ ability and willingness to marshal their political and legal resources to challenge the agency if it pursues a policy that businesses oppose. Regulators pay attention to political signals, Acs and Coglianese argue, and they may choose not to proceed with a proposed rule if they expect significant opposition.

Acs and Coglianese posit that regulators can use information about different groups’ lobbying efforts to assess which groups are more likely to be successful in influencing the U.S. Congress, White House, or courts to constrain or overturn the regulator’s efforts. Through lobbying, Acs and Coglianese argue, businesses reveal their political power and this information can intimidate agencies.

Acs and Coglianese hypothesized that the presence of business lobbying can have two effects on agencies. First, lobbying may create a “chilling effect”—meaning that agencies subject to more business lobbying are less likely to propose new regulations in the first place, and any rules they do propose are less likely to make major policy changes. Second, lobbying may produce a “retreating effect,” such that agencies that propose rules withdraw them after receiving opposing comments from business interests.

To test for a potential chilling effect, Acs and Coglianese collected data on rulemaking proposals from 69 federal agencies over a seven-year period from 2008 to 2014. Controlling for presidential administrations and other variables, they found that agencies issue substantially fewer regulatory proposals when there is active business lobbying targeting them. A one standard deviation increase in lobbying activity by business groups, for example, was associated with a 25 percent decline in regulatory proposals.

Acs and Coglianese discovered that this negative relationship between lobbying and rulemaking activity also holds when considering only those rules deemed by the agency to be significant policy changes, with agencies issuing fewer such rules when they face greater business lobbying.

To look for a retreating effect, Acs and Coglianese examined what agencies do when rules they have proposed face opposition from business. Analyzing data on comments submitted by businesses as well as business spending on lobbying, Acs and Coglianese found that oppositional comments submitted by businesses that are actively lobbying the agency are associated with agencies’ withdrawals of proposed rules. When businesses spent significant amounts on lobbying at the agency in the time period before agencies released proposals, agencies were nearly certain to withdraw proposed rules that these businesses opposed rather than continuing to revise and finalize them.

Acs and Coglianese found that older lobbying appears to have less influence on regulatory rulemaking decisions. They reason that this is likely because prior lobbying reveals less information about the business’s current inclination and ability to challenge an agency’s actions.

Although the public notice and comment process is a central tenet of U.S. administrative law and presumably egalitarian in allowing anyone to participate in rulemaking, Acs and Coglianese suggest that business lobbying and intimidation may be more influential than the public commenting process that most political scientists have studied. When business lobbying intimidates agencies, it can shape agencies’ decisions about which rules to proceed with from the start.

Acs and Coglianese’s research indicates that significant policymaking may be occurring outside the realm of public scrutiny. It may also shed light on what businesses might expect to achieve if they spend billions of dollars on lobbying: Intimidating federal agencies from adopting rules they oppose.