Which is key to effective emerging tech regulations.

Ryan Hagemann, senior fellow in regulatory governance of emerging technologies at the Niskanen Center, Jennifer Skees, legal research associate in the technology policy program at the Mercatus Center at George Mason University, and Adam Thierer, senior research fellow at the Mercatus Center at George Mason University, former President of the Progress & Freedom Foundation, Director of Telecom Studies at the Cato Institute, and Fellow in Economic Policy at the Heritage Foundation, Soft Law for Hard Problems: The Governance of Emerging Technologies in an Uncertain Future, 2018, Forthcoming – Colorado Technology Law Journal,

Regulatory certainty is key for commercial deployment of any new technology. As Robert Hoerr notes: "uncertainty in the regulatory environment has the potential to increase both the costs and time needed for development, thereby making the commercialization process unpredictable and, in the worst case, incapable of being financed."45 Of course, not all certainty is created equal. A rule that significantly constrains or preemptively prohibits the deployment of a new technology establishes certainty, but may very often fail to account for beneficial trade-offs. By contrast, given the existence of a regulatory apparatus intended to serve the public interest, a total lack of rules governing a new technology doesn't create any certainty for innovators and entrepreneurs. 46 [Footnote 46] This is in part because industry actors recognize the ephemeral nature of an unregulated market given the size and scope of the authorities granted to the breadth of modern federal regulatory agencies. Regulations inevitably materialize in some form, sometimes driven by exogenous pressures on regulators (from Congress directly, or indirectly via shifts in public opinion or advocacy groups), other times by a variety of industry incentives that clamor for navigable rules (whether to establish the certainty necessary for commercial operations or to crowd out future entrants). [End Footnote] Pervading uncertainty is further compounded by the nature of many modern digital technologies potentially falling under the authority of any number of regulatory agencies. Regulatory uncertainty for such technologies can have a severe impact on commercial investment and development, given that more than one agency could conceivably claim authority over a potential technology. This problem of "two parents, two [*246] rules" 47Link to the text of the note is further exacerbated by competing scopes of authority, as well as different institutional cultures that are more or less averse to regulating high-risk innovations. If regulators express an affirmative desire to regulate a particular technology, they are inevitably confronted with the political realities of overlapping jurisdictions, further complicating the already difficult task of governance and oversight. An additional barrier to regulatory efficiency is the lack of empirical frameworks for appropriately assessing the costs and benefits of a particular course of action. In theory, evidentiary-based justifications should serve as the rationale for regulatory action, focusing on known harms to consumers or public safety. In practice, this is not always the case, and despite possessing broad delegated authorities - such as the Federal Trade Commission's ("FTC") Section 5 authority over consumer protection standards 48Link to the text of the note and the FDA's authority to define "safe and effective" drugs and biologics 49Link to the text of the note - many federal agencies fail to narrowly target their enforcement efforts based on clear taxonomies of harm. While a lack of clear rules can contribute to market uncertainty, so can judicial review of any rules that are created. A number of judicial deference standards touch on the statutory authority of agency action and resultant promulgated regulations, some of which may end up being implicated in future court challenges to soft law governance. The Chevron standard is among the more deferential of these standards because, for the most part, it defers to agencies on pure questions of statutory interpretation, provided agency interpretation is a reasonable and permissible construction of the statute. 50Link to the text of the note Whether the congressional delegation of authority is explicit or implicit slightly changes the standards of evaluation, but by and large the courts have tended to defer to an agency's interpretation of an ambiguous statute in these contexts. 51Link to the text of the note [*247] In the context of soft law, Skidmore v. Swift & Co. 52Link to the text of the note is perhaps the most relevant judicial deference standard and has been held to apply in situations that specifically implicate soft criteria. 53Link to the text of the note Skidmore applies when an "agency is applying special expertise and using its understanding of the facts to carry out congressional purposes," 54Link to the text of the note and affords deference in proportion to the agency's power to persuade. 55Link to the text of the note Offering recommendations for improving the consistency of applying deference, William Eskridge and Lauren Baer suggest that: Skidmore should be the default regime under which the Court considers agency inputs, with those inputs being especially valued when (a) the agency has expertise on issues as to which judges do not; (b) the agency has rendered a reasoned judgment after input from the public; and/or (c) there has been public or private reliance on agency rules or guidances. 56Link to the text of the note Such an approach has important implications for the future of soft law, as any legal challenge to soft criteria in general, or multistakeholder proceedings in particular, would likely fall under the deference purview of a Skidmore analysis. As of this writing, however, no soft criteria or soft law activity focusing on emerging technology regulations has been challenged in the courts, which makes the task of evaluating how deference may apply in such a circumstance difficult to portend. Such an analysis would involve a dedicated law review article all to itself. 57Link to the text of the note For the purposes here, it will suffice to note that the legal uncertainty surrounding the use of soft criteria as governance mechanisms casts a long and dark shadow over the long-term viability of a soft law regime. Because of the consensus-based nature of many soft criteria delivered through government-convened multistakeholder processes, the likelihood of a serious legal challenge diminishes in proportion to the level of openness and transparency afforded to the process, as well as the involvement of more stakeholders with a vested interest in the outcome of such a proceeding. [*248] The likelihood of willing stakeholder engagement is also a function of the level of trust and legitimacy such actors are willing to grant to the proceeding. These are the topics of the next section.