Strategic avoidance and rulemaking procedures

Abstract

Informal, ‘notice-and-comment’, rulemaking is the prototypical mechanism employed by US regulators. However, agencies frequently claim their actions exempt from the process, and courts typically agree. Agencies thus face an important strategic choice between informal rulemaking and avoidance. To study this choice, we analyze a model of rulemaking with exemption and empirically analyze agency avoidance. Our model implies that more biased agencies engage in less avoidance, as they face more skepticism from the courts and, thus, require support from group comments to have their rules upheld. Empirically, we find support for this prediction. As for policy implications, we show it is more beneficial to allow exemptions when the agency is more biased.