What Is Chevron Deference and How Much Does It Matter?

There’s a ton of important news that happened last week, which I’ll put below.

First I want to highlight two items. The first is the consequence of Joe Biden’s debate performance, the second is the Supreme Court striking down a legal doctrine called Chevron Deference that structures how the government regulates industry.

Let’s start with the debate, which was very ugly for Biden.

I don’t use this forum to make political prognostications, but to analyze monopoly questions. And on that score, Biden as a person matters. Right before this President took office, I analyzed his track record as a Senator, and found a surprising if thin streak of economic populism threading through his career, such as when he called Stephen Breyer “presumptuous and elitist” in 1994, or when he discussed banning non-compete agreements on the campaign trail.

Biden, encouraged by Elizabeth Warren and Bernie Sanders, has governed in some ways as a populist, which is one reason the anti-monopolists have a foothold on policy. That said, it’s not clear to me how durable populism is in the Democratic Party. In the policy world, there’s a pretty strong recognition that concentrations of power matter. But who takes the baton from Biden, either this year or in 2028, will matter a great deal as well.

Ok, now on to Chevron Deference, which the Supreme Court just struck down in a decision released on Friday called Loper Bright. Liberals are spitting mad, calling this the biggest judicial power grab since 1803. Conservatives are joyful, arguing that the balance of power among an overreaching executive branch and legislative branch is now set correctly. What is it? Why does it matter? And did the apocalypse or nirvana just happen?

The debate over Chevron Deference is confusing, not because it’s complicated, but because there are two frames at work, one in good faith and one in bad faith. And both are reasonable lenses through which to see the discussion. The good faith frame is that Chevron is about whether regulators or judges should be able to define what Congress meant by its statutes. This lens requires asking questions about the separation of powers and the role of the judiciary, and empowering expert bodies vs generalist judges. But this framework doesn’t explain the anger and hyperbole. That comes from the bad faith framework, which is whether repealing Chevron is merely a partisan power grab by big business.

Let’s start with what Chevron Deference is. The first time I encountered the concept of Chevron Deference was in the early 2000s, when the Bush administration Federal Communication Commission allowed cable broadband companies like Comcast to monopolize internet access. At the time, there was lots of competition in broadband access, since broadband providers, as telecommunications services, were under the legal obligation to lease out their lines, like how the phone companies had to allow consumers the ability to reach dial-up internet providers like AOL.

In 2002, the Bush FCC claimed that cable broadband wasn’t a telecommunications service, but was more like a newspaper, an ‘information service.’ And so the rules written by Congress in the Communications Act, according to the FCC, didn’t apply. Within a few years, most independent broadband providers were dead. And America, which had led the world in broadband deployment, fell way behind. Of course, advocates sued, and the suit went to the Supreme Court, which had to answer the question: Was the FCC’s action legal? Now, the Supreme Court could have said ‘let’s look at the statute.’ But they didn’t. Instead, Clarence Thomas, writing for the majority in 2005, said that judges have to defer to an administrative agency on any reasonable interpretation of the law. (Scalia, dissenting, said it was absurd to consider a broadband provider anything but a telecommunications service.)

The Brand X decision, as it came to be known, was an expansion of the principle laid down in an earlier decision in 1984, Chevron U.S.A., Inc. v. NRDC. In the early 1980s, the Reagan Environmental Protection Agency, run by Neil Gorsuch’s mother Anne Gorsuch, sought to relax air quality standards, despite the Clean Air Act being ambiguous on whether the EPA could in fact do that on its own authority. Lower courts, stacked with liberals, said Reagan couldn’t just deregulate without Congress rewriting rules. The Supreme Court, however, disagreed, and laid down the administrative principle that Thomas cited twenty one years later.

So in a sense, Chevron Deference was a way for administrations who wanted to get around populist laws and a liberal judiciary to just decree that the laws were no longer in force. But eventually progressive regulators used Chevron as well, much to the irritation of the corporate world. Over the course of the 2000s, for instance, regulators sought to argue that carbon dioxide was an air pollutant under the Clean Air Act, leading to Obama’s 2015 Clean Power Plan, which set EPA limits on carbon emissions. As the judiciary got more conservative, it now seemed foolish to let regulators define the law.

By 2020, Clarence Thomas was regretting his Brand X decision, saying “it is never too late to surrender former views to a better considered position.” In 2022, in West Virginia vs EPA, conservatives on the Supreme Court struck down the Clean Power Plan under a new standard it created called the “Major Questions Doctrine,” which means that any agency action delegated by Congress that involves a lot of money has to be clearly authorized by statute. Then, last week, in a decision by John Roberts, the Supreme Court overruled Chevron, saying that judges defines statutes, not agencies.

In his opinion, Roberts didn’t say that Congress couldn’t delegate rule-making authority to agencies when statutes are ambiguous, just that Congress had to make it clear that it sought such a delegation. Thomas went further, writing a separate opinion saying that any such delegation of rule-writing was unconstitutional.

In other words, from one perspective, despite all the high-minded rhetoric about constitutional separations of power, this fight is a contest about power. At first, big business liked Chevron because it let them deregulate without having to go to Congress or the judiciary and ask them to weaken the Clean Air Act or other popular laws. Then, as they got more and more allies in the judiciary they didn’t like it because Democrats started to use it for the same reason the Republicans had, to get around Congress and a conservative judiciary.

Chevron Deference, however, wasn’t just a mechanism to implement a certain agenda, it was also a value neutral process change to move power from courts to agencies. And it is deeply embedded in policymaking. Since 1984, Congress has passed hundreds if not thousands of laws, under the assumption that agencies implementing those laws had the ability to execute them even if there was ambiguity or the law was silent on a certain detail. And many agencies and courts have built their rule-making and litigation strategies on Chevron Deference, for both significant and insignificant regulations.

On net, I think this decision could be bad, and induce chaos. But first I’ll go over the good news. A lot of people see regulation and government as an unalloyed good, but it is not. Agencies do collude with big business, and when sued, defend themselves with this doctrine. So Chevron doesn’t always protect good rules.

There’s also the fact that the ruling is relatively narrow; Congress can act to make explicit delegations of authority, as Roberts noted. They could actually pass Chevron Deference tomorrow, and put it in statute. Loper Bright also doesn’t really touch the Antitrust Division, or the Federal Trade Commission, as the FTC rarely relies on Chevron Deference. I do think the FTC’s non-compete ban will be struck down, possibly next week, but under a different rationale. Finally, it’s good to force Congress to have more discipline in legislating, the handwaving in writing laws does show a basic disdain for governance.

Now comes the bad news, which is mostly that Roberts has invited chaos in government. Thousands upon thousands of regulations and laws were crafted under the premise that agencies could interpret their statutes themselves and write rules executing them. Now lifetime appointed judges without actual expertise are going to have the chance to rewrite all of them. Roberts has said that judges must now interpret statutes based on an older standard, Skidmore vs Swift. And maybe judges will do a good job, but given the heavy while collar corporate defense tilt of the judiciary, I am concerned.

On a practical level, there’s now really no way to know what the law is across the board. For instance, take a law against unfair foreign subsidies, which instructs the Commerce Department to calculate the subsidy and act based on the amount. Commerce itself has many ways to do so, since subsidies differ for every country and every market, and change all the time. Now it will be possible to sue based on the premise that, say, the statute is silent on how to calculate a particular subsidy given to producers of televisions in China. And a judge can, if he or she desires, totally remake trade policy in that market. That’s kind of crazy, and there are rules like this all over the place where agencies are doing their best to implement Congressional policy.

The bottom line is threefold. First, this decision is about moving power to judges. And judges right now are deferential to corporate power, so moving authority to judges from agencies is on net a bad thing, though I don’t want to overstate this dynamic, since agency bureaucrats are often problematic as well. Second, Loper Bright is part of a broader framework, which is to break the ability of Congress to act, and then kick decisions over to conservative courts. The real response is to get Congress to legislate again. And third, let’s not overstate the impact of this decision. We had an administrative state prior to 1984, and it worked pretty well. By contrast, Bush and Obama had Chevron deference, and the results were bailouts, monopolies, and corruption. Even now, the Biden Department of Justice is unable to change the leadership of Boeing, and that’s for lack of will, not authority.

In other words, this decision isn’t great. And yeah, there’s a lot of bad faith involved. But the hair on fire warnings come from those who admire government bureaucracy, regardless of whether it delivers. So be a bit skeptical on that front.

And now, the good and bad monopoly news of the week.