This is in response to your request for our comments on S. 1291, the Administrative Practice and Regulatory Control Act of 1979. I must emphasize that the Administrative Conference as a body has not considered this bill and that the views set forth herein, to the extent they go beyond the formal Conference recommendations I cite, are those of my Office and not necessarily those of the Conference as a whole.

When you introduced S. 1291 you remarked that it is intended to complement other important regulatory proposals such as S. 262, introduced by Senator Ribicoff, and colleagues on the Governmental Affairs Committee, or the Administration's regulatory reform bill (S. 755, H.R. 3263). Copies of our detailed comment on those bills are enclosed.

TITLE I

Rulemaking Procedure

Title I of S. 1291, Improving the Regulatory Process, would significantly modify the informal rulemaking section of the Administrative Procedure Act, 5 U.S.C. § 553. The revision would narrow several of the present exemptions from notice-and-comment procedure, alter the existing minimum procedural requirements applicable to all non-exempt rules, and, in new section 553a and new sub-sections 553(c) and (f), establish more rigorous requirments for "significant" rules.

Narrowing of exemptions. The present exemption from notice-and-comment procedures for matters relating to "public property, loans, grants, benefits or contracts," would be eliminated. Because of the substantial public impact of many of these rules, the Administrative Conference has long favored this step. See ACUS Recommendation 69-8, 1 C.F.R. § 305.69-8.

The bill also narrows the present exemption for matters involving a military or foreign affairs function of the United States so that it covers only such functions as are "specifically authorized under criteria established by Executive order to be kept secret in the interest of the national defense or foreign policy." This change, which makes the exemption consistent with the parallel provision in the Freedom of Information Act, 5 U.S.C. § 552(b) (1), is expressly supported by the Conference, see ACUS Recommendation 73-5, 1 C.F.R. § 305.73-5.

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tote from the it D. le for presenting or deciding the case. The Conference could quite appropriately evaluate agency rules and procedures and take reports on agency activity under this program. Further, consistent with other proposals in S. 1291, it could issue advisory guidelines on the program for the agencies' use.

TITLE II

Title II would enact a new requirement, placed in a new chapter 6 of Title 5, U.S.C., that agencies apply a pro-competitive standard in taking certain actions. This proposal tenders issues that are primarily substantive, and, therefore, beyond our statutory concern and expertise. However, we would raise a few questions that Occur to us upon reading the text. Section 602 forbids agencies to take certain actions unless they find that such action "is the least anticompetitive alternative legally and practically available to achieve statutory goals." We doubt that the term "least anti-competitive" has a sufficiently definite meaning to provide guidance to the agencies. For example, would an agency be required always to choose the smaller of two entities competing for an exclusive license, or could it take into account the financial responsibility and, hence, greater viability of the larger applicant? Would the term "license" cover such actions as that of the National Park Service in granting or denying permits to concession stands in the national parks? What about the grant of offshore oil leases by competitive bid?

Finally, the language in § 602 (b) does not parse very well. It speaks of "regulation" based upon "a finding that an applicant for entry does not meet [health and safety standards]." But the term "regulation" is nowhere defined. If it is intended to mean "rule," as defined in section 551, the result is confusing because few rules "directly" regulate entry or are based upon a "finding" as to particular applicants or licensees.

TITLE III

Title III sets up a high-level Committee on Regulatory Evaluation to evaluate and assess on a fixed schedule the need for retention of specific, regulatory agencies. Based upon the recommendations of the Committee, the President would report on these agencies and propose appropriate reform legislation, which would be "privileged" in Congress.

We have no comment on this proposal.

TITLE IV

This portion of the bill, devoted to the functions and structure of the Administrative Conference, is of especially great interest to us. The bill would make a number of important amendments to the Administrative Conference Act, 5 U.S.c. S$ 571-576.

Structure of the Conference

As I believe it very important to do, S. 1291 retains the basic membership structure of the Administrative Conference. Even though the membership would not

On March 6, 1979, I testified before the Judiciary Committee in support of S. 382, as it was introduced in February. I have recently reviewed the changes in the new draft, and I have the following comments.

The new draft makes several changes from the original version on which I testified. It limits the scope of the bill, focuses the findings that each agency must make on anticompetitive alternatives, removes the power of the Attorney General to require an administrative hearing on competition issues, and eliminates the original judicial review standard, which seemed to apply a hearing-type evidentiary standard ("substantial evidence on the record") to rulemaking proceedings. These changes appear to have two major effects: they limit the applicability of the statute to a limited class of agency actions, and they clarify the bill's purpose as instituting a routine for considering the competitive consequences of agency decisions, rather than redirecting the primary statutory goals of each agency.

The scope of the former version was defined in terms of the effect of the agency action: if the action was likely to create or maintain an anticompetitive situation, the agency had to make the specified findings. The unamended bill therefore applied to actions intended to promote health, safety, or fair business practices as well as to actions intended primarily to control supply and demand in some way. The scope of the amended version is defined in terms of the purpose of the action to be taken. It does not apply unless the action is intended to regulate entry, price, production or distribution levels, or agreements among producers or purchasers (these actions will be referred to as "economic regulations"). Thus, the scope of the new draft excludes non-economic regulations (even though they may have a substantial effect on competition) and includes all economic regulations (even the ones that do not meet the old version's threshold standard derived from the Clayton Act).

I took the position in my testimony that "least anticompetitive effect" analysis should be applicable to both consumer protection and economic regulation. The fact that the amended bill limits its application to economic regulation does not change my basic support for the bill. Procompetitive thinking is surely needed in economic regulation, regardless of whether it is used in other areas. And application of the legislation to all such decisions, regardless of their actual effect on competition, is an improvement; attention to competitive alternatives is good policy even for minor decisions, and it avoids uncertainty over which decisions are covered by the law. Nevertheless, I feel that cutting away all application to government action other than strictly economic activities is a serious loss. Public-utility-type regulation such as the classic CAB pricing and entry controls is already shrinking fast, and today represents only a small fraction of total U.S. government regulatory activity. The value of competition is already widely recognized in the economic area. The real frontier question is whether and how we can allow the broadest range for innovation and rivalry in areas such as auto or industrial safety, energy and natural resources, and the vast field of distribution of benefits to the needy. I feel that the bill could have been a major force for change in these areas.

One passage of amended Section 3 (a) seems to require more precise language or an explanation. That paragraph requires findings for agency action that "regulates or licenses entry under a scheme in which the level of entry is subject to limitation." I surmise that the underlined portion is intended to focus on types of regulations that purposely limit the number of competitors in a given market, without regard to fitness. However, the distinction is not too clear. I suggest it would be clearer to say, "regulates or licenses entry for reasons other than health, safety, or fitness.'

The amended bill requires only that the contemplated action be found to be "the least anticompetitive alternative legally and practically available to achieve statutory goals." This seems to make clear that any statutory goal is a valid justification for agency action, as long as that action minimizes the anticompetitive effects as much as possible. The public benefits need not outweigh the anticompetitive effects. This seems more in keeping with the nature of legislative and administrative processes. It should be the responsibility of the agencies to carry out statutory directives in the most competitive manner, while it is properly the job of Congress, not regulators, to weigh the importance of statutory goals against their anticompetitive consequences. The amendments thus make clear that the Competition Improvements Act is intended to force regulators to consider competitive alternatives only within the context of statutory directives, and that the Act was not intended to amend each agency's basic statute by inserting a substantive pro-competition override. These changes are consistent with my original interpretation of the bill and add to its clarity.