COMPETITIVE ENTERPRISE INSTITUTE

VOL. 30, NO. 4 | FALL 2017

FEATURED ARTICLES

The Importance of an Under-the-Radar

Supreme Court Case on Sports Betting
4 BY MICHELLE MINTON
BY ROBERT J. SMITH
An Appreciation: Atlas
Shrugged at 60 N ew Jersey tried to repeal its own law
against sports gambling, but a federal
law banning sports gambling was used to
stop Garden State voters from deciding on
their own state laws. Now the United States
Supreme Court is set to weigh in. As I note in
a new CEI paper (“Let States Regulate Internet
Gambling within their Borders”), there is much

8 at stake in this case, from the right of state

voters to decide their own laws, to consumer
protection from fraud, to states’ ability to meet
BY IAIN MURRAY
the needs of their residents.
Eventually Amazon Will Fail, On the surface, New Jersey merely
and That’s a Good Thing wants the ability to repeal its own state laws
prohibiting sports gambling, which would
make the activity legal at casinos and race
tracks in the state. At its heart, however, the
Court’s decision on the matter could impact
every other state’s ability to set its own poli-
12 cies—regardless of the federal government’s
wishes—on a wide range of issues from gun
BY IAIN MURRAY and education policy, to marijuana and
immigration regulation. More importantly, the
Air Traffic Control Might Finally case before the court involves a threat to our
Move into the 21st Century fundamental system of government that gives
state voters the right to determine how they
are regulated.
ALSO IN THIS ISSUE Apart from Nevada, betting on sport-
ing events is mostly banned throughout the
CEI Events and Public Appearances. . . . . 6 U.S. due to a 1992 law, the Professional
Congress Can Rescind the CFPB’s Gift to and Amateur Sports Protection Act (PASPA),
Trial Lawyers . . . . . . . . . . . . . . . . . . . . . . . . 9 which prohibited states from legalizing any
Repealing the Clean Power Plan Will form of sports gambling they didn’t have
Benefit All Americans. . . . . . . . . . . . . . . . 10 prior to the law. Its purpose was to stop the
spread of sports betting, but by all accounts,
Banishing Regulatory “Dark Matter”. . . . 11
it failed. According to the American Gaming
The Good, the Bad, and the Ugly. . . . . . 14 Association, Americans spent $47 million
Media Mentions. . . . . . . . . . . . . . . . . . . . 15 during the 2017 Super Bowl alone—with
End Notes . . . . . . . . . . . . . . . . . . . . . . . . . 16
upwards of 97 percent of that occurring
on the black market. Recognizing both an
opportunity to profit from taxing the activity
and an obligation to protect the thousands of
consumers engaged in such wagering, the
New Jersey legislature took steps to regulate
sports betting in the state.
New Jerseyians were overwhelmingly in
favor of the move, voting in 2011 for a consti-
tutional amendment to legalize sports betting
by a margin of nearly two to one. However,
the legislature was blocked from implement-
ing the law by the National Collegiate
Athletics Association, National Football
League, National Basketball Association,
National Hockey League, and Major League
Baseball, which sued the state. The leagues
alleged that PASPA not only prohibits states
from legalizing sports betting, but even
prevents them from repealing their own laws.
That means a de facto decriminalization of
the activity.
While the Third Circuit Court of Appeals
agreed with the leagues’ logic, New Jersey
(continued on page 3)
 To Reform Regulation, Reform Rulemaking
by Kent Lassman
We are living with the results of a revolution. American
constitutional government, premised on consent and
designed to protect liberty, has come to rule increas-
ingly large areas of our lives. This revolution has been
long in the making, with roots reaching back 140 years,
and really accelerated in the last century with funda-
mental changes to make the New Deal an entrench-
ment of expert rule from afar. We’ve moved from a
constitutional republic to rule by administrative fiat.
FROM THE PRESIDENT
The revolution has not been bloodless. There are
certainly foregone gains. The businesses that never
started, growth that did not happen, innovation that
fails to see the market. And there are the losses of
liberty seen by typical Americans with every contact
they have seeking information or clarification from the
regulatory apparatus.
The IRS cannot guarantee its own interpretations of
the tax code. The Securities and Exchange Commission
can choose whether to pursue penalties—and whether
those should go before an administrative law judge or
court. In fact, the agency even boasts that this adds to
its “all-encompassing enforcement.”
Perhaps most troubling are the lives lost through the
suppression of scientific knowledge, through regulatory
agendas that put regulatory agencies’ interests ahead
of consumer safety—from auto fuel economy standards
that result in more highway deaths as the they force
manufacturers to make smaller vehicles to Food and
Drug Administration rules that throttle the introduction
of new lifesaving medical devices. In all, the regulatory
revolution robs us of our blood, our treasure, and our
liberty.
It is time to turn things around. And there is a path
forward. It won’t be easy, but there is promise for the
future. We can remove ourselves from an extraconsti-
tutional system of government that no longer protects
liberty but is designed to rule.
We have two big problems—delegation and
deference. There are three lines of attack that must be
brought, with all the fury we can muster, against both
problems—economic, constitutional, and moral.
Reining in overregulation will allow for greater
economic growth and efficiency, as businesses and
Publisher
Kent Lassman
Editor
Richard Morrison
Ph (202) 331-1010
Fax (202) 331-0640 Editorial Director
info@cei.org Ivan G. Osorio
ISSN#: 1086-3036
2 CEI.ORG
entrepreneurs are able to direct their resources and
energies to their most productive uses, rather than
spend precious time and effort complying with rules. As
CEI’s Wayne Crews notes, regulation imposes costs on
the American economy of around $1.9 trillion. It’s well
past time to pare that back.
It will also help restore the Constitution’s separa-
tion of powers. Last year, agencies issued 18 new
regulations for every law passed by Congress. And the
courts often give excessive deference to agencies to
interpret rules as they see fit. Such overdelegation to the
executive erodes the separation of powers in ways the
Founders would find troubling.
Finally, regulatory reform can enhance equity
and fairness by making rules clear and predictable.
In addition to rules, agencies often regulate through
“regulatory dark matter”—memos, guidance docu-
ments, interpretive bulletins, and other issuances that
carry regulatory weight, but do not go through the
Administrative Procedure Act’s notice-and-comment
rulemaking requirement.
The way to engage those three lines of attack
requires a methodology that we know can be success-
ful, based on CEI’s experience with policy analysis,
litigation, outreach, and coalition-building.
Regulation is big, oppressive, largely hidden from
public view, and of dubious constitutionality. We need
more than to just trim back some rules. We need to
reestablish that overly broad delegation is not accept-
able. It is not enough to roll back the Waters of the
United States rule if the Environmental Protection
Agency continues to run unchecked. Congress needs to
stop delegating away its duty.
We will know we are winning when the combined
effects of deregulation and administrative process
reforms outstrip the negative drag on our economy,
legal system, and ability to live as free people.
I hope you will join me in this effort.
The CEI Planet is produced by the Competitive Enterprise
Institute, a pro-market public interest group dedicated to
free enterprise and limited government.
CEI is a non-partisan, non-profit organization incorporated in
the District of Columbia and is classified by the IRS as a 501
(c)(3) charity. CEI relies upon contributions from foundations,
corporations, and individuals for its support. Articles may be
reprinted provided they are attributed to CEI.
COMPETITIVE ENTERPRISE INSTITUTE
 Sports Betting, continued
and outside observers like CEI, the
Pacific Legal Foundation, and the
Cato Institute argued that a federal
law that blocks state legislatures from
modifying their own laws as they and
their voters see fit is a violation of the
Constitution’s 10th Amendment, which
reserves the power to regulate wholly
in-state matters to the states.
In June, apparently recognizing
merit in this argument, the Supreme
Court agreed to hear the case. Of
particular interest to the Court is the
question of whether or not PASPA
unjustly commandeers state author-
ity—does it compel the state to imple-
ment federal laws in violation of the
Constitution?
The anti-commandeering doctrine
stems from the era of slavery, from a
state’s unwillingness to implement the
federal Fugitive Slave Act of 1793,
which required northern states to return
escaped slaves to their “masters.”
States that did not want to comply with
the law successfully argued before
the Supreme Court in 1842 that the
federal government could not force
states to enforce its laws (see Prigg
v. Pennsylvania). The doctrine stands
against the federal government using
states and their resources as its pup-
pets. It also lets states try different
approaches to policy and, in that way,
serve as laboratories of democracy. It
lets state lawmakers set policies based
on the values of their constituents and
keeps lawmakers more accountable to
their voters.
If federal lawmakers can force the
states to do their bidding, members of
Congress can escape accountability
for laws and regulations that are costly,
unpopular, or problematic, but imple-
mented through the states’ authority.
Voters may unwittingly blame local
lawmakers for failing to do state voters’
bidding, unaware that state lawmakers
were powerless to modify these laws.
Thus, state lawmakers would bear the
costs and take the blame for decisions
made by federal politicians.
COMPETITIVE ENTERPRISE INSTITUTE
Should the Supreme Court rule
against New Jersey, it would not only
impact that state’s ability to legalize
sports betting, it could have ramifica-
tions for countless other policies in
which state voters wish to diverge from
federal policies. For example, states
that decriminalized medical or recre-
ational marijuana may find themselves
compelled to enforce and prosecute
federal drug laws. States that wish to
enhance gun control policies could
find themselves in a tricky situation
under the current administration—just
like states that want to maintain free
access to guns under subsequent,
more liberal administrations. Similarly,
Congress or the president might force
states with sanctuary cities to deny
them funding if they fail to comply with
federal immigration law.
Most efforts to change unpopular
policies begin at the state level, where
lawmakers are more aware of voters’
changing attitudes and have a greater
willingness to experiment with new
approaches to regulatory problems.
The successes or failures of these
experiments help everyone see what
works and what doesn’t.
On the flipside, granting the fed-
eral government the power to com-
mand state legislation could result in
regulatory stagnation that is ultimately
out of step with the values of voters.
If PASPA is allowed to stand and the
federal government allowed to force
states to freeze—in perpetuity—their
laws, regardless of what state voters
want, this sort of regulatory evolution
would grind to a halt.
No matter how one feels about
sports betting or any other issue in
particular, the importance of preserv-
ing the states’ right to make their own
decisions on these matters should be
painfully clear.
Michelle Minton (michelle.minton@cei.
org) is a senior fellow at CEI. A version
of this article was originally published on
OpenMarket.org.
C E I . O R G 3
Help the Competitive
Enterprise Institute carry
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of Liberty Society
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 An Appreciation: Atlas Shrugged at 60
BY ROBERT J. SMITH

S ixty years ago this October, Ayn

Rand’s monumental novel, Atlas
Shrugged, was published. It led a vast
number of people around the world to
become advocates of the philosophy
of individual liberty and free markets.
And remarkably, it is still doing so.
I’m certain nearly all libertarians
can remember fairly precisely when or
where they first read it—and sometimes
The Fountainhead. I can still remember
cutting classes at Stanford for two days
as I sat in my room buried in the rivet-
ing book. (I am not a speed reader!)
I fondly remember the Atlas
Society’s 50th Anniversary Gala of the
book’s publication. I had the plea-
sure of sitting next to my old friend,
the late great Manuel (Muso) Ayau,
the founder of Universidad Francisco
Marroquín (UFM) in Guatemala, an
outstanding academic institution that
describes its mission as being dedi-
cated “to teach and disseminate the
ethical, legal, and economic principles
Manuel Ayau (left) and David Kelley
of a society of free and responsible
persons.” I believe The Fountainhead
was the book that sparked his interest
in the ideas of liberty. And there is a
sculpture honoring Atlas Shrugged at
the UFM business school (see above).
Ayau persevered in building a
world-famous institution dedicated
to teaching liberty in an environment
of Marxist terrorism and violence, in
which businessmen were constantly
threatened with kidnapping or shoot-
ing. The late author, journalist, and
commentator Jeffrey St. John told me
a story about once having dinner at
Muso’s home with a small gathering
of free-market intellectual leaders. He
said the long dining table was formally
set with all the requisite silverware and
wine glasses—with one necessary
addition. Each place setting had a
revolver placed at the right hand side
of the dinner plate. The threat of terror-
ism was that omnipresent.
Muso also delighted in collecting
jokes portraying economic common
sense as well as socialist nonsense.
One of his favorites went as follows:

4 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE

 Ayau persevered in is the problem? Are you a procras-
tinator and always start to work
building a world- too late and miss the bus and are
frantically trying to catch it?”

famous institution The young man replied: “I hope to

start my own small business one of
dedicated to these days, so I run to work each
day behind the bus and save $2
on every trip. Eventually I will have
teaching liberty in saved enough to start my business.”

an environment of The government minister responded:

Marxist terrorism
and violence.
A government economics minister
who was driven to work every
morning in a chauffeured limousine
would often see a well-dressed
young man carrying a briefcase
and running behind a bus. He
began to watch for this young man
and noticed that the pattern was
always the same.
Finally, he became curious enough
that one morning, on spotting the
runner, he asked his chauffeur to
stop and honk at the man. He rolled
down the window and waved him
over and said: “Young man, I’ve
seen you running behind that bus
nearly every day for weeks. What
“Oh that will never work. It will
take forever. You must try another
strategy.”
Curious, the young man asked:
“And what is that?”
The minister replied: “You must run
behind a taxicab and you can save
$10 on every trip.”
It was also a pleasure seeing both
Barbara and Nathaniel Branden at the
gala.
I also really love Rand’s much
shorter work, Anthem. I think it is a
brilliant depiction of the rediscovery of
freedom in a collectivist society.
Among the many noted people
who have been influenced by Atlas
Shrugged are Nancy and Fred Cline,
owners of Cline Cellars winery in the
Carneros region of Sonoma County,
California. The Clines had a long
struggle in fighting the efforts of the
federal government to shut them down
for supposedly destroying jurisdictional
waters of the United States by plant-
ing vineyards on their land. Eventually,
after a long and costly fight, the Clines
prevailed.
Nancy remains a great fan of Atlas
and on October 9, 2010, when the
Clines were holding a gala dinner
honoring me and CEI for our work on
property rights, the Clines’s highway
billboard recognized CEI (see above).
(As of this writing the Clines’ winer-
ies have survived the fires raging all
around them.)
I’m sure these great books will be
inspiring freedom lovers another 60
years from now.
Robert J. Smith (R.J.Smith@cei.org) is a
distinguished fellow at CEI. A version of
this article was originally published on
OpenMarket.org.

• Go to: https://smile.amazon.com/
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• Scroll down to the “Search Charity” box and
… that your Amazon type: Competitive Enterprise Institute
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It’s an easy way to expand the

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COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 5

 C E I E V E N T S A ND P UBL IC A P P E A R A NCE S

Sam Kazman to EPA: Federal Fuel Economy Standards Should

Be Reconsidered
On September 6, the Environmental Protection Agency (EPA) held a hearing on a
Trump administration proposal to reconsider the stringent Corporate Average Fuel
Economy (CAFE) standards that had been put in place during the Obama adminis-
tration. CEI General Counsel Sam Kazman spoke in favor of the proposed recon-
sideration of these overly stringent fuel economy standards, which increase traffic
deaths by restricting vehicle size and weight.

Former SEC Member Paul Atkins Joins Wayne Crews and CEI
Supporters in Chicago
Also on September 6, at an invitation-only luncheon in Chicago, CEI Vice President for
Policy Wayne Crews and former Securities and Exchange Commission member Paul Atkins
discussed the current prospects for regulatory reform in Washington, with a special emphasis
on the finance sector. The luncheon was held at the Chicago Union League Club and was
attended by CEI donors in the Chicago area.

Image courtesy of Heritage Foundation

and Willis Bretz

R.J. Smith Addresses National

Monuments on Heritage
Left to right: Myron Ebell, Owen Paterson, CEI Senior Fellow
Foundation Panel
Angela Logomasini, and CEI Founder Fred Smith Also on October 4, CEI Distinguished Fellow
Robert J. Smith participated on a panel at the
Former UK Environment Secretary Owen Paterson Heritage Foundation about policy solutions
Discusses Brexit at CEI regarding national monuments. The panel
was part of a half-day conference cospon-
On October 4, 2017, Owen Paterson MP, who until 2014 was the sored by Heritage and the Sutherland Institute
United Kingdom’s Secretary of State for Environment, Food, and on the Department of the Interior’s review
Rural Affairs, visited CEI to deliver remarks on how the U.K.’s separa- of national monuments created since 1996
tion from the European Union (EU) will allow the former to develop under the Antiquities Act of 1906. The panel,
more effective, better-targeted environmental policies tailored to the moderated by Heritage’s Katie Tubb, also
country’s specific needs. He was introduced by Myron Ebell, director featured Hannah Downey of the Property
of CEI’s Center for Energy and Environment. and Environment Research Center and Matt
Anderson of the Sutherland Institute.

6 CEI.ORG COMPETITIVE ENTERPRISE INSTITUTE


Left to right: CEI President Kent Lassman, Sen. James Lanfkord, and
CEI Board Member Jean-Claude Gruffat
Sen. James Lankford Meets with CEI
Guests in New York
On October 23, CEI had the privilege of hosting Sen.
James Lankford (R-Okla.) and more than two dozen
CEI friends for breakfast at the Union League Club
in New York City. Sen. Lankford has an impressive
grasp of policy issues and, as a Senate subcommittee
chairman, has a passion for regulatory reform. He
fielded questions for more than an hour and did not
leave until he had spoken with each attendee. We
enjoy a good working relationship with Members of
Congress, like Sen. Lankford, who understand that
CEI policy experts serve as an important scholarly
resource for their legislative work.

Wayne Crews Testifies

before House Oversight
Committee
On October 24, Wayne Crews
testified before the House
Oversight and Government Report
Committee on the current imple-
mentation of President Trump’s
executive orders on regulatory
reform. He noted that while much
progress has been made in reining
in the proliferation of new rules,
much work is still needed in rolling Iain Murray Makes the Case
back existing rules. against Unaccountable
Agency
Also on October 24, CEI hosted a lun-
cheon discussion at our office featuring
Ted Frank Participates in Vice President for Strategy Iain Murray,
American Bar Association on the abusive history of Consumer
Class-Action Debate Financial Protection Bureau and CEI’s
policy recommendations to rein in this
On October 26, Ted Frank, director of
rogue agency. The event was attended
CEI’s Center for Class Action Fairness,
by CEI donors and free market allies.
participated in the discussion,
Murray explained the problems surround-
“The Conservative Case for Class
ing the CFPB, including its unconstitutional
Actions—A Monumental Debate,”
structure and the harmful effects a variety
at the American Bar Association’s
of CFPB rules have had on consumers.
annual National Institute on Class
In 2012, CEI filed a legal challenge to
Actions, in Washington, D.C. He was
the CFPB’s constitutionality. The case is
joined on the panel by the Honorable
currently stalled in District Court in the
Jeffrey Sutton of the United States
D.C. Circuit, but we anticipate significant
Court of Appeals for the Sixth Circuit
developments in the coming weeks.
and Vanderbilt University Law
Professor Brian Fitzpatrick.

COMPETITIVE ENTERPRISE INSTITUTE C E I . O R G 7

 Eventually Amazon Will Fail, and That’s a
Good Thing
BY IAIN MURRAY
T he Federal Trade Commission has
cleared the merger between Amazon
and Whole Foods, sparking yet more
fears that the retail giant is becoming
too big. Even as commercial enterprises
adjust, politicians and bureaucrats in
America, Europe, and elsewhere are
sounding the alarm about how big
companies like Amazon and Google
are shutting out smaller competitors and
hogging the marketplace. But their wor-
ries are misplaced. The market will see
to Amazon just as Amazon saw to its
predecessors.
If a company delivers huge amounts
of value to consumers at a price that
suits them and revolutionizes the way
we do business, government can
see it as a problem to be stopped.
What politicians don’t seem to grasp
is that today’s big companies were
yesterday’s small companies—which
upended yesterday’s big companies.
Amazon, Google, and Netflix are
now big companies that all started by
creating new markets and new oppor-
tunities, which proved the undoing of
the companies and services that came
before. All three began as startups, not
offshoots from a dominant market com-
pany. Google was founded in a garage
by an entrepreneur maxing out his credit
cards. Now we can hardly remember a
time before “Google” was a verb.
In fact, dominant market actors
rarely last for long. Incredible as it
may seem at this moment, Google
will fade into memory some day, and
the firms that will arise to supplant it
may not have even been founded yet.
New industries replace old ones with
new products or services we find more
valuable. Even the most innovative
8 CEI.ORG
companies find it difficult to stay in the
race when confronted by a truly inno-
vative competitor. It’s what Harvard
business professor Clayton Christensen
calls the “innovator’s dilemma”—it is
much easier to innovate outside the
confines of large companies. Amazon
is a prime example.
First, an old industry of small
bookstores with eclectic offerings was
largely replaced in the 1990s by “big
box” bookstores like Borders, where
you could get the latest novel by your
favorite author and browse through
a huge inventory of other books and
merchandise. These bookshops were
so dominant that the romantic comedy
You’ve Got Mail, about the “problem”
of big box stores, was a big hit.
But then Amazon, a small Internet
startup company, started selling books
online, soon undercutting the costs of
the big box stores and delivering books
straight to your door. You couldn’t
browse the books themselves, but the Amazon.com's "Day 1" tower in
online company offered useful informa-
Seattle, WA
tion in the form of customer reviews
and book suggestions based on your
that a lost child at a concert would
browsing and recent purchases. As
become the company’s property. Yet
it grew, Amazon applied the same
it was bankrupted by Netflix, which is
business model to other goods besides
now producing its own original content
books and created new markets in
and competing directly with established
online book publishing and web
TV networks—as is Amazon, of course.
services.
We don’t need government to
Now, Amazon is a world leader,
constrain large companies. The markets
having long since outcompeted
and innovation will do that job just
Borders into oblivion.
fine. In the meantime, Amazon cut
Cue the biggest threat of all: politi-
prices at Whole Foods almost imme-
cal predators. Recently, Amazon, like
diately. That’s the market working for
Google, drew political fire and worries
consumers.
over market dominance when it moved
to acquire Whole Foods.
Another startup-to-success story is
Iain Murray (iain.murray@cei.org) is vice
entertainment company Netflix. But,
president for strategy at CEI. A version
wait—remember Blockbuster? The
of this article was originally published by
video rental store chain was once so
the Foundation for Economic Education.
prominent that The Simpsons joked
COMPETITIVE ENTERPRISE INSTITUTE
 Congress Can Rescind the CFPB’s Gift to
Trial Lawyers
BY TED FRANK
D o Americans need more lawsuits?
They’ll get them if the Consumer
Financial Protection Bureau (CFPB)
has its way. The CFPB—created by the
Dodd-Frank Act of 2010 and still run by
an Obama appointee—issued a rule in
July 2007 barring financial institutions
from including arbitration clauses in their
contracts with customers. That means
disputes would have to be settled by
class-action lawsuits, which mostly
benefit lawyers.
The agency justifies its rule by
claiming it found that 79 percent of
money paid in class-action settlements
goes to consumers. The statistic is
bogus. Lawyers publicize the handful
of settlements in which cash actually
goes to consumers but hide from public
view the overwhelming majority of
settlement results.
A Florida federal district court, for
example, has in recent years approved
several settlements with banks con-
cerning mortgage-insurance practices.
Lawyers collected tens of millions of
dollars. But the claims process for mort-
gage-holder class members was so
arduous that consumers were certain
to receive only a fraction of that. Class
members, who have no say over who
is appointed as their attorney, objected
repeatedly. The court refused to con-
sider how much class members would
actually receive in the settlements—or
even require its disclosure.
How did the CFPB study treat settle-
ments like these, in which there is no
public information about how much
the class received? It assumed every
class member got paid, then calcu-
lated its ratio based on that fictional
“gross relief” number. The agency also
calculated a “net relief” ratio based
on actual payments—but that ratio
ignored all settlements in which the
COMPETITIVE ENTERPRISE INSTITUTE
actual payments were not disclosed,
as well as those in which the class
received no cash at all and the attor-
neys got 100 percent of the proceeds.
My legal team at the Competitive
Enterprise Institute got involved in a
recent class-action settlement involv-
ing Duracell batteries. (The CFPB rule
only applies to financial businesses,
but the rules for what lawyers can
take from class-action settlements are
the same for batteries as for banks.)
The plaintiffs’ attorneys in the Duracell
case received more than 16 times as
much as their clients. They countered
that since the majority of class-action
settlements fail to compensate more
than 99.7 percent of the class, their
0.5 percent compensation rate was
above average. We regularly litigate
against settlements with even worse
ratios than that.
Class-action attorney’s fees often
total thousands of dollars an hour. And
even that number understates the wind-
fall to lawyers because, as The Wall
Street Journal reported in 2013, many
cases involve $25-an-hour temps with
law degrees doing menial tasks that
are billed to class members at over
$500 an hour.
C E I . O R G 9
The CFPB’s study also ignored the
millions of dollars spent on lawyers to
defend against lawsuits even when the
defendants prevail—costs eventually
passed to consumers.
Congress has a chance to undo
this CFPB regulation, thanks to the
Congressional Review Act of 1996.
The law requires federal agencies to
submit new rules to Congress, which
then has 60 “session days” to disap-
prove such rules with a simple majority
vote and presidential signature. The
House voted in July to repeal the CFPB
rule. The Senate can save consumers
billions by following suit.
Trial lawyers are a major source of
Democratic funding and can expect
lockstep Democratic opposition to
efforts to repeal the rule, as happened
in the House. Senate Republicans need
to unify and get the 50 votes required
to perform the consumer-protection
role the CFPB has abdicated.
Ted Frank (ted.frank@cei.org) is director
CEI’s Center for Class Action Fairness.
A version of this article was originally
published in The Wall Street Journal.
 Repealing the Clean Power Plan Will Benefit
All Americans
BY MARLO LEWIS, JR.
E nvironmental Protection Agency
(EPA) Administrator Scott Pruitt's
proposal to repeal the so-called Clean
Power Plan is the most notable step
President Trump and his team have
taken to date to end the Obama admin-
istration's unlawful and economically
destructive war on affordable energy.
Although there is no shortage of
policy reasons to repeal the Clean
Power Plan, which promises lots of
economic pain for no discernible
environmental gain, Pruitt is propos-
ing repeal chiefly because the plan
exceeds the legal authority delegated
to the agency by Congress.
The EPA issued the Clean Power
Plan under the Clean Air Act's Section
111(d). The EPA’s consistent regulatory
practice over the previous 45 years,
the statutory text, and the legislative
history all compel the conclusion that
the EPA’s power is limited to setting
emission standards that facilities can
affordably meet through technological
or operational modifications.
The Obama administration refused
to accept that limitation. It wanted big
reductions in power plant emissions
of carbon dioxide (CO2) like those
in the cap-and-trade schemes that
Congress had previously rejected. But
CO2-capture technology cannot be
retrofitted at a reasonable cost onto
current fossil-fuel power plants. So the
Obama administration reimagined
Section 111(d) to authorize the EPA to
set emission standards too stringent
for any existing coal or natural gas
power plant to achieve, while allow-
ing the owners to comply by reducing
output and investing in new renewable
generation instead.
This obvious government favorit-
ism punishes owners and operators of
coal and natural gas power plants. In
10 CEI.ORG
addition, the EPA interfered with states’
authority to manage their respective
power sectors. This is why the Clean
Power Plan is really a clear power
grab. Congress never gave the EPA the
authority to transfer wealth from politi-
cally disfavored power generators to
special interests or to restructure state
electric power sectors.
Three bizarre consequences further
highlight the Clean Power Plan’s
illegality. First, although Section 111(d)
deals solely with “existing” facilities
in specified industrial source catego-
ries (in this instance, fossil fuel power
plants), compliance would supposedly
be achieved by investing in “new”
wind and solar facilities outside the
source category.
Second, the plan’s “performance
standards” are actually nonperfor-
mance mandates, compelling owners
of fossil fuel power plants to produce
less power or simply shut down. Third,
the plan imposes tougher emission
standards on existing sources than the
corresponding and prerequisite new
source rule imposes on new sources,
which flouts common sense. As the
repeal proposal explains, “the costs
of controlling emissions from existing
facilities will ordinarily be greater than
those for control of new sources.”
Most people don’t like bureau-
cratic power grabs, and they typically
like job-killing regulations even less.
The Obama EPA projected relatively
small job losses and electricity rate
increases from the Clean Power Plan,
but outside experts disagree. The
Heritage Foundation estimated the plan
would reduce annual employment by
479,000 jobs in 2027, reduce cumu-
lative GDP by hundreds of billions of
dollars between 2020 and 2030, and
reduce cumulative household income by
more than $10,000. NERA Economic
Consulting estimated rate increases of
11 to 14 percent from 2022 to 2033.
COMPETITIVE ENTERPRISE INSTITUTE
However, the economic impacts
of the first plan compliance period
are almost beside the point. The plan
is a framework empowering the EPA
to continually tighten the regulatory
screws for decades to come. So, it’s not
the first compliance period targets, but
the prospect of increasingly draconian
curbs on coal and gas power plants
that makes the plan toxic to the domes-
tic energy renaissance on which U.S.
industrial competitiveness depends.
The Obama EPA claimed the Clean
Power Plan would deliver up to $95
billion in climate change mitigation
benefits by 2030, but that’s flimflam.
The EPA’s own climate model estimated
the plan would avert less than 0.02
degrees Celsius of global warming by
2100—too small an amount to have any
discernible impact on weather patterns,
polar bear populations, or anything else
people care about. The climatic effects
in 2030 would be even smaller.
The Clean Power Plan is an unlaw-
ful power grab that forces American
consumers to endure higher electric
rates, fewer jobs, and a less competi-
tive economy—and all for no detect-
able climate benefit. In pursuing
repeal, the administration has clearly
made the right call.
Marlo Lewis (marlo.lewis@cei.org) is
a senior fellow at CEI. A version of this
article was originally published in The
Washington Examiner.
 Banishing Regulatory “Dark Matter”
BY WAYNE CREWS
T urns out there aren’t just too many
regulations, but too many different
kinds of them to track.
Congress has stalled out on passing
regulatory reform legislation and send-
ing it to President Trump’s desk, in spite
of the significant achievement early in
the 115th session of disapproving 14
Obama-era “midnight rules.”
As regulatory liberalization ideas
bounce around but stall, and as one
inventories rules as well as mounting
informal regulatory “dark matter,” one
thing starts to stand out: the profusion
of various names that even ordinary
regulations go by, complicating the
goal of controlling them.
The main vehicle for reform
is now the bipartisan Regulatory
Accountability Act, which would
codify some of the regulatory review
and cost-benefit analysis procedures
employed by presidential administra-
tions since the 1980s, and detailed
in their non-controversial execu-
tive orders. (Its cosponsors include
Democrats Sens. Heidi Heitkamp of
North Dakota and Joe Manchin of
West Virginia.)
Lawmakers should inventory,
simplify, and consolidate the federal
bureaucracy’s increasingly confus-
ing nomenclature, which includes rule
categories like “major,” “nonmajor,”
“significant,” “economically signifi-
cant,” “substantive,” and numerous
others. That streamlining should extend
beyond formal rules to informal
guidance documents, memoranda,
administrative interpretations, bulletins,
and other issuances that agencies
use to implement policy. This “dark
matter,” under many different names
and guises, proliferates without always
following the Administrative Procedure
Act’s notice-and-comment rulemaking
requirements. I detail these in my new
report, “What’s the Difference between
COMPETITIVE ENTERPRISE INSTITUTE
‘Major,’ ‘Significant,’ and all those
other Federal Rule Categories? A Case
for Streamlining Regulatory Impact
Classification.”
The most “bulky” kind of rules, the
“economically significant” ones with
over $100 million in economic impact,
are not actually specifically defined in
law or executive order. The name is just
a term of art referring to certain type of
“significant” rule.
Over time, the profusion of and
array of official designations of rule
types and effects has complicated the
federal regulatory enterprise. Some
types of rules noted above are defined
in legislation, some in executive orders,
while other designations are the cre-
ations of administrators.
As the administrative state contin-
ues to grow, not knowing what to call
regulatory actions nor how to clearly
disclose their impact to Americans is
a significant but artificially created
obstacle to addressing regulatory
overreach, one that must be taken into
account in any reform legislation. The
significant and major rules already
get inadequate oversight, let alone the
myriad seemingly minor rules.
For example, reporting on agency
actions—especially on costly, burden-
some, or controversial ones—could be
refined by deciding between the terms
“significant” or “major” rules to create
more uniformity, by greatly expanding
disclosure of guidance and by subject-
ing guidance to reforms that treat it
more like ordinary rulemaking.
The streamlined categories could be
given greater clarity by assigning cost
estimate tiers to rules—for example,
those with estimated annual costs
above $50 million and below $100
million, above $100 million and below
$150 million, and so forth. Further clar-
ity can come from segregating regula-
tions by categories such as paperwork,
economic, social, safety, and environ-
mental, and by separating out those
actions addressing agency internal
C E I . O R G 11
The most “bulky”
kind of rules, the
“economically
significant”
ones with over
$100 million in
economic impact,
are not actually
specifically
defined in law or
executive order.
operations that nonetheless get lumped
in with other “rules.”
Ultimately, policy makers need to
increase democratic accountability
for the rules and mandates Americans
contend with by reclaiming its Article I
lawmaking power, and ending over-
delegation of rulemaking power to the
executive branch.
But the Constitution isn’t coming to
the rescue in the short term. Therefore,
it’s time for bipartisan nomenclature-
scrubbing. Today’s complexity helps
preserve a large, unwieldy and
undemocratic bureaucracy that dead-
ens our economy. Reducing that com-
plexity is the lowest of the low-hanging
regulatory reform fruit.
Wayne Crews (wayne.crews@cei.org) is
vice president for policy at CEI. A version
of this article was originally published in
The Washington Times.
 Air Traffic Control Might Finally Move into
the 21st Century
BY MARC SCRIBNER
A merica is long overdue for an over-
haul of our radar-based air traffic
control system. Yet federal moderniza-
tion efforts are plagued by delays,
cost overruns, and shifting goals and
requirements. Congress and regulators
have been lackluster at managing and
upgrading the 24/7 business of air
traffic control, according to reams of
government audit reports.
That's why many policy makers,
air traffic managers, free-market
organizations, Clinton and Obama
administration transportation experts,
the Department of Defense, airlines,
and even labor unions are supporting
a proposal to restructure air traf-
fic control around recognized best
practices of the International Civil
Aviation Organization. The U.S. is the
last major industrialized country yet to
reform air traffic control in this manner.
12 CEI.ORG
The House is expected to vote soon
on these reforms as part of the 21st
Century Aviation Innovation, Reform,
and Reauthorization (AIRR) Act.
The goal is to modernize air traffic
control for the benefit of all air travel-
ers. The best way to do that is to keep
the Federal Aviation Administration
as the national aviation safety regu-
lator but separate out the Air Traffic
Organization, transferring air traffic
control duties to an independent non-
profit user cooperative. Airspace users
would pay cost-based user fees, and
any excess revenue would be rein-
vested into the system or returned to
customers.
This model has been highly success-
ful where it has been adopted in recent
decades. It ends the conflict of interest
of having an aviation safety regula-
tor regulate its own air traffic business
operations. And that more focused,
streamlined system has led to lower
costs, fewer delays, and the adoption
COMPETITIVE ENTERPRISE INSTITUTE
of modern technologies and practices.
Unfortunately, a special interest
group representing the flight depart-
ments of Fortune 500 companies is
vigorously opposing these common-
sense reforms. The National Business
Aviation Association (NBAA) is the
primary American lobby group for
corporate jet owners and operators. Its
board of directors includes members
representing industry titans such as
American Express, DuPont, JPMorgan
Chase, Honeywell, and Walmart.
NBAA fears losing its massive cross-
subsidy to C-Suite corporate execu-
tives from people who fly coach.
Most taxpayers and air travelers
are unaware that under the existing
federal aviation tax structure, corpo-
rate jets get a massive tax subsidy.
Business jets contribute less than 1
percent of the tax revenue that sup-
ports air traffic control yet account for
more than 10 percent of system use.
Taxes on airline tickets conveniently
 pick up their tab. Complaints from the
corporate jet set over new cost-based
user fees would be understandable,
but for the fact that the current proposal
exempts them from fees.
But the NBAA has bankrolled
campaigns that falsely claim air traffic
control reform is a giveaway to major
airlines. In truth, under the reform plan,
large and regional passenger carriers
will have just two seats on a board of
directors that numbers 13. They get the
same number of seats as general avia-
tion, such as NBAA’s members and
noncommercial hobby pilots.
Among lawmakers in Congress,
opponents expressed concern about
the impact of reforms on general avia-
tion. That’s because, despite being
held harmless by the reform proposal’s
user fee provisions, the general avia-
tion lobby coordinated by NBAA has
claimed airport and airspace access
will be threatened.
That, too, is wrong. The 21st Century
AIRR Act provides robust, explicit
access protections that were negoti-
ated by Rep. Sam Graves (R-Mo.),
a pilot and co-chair of the House’s
General Aviation Caucus. Graves
recently endorsed the reform legisla-
tion after his concerns were addressed.
So has Ohio-based NetJets, a NBAA
Since its release, CEI’s I, Whiskey: The Human Spirit has won 10 awards, been
screened more than 50 times worldwide, and garnered nearly a quarter million
views online! The film has also been accepted into 12 film and whiskey festivals.
Upcoming screenings include the Portland Film Festival, Cucalorus, and Silicon
Valley International Film Festival.
COMPETITIVE ENTERPRISE INSTITUTE
Leadership Council member and the
largest business jet company in the
world.
The status quo,
The real problem is the current
state of air traffic control. The status with its inconsistent
quo, with its inconsistent funding and
risk of government shutdowns, is what
threatens general aviation access,
funding and risk
particularly in rural areas. Under the
reform proposal, the non-profit, with
of government
its consistent revenue stream and
improved management, would be shutdowns, is what
able to more rapidly deploy remote
and virtual control towers to improve
access by reducing the cost of provid-
threatens general
ing air traffic control services at rural,
low-volume airports.
aviation access,
To build its anti-reform echo
chamber, NBAA hatched front groups particularly in
under the auspices of the Alliance
for Aviation Across America and GA
United’s ATC Not for Sale. These
rural areas.
NBAA-backed groups repeat NBAA
talking points and purport to show system just to preserve the corporate jet
broad grassroots opposition to reform. welfare that everyday American airline
But tax records indicate nearly all customers underwrite is a boondoggle
of the Alliance’s budget came from all members of Congress should reject.
NBAA contributions, and GA United’s
campaign is run by the senior manager
of content and social media at NBAA. Marc Scribner (marc.scribner@cei.org)
NBAA’s private interests should is a senior fellow at CEI. A version of this
not trump the public interest. Forgoing article was originally published in The
a modern American air traffic control Washington Examiner.
C E I . O R G 13
 THE
GOOD
The Good: CCAF’s Subway
“Footlong” Settlement Nets
Win for Class Action Fairness
On August 25, an appeals court rejected
a settlement in a lawsuit involving
Subway’s “footlong” sandwiches that
would have paid the plaintiffs’ attorneys
over half a million dollars, while leav-
ing nothing to the class members. CEI
objected to the settlement in a lower
court and then appealed its approval
to the U.S. Court of Appeals for the
Seventh Circuit. The original class action
suit alleged that Subway sandwiches
often fell short of the chain’s “footlong”
claim. No one disputed that the amount
of dough and ingredients was uniform for
each sandwich, and the named plaintiffs
conceded that the sandwiches’ length
didn’t affect their purchases. Still, the
plaintiffs’ lawyers sought a fee award and
payments to class representatives totaling
$525,000.
“The Subway sandwich litigation was
a racket used by plaintiffs’ attorneys to
extract fees for themselves, as the Seventh
Circuit rightly recognized,” said Ted
Frank, director of CEI’s Center for Class
Action Fairness and the Subway customer
objecting to the settlement. “We hope the
failure of this frivolous lawsuit and unfair
settlement deal will discourage others
from pursuing frivolous class actions.” On
remand, plaintiffs abandoned their efforts
to pursue claims against Subway.
14 CEI.ORG
THE
BAD
The Bad: Green Activists
Continue Fight against
Useful Pesticide
Last spring, Environmental Protection
Agency Administrator Scott Pruitt
denied a petition by environmental
activists to ban the pesticide chlor-
pyrifos, which has safely helped
farmers to combat pests for over 50
years. The Pesticide Action Network
of North America and Natural
Resources Defense Council, who
filed the original petition in 2007,
appealed Pruitt’s decision before
the Ninth Circuit Court of Appeals.
The court denied their appeal in July.
However, the court only rejected
it on procedural grounds, explain-
ing that the greens must first file an
administrative appeal with the EPA.
If the EPA denies them, they can
go back to the Ninth Circuit, likely
setting off more litigation. Worse,
the Protect Children, Farmers, and
Farmworkers from Nerve Agent
Pesticides Act of 2017, recently
introduced in the Senate, would ban
the chemical without any scientific
justification.
“The Trump administration needs
to stand firm behind Pruitt’s deci-
sion and be prepared to defend
it,” said CEI Senior Fellow Angela
Logomasini. “A ban would have
serious adverse impacts on a wide
range of crops.”
COMPETITIVE ENTERPRISE INSTITUTE
THE
UGLY
The Ugly: CFPB Payday
Loan Rule Will Restrict
Access to Credit
On October 5, the Consumer Financial
Protection Bureau published a burden-
some new regulation on payday loans
that threatens to cut off many struggling
Americans’ access to credit. The payday
loan rule will require lenders to assess
customers’ “ability to repay” to ensure
borrowers can repay the loans and fees
within two weeks, even though immedi-
ate access to cash is the reason people
take out payday loans in the first place.
It will cap the number of times a cus-
tomer can roll over a loan at three, and
it will bar lenders from trying to charge
a customer’s checking account after two
unsuccessful attempts. These restrictions
may seem well-intended, but in effect,
they direct lending to those who least
need it and prevent lenders from col-
lecting from borrowers who do not pay,
raising the cost to other customers.
“Eliminating the already limited
choices of vulnerable consumers will do
more harm than good,” said CEI Policy
Analyst Daniel Press. “It is not even
certain whether the rule is constitutional.
The CFPB was explicitly prevented from
imposing interest rate caps or regulating
consumer credit prices by the Dodd-
Frank Act. Yet they have found a work-
around by imposing the ‘ability to repay’
standard on certain thresholds of loans,
creating a de facto usury cap.”
 MediaMENTIONS
Reuters showcases the significant
ruling in the Subway sandwich
foot-long class action lawsuit,
quoting Ted Frank on why the
court’s decision to throw out the
case was a good step toward
diminishing class action abuse.
But a prominent class-action critic,
Ted Frank, said ... it made no sense to
award $520,000 to the customers’
lawyers, plus $5,000 of “incentive”
awards to 10 plaintiffs, for settling.
“This is exactly the opinion we were
hoping for,” Frank said in an interview.
“It affirms the principle that when attor-
neys bring class actions to benefit only
themselves, it’s an abuse of the system,
and courts should not tolerate it.”
–August 25, Reuters
Myron Ebell highlights why EPA
Administrator Scott Pruitt needs
to focus next on the dangerous
endangerment finding.
Myron Ebell, who led Trump’s EPA
transition team, says he wants Pruitt
to challenge the EPA’s endangerment
finding—the scientific document under-
pinning the agency’s global-warming
regulation. “It’s essential,” Ebell says.
But Pruitt is savvy about which battles he
picks. Challenging the endangerment
finding would trigger a legal fight much
like that which ensnared Trump’s ill-fated
travel ban.
–November 6, Time
Wayne Crews explains how
much progress President Trump
has actually made on pushing
back against the regulatory state.
The Trump administration has
withdrawn or delayed more than 800
Obama-era regulatory actions in its
first six months. Proposals for new rules,
including those to delay or rescind
existing rules, dropped 32 percent
from the same period in 2016 under
Obama, and are down from similar
six-month periods under presidents
George W. Bush, a Republican, and
COMPETITIVE ENTERPRISE INSTITUTE
Bill Clinton, a Democrat, according to
the libertarian Competitive Enterprise
Institute. At the same time, Trump has
limited new federal regulations by
requiring agencies to cut two rules
for every new one they create. He
has asked each agency to name a
regulatory reform officer to take aim
at unneeded rules. “By far, this is the
most significant regulatory rollback
since Ronald Reagan,” said Wayne
Crews, vice president for policy at
the Competitive Enterprise Institute.
“The Trump mode so far is to regulate
bureaucrats rather than the public.”
–September 28, Reuters
CEI is cited in the discussion of the
upcoming Janus Supreme Court
case, which addresses unions
using member dues for political
purposes.
The debate over whether govern-
ment unions should exist at all, repre-
senting the interests of the protected
government class over those of the
American people, is for another time.
The reality we are faced with today
is one where organizations such as
AFSCME have, as the Competitive
Enterprise Institute noted, “demon-
strated unbridled creativity in channel-
ing the fees paid” by individuals such
as [plaintiff Mark] Janus “to fund a
range of ideological activities as wide
as any political party’s.” The fact is,
money is fungible and can be easily
redirected wherever government union
officials—or AFSCME leadership in this
case—intend for it to go.
–October 6, The Washington Post
A review of Iain Murray’s report
on the Consumer Financial
Protection Bureau captures
the harm the agency does to
consumers.
“The Consumer Financial Protection
Bureau was set up under the Dodd-
Frank Act of 2010 in violation of con-
stitutional norms ostensibly to protect
C E I . O R G 15
consumers from bad
actors in the bank-
ing and financial
services industry,
but the agency is
instead actively
harming consum-
ers, pressing ahead
with regulations
even when the benefit to consumers is
likely to be outweighed by the costs,”
wrote Iain Murray, vice president for
strategy at the Competitive Enterprise
Institute, in a new study titled, “The
Case against the Consumer Financial
Protection Bureau: Unconstitutionally
Structured and Harmful to Consumers.”
Murray cites as a recent example the
“huge $185 million fine the Bureau
levied on Wells Fargo Bank for the
‘upselling’ scandal,” in which bank
staffers misled customers to open new
services accounts or simply opened
credit accounts in their names without
telling them.
–September 22, Investor’s
Business Daily
Delaying the Labor Department’s
fiduciary rule is good news, but
John Berlau explains how it still
harms investors.
While opponents are cheering the
delay, they also say the parts of the
regulation that already have taken
effect are hurting investors. “The fidu-
ciary rule effectively limits choices for
investors because the government and
trial lawyers are the ones who define,
under the rule, which investments are
in the ‘best interest’ of investors,” said
John Berlau, a financial policy expert
at the Competitive Enterprise Institute.
Opponents say the evidence of harm
to investors lies in the fact that some
brokerages are changing the way they
approach management of individual
retirement accounts, or IRAs.
–August 10, CNBC

1310 L Street NW, 7th Floor
Washington, DC 20005
...END NOTES
Rain or Shine, Always Issue a Fine
Government agencies are often criticized for not being
fast or efficient enough in delivering their services. Don’t put
Miami-Dade County’s building and safety code inspectors
on that list, though. According to WSVN-TV in Miami, the
county’s inspectors ticketed residents for code violations in
September within hours of Hurricane Irma passing over the
area. Homeowner Celso Perez was helping neighbors move
downed trees out of the road when an enforcement officer
arrived and wrote Perez a citation for the fence around his
pool, which had been partially blown over by the storm.
The county employee helpfully hung the ticket on the portion
of Perez’s fence that was still standing and left him and his
neighbors to continue their cleanup work.
Won’t Someone Think of the Sand Dredging
Companies?
Local safety officials, however, aren’t the only ones
adding insult to injury as South Florida residents attempt to
put their lives back together after recent storms. Hurricane
Irma washed away a huge volume of sand from beaches
around Miami, and given free-spending tourists’ preference
for sandy beaches, replacing it is a top priority for local
officials. Unfortunately, beach rehab efforts have to contend
with the provisions of the Water Resources Development
Act, which requires such sand to be domestically sourced.
New sand could be purchased from overseas providers in
places like the Bahamas, where supplies can be obtained for
roughly half the cost of U.S. sources, but the 1986 law firmly
says no.
16 CEI.ORG
Nonprofit Org.
U.S. Postage
PAID
Permit 425
Southern MD
New Yorkers Free to Dance the Charleston Again
Despite its reputation as the City That Never Sleeps, New
York City has had its share of moralistic legal restrictions over
the years. One of those was just recently repealed—the Big
Apple’s cabaret law and licensing regime, which tightly con-
trolled when and where people could dance in public. Since
the mid-1920s, the city kept most bars and restaurants from
allowing people to get down, and limited which performers
were allowed to play live music. Like any complex licensing
regime, it was always subject to capricious and even vindic-
tive enforcement, disadvantaging whichever business owners
and performers were out of favor with the local authorities.
Berlin Police Crack Down on Noxious Gas Emissions
Berlin’s Police Unit 32 has been having a rough time.
First, it made headlines for holding rowdy celebrations fol-
lowing the G20 summit in Hamburg in July. Now the same
unit is making headlines for a different kind of questionable
behavior: overreacting to a flatulent citizen. After stopping a
group of people and demanding to see their identification,
one of the individuals being asked to produce documents
allegedly broke wind in the presence of the officers and
was fined the equivalent of over $1,000 for the disrespect
gesture. As CityLab.com reports, the unusual enforcement
action has become known as the Irrer Pups-Prozess, or
“Crazy Toot Trial.”
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