No, it Isn't Ok if Conservatives Abuse Regulation Either.
Texas AG Ken Paxton is accused of turning consumer-protection regulation into a tool of universal regulation
Important caveats: This is based on a news report, there are limited facts available, no allegations have been proven and new information may materially change any analysis.
The use of regulation in one area as a tool to de facto regulate downstream actors and actions is an emerging and distressing trend. I’ve written a lot about it, especially in the case of the New York state financial regulator’s alleged efforts to suppress pro-Second Amendment speech via bank and insurance regulation, which the Supreme Court recently ruled could be a First Amendment violation. As I and my colleagues have said in the past, while it appears that the threat is currently coming mostly from the left, there is no reason that this must be so.
In fact, there are allegations that the Attorney General of Texas, Ken Paxton, is using state regulatory laws to achieve unrelated conservative policy goals. Paxton is alleged to be using consumer protection law to target groups disfavored by (at least some) conservatives, such as groups that provide services to immigrants without legal status and the providers of medical services to transgender teens.
According to the allegations the AG is not responding to consumer complaints. Instead, the AG’s office is using the sweeping power afforded them by consumer protection laws to initiate investigations on its own with the goal of intimidating and harassing groups serving disfavored causes to get them to stop serving those causes. Put differently, the AG is accused of targeting intermediaries to harm a downstream actor, just like what Maria Vullo is accused of doing to the NRA.
As with financial regulation, consumer protection regulation can be uniquely well suited to abuse because of both its breadth and its vagueness. The laws cover almost every market actor to one degree or another. They also tend to provide a lot of discretion to those who enforce them to initiate investigations, impose burdens on the targets of investigations, such as document production, and even define what type of behavior may violate the law.
Yes, a targeted party can resist the government’s efforts in courts, as some of the groups allegedly targeted by Paxton are doing, but resisting increases cost and risk significantly. The danger (or intent depending on your perspective) is that, rather than face increased risk, parties will stop serving the disfavored group.
Of course, this isn’t to say that every use of consumer protection regulation (or financial regulation for that matter) against a politically controversial target would be inappropriate. There are times when laws are violated, and being a controversial group is not a get-out-of-jail free card. A regulator applying the law in a fair and even-handed manner, without malice or inappropriate intent, and without some sort of unconstitutional effect (e.g. an unconstitutional “chilling” of speech) would be permissible.
It is also worth distinguishing the alleged conduct of the Texas AG office from other cases, such as a potential use of consumer protection law to protect customers from essential firms, such as payments processors, using vague terms of service to punish and suppress speech they dislike. As I discussed in detail in this series talking about PayPal’s terms of service and their alleged targeting of conservative political groups there are legitimate arguments that vague terms of service that fail to spell out limits on how the product could be used, but then punish users who violate the terms could be unfair trade practices. That they could be potentially used to suppress speech would only make the justification for the State to step in to protect people as consumers and citizens more reasonable.
That is different, however, from what Texas is reportedly doing. The investigations are supposedly not being initiated because a consumer is potentially being harmed, but rather out of the regulator’s distaste for the general business of the target.
Of course, it is possible that the AG’s investigations are well founded, or at least not motivated by a desire to attack the lawful conduct of its targets. If not, however, it will provide yet more evidence that it isn’t just the right that should fear the abuse of specific regulation as a tool of universal regulation.
We should realize that there are two stable equilibria before us. One is that policymakers, left and right, try to use any leverage they have to regulate universally. The other is that this is prohibited by law as well as norms and the expectations of voters and politicians. What is not stable is the idea that one side could do it with the other side perpetually refusing to follow suit.
After all, if using specific regulation as universal regulation is effective and permitted why won’t policymakers use it? Wouldn’t policymakers who refused to use their authority in such a way be replaced by voters by those who would? Once the genie is out of the bottle the race will be to get as much leverage through as many angles as possible. Regulators will be selected in part for their ability and willingness to get creative to accomplish the “whole of government” objective. Of course, that may harm their ability to accomplish the core and original intent of the regulation, as Prof. Hill argues with regard to bank regulators. That cost might be viewed as acceptable however if it helps some group accomplish what they see as a more important goal.
To prevent this we will need to not only discourage, but prohibit such regulatory abuses. The Supreme Court took a step in this direction in their recent NRA v. Vullo decision, and it is perhaps ironic that Paxton may be one of the first government officials to have that case cited against him. Still, it will require more work from not only the courts but also legislatures and voters to ensure that regulation is not abused. Hopefully, left and right can appreciate the stakes and come together to address this pressing threat. Otherwise regulation may become just another front in a war of all against all.