Introduction
One of the principal motives when embarking on this book was to shed light on the challenges expert economic evidence and analysis presents for judicial review in a neighbouring to competition law field, that of utility regulation, which has been largely underexplored by both competition law and administrative law scholars. It soon became clear that although there is a significant body of doctrinal analysis on judicial review of regulatory agencies’ decisions, there is very little research that has sought to systematically examine the interaction of both regulators and courts with economic evidence. This book aims to address this gap in the literature by engaging deeply with economics and exploring for the first time their impact on the exercise of regulatory discretion and judicial review in two common law jurisdictions: the USA and the UK. In doing so, the book combines theoretical, doctrinal, comparative, and empirical analysis.
The methodological design of this comparative study was not driven by any need to adhere to one of the established camps of comparative legal research, i.e., the ‘functional’ or the ‘law and culture’ approach. What rather informed the design was the nature of the research question,[1] the enquiry’s context, subject-matter, and purpose. The end-product is a profoundly comparative and interdisciplinary endeavour, that embraces methodological pluralism. This is not out of methodological ambition. It is rather that the issue of adjudicating economic evidence in regulatory disputes is a complex one. It depends in part on normative arguments about which institutions in the regulatory state (courts or regulators) should have primary interpretive authority over defining economically informed concepts (e.g., cost-orientation) upon which our enjoyment of essential services depends. It also requires an understanding of how judicial and other institutions respond to the demands of judicial review of economic evidence, how they perceive their role in the regulatory enterprise and how their role evolves over time. It is essentially about regulatory and judicial discretion, its constraints, and limits at the intersection of two distinct ‘rationalities’: legal and economic. In the remaining space, I will first briefly present the research question (section 2), then elaborate on the choice of the US and the UK as the main comparator jurisdictions (section 3) and finally explain why comparative institutional analysis is as a promising methodological avenue that promotes the comparative nature of this study (section 4), before offering some brief concluding thoughts (section 5).
Research Question
In the book I am raising an uncomfortable question: how can appellate courts staffed with generalist judges feel confident in reviewing expert regulators’ decisions? This question becomes even more pressing if we think that judicial review serves, amongst others,[2] as a key error-correction device, i.e., a mechanism for ensuring the soundness and accuracy of regulatory decisions.[3] Assuming, therefore, that judicial review can minimise erroneous regulatory decisions, does the increased amount of economic evidence that is presented in regulatory disputes challenge the error-correction function of judicial review? To put it otherwise, what are the limits of judicial review of economic evidence in appeals from utility regulators in the US and the UK? And how should such limits be addressed from an institutional design perspective?
The question is highly topical. From distant Australia to South America and from Asia to the UK, several jurisdictions have been focusing their attention on the review mechanisms of regulatory decisions in the utility sector, as evidenced by several high-profile policy reforms.[4] The loose strands of the ongoing academic and policy debate on regulatory appeals seem to revolve around two issues. The first issue may be dubbed ‘jurisprudential’ and concerns the appropriate scope of review of regulatory decisions. Couched in the familiar language of ‘judicial deference’ versus ‘non-deference’ the scope of review encompasses questions concerning the standard of review (e.g., correctness, reasonableness) and the intensity thereof. The second one may be dubbed ‘institutional’ and broadly relates to the optimal institutional response to the pervasiveness of economic evidence in regulatory decisions. For instance, should such decisions be reviewed by courts of general jurisdiction or by specialist adjudicatory bodies, composed of professional judges and lay members with a background in economics?
The ‘clients’[5] who intend to make use of this comparative knowledge are the many jurisdictions around the world, that grapple with similar concerns. My aim is to identify and expose the macro-levels and micro-level factors that affect the reception of economic evidence in courts so as to offer a ‘recipe’ for adjudicating regulatory disputes and a valuable roadmap for the institutional design of the regulatory and judicial process. As I will explain below comparative institutional analysis serves well this purpose.
Why the US and the UK as the main two comparator jurisdictions?
Three main reasons informed the choice of the US and the UK as the main two comparator jurisdictions. At a first glance, it is fairly evident that the US is a far more mature system with regard to the role of economic evidence in regulation compared to the UK, where the boundaries between the role of economists and lawyers are more pronounced in view of the little impact economic analysis of law has had in legal academia and consequently the bar and the bench. Beyond that, historical and institutional considerations also have a role to play in the selection. Historically, the US is the antecedent of the modern regulatory state, the jurisdiction where regulation through independent regulatory commissions was first documented. At the same time, it is the jurisdiction that first experienced the rise of professional expertise in utility regulation. Those features allow the observation of an evolutionary response to the challenges posed by the presentation of economic evidence in regulatory disputes. By contrast, the British regulatory state is a more recent phenomenon, as it emerged after the late 1980s’ vast privatisation programmes. There were no precedents for the regulators to work with at the time, hence the reactions to the challenges posed by economic evidence developed in an incremental fashion.
On the institutional level, three significant differences exist in the way the US and the UK have sought to deal with the increased recourse to expert economic evidence and analysis. Firstly, the two jurisdictions have adopted different models for the review of economic evidence. Briefly, the US has adopted an internal, administrative litigation model: when a decision involving economic evidence made by a US federal agency is challenged or disputed a common pattern is for the decision to be first reviewed by an adjudicatory institution embedded in the regulatory agency, that of the Administrative Law Judge (ALJ). By contrast, the UK has adopted an external model of review: economic evidence is (most of the time) reviewed in the first instance by a body external to the regulators, the Competition and Markets Authority (CMA).
Secondly, differences exist with regard to the standard of review of regulatory decisions. Contrary to the US, in the UK both the options of merits review and judicial review are (in principle) open for challenging regulatory agencies’ decisions. Thirdly, while the US has resisted the idea of establishing specialist courts for the resolution of regulatory disputes, in the UK one can witness an institutional response to the challenges posed by economic evidence, exemplified with the establishment of the specialist Competition Appeal Tribunal (CAT).
Those three differences together permit the observation of how economic evidence is received in different institutional settings (i.e., generalist courts and specialist tribunals, internal review and external review) and of the role of the different standards of review in the judicial scrutiny of such evidence.
The promises of comparative institutional analysis
In a bid to uncover the wider set of institutional factors that determine the reception of economic evidence in different regulatory and adjudicative settings, the book advances an institutional analysis of the study of judicial review of economic evidence. Such analysis is very much influenced by the so-called ‘socio-political’ strand[6] of institutionalist approaches in the study of law and courts. Unlike the ‘rationalist’ strand which views judges as pure rational choice maximisers and courts as the mere aggregation of judges’ preferences, the socio-political strand[7] allow us to easily reject single-factor explanations, such as that judges do not understand economics in favour of a richer set of macro-level (e.g., cultural, and environmental factors) and micro-level (e.g., court’s rules of procedure) institutional factors.
The institutional approach draws significantly on Neil Komesar’s analytical framework of comparative institutional analysis.[8] Komesar approaches institutions, such as the adjudicative and regulatory process, as imperfect alternative mechanisms by which societies carry out their goals. Because one institution may be better able to implement those goals than another institution, comparative institutional analysis stresses the primary role of institutional choice: ‘the decision of who decides’. [9] Komesar approaches these choices in ‘participatory terms’ (the direct or indirect participation of the affected stakeholders in the decision-making process). Which institution brings out the diversity of affected interests on a given issue, while avoiding situations of both ‘minoritarian bias’ (the over-representation of minority interests seeking rents) and ‘majoritarian bias’ (the over-representation of majority interests, such as consumers).[10] If the regulatory and adjudicative institutional process are imperfect alternatives, as this book contends, it follows that the challenges posed by economic evidence in regulatory disputes should be addressed by a comparative institutional analysis of these imperfect alternative choices to select the least imperfect one.
Through the examination of the main actors involved in the regulatory process in the US and the UK and the different avenues that exist for challenging regulatory decisions, the book reveals a plethora of imperfect decision-makers that are involved in the regulatory and adjudicative process. Those imperfect decision-makers vary significantly with respect to their expertise in regulatory matters and the ways in which they apply and/or scrutinise economic evidence. Hence the differences in the degree of scrutiny of economic evidence across the two jurisdictions can be interpreted not solely as differences between institutions and procedure, but also as stemming from the different incentives presented to judges by the broader socio-political and constitutional landscape in which they are embedded. Hence, while the so-called ‘functionalists’ would only look at the written law, the institutional approach to comparative legal research allows us to take into account both micro-level considerations pertaining to the relevant laws governing economic regulation in the two countries, the nature of the proceedings (administrative or court proceedings) as well as macro-level considerations’, such as federalism, that a ‘law as culture’ approach would demand us to take into consideration. The thorough examination of these factors through the prism of comparative institutional analysis yields a more nuanced account of the error-correction function of judicial review, one which is devoid of single-factor considerations, such as that economic evidence is too complicated for generalist judges, in favour of a richer set of variables, that do and should inform both the jurisprudential (standard of review) and the institutional (generalist vs specialist courts) dilemma.
Conclusion
The research endeavour undertaken required to step out of one’s comfort zone, not only in navigating the interdisciplinary nature of the work, but also in bringing together two fertile sources of scholarship: the competition law and regulation scholarship (which informs the substantive rules governing economic regulation) and the administrative law scholarship (which informs the procedural rules governing this area). It is hoped that the book will stimulate and encourage a productive dialogue between the disciplinary communities of lawyers and economists, but also between competition law and administrative law scholars, who have tended to talk past each other despite facing common interpretive challenges.
Posted by Dr Despoina Mantzari (Associate Professor in Competition Law and Policy, UCL Laws).
[1] Mark Van Hoeck, ‘Methodology of Comparative Legal Research’ in Mark Van Hoeck (ed), Methodologies of Legal Research: Which Kind of Method for which Kind of Discipline (Hart 2013).
[2] To this effect see C Harlow and R Rawlings Law and Administration (3rd edn, CUP 2009) 669. See further Martin Shapiro, ‘Appeal’ (1980) 14 L & Soc Rev 629.
[3] See e.g., Steven Shavell, ‘The Appeals Process as a Means for Error Correction’ (1995) 24 JLS 379; Chad M Oldfather, ‘Error Correction’ (2010) 85 Ind LJ 49.
[4] In Australia see Standing Council on Energy and Resources (SCER), ‘Review of the Limited Merits Review Regime’ (July 2012). In the UK see Department for Business, Innovation and Skills (DBIS), ‘Streamlining Regulatory and Competition Appeals: Consultation on Options for Reform’ 19 June 2013, available at: < https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/229758/bis-13-876-regulatory-and-competition-appeals-revised.pdf>. In September 2020, John Penrose MP was commissioned by the UK Chancellor of the Exchequer and the Secretary of State for Business, Energy and Industrial Strategy to write an independent report on how the UK’s approach to competition and consumer issues could be improved. The report was published in February 2021, see ‘Power to the People: Independent Report on Competition Policy’ available at: https://www.gov.uk/government/publications/power-to-the-people-independent-report-on-competition-policy. See also Navroz Dubash and Bronwen Morgan (eds), The Rise of the Regulatory State of the South: Infrastructure and Development in Emerging Economies (OUP 2013).
[5] J Basedow, ‘Comparative Law and its Clients’ (2014) 62 (4) The American Journal of Comparative Law 821
[6] Tom Ginsburg and Robert A Kagan, ‘Institutionalist Approaches to Courts as Political Actors’ in Tom Ginsburg and Robert A Kagan (eds) Institutions and Public Law – Comparative Approaches (Peter Lang 2005) 1-3. See Michael A Bailey and Forrest Maltzman, The Constrained Court: Law, Politics and the Decisions Judges Make (Princeton Univ Press 2011).
[7] Under this approach, the judiciary is thought to have its own ‘utility maximising function’. See Richard Posner, ‘What Do Judges Maximize? The Same Thing as Everyone Else’ (1993) 3 S Ct Econ Rev 1, 3; Lawrence Baum, ‘What Judges Want?’ 749-50; Barry Friedman, ‘The Politics of Judicial Review’ (2005) 85 Texas L Rev 257, 258.
[8] Neil K Komesar, Imperfect Alternatives: Choosing Institutions in Law, Economics and Public Policy (U Chi Press 1997) 26.
[9] Ibid 3.
[10] Ibid 27.
Suggested citation: D Mantzari, ‘Courts, Regulators, and the Scrutiny of Economic Evidence – Comparative Perspectives (OUP 2022) – Reflections on Methodology’, BACL Blog, available at https://british-association-comparative-law.org/2023/10/27/courts-regulators-and-the-scrutiny-of-economic-evidencecomparative-perspectives-oup-2022-reflections-on-methodolog-by-despoina-mantzari/
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