Feb 26, 2020 —University of Colorado Boulder Law professor Craig Konnoth evaluated the practice of the federal government granting private companies preemptive power over state law and offered a trilateral approach to checking private power in his article Preemption Through Privatization.
Konnoth recognized that, under both the Trump and Obama administrations, control of health data regulation was taken from states and granted to private groups. This inspired Konnoth to further investigate the phenomenon of replacing state regulatory power with that of private entities.
“The federal government is encouraging behavior that would lead to a displacement of state regulation,” he said. “What I do in the paper is lay out three different approaches to displacing state law through private entities.”
These approaches are (1) Congress or another administrative agency preempting an area of law, transferring control in that area from states to private entities and the contracts they develop, (2) the federal government subsidizing or using other market techniques to incentivize private firms to act in ways that dampens the force of state policy, , and (3) the federal government delegating the power of preemption to private entities.
“Under current law, there is nothing that would prevent a private entity being delegated a power to actually make law that would, among other things, have the capability of preempting state law,” he said. “This kind of privatized preemption is more dangerous than your standard preemption.”
Private preemption does raise a number of concerns. Voters may be displeased if the federal government preempts state law, and preemption by private entities possesses fewer institutional safeguards.
“The literature often looks to doctrinal solutions that I think of as quite limited in various ways because the doctrinal solutions are largely going to be driven by who’s in the Supreme Court,” he said, “and, if anything, while scholars have been saying, ‘This is the way we should go to solve this problem,’ the Court has been going in the other direction.”
Konnoth proposes three answers to this issue: giving states authority from the beginning, developing plans in which states have oversight authority, and empowering the states with real enforcement authority.
“I argue that with respect to numerous schemes where you have private entities involved, you should give states the authority to actually check and litigate and enforce claims against private entities that behave in ways that are undesirable,” he said.
Ultimately, Konnoth believes a system where both states and the federal government can oversee private entities is the ideal solution to privatized preemption.
“I suggest that this kind of trilateral balance would actually be better than the bilateral relationships urged by the traditional preemption and privatization literatures.