Explaining Regulatory Behavior
Whether public or private, safety standards generally impose concentrated costs and confer dispersed benefits. "It may be astonishing that [regulation] of this sort is ever passed," observes James Q. Wilson, who advances a theory of entrepreneurial politics to explain its emergence in the public sector. The theory, which relies on latent public opinion and anti-business sentiment, helps explain the government's behavior in at least three of the four case studies. Aviation safety seems to be a case unto itself. Wilson's theory does not explain private regulation, however. Private standards are not foisted on the private sector the way public standards are. Instead, private regulation is usually explained by some form of "capture" theory. The notion of capture is almost redundant, since private standards-setting is a form of self-regulation. Private standards are often thought to reflect "the lowest common denominator" or "the path of least resistance." But the varied and sometimes stringent behavior observed in the private sector challenges these notions. The expected politics of private regulation prevailed in only one case, resulting in the lax standard for grain elevators. Moreover, there are puzzles about the behavior of the private sector in all four cases. Why was the Z21.11.2 committee willing to upgrade its requirements, substantially adding to retail costs, but unwilling to add the inexpensive oxygen depletion sensor? Why are certain provisions in UL 1482 and NFPA 408 overly stringent in the view of independent experts with no
commercial axe to grind? Moreover, why weren't economic concerns ever voiced when NFPA 408 was upgraded?
This chapter explores two traditional explanations for regulatory behavior, along with three more powerful ones suggested by the case studies. The most conventional explanation of private regulation builds on the metaphor of the path of least resistance. Forestalling government regulation is the other motive most commonly attributed to the private sector. Other explanations suggested by the cases include: the political economy of product testing, the peculiar politics of aviation safety, and the legal constraints of the regulatory environment.
The Political Economy of Safety Regulation
The Path of Least Resistance
Private standards-setting is widely thought to be controlled by those who want the least done. Most private standards are "consensus" standards, a process noted for the rule that there be no "unresolved negatives" among those participating. This process seems practically designed to ensure that standards-setters follow the path of least resistance. The need for consensus, Eads and Reuter argue, leads to a "watering down" of many standards. The process is abetted, others add, by the lack of consumer representatives agitating for increased safety.
The case studies provide selective support for the conventional wisdom. Business interests often express concerns about the cost of upgrading standards. Manufacturers of woodstoves and gas space heaters complained that the costs of certain UL and AGA requirements were unjustifiably high. Grain elevator operators sing the same refrain. There may be a realm in which engineers reign, but it is most likely to encompass provisions that would not add costs perceived to be significant by producers. "People who don't have instructed votes still know who they work for," observes an NBS official familiar with many private standards-setters.
Concerns about "imbalance" among participating interests also find support in the cases. Organized consumer groups had a meek voice compared to manufacturers in all of the private cases. "Numbers count," according to an engineer at Consumers Union, "and I have been at a lot of meetings where I am the only negative vote—and that is the end of it." UL and some ANSI-sponsored committees pay lip service to "consumer participation," but consumer groups actually play only a
minimal role in the process. It is not that private standards-setters specifically exclude consumers—although attorneys have occasionally been excluded—so much as that consumers are unorganized and rarely have the resources to participate.
But the "path of least resistance" is not a predictive explanation, since it says nothing about when resistance will or will not occur. Moreover, it leaves unanswered the question why pro-safety results sometimes obtain over the objections of some business interests. The cases suggest two reasons why the lowest common denominator might not prevail: (1) there are unlikely pro-safety interests in the private sector, and (2) there are institutional impediments to the "watering down" process hypothesized by Eads and Reuter.
Unlikely Safety Interests . Although the range of interests on most committees is limited by the paucity of consumer participants, the cases highlight several largely unrecognized advocates of safety in the private sector. For example, representatives of the insurance industry have an interest in controlling losses. Insurance representatives pushed UL to upgrade its requirements for metal chimneys. Vendors of safety equipment also carry the pro-safety flag. Manufacturers of dust-control equipment speak out for improved housekeeping measures on the NFPA Agricultural Dusts committee. Labor representatives on some committees also favor various safety measures. The Air Line Pilots Association is active on NFPA's aviation committees; a representative from a Grain Workers Local sits on its Agricultural Dust Committee.
Installers and servicers also care about safety, often more than they care about cost or selection. An outspoken member of the National Chimney Sweep Guild was almost successful in getting NFPA to ban large stoves that require clearances of more than the traditional thirty-six inches. Representatives of gas utilities, whose employees must confront the victims of product injuries, frequently argue in favor of additional safety features for gas appliances. The J. C. Penney testing lab, designed to incorporate considerations about the consumer into purchasing decisions, also suggests occasional improvements in UL standards. Finally, "the fire service" itself, as it is known around NFPA, is well represented on NFPA committees. Firefighters spread what the NFPA president recently called "the gospel of fire protection." A Washington lawyer familiar with private safety standards agrees that "most NFPA committees have a bias toward the fire services." Needless to say, cost-benefit analysis is not one of the commandments.
The most intriguing examples of unlikely safety interests are committee members who appear to act against the interest they represent. Staff members at AGA Labs, for example, favored a ban on space heaters, while the AGA at large—overseer of the labs—opposed it. The representative of a major airline takes positions on NFPA aviation committees that are sometimes opposed by his superiors. The simple explanation is that an "interest" is rarely homogeneous. Just as consumers are not interested only in safety, manufacturers are not interested only in costs. Take a commercial airline, for example. Part of the organization is interested in keeping operating costs down, while other parts are interested in reducing insurance and liability costs. The latter are likely to favor increased expenditures for safety. The Maintenance Department probably wants a larger budget, and the Marketing Department might be interested in adding those safety items that matter most to passengers (for example, smoke detectors but not fire-blocking seat covers). In the case of NFPA 408, the airline representative cited above works in the Engineering and Safety Department. His professional interest is in safety, with little regard for cost. And since it is more likely that a safety engineer than an account executive will sit on the relevant standards-setting committee, organizational interests are likely to be subtly slanted in favor of safety in many cases.
Institutional Considerations . The second problem with "capture" theory is more fundamental: there are institutional reasons why standards-setting does not always reflect the conventional wisdom. Primarily, standards used by product testing labs are not written by "consensus." They are written by in-house engineers and only later sent through a "canvass" process leading to ANSI approval and the designation "national consensus standard." Fatal to the "watering down" theory, delays in the ANSI canvass process have no effect on the testing labs. UL uses (and revises) its standards long before they are distributed by ANSI for comment and review. UL officials privately confirm that failure to achieve ANSI approval would not affect this situation. In other words, UL is happy to go ahead without ANSI's imprimatur. Accordingly, no participants have an influence akin to veto power. While UL seeks comments from industry, it also adopts standards that do not enjoy the "consensus" of all manufacturers. The "least common denominator" argument also lacks an explanation for the role of the staff. A study of the Association of Home Appliance Manufacturers concluded that the staff has its own sense of mission and its own in-
terests, pursuing some goals that are not necessarily in the interest of the general membership.
Forestalling Government Regulation
Private regulatory behavior that does not follow the path of least resistance is often explained as an effort to forestall government regulation. This theory allows for stricter results without attributing altruistic motives to the private sector. The theory both overexplains and underexplains private regulatory behavior. It overexplains to the extent that virtually any outcome, lenient or strict, can be attributed to the threat of government regulation. As David Garvin states:
Only if firms were able to identify both the standards that would be established under government regulation and the precise amount that voluntary standards could fall below this level without inducing government action would [the lowest possible level] automatically follow. This information is seldom available. As a result, risk-averse firms, anxious to deter government regulation, might unknowingly set standards as rigorous—or, conceivably, even more stringent than—those that the government would demand.
Accordingly, the theory is not predictive either. Almost any outcome might result from the desire to forestall government regulation. The "forestalling theory" also underexplains private regulatory behavior, since private standards generally predate and significantly outnumber government regulations. The threat of CPSC regulation, for example, cannot possibly be relevant to more than a small number of UL standards.
Even if the forestalling theory does not have wide application, it is most likely to apply to paired cases. Although private standards usually predate public ones—as they did in all four of the case studies—it seems likely that the private sector might upgrade its standards in response to the threat of government regulation. At first glance, the private participants seemed to be motivated by the possibility of government influence. UL changed its labeling requirements in response to the CPSC. The same motive helped move AGA Labs to upgrade Z21.11.2. Even the NFPA Agricultural Dusts committee upgraded 61B in a few respects with the hope of forestalling OSHA. But these motivations were not particularly strong. Although UL changed its labeling provisions, the bulk of the standard has nothing to do with labeling or the threat of CPSC regulation. Committee members considering revisions to NFPA
61B seemed resigned to government regulation and certainly were not willing to enact serious grain-dust controls in order to prevent it.
Forestalling government regulation was a dominant influence in only one case: gas space heaters. The AGA/ANSI standard was upgraded in several significant ways while government contemplated regulatory action. But, as with NFPA and grain elevators, the private sector was unwilling to mandate what the government obviously wanted: an ODS requirement. It added that only after the CPSC did. This is not to say that forestalling government regulation is always a weak motive. The case studies suggest that this motive is largely subordinate to other factors, such as the demand for private standards. That demand and the broader political economy of private regulation suggest that product testing labs have different motivations than other private standards-setters. Product testing labs have a financial interest in eliminating competing government regulation, before or after the fact. That is why AGA/ANSI adopted the CPSC's ODS requirement and why UL was willing to alter its labeling requirements. Other standards-setters seldom have this strong an interest. The political economy of product testing is discussed below, followed by consideration of the peculiar politics of NFPA and the special problem of aviation safety.
The Business of Product Testing
Hypotheses based on the assumption that private standards-setting involves some form of collective deliberation and democratic decision-making are inappropriate for the hundreds of standards developed by testing labs. Unlike government agencies, these organizations do not operate on an issue-by-issue basis. Standards are an ongoing business. And being in the business of certification affects the approach one takes in promoting the goal of product safety. Motivated by the financial interest in certification and bolstered by the market power attendant to such a position, testing labs have different regulatory incentives than are often attributed to the private sector. Testing labs have unusual incentives for making standards demanding, although they experience countervailing forces as well. The tendency toward stringency is particularly strong when it comes to compliance.
Testing labs generally do not develop standards unless there is a proven and profitable market. These labs are in a responsive position, responding to a demand for a given standard. UL does not seek out
clients, clients seek out UL. They come for various reasons. Sometimes product certification is required by law (as in jurisdictions mandating listed woodstoves), sometimes the demand originates with product liability insurers or retail stores, and on occasion an industry voluntarily seeks certification to bolster consumer confidence. These forces combined to compel compliance with the Z21 standard. They were weaker in the case of woodstoves, probably owing to poor building code enforcement, although the pressures for compliance increased over time.
The economic realities of product testing help explain one of the major differences in public and private conceptions of safety regulation. To private testing organizations, it is almost always a "given" that the product will be marketed. UL and AGA Labs never seriously consider whether a product is best banned altogether (or "unlisted," in lab parlance). Even though some staff members at AGA Labs felt that unvented gas space heaters should be banned, it was a foregone conclusion that AGA Labs would continue to list them. The certification business can be very profitable. It is not in the interests of AGA Labs or UL to eliminate a testing market.
Testing labs are also particularly sensitive to the cost of developing and implementing standards for certification. This business equivalent of cost-benefit analysis further limits the kinds of standards that get written. The process is akin to the problem of "orphan drugs." Insufficient demand for certification causes testing labs to overlook certain problems. Aviation safety is a case in point. There are sound scientific arguments for testing aviation fire extinguishers to special standards. UL advanced these arguments when opposing the FAA rule. UL has even received requests to develop such standards. But from UL's point of view, the limited market for aviation fire extinguishers does not justify the cost of developing special standards and test procedures.
Considerations attendant to the business of product testing help explain other aspects of UL's problem. In order to maintain support and credibility for their business, testing labs must take care that their test methods are defensible, reproducible, and relatively inexpensive. Developing test methods is inherently difficult, since the goal is a simple procedure that provides information useful in a complex world where products are used (and misused) in countless ways. UL and other testing labs generally handle the problem by deferring to accepted definitions of proper use. This means following the applicable use and installation codes as well as the manufacturers' instructions. This helps explain why UL is so reluctant to factor consumer misuse into its standards. There
is often no defensible way to do it, especially when the misuse concerns the most basic conditions of installation and use. UL tests kerosene heaters, for example, using certified K-1 kerosene fuel as specified in the manufacturer's instructions. Testing for the "flare up" problem would require the addition of some amount of gasoline to the fuel. Should this be trace amounts, as would occur if a consumer put kerosene into an old gas can, or some larger amount that would simulate even grosser misuse? There is neither an obvious nor an easily defensible answer. Similar problems are posed by the fact that misuse can occur in a variety of different ways. Should UL also add tests for other improper fuel mixtures? Including "representative" examples of misuse could expand the cost of testing significantly, raising objections from manufacturers. It could also force some products from the market entirely, eliminating the market for certification. If enough gasoline is added to the fuel, all kerosene heaters will fail the test.
Simulating misuse can also be technically difficult, particularly if the hazard is related to poor maintenance. For example, it would be difficult to design practical and reproducible tests to simulate the kind of lint buildup that can, after six to eight months, impede the performance of a gas space heater. Creosote buildup poses a similar problem. It would be extremely time-consuming to build up actual creosote for testing. Yet without such an approach, there would surely be criticism of the test method intended to simulate the problem. In sum, organizations such as UL sometimes resist recognizing misuse problems because of the implementation problems that would occur in testing. Product certifiers must think ahead to the implementation problems involved in developing test methods. Accordingly, they are sensitive to problems that the CPSC often overlooks in its desire to "do something."
Beginning with a demand for their service also endows the testing labs with certain regulatory power. It may be certain that the product will be listed, but the listing agency has considerable discretion in determining the requirements. There is almost never competition between labs using different testing requirements. Hence, a manufacturer who disagrees with, say, the UL standard for woodstoves has little choice but to comply. A lawyer who criticizes many private standards for being too lenient agrees that "the UL staff, from a professional point of view, can often set a level just because they think it is right." Market power does not create unbounded discretion, however. Opinions vary about the power of the staff at organizations such as UL. Most observers agree that proposed standards must enjoy the support of a critical mass of
manufacturers. Even though UL has market power, it cannot afford to lose industry support. The credibility of the UL label would be called into question if firms were moved to challenge its standards openly. Accordingly, UL engineers speak of "what they can get away with" in their safety standards.
Several additional factors constrain the commercial testing labs. Product certification also involves a considerable degree of deference to manufacturers. The only way UL can provide certification quickly, particularly for new products, is to incorporate many prevailing business practices into its standards. The impression of most observers is that AGA and UL can "push" a recalcitrant firm marketing a product below widely accepted levels of safety, but must "follow" the determination of what is generally acceptable. "We are always following the crowd," comments an engineer at AGA Labs. The ability of testing labs to "push" is also affected by the availability of information. UL and AGA do not write product standards so much as review existing products. The certification business is prospective; products are often certified before they are marketed. Armed with specific information about product problems, UL is most effective in gaining overall improvements in standards. Absent such information, however, anyone urging a change in UL standards is likely to be rebuffed for failing to present evidence "from the field."
Product certifiers take a similar view of research: it is expensive and will not be undertaken unless the payoff is clear. Research projects are occasionally undertaken that might improve numerous standards at once, such as research on shock hazards and sharp surfaces. But research to improve some aspect of a single standard is much less likely. UL is not inclined to, investigate the qualities of catalytic combustors for woodstoves unless industry sponsors the work. UL 1482 will continue to generate revenue without this research.
A final aspect of product certification that distinguishes it from other private standards is compliance. Compliance is the business of product testing. The income received from these "follow-up" services, combined with the threat of liability if products do not actually meet the stated requirements, prompts the testing labs to implement comprehensive inspection schemes. Testing labs go to extraordinary lengths to ensure that products bearing their label comply with their standards. UL inspects producers at least four times a year, regardless of their track record—an approach that far exceeds any public enforcement scheme. But product testing labs are also more willing to phase in requirements
over time. Since they demand total compliance from their clients and charge dearly for certification, the best way for testing labs to placate angry customers is to allow ample time for compliance. Unlike the CPSC, UL is usually receptive to adjusting the effective date to production cycles, assuring minimal problems with retrofitting or disposing of existing inventories.
NFPA Standards: Economics, Politics, and Process
While independent labs are both bolstered and constrained by the market for certification, the forces affecting membership organizations are clearly different. But the underlying reality, as observed by Anthony Downs, is essentially the same: "No bureau can survive unless it is continually able to demonstrate that its services are worthwhile to some group with influence over sufficient resources to keep it alive." This support need not come directly from the most obvious source, the membership. Membership dues account for 41 percent of ANSI's revenues; the sale of publications accounts for 54 percent. Other membership organizations are even more dependent on those purchasing their standards than on those writing them. Membership dues account for less than 8 percent of NFPA's revenues; publication sales account for almost 60 percent. Sufficient support from those who rely on standards can empower private standards-setters vis-à-vis their membership.
Beyond these market-based forces, other sources of support "such as the state subsidizing the organization or legally enforcing its policies" can supplement and transform constraints imposed by the membership. As a result, the demand for NFPA standards, and hence the nature of NFPA politics, is extremely variable. The National Electric Code, given the force of law in virtually every state in the country, generates intense interest from a wide range of groups. So does the Life Safety Code. In those instances, NFPA standards-setting is apparently characterized by lively interest-group politics. The health care industry battles with the building trades; the makers of plastic pipe oppose those who sell metal. Both standards were the source of scandals earlier this decade when specific commercial interests attempted to "pack" the annual convention to change the standard through an unusual floor vote. NFPA has since vested greater authority in its Standards Council, making it impossible to write code text on the convention floor.
This is not to say that NFPA standards are merely a reflection of the
most powerful interests on the relevant technical committees. First, these committees have a "balanced" membership designed to prevent any single group from dominating. Some of these interests, as discussed earlier in this chapter, are advocates of safety regulation. Second, installation and use standards permit a modicum of leeway unavailable to testing labs. Use standards are broader in scope than product standards, so that a demand for the standard will still exist even if it prohibits certain products or practices. Although NFPA desires to sell as many standards as possible, and this certainly affects which standards get written and how often they are updated, it is not beholden to particular interests in the same way as product certifiers. Accordingly, the National Fuel Gas Code prohibits propane cabinet heaters (and could do likewise with gas space heaters) without affecting the demand for the standard.
Unfortunately, the demand for other NFPA standards, including 61B and 408, is considerably weaker than that for the National Electric Code. The NFPA liaison to the grain elevator committee could not name a single organization or firm that actually uses NFPA 61B. The only apparent interest in NFPA 408 is from foreign countries. The stakes are much lower for standards with such little demand. These standards are more likely to fall behind the times as weak demand is reflected among the committee members. NFPA is also unlikely to pour organizational resources into standards that generate little income. The resulting politics are quite varied. But without a strong demand for the standard—created through, say, use by some government agency—NFPA committees lose an important source of leverage in determining how strict to make standards.
The politics of NFPA regulation also differ from what Wilson has described on the public side in one glaring respect: antibusiness sentiment does not drive private regulation. As a consequence, private regulation is largely unaffected by the injury statistics and major catastrophes that entrepreneurial politicians use to mobilize public support for regulation. NFPA investigated the Air Canada incident, but there were no apparent repercussions for any of the aviation safety committees. The series of grain elevator explosions in 1977 probably prompted the NFPA Agricultural Dusts committee to meet—revision of the standard was already overdue—but the explosions did not cause significant changes in the standard. The limited role of public sentiment in private regulation seems to account for the less hurried and often more thoughtful approach to standards-writing in the private sector. The
kind of pressure that motivated the FAA staff to want, above all else, to complete the rulemaking proceeding for aviation fire safety does not exist on the private side. The reduction in hastiness might come at the expense of timeliness, however. Lacking external pressure to "do something," the private sector sometimes does nothing at all. NFPA 408 was so neglected that by the late 1970s it was considered practically useless.
Lacking what Wilson calls the most potent method for overcoming opposition to regulation—the public sentiment that follows any catastrophe—the NFPA committees apparently do whatever can be accomplished through political compromise. This suggests a grim reality, with standards taking whatever shape business interests desire. Hence the conventional wisdom that private standards-setting organizations are "captured." The grain elevator case supports this hypothesis. The National Grain and Feed Association opposes any regulation of grain elevator housekeeping, and NFPA 61B is obliging. But this hypothesis has limited explanatory power. The political "compromise" reached in aviation safety, and possibly in many other NFPA standards, is surprisingly strict. More NFPA standards should be examined before general conclusions are drawn about the politics of NFPA standards-setting in specific, and of membership organizations in general.
Risk and Culture: The Peculiar Fear of Flying
The politics of aviation safety are unusual, possibly unique. The political forces favoring increased public regulation are formidable, particularly during a proclaimed era of deregulation. Many congressmen favor increased safety regulation, practically without regard to cost. (They travel frequently by air, and so do their most influential constituents.) The NTSB, a zealous advocate of increased regulation, provides Congress with recommendations that carry the weight of "expert advice." The powerful Air Line Pilots Association also joins several unions representing flight attendants in urging Congress to adopt regulations proposed by the NTSB. Virtually nobody but the Airline Transportation Association argues against increased expenditures for aviation safety, and its voice is muted by the fact that many airlines generally favor government regulation. That is, they often prefer to have the government specify necessary safety precautions than to decide themselves. There is also widespread popular support for airline safety. It is one of those rare issues that motivates hundreds of citizens to write cards and letters directly to an administrative agency in support of new
regulations. More common are the CPSC proceedings, which attract little public interest.
Aviation safety is, quite simply, a political sacred cow. This explains much of what happened with the respective NFPA and FAA standards. The unusual alliance of political interests favoring aviation safety regulation accounts for the FAA proposal and its quick adoption. Mobilized by the Air Canada fire, these forces motivated Congress to establish strict oversight procedures in 1984 to ensure the quick enactment of various regulations, including the fire extinguisher and smoke detector rule. The special status of aviation safety apparently dulled the OMB's normally critical senses about new regulations. There were no challenges to the cost-benefit analysis, no delays to seek additional justifications or modifications from the agency. Similarly, without serious objection, NFPA enacted regulatory provisions that committee members agree will cost more than what can be justified rationally. But apparently the fear of flying is pervasive. The politics of aviation safety produces regulatory outcomes unlike those commonly associated with social regulation.
Legal Constraints on Standards-Setting
Political and economic factors only partly explain regulatory behavior. The law is a powerful external influence, placing very different constraints on the two sectors. Only private standards-setters are subject to the antitrust laws—unless they can cloak their activity under the guise of a "public purpose." And lacking the sovereign immunity defense, private organizations are far more vulnerable to liability suits than their public counterparts. But public agencies are subject to more frequent and intrusive judicial review of their regulatory decisions. These legal influences, explored below, help explain the observed differences in regulatory philosophy.
Critics of private standards charge that the activity is prone to anticompetitiveness and that, owing to lax antitrust enforcement, the law does not sufficiently discourage such activity. Proponents counter that the combination of liability law and antitrust law keeps private standards within an acceptable range of results. The argument goes as follows: private standards must be reasonable because liability attaches if a
product is not reasonably safe, while the antitrust law assures that standards will not be arbitrary or anticompetitive. The case studies suggest that antitrust concerns are voiced by committee members more openly than those about liability, but their perceptions of antitrust law are often uninformed.
The accusation that anticompetitive purposes lurk behind private standards is understandable given the unsavory history of product standards. Standardization schemes involving everything from ice cream to carpets were struck down by the courts in the 1940s as thinly veiled efforts at price fixing. AGA Labs was implicated in one of the most famous legal decisions in the field, Radiant Burners v. Peoples Gas, for allegedly withholding product certification for anticompetitive reasons. Economic considerations certainly influenced the AGA/ANSI committee's decision about requiring the ODS device when there was only one supplier. Ironically, while pleading antitrust concerns, most committee members were actually worried about putting U.S. companies at a competitive disadvantage. But popular perceptions to the contrary, there are several reasons why safety standards are unlikely to be infused with anticompetitive purposes. First, price fixing schemes tend to involve the shape or size of a product, not its safety features. The former are necessary to standardize prices, the latter are not.
More important, anticompetitive motives are most likely to be a problem in interpreting or applying safety standards, not in writing them. Anticompetitive implications are the clearest in applied situations, where outside scrutiny is minimal compared to standards-writing. The most celebrated case in the field, American Society of Mechanical Engineers v. Hydrolevel Corp., involved a conspiracy between two volunteers on a small subcommittee that helps issue thousands of annual interpretations to the Boiler and Pressure Vessel Code. In 1988, the Supreme Court declined to apply the "governmental action" immunity and upheld a verdict against a producer of steel conduit that had "packed" an NFPA meeting in order to keep polyvinyl chloride from becoming an accepted substitute under the National Electric Code.
There is somewhat less here than meets the eye. There has never been a successful antitrust suit alleging that a safety standard itself, as opposed to an interpretation, violated antitrust laws. The recent Supreme Court cases involved unusual circumstances and are unlikely to have widespread effect on private standards-setting, although they suggest a trend that might be counterproductive. American Society of Mechanical Engineers v. Hydrolevel Corp. involved an interpretation of the Boiler
and Pressure Vessel Code, something that focuses directly on a single product, not on the formation of general standards. Allied Tube and Conduit Corp. v. Indian Head involved a decision on the floor of an NFPA meeting, not in a committee or subcommittee, where almost all policy decisions are actually made. Morever, as a result of changes prompted in part by these cases, standards-setters are providing fewer "interpretations" and the decisive "floor vote" is a thing of the past at NFPA.
This leaves vast regions of standards-setting largely unaffected by antitrust considerations. In fact, the law tolerates a great deal of private activity, some of it questionable by almost any measure. By applying the so-called rule of reason to cases involving standards-setting proper, courts have sanctioned several private standards acknowledged to stifle technological innovation. Absent a showing of bad faith, there is almost always an "objective" reason for a standard that can pass judicial muster.
Private responses to antitrust law often seem out of proportion to the actual requirements of the law. Antitrust law is a popular excuse for almost every negative decision in the private sector. Since standards exclude things by definition, there is always an intuitively appealing argument that proposed requirements might illegally exclude something from the market. The law is not actually this restrictive. Even standards of obviously questionable scientific merit have been treated with great deference by courts and agencies. "We give the benefit of the doubt to the standards setter," according to a Federal Trade Commission official. The makers of low-tolerance metal chimneys or high-clearance woodstoves would have a valid antitrust claim only if they could prove the standards to be "manifestly anti-competitive and unreasonable."
Antitrust law is nevertheless influential in standards-setting, according to participants. Fear of the antitrust law, well founded or not, apparently helps explain the reluctance of private organizations to ban specific product types or push technology. A representative of the Gas Appliance Manufacturers Association argues that the Z21.11.2 committee could not require the ODS device, which was manufactured solely by a European manufacturer, without raising "serious antitrust problems." UL, beset by a controversy about the temperature tolerance of metal chimneys, argues that the antitrust law is one of the reasons it cannot upgrade the standard. Similarly, after the NFPA general membership agreed in an unusual floor vote to ban woodstoves requiring more than thirty-six-inch clearances, the Standards Council overturned
the action, citing antitrust concerns. These concerns are both widespread and overstated.
Unlike antitrust law, liability law is seldom cited as an official reason for doing anything in the private sector. Yet the case studies suggest that liability is a more significant factor than antitrust law in explaining regulatory behavior. Liability concerns help explain why so many provisions in NFPA 61B are vague and why, in both 61B and 408, NFPA pushes the distinction between "requirements" and "appendices." More generally, liability law seems to explain the reluctance of the private sector to (1) recognize or address issues of consumer misuse, (2) embrace certain new technologies, and (3) include work rules or operational controls in safety standards.
Turning first to misuse: incorporating misuse considerations into standards can nullify the one effective defense to product liability suits that product certifiers and manufacturers still retain in some states—the misuse defense. This defense works only if the plaintiff's use of the product was unforeseeable to the manufacturer. Accordingly, the more misuse is acknowledged in standards, the more manufacturers and product certifiers might be held responsible for it (no matter how impossible the task). In other words, because of liability law it is not in UL's interest to think too much about potential consumer misuse.
There is a similar reluctance to adopt certain new technologies. The failure of a new safety device might leave a manufacturer or certifier in a worse legal position than if it had not addressed the problem to begin with. The argument, advanced to explain the slow diffusion of antilock braking technology, appears to explain the reluctance to require the ODS for gas space heaters. Committee members admit privately that data on failure rates of the device in Europe were considered legal dynamite. Even if it significantly reduced the number of carbon monoxide deaths, as expected, manufacturers worried that the occasional injury it failed to prevent—as a result of equipment failure or poor maintenance—would be seen as the fault of the manufacturer, not the consumer.
Standards-setters also worry that "upgrading" a standard leaves existing products more vulnerable to product liability suits. Improvements can be cited in some jurisdictions as evidence that the old standard was
inadequate. When, as in the case of UL's metal chimney standard, hundreds of thousands of products manufactured under the existing standard are still in use (and will be for many years to come), there is considerable reluctance to "upgrade" the standard. This reason, admitted privately by UL officials, makes much more sense than the stated concern about excluding low-tolerance chimneys from the market.
Finally, liability concerns help explain why the operational controls were placed in the appendices of NFPA 408 and 61B. Technical and engineering standards are much easier to control. Third-party certification assures compliance with many product standards. Compliance with other provisions in NFPA 408 and 61B involves fairly discrete acts—carrying a certain type and number of fire extinguishers, attaching devices to converyor belts in grain elevators, using specified building materials. Operational controls, on the other hand, require unfailing implementation. They are dependent on the goodwill and reliability of employees. They are also where corners are likely to be cut in the face of various economic pressures. Either way, liability fears apparently keep the private sector from mandating operational controls.
The Burden of Justification
The most important legal influence on public regulation appears to be the specter of judicial review. There is no analogy in the private sector. Except for violations of antitrust law, there is no possible basis for challenging the substance of private standards in court (and the antitrust law, as already explained, gives substantial deference to private safety standards in the absence of proven bad motives). With the CPSC, standards are not just reviewable by court, the statute allowing such review is intended to encourage closer judicial scrutiny than under the traditional, more deferential approach. The agency has not fared well in the courts. A standard for swimming pool slides was rejected because the CPSC "provided little evidence that warning signs would benefit consumers." The court rejected arguments based on "common sense" and faulted the agency for not having tested the effectiveness of the required signs. That same year, another court, rejecting portions of a safety standard for matchbook covers, practically demanded that the agency justify all of its decisions with cost-benefit analyses.
This sort of judicial review creates a burden of justification on public agencies that does not hinder their private counterparts. "We cannot go to court on engineering judgment," notes a CPSC staff member with
dismay. This suggests a major difference between public and private standards-writing. Public agencies cannot "get away with" what forms the basis for most private standards: engineering judgment, common sense, and educated guesses. The burden of justification probably helps explain why the government agencies shied away from technical issues in the case studies, seizing issues for which technical proof is least significant, such as warning labels and effective dates.
The final three chapters assess the policy implications of these observations and explanations. Chapter 10 aggregates the institutional considerations, setting forth the comparative institutional advantages of each system. Chapter 11 examines the most common policy prescription for improving standards-setting: changing administrative procedures. Chapter 12 considers interactive strategies and alternative policy instruments that are also worthy of consideration but are often overlooked in discussions of standards policy.