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Agency Threats


Tim Wu


Most legal writers are implicitly or explicitly critical of the use of threats as an alternative to rulemaking or adjudication. The general presumption is that the use of threats is a kind of symptom of an underlying malady - a broken rulemaking or adjudication process. For example, Professor Lars Noah describes the use of threats as an “intractable problem,” given the difficulty of “controlling the exercise of such wide-ranging discretionary power.” In this brief Essay, I write in defense of regulatory threats in particular contexts.

The use of threats instead of law can be a useful choice - not simply a procedural end run. My argument is that the merits of any regulative modality cannot be determined without reference to the state of the industry being regulated. Threat regimes, I suggest, are important and are best justified when the industry is undergoing rapid change - under conditions of “high uncertainty.” Highly informal regimes are most useful, that is, when the agency faces a problem in an environment in which facts are highly unclear and evolving. Examples include periods surrounding a newly invented technology or business model, or a practice about which little is known. Conversely, in mature, settled industries, use of informal procedures is much harder to justify.

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