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Supreme Court Rulings Shift Regulatory Power, Businesses Face Uncertainty

Supreme Court's rulings dismantle 40-year-old precedent, causing regulatory uncertainty and prompting legal challenges across multiple industries.

By Mackenzie Crow

7/11, 00:30 EDT
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Key Takeaway

  • The Supreme Court's recent decisions in Loper Bright and Corner Post cases dismantle the "Chevron deference," shifting regulatory power from agencies to judges.
  • This shift may lead to longer approval times for products and permits, increased legal challenges, and inconsistent regulations across states.
  • Companies could face more regulation by enforcement and a fragmented regulatory landscape, complicating nationwide operations.

Supreme Court Decisions Impact Regulations

Late last month, the U.S. Supreme Court made significant rulings that are already reshaping the regulatory landscape for American businesses. The court's conservative majority dismantled the "Chevron deference," a 40-year-old precedent that required judges to defer to government experts when laws were ambiguous. This decision, along with the ruling in a separate case that allows new industry players to challenge long-settled rules, is causing ripples across various sectors. The justices have sent nine cases back to lower courts for reconsideration, including those involving wetlands, renewable energy, and other regulations. A federal judge in Texas recently indicated that plaintiffs challenging a Biden administration ban on non-compete agreements are now more likely to succeed, given that judges, rather than agencies, have the final say on regulations.

Business Implications and Legal Challenges

The Supreme Court's decisions are prompting a wave of legal challenges from various industries. Hospitals, utilities, and even gun rights advocates are gearing up to use these rulings to contest new and existing regulations. Corporate law firms are compiling lists of regulations they aim to dismantle. However, businesses may face unintended consequences. Government agencies, with finite resources, will need to allocate more effort to defending their decisions in court, potentially delaying approvals for drugs, investment funds, and power plants. Legal challenges to approved products and permits will now be heard by judges who may not defer to agency expertise, leading to prolonged legal battles. The Corner Post decision further complicates matters by allowing companies not in existence at the time of a regulation's enactment to challenge it, creating a perpetual state of regulatory uncertainty.

Regulatory Uncertainty and Enforcement

The new legal landscape introduces significant uncertainty for businesses. Until recently, challenges to new regulations had to be made within six years of their enactment. Now, any new company can challenge a rule at any time, leading to a lack of regulatory stability. This uncertainty is likely to discourage companies from investing in compliance technologies and equipment, knowing that competitors might stall and sue. Additionally, agencies like the SEC may resort to regulation by enforcement, using investigations and fines to set new standards instead of formal rulemaking. This approach could lead to inconsistent enforcement and further complicate the regulatory environment.

Street Views

  • Varu Chilakamarri, K&L Gates (Neutral on regulatory changes):

    "At least before there was a clear universe of things that could be challenged, and you’d have greater certainty after a certain amount of time."

  • Rachel Weintraub, Coalition for Sensible Safeguards (Cautiously Optimistic on regulation):

    "There are benefits within the market for regulation. It provides an equal playing field and stability."