Administrative Law

Mental Health Telehealth Services May Not Be Protecting Your Data

March 5, 2023
Administrative Law, COVID-19, Data Privacy, Health, Healthcare, Internet, New Technology, Privacy

Tessa Wright, MJLST Staffer

The COVID-19 pandemic changed much about our daily lives, and nowhere have those changes been more visible than in the healthcare industry. During the pandemic, there were overflowing emergency rooms coupled with doctor shortages.[1] In-person medical appointments were canceled, and non-emergency patients had to wait months for appointments.[2] In response, the use of telehealth services began to increase rapidly.[3] In fact, one 2020 study found that telehealth visits accounted for less than 1% of health visits prior to the pandemic and increased to as much as 80% of visits when the pandemic was at its peak.[4] And, while the use of telehealth services has decreased slightly in recent years, it seems as though it is likely here to stay. Nowhere has the use of telehealth services been more prevalent than in mental health services.[5] Indeed, as of 2022, telehealth still represented over 36% of outpatient mental health visits.[6] Moreover, a recent study found that since 2020, over one in three mental health outpatient visits have been delivered by telehealth.[7] And while this increased use in telehealth services has helped make mental health services more affordable and accessible to many Americans, this shift in the way healthcare is provided also comes with new legal concerns that have yet to be fully addressed.

Privacy Concerns for Healthcare Providers

One of the largest concerns surrounding the increased use of telehealth in mental health services is privacy. There are several reasons for this. The primary concern has been due to the fact that telehealth takes place over the phone or via personal computers. When using personal devices, it is nearly impossible to ensure HIPAA compliance. However, the majority of healthcare providers now offer telehealth options that connect directly to their private healthcare systems, which allows for more secure data transmission.[8] While there are still concerns surrounding this issue, these secure servers have helped mitigate much of the concern.[9]

Privacy Concerns with Mental Health Apps

The other privacy concern surrounding the use of telehealth services for mental health is a little more difficult to address. This concern comes from the increased use of mental health apps. Mental health apps are mobile apps that allow users to access online talk therapy and psychiatric care.[10] With the increased use of telehealth for mental health services, there has also been an increase in the use of these mental health apps. Americans are used to their private medical information being protected by the Health Insurance Portability and Accountability Act (HIPAA).[11] HIPAA is a federal law that creates privacy rules for our medical records and other individually identifiable health information during the flow of certain health care transactions.[12] But HIPAA wasn’t designed to handle modern technology.[13] The majority of mental health apps are not covered by HIPAA rules, meaning that these tech companies can sell the private health data from their apps to third parties, with or without consent.[14] In fact, a recent study that analyzed 578 mental health-related apps found that nearly half (44%) of the apps shared users’ personal health information with third parties.[15] This personal health information can include psychiatric diagnoses and medication prescriptions, as well as other identifiers including age, gender, ethnicity, religion, credit score, etc.[16]

In fact, according to a 2022 study, a popular therapy app, BetterHelp, was among the worst offenders in terms of privacy.[17] “BetterHelp has been caught in various controversies, including a ‘bait and switch’ scam where it advertised therapists that weren’t actually on its service, poor quality of care (including trying to provide gay clients with conversion therapy), and paying YouTube influencers if their fans sign up for therapy through the app.”[18]

An example of information that does get shared is the intake questionnaire.[19] An intake questionnaire needs to be filled out on BetterHelp, or other therapy apps, in order for the customer to be matched with a provider.[20] The answers to these intake questionnaires were specifically found to have been shared by BetterHelp with an analytics company, along with the approximate location and device of the user.[21]

Another example of the type of data that is shared is metadata.[22] BetterHelp can share information about how long someone uses the app, how long the therapy sessions are, how long someone spends sending messages on the app, what times someone logs into the app, what times someone sends a message or speaks to their therapists, the approximate location of the user, how often someone opens the app, and so on.[23] According to the ACLU, data brokers, Facebook, and Google were found to be among the recipients of other information shared from BetterHelp.[24]

It is also important to note that deleting an account may not remove all of your personal information, and there is no way of knowing what data will remain.[25] It remains unclear how long sensitive information that has been collected and retained could be available for use by the app.

What Solutions Are There?

The U.S. Department of Health and Human Services recently released updated guidance on HIPAA, confirming that the HIPAA Privacy Rule does not apply to most health apps because they are not “covered entities” under the law.[26]  Additionally, the FDA put out guidance saying that it is going to use its enforcement discretion when dealing with mental health apps.[27] This means that if the privacy risk seems to be low, the FDA is not going to enforce or chase these companies.[28]

Ultimately, if mental telehealth services are here to stay, HIPAA will need to be expanded to cover the currently unregulated field of mental health apps. HIPAA and state laws would need to be specifically amended to include digital app-based platforms as covered entities.[29] These mental health apps are offering telehealth services, similar to any healthcare provider that is covered by HIPAA. Knowledge that personal data is being shared so freely by mental health apps often leads to distrust, and due to those privacy concerns, many users have lost confidence in them. In the long run, regulatory oversight would increase the pressure on these companies to show that their service can be trusted, potentially increasing their success by growing their trust with the public as well.

Notes

[1] Gary Drenik, The Future of Telehealth in a Post-Pandemic World, Forbes, (Jun. 2, 2022), https://www.forbes.com/sites/garydrenik/2022/06/02/the-future-of-telehealth-in-a-post-pandemic-world/?sh=2ce7200526e1.

[2] Id.

[3] Id.

[4] Madjid Karimi, et. al., National Survey Trends in Telehealth Use in 2021: Disparities in Utilization and Audio vs. Video Services, Office of Health Policy (Feb. 1, 2022).

[5] Shreya Tewari, How to Navigate Mental Health Apps that May Share Your Data, ACLU (Sep. 28, 2022).

[6] Justin Lo, et. al., Telehealth has Played an Outsized Role Meeting Mental Health Needs During the Covid-19 Pandemic, Kaiser Family Foundation, (Mar. 15, 2022), https://www.kff.org/coronavirus-covid-19/issue-brief/telehealth-has-played-an-outsized-role-meeting-mental-health-needs-during-the-covid-19-pandemic/.

[7] Id.

[8] Supra note 1.

[9] Id.

[10] Heather Landi, With Consumers’ Health and Privacy on the Line, do Mental Wellness Apps Need More Oversight?, Fierce Healthcare, (Apr. 21, 2021), https://www.fiercehealthcare.com/tech/consumers-health-and-privacy-line-does-digital-mental-health-market-need-more-oversight.

[11] Peter Simons, Your Mental Health Information is for Sale, Mad in America, (Feb. 20, 2023), https://www.madinamerica.com/2023/02/mental-health-information-for-sale/.

[12] Supra note 5.

[13] Supra note 11.

[14] Id.

[15] Deb Gordon, Using a Mental Health App? New Study Says Your Data May Be Shared, Forbes, (Dec. 29, 2022), https://www.forbes.com/sites/debgordon/2022/12/29/using-a-mental-health-app-new-study-says-your-data-may-be-shared/?sh=fe47a5fcad2b.

[16] Id.

[17] Supra note 11.

[18] Id.

[19] Supra note 5.

[20] Id.

[21] Id.

[22] Id.

[23] Id.

[24] Id.

[25] Supra note 5.

[26] Id.

[27] Supra note 10.

[28] Id.

[29] Supra note 11.

Call of Regulation: How Microsoft and Regulators Are Battling for the Future of the Gaming Industry

February 21, 2023
Administrative Law, Antitrust, EU Law, Regulatory, Telecommunication, Video Games

Caroline Moriarty, MJLST Staffer

In January of 2022 Microsoft announced its proposed acquisition of Activision Blizzard, a video game company, promising to “bring the joy and community of gaming to everyone, across every device.” However, regulators in the United States, the EU, and the United Kingdom have recently indicated that they may block this acquisition due to its antitrust implications. In this post I’ll discuss the proposed acquisition, its antitrust concerns, recent actions from regulators, and prospects for the deal’s success.

Background

Microsoft, along with making the Windows platform, Microsoft Office suite, Surface computers, cloud computing software, and of new relevance, Bing, is a major player in the video game space. Microsoft owns Xbox, which along with Nintendo and Sony (PlayStation) is one of the three most popular gaming consoles. One of the main ways these consoles distinguish themselves from their competitors is by categorizing certain games as “exclusives,” where certain games can only be played on a single console. For example, Spiderman can only be played on PlayStation, the Mario games are exclusive to Nintendo, and Halo can only be played on Xbox. Other games, like Grand Theft Auto, Fortnite, and FIFA are offered on multiple platforms, allowing consumers to play the game on whatever console they already own.

Activision Blizzard is a video game holding company, which means the company owns games developed by game development studios. They then make decisions about marketing, creative direction, and console availability for individual games. Some of their most popular games include World of Warcraft, Candy Crush, Overwatch, and one of the most successful game franchises ever, Call of Duty. Readers outside of the gaming space may recognize Activision Blizzard’s name from recent news stories about its toxic workplace culture.

In January 2022, Microsoft announced its intention to purchase Activision Blizzard for $68.7 billion dollars, which would be the largest acquisition in the company’s history. The company stated that its goals were to expand into mobile gaming, as well as make more titles available, especially through Xbox Game Pass, a streaming service for games. After the announcement, critics pointed out two main issues. First, if Microsoft owned Activision Blizzard, it would be able to make the company’s titles exclusive to Xbox. This is especially problematic in relation to the Call of Duty franchise. Not only does the Call of Duty franchise include the top three most popular games of 2022, but it’s estimated that 400 million people play at least one of the games, 42% of whom play on Playstation. Second, if Microsoft owned Activision Blizzard, it could also make its titles exclusive to Xbox Game Pass, which would change the structure of the relatively new cloud streaming market.

The Regulators

Microsoft’s proposed acquisition has drawn scrutiny from the FTC, the European Commission, and the UK Competition and Markets Authority. In what the New York Times has dubbed “a global alignment on antitrust,” the three regulators have pursued a connected strategy. First, the European Commission announced an investigation of the deal in November, signaling that the deal would take time to close. Then, a month later, the FTC sued in its own administrative court, which is more favorable to antitrust claims. In February 2023, the Competition and Markets Authority released provisional findings on the effect of the acquisition on UK markets, writing that the merger may be expected to result in a substantial lessening of competition. Finally, the EU commission also completed its investigation, concluding that the possibility of Microsoft making Activision Blizzard titles exclusives “could reduce competition in the markets for the distribution of console and PC video games, leading to higher prices, lower quality and less innovation for console game distributors, which may, in turn, be passed on to consumers.” Together, the agencies are indicating a new era in antitrust – one that is much tougher on deals than in the recent past.

Specifically, the FTC called out Microsoft on its past acquisitions in its complaint. When Microsoft acquired Bethesda (another video game company, known for games like The Elder Scrolls: Skyrim) in 2021, the company told the European Commission that they would keep titles available on other consoles. After the deal cleared, Microsoft announced that many Bethesda titles, including highly anticipated games like Starfield and Redfall, would be Microsoft exclusives. The FTC used this in its complaint to show that any promises by Microsoft to keep games like Call of Duty available to all consumers could be broken at any time. Microsoft has disputed this characterization, arguing that the company made decisions to make titles exclusive on a “case-by-case basis,” which was in line with what it told the European Commission.

For the current deal, Microsoft has agreed to make Call of Duty available on the Nintendo Switch, and it claims to have made an offer to Sony, guaranteeing the franchise would remain available on PlayStation for ten years. This type of guarantee is known as conduct remedy, which preserves competition through requirements that the merged firm commits to take certain business actions or refrain from certain business conduct going forward. In contrast, structural remedies usually require a company to divest certain assets by selling parts of the business. One example of conduct remedies was in the Live Nation – Ticketmaster merger. The companies agreed not to retaliate against concert venue customers that switched to a different service nor tie sales of ticketing services to concerts it promoted. However, as the recent Taylor Swift ticketing dilemma proves, conduct remedies may not be effective in eliminating anticompetitive behavior.

Conclusion

Microsoft faces an uphill battle with its proposed acquisition. Despite its claims that Xbox does not exercise outsize influence in the gaming industry, the sheer size and potential effects of this acquisition make Microsoft’s claims much weaker. Further, the company faces stricter scrutiny from new regulators in the United States. Assistant Attorney General Jonathan Kanter, who leads the DOJ’s antitrust division, has already indicated that he prefers structural remedies to conduct ones, and Lina Khan, FTC commissioner, is well known for her opposition to big tech companies. If Microsoft wants this deal to succeed, it may have to provide more convincing evidence that it will act differently than its anticompetitive conduct in the past.

Saving the Planet With Admin Law: Another Blow to Tax Exceptionalism

December 13, 2022
Administrative Law, Environmental Law, Tax Law

Caroline Moriarty, MJLST Staffer

Earlier this month, the U.S. Tax Court struck down an administrative notice issued by the IRS regarding conservation easements in Green Valley Investors, LLC v. Commissioner. While the ruling itself may be minor, the court may be signaling a shift away from tax exceptionalism to administrative law under the Administrative Procedures Act (“APA”), which could have major implications for the way the IRS operates. In this post, I will explain what conservation easements are, what the ruling was, and what the ruling may mean for IRS administrative actions going forward. 

Conservation Easements

Conservation easements are used by wealthy taxpayers to get tax deductions. Under Section 170(h) of the Internal Revenue Code (“IRC”), taxpayers who purchase development rights for land, then donate those rights to a charitable organization that pledges not to develop or use the land, get a deduction proportional to the value of the land donated. The public gets the benefit of preserved land, which could be used as a park or nature reserve, and the donor gets a tax break.

However, this deduction led to the creation of “syndicated conservation easements.” In this tax scheme, intermediaries purchase vacant land worth little, hire an appraiser to declare its value to be much higher, then sell stakes in the donation of the land to investors, who get a tax deduction that is four to five times higher than what they paid. In exchange, the intermediaries are paid large fees. 

Conservation easements can be used to protect the environment, and proponents of the deduction argue that the easements are a critical tool in keeping land safe from development pressures. However, the IRS and other critics argue that these deductions are abused and cost the government between $1.3 billion and $2.4 billion in lost tax revenue. Some appraisers in these schemes have been indicted for “fraudulent” and “grossly inflated” land appraisals. Both Congress and the IRS have published research about the potential for abuse. In 2022, the IRS declared the schemes one of their “Dirty Dozen” for the year, writing that “these abusive arrangements do nothing more than game the tax system with grossly inflated tax deductions and generate high fees for promoters.”

Notice 2017-10 and the Tax Court’s Green Valley Ruling

To combat the abuse of conservation easements, the IRS released an administrative notice (the “Notice”) that required taxpayers to disclose any syndicated conservation easements on their tax returns as a “listed transaction.” The notice didn’t go through notice-and-comment procedures from the APA. Then, in 2019, the IRS disallowed over $22 million in charitable deductions on Green Valley and the other petitioners’ taxes for 2014 and 2015 and assessed a variety of penalties.  

While the substantive tax law is complex, Green Valley and the other petitioners challenged the penalties, arguing that the Notice justifying the penalties didn’t go through notice and comment procedures. In response, the IRS argued that Congress had exempted the agency from notice-and-comment procedures. Specifically, the IRS argued that they issued a Treasury Regulation that defined a “listed transaction” as one “identified by notice, regulation, or other form of published guidance,” which should have indicated to Congress that the IRS would be operating outside of APA requirements when issuing notices. 

The Tax Court disagreed, writing “We remain unconvinced that Congress expressly authorized the IRS to identify a syndicated conservation easement transaction as a listed transaction without the APA’s notice-and-comment procedures, as it did in Notice 2017-10.” Essentially, the statutes that Congress wrote allowing for IRS penalties did not determine the criteria for how taxpayers would incur the penalties, so the IRS decided with non-APA reviewed rules. If Congress would have expressly authorized the IRS to determine the requirements for penalties without APA procedures in the penalty statutes, then the Notice would have been valid. 

In invalidating the notice, the Tax Court decided that Notice 2017-10 was a legislative rule requiring notice-and-comment procedures because it imposed substantive reporting obligations on taxpayers with the threat of penalties. Since the decision, the IRS has issued proposed regulations on the same topic that will go through notice and comment procedures, while continuing to defend the validity of the Notice in other circuits (the Tax Court adopted reasoning from a Sixth Circuit decision).

The Future of Administrative Law and the IRS 

The decision follows other recent cases where courts have pushed the IRS to follow APA rules. However, following the APA is a departure from the past understanding of administrative law’s role in tax law. In the past, “tax exceptionalism” described the misperception that tax law is so complex and different from other regulatory regimes that the rules of administrative law don’t apply. This understanding has allowed the IRS to make multiple levels of regulatory guidance, some binding and some not, all without effective oversight from the courts. Further, judicial review is limited for IRS actions by statute, and even if there’s review, it may be ineffective if the judges are not tax experts. 

This movement towards administrative law has implications for both taxpayers and the IRS. For taxpayers, administrative law principles could provide additional avenues to challenge IRS actions and allow for more remedies. For the IRS, the APA may be an additional barrier to their job of collecting tax revenue. At the end of the day, syndicated conservation easements can be used to defraud the government, and the IRS should do something to curtail their potential for abuse. Following notice-and-comment procedures could delay effective tax administration. However, the IRS is an administrative agency, and it doesn’t make sense to think they can make their own rules or act like they’re not subject to the APA. Either way, administrative law will likely continue to prevail in both federal courts and Tax Court, and it will continue to influence tax law as we know it.

The Crypto Wild West Chaos Continues at FTX: Will the DCCPA Fix This?

November 27, 2022
Administrative Law, Cryptocurrency, Regulatory

Jack Atterberry, MJLST Staffer

The FTX Collapse and Its Implications

Over the last few weeks, the company FTX has imploded in what appears to be a massive scam of epic proportions. John Ray III, the former Enron restructuring leader who just took over FTX as CEO in their bankruptcy process, described FTX’s legal and bankruptcy situation as “worse than Enron” and a “complete failure of corporate control.”[1] FTX is a leading cryptocurrency exchange company that provided a platform on which customers could buy and sell crypto assets – similar to a traditional finance stock exchange. As of this past summer, FTX was worth $32 billion and served as a platform that global consumers trusted enough to deposit tens of billions of dollars in assets.[2]

Although FTX and its CEO Sam Bankman-Fried (“SBF”) engaged in numerous questionable and likely illegal business practices, perhaps the greatest fraudulent activity was intermingling customer deposits on the FTX exchange platform with assets from SBF’s asset management firm Alameda Research. Although facts are still being uncovered, preliminary investigations have highlighted that Alameda Research was using customer deposits in their trading and lending activities without customer consent – now customers face the unpleasant reality that their assets (in excess of $1 billion on aggregate) may never be returned.[3] While many lessons in corporate governance can be learned from the FTX situation, a key legal implication of the meltdown is that crypto has a regulatory problem that needs to be addressed by Congress and other US government agencies.

Current State of Government Regulation

Crypto assets are a relatively new asset class and have risen to prominence globally since the publishing of the Bitcoin white paper by the anonymous Satoshi Nakamoto in 2009.[4] Although crypto assets and the business activities associated with them are regulated in the United States, this regulation has been inconsistent and has created uncertainty for businesses and individuals in the ecosystem. Currently, the US Securities and Exchange Commission (“SEC”), state legislatures, the US Treasury, and a host of other government agencies have acted inconsistently. The SEC has inconsistently pursued enforcement actions, state governments have enacted differing digital assets laws, and the Treasury has banned crypto entities without clear rationale.[5] This has been a major problem for the industry and has led companies (including now infamously FTX) to move abroad to seek more regulatory certainty. Companies like FTX have chosen to domicile in jurisdictions like the Bahamas to avoid having to guess what approach various state governments and federal agencies will take with regard to its digital asset business activities.

Earlier in 2022, Congress introduced the Digital Commodities Consumer Protection Act (“DCCPA”) to attempt to fill gaps in the federal regulatory framework that oversees the crypto industry. The Digital Commodities Consumer Protection Act amends the Commodity Exchange Act to create a much-needed comprehensive and robust regulatory framework for spot markets of digital asset commodities. The DCCPA would enable the Commodity Futures Trading Commission (“CFTC”) to require digital asset commodity exchanges to actively prevent fraud and market manipulation, and would provide the CFTC regulatory authority to access quote and trade data allowing them to identify market manipulation more easily.[6] Taken as a whole, the DCCPA would implement consumer protections relating to digital asset commodities, ensure oversight of digital asset commodity platforms (such as FTX, Coinbase, etc.), and better prevent system risk to financial markets.[7] This regulation fills in a necessary gap in federal crypto regulation and industry observers are optimistic of its chances in getting passed as law.[8]

Digital Asset Regulation Has a Long Path Ahead

Despite the potential benefits and strong congressional regulatory action that the DCCPA represents, elements of the bill have been criticized by both the crypto industry and policy experts. According to the Blockchain Association, a leading crypto policy organization, the DCCPA could present negative implications for the decentralized finance (“DeFi”) ecosystem because of the onerous reporting and custody requirements that elements of the DCCPA would inflict on De-Fi protocols and applications[9]. “De-Fi” is a catch-all term for blockchain-based financial tools that allow users to trade, borrow, and loan crypto assets without third-party intermediaries.[10] The DCCPA attempts to regulate intermediary risks associated with digital asset trading whereas the whole point of De-Fi is to remove intermediaries through the use of blockchain software technology.[11] The Blockchain Association has also criticized the DCCPA as providing an overly broad definition for “digital commodity platform” and an overly narrow and ambiguous definition of “digital commodity” which could create future unnecessary turf wars between the SEC and CFTC.[12] When Congress revisits this bill next year, these complexities will likely be brought up in weighing the pros and cons of the bill. Besides the textual contents of the DCCPA, the legislators pushing forward the bill must also deal with the DCCPA’s negative association with Sam Bankman-Fried, the former FTX CEO. The former FTX CEO and suspected fraudster was perhaps the greatest supporter of the bill and lobbied for its provisions before Congress several times.[13] While Bankman-Fried’s support does not necessarily mean anything is wrong with the bill, some legislators and lobbyists may be hesitant to push forward a bill that was heavily influenced by a person who perpetrated a massive fraud scheme severely hurting thousands of consumers.

Though the goal of the DCCPA is to establish CFTC authority over crypto assets that qualify as commodities, the crypto ecosystem will still be left with several unanswered regulatory issues if it is passed. A key question is whether digital assets will be treated as commodities, securities or something else entirely. In addition, another key looming question is how Congress will regulate stablecoins—a type of digital asset where the price is designed to be pegged to another type of asset, typically a real-world asset such as US Treasury bills. For these unanswered questions Congress and the SEC will likely need to provide additional guidance and rules to build on the increased certainty that could be brought about with the DCCPA. By passing an amended version of the DCCPA with more careful attention paid to the De-Fi ecosystem as well as clarified definitions of digital commodities and digital commodity platforms, Congress would go a long way in the right direction to prevent future FTX-like fraud schemes, protect consumers, and ensure crypto innovation stays in the US.

Notes

[1] Ken Sweet & Michelle Chapman, FTX Is a Bigger Mess Than Enron, New CEO Says, Calling It “Unprecedented”, TIME (Nov. 17, 2022), https://time.com/6234801/ftx-fallout-worse-than-enron/

[2] FTX Company Profile, FORBES, https://www.forbes.com/companies/ftx/?sh=506342e23c59

[3] Osipovich et al., They Lived Together, Worked Together and Lost Billions Together: Inside Sam Bankman-Fried’s Doomed FTX Empire, WSJ (Nov. 19, 2022), https://www.wsj.com/articles/sam-bankman-fried-ftx-alameda-bankruptcy-collapse-11668824201

[4] Guardian Nigeria, The idea and a brief history of cryptocurrencies, The Guardian (Dec. 26, 2022), https://guardian.ng/technology/tech/the-idea-and-a-brief-history-of-cryptocurrencies/

[5] Kathryn White, Cryptocurrency regulation: where are we now, and where are we going?, World Economic Forum (Mar. 28, 2022), https://www.weforum.org/agenda/2022/03/where-is-cryptocurrency-regulation-heading/

[6] https://www.agriculture.senate.gov/imo/media/doc/Testimony_Phillips_09.15.2022.pdf

[7] US Senate Agriculture Committee, Crypto One-Pager: The Digital Commodities Consumer Protection Act Closes Regulatory Gaps, https://www.agriculture.senate.gov/imo/media/doc/crypto_one-pager1.pdf

[8] Courtney Degen, Washington wants to regulate cryptocurrency, Pensions & Investments (Oct. 3, 2022), https://www.pionline.com/cryptocurrency/washington-wants-regulate-crypto-path-unclear

[9] Jake Chervinsky, Blockchain Association Calls for Revisions to the Digital Commodities Consumer Protection Act (DCCPA), Blockchain Association (Sept. 15, 2022), https://theblockchainassociation.org/blockchain-association-calls-for-revisions-to-the-digital-commodities-consumer-protection-act-dccpa/

[10] Rakesh Sharma, What is Decentralized Finance (DeFi) and How Does It Work?, Investopedia (Sept. 21, 2022), https://www.investopedia.com/decentralized-finance-defi-5113835.

[11] Jennifer J. Schulpt & Jack Solowey, DeFi Must Be Defended, CATO Institute (Oct. 26, 2022), https://www.cato.org/commentary/defi-must-be-defended

[12] Jake Chervinsky, supra note 7.

[13] Fran Velasquez, Former SEC Official Doubts FTX Crash Will Prompt Congress to Act on Crypto Regulations, CoinDesk (Nov. 16, 2022), https://www.coindesk.com/business/2022/11/16/former-sec-official-doubts-ftx-crash-will-prompt-congress-to-act-on-crypto-regulations/

Twitter Troubles: The Upheaval of a Platform and Lessons for Social Media Governance

November 17, 2022
Administrative Law, Business Law, Ethics, Internet, Regulatory, Social Media, Telecommunication

Gordon Unzen, MJLST Staffer

Elon Musk’s Tumultuous Start

On October 27, 2022, Elon Musk officially completed his $44 billion deal to purchase the social media platform, Twitter.[1] When Musk’s bid to buy Twitter was initially accepted in April 2022, proponents spoke of a grand ideological vision for the platform under Musk. Musk himself emphasized the importance of free speech to democracy and called Twitter “the digital town square where matters vital to the future of humanity are debated.”[2] Twitter co-founder Jack Dorsey called Twitter the “closest thing we have to a global consciousness,” and expressed his support of Musk: “I trust his mission to extend the light of consciousness.”[3]

Yet only two weeks into Musk’s rule, the tone has quickly shifted towards doom, with advertisers fleeing the platform, talk of bankruptcy, and the Federal Trade Commission (“FTC”) expressing “deep concern.” What happened?

Free Speech or a Free for All?

Critics were quick to read Musk’s pre-purchase remarks about improving ‘free speech’ on Twitter to mean he would change how the platform would regulate hate speech and misinformation.[4] This fear was corroborated by the stream of racist slurs and memes from anonymous trolls ‘celebrating’ Musk’s purchase of Twitter.[5] However, Musk’s first major change to the platform came in the form of a new verification service called ‘Twitter Blue.’

Musk took control of Twitter during a substantial pullback in advertisement spending in the tech industry, a problem that has impacted other tech giants like Meta, Spotify, and Google.[6] His solution was to seek revenue directly from consumers through Twitter Blue, a program where users could pay $8 a month for verification with the ‘blue check’ that previously served to tell users whether an account of public interest was authentic.[7] Musk claimed this new system would give ‘power to the people,’ which proved correct in an ironic and unintended fashion.

Twitter Blue allowed users to pay $8 for a blue check and impersonate politicians, celebrities, and company media accounts—which is exactly what happened. Musk, Rudy Giuliani, O.J. Simpson, LeBron James, and even the Pope were among the many impersonated by Twitter users.[8] Companies received the same treatment, with an impersonation Eli Lilly and Company account writing “We are excited to announce insulin is free now,” causing its stock to drop 2.2%.[9]This has led advertising firms like Omnicom and IPG’s Mediabrands to conclude that brand safety measures are currently impeded on Twitter and advertisers have subsequently begun to announce pauses on ad spending.[10] Musk responded by suspending Twitter Blue only 48 hours after it launched, but the damage may already be done for Twitter, a company whose revenue was 90% ad sales in the second quarter of this year.[11] During his first mass call with employees, Musk said he could not rule out bankruptcy in Twitter’s future.[12]

It also remains to be seen whether the Twitter impersonators will escape civil liability under theories of defamation[13] or misappropriation of name or likeness,[14] or criminal liability under state identity theft[15] or false representation of a public employee statutes,[16] which have been legal avenues used to punish instances of social media impersonation in the past.

FTC and Twitter’s Consent Decree

On the first day of Musk’s takeover of Twitter, he immediately fired the CEO, CFO, head of legal policy, trust and safety, and general counsel.[17] By the following week, mass layoffs were in full swing with 3,700 Twitter jobs, or 50% of its total workforce, to be eliminated.[18] This move has already landed Twitter in legal trouble for potentially violating the California WARN Act, which requires 60 days advance notice of mass layoffs.[19] More ominously, however, these layoffs, as well as the departure of the company’s head of trust and safety, chief information security officer, chief compliance officer and chief privacy officer, have attracted the attention of the FTC.[20]

In 2011, Twitter entered a consent decree with the FTC in response to data security lapses requiring the company to establish and maintain a program that ensured its new features do not misrepresent “the extent to which it maintains and protects the security, privacy, confidentiality, or integrity of nonpublic consumer information.”[21] Twitter also agreed to implement two-factor authentication without collecting personal data, limit employee access to information, provide training for employees working on user data, designate executives to be responsible for decision-making regarding sensitive user data, and undergo a third-party audit every six months.[22] Twitter was most recently fined $150 million back in May for violating the consent decree.[23]

With many of Twitter’s former executives gone, the company may be at an increased risk for violating regulatory orders and may find itself lacking the necessary infrastructure to comply with the consent decree. Musk also reportedly urged software engineers to “self-certify” legal compliance for the products and features they deployed, which may already violate the court-ordered agreement.[24] In response to these developments, Douglas Farrar, the FTC’s director of public affairs, said the commission is watching “Twitter with deep concern” and added that “No chief executive or company is above the law.”[25] He also noted that the FTC had “new tools to ensure compliance, and we are prepared to use them.”[26] Whether and how the FTC will employ regulatory measures against Twitter remains uncertain.

Conclusions

The fate of Twitter is by no means set in stone—in two weeks the platform has lost advertisers, key employees, and some degree of public legitimacy. However, at the speed Musk has moved so far, in two more weeks the company could likely be in a very different position. Beyond the immediate consequences to the company, Musk’s leadership of Twitter illuminates some important lessons about social media governance, both internal and external to a platform.

First, social media is foremost a business and not the ‘digital town square’ Musk imagines. Twitter’s regulation of hate speech and verification of public accounts served an important role in maintaining community standards, promoting brand safety for advertisers, and protecting users. Loosening regulatory control runs a great risk of delegitimizing a platform that corporations and politicians alike took seriously as a tool for public communication.

Second, social media stability is important to government regulators and further oversight may not be far off on the horizon. Musk is setting a precedent and bringing the spotlight on the dangers of a destabilized social media platform and the risks this may pose to data privacy, efforts to curb misinformation, and even the stock market. In addition to the FTC, Senate Majority Whip, and chair of the Senate Judiciary Committee, Dick Durbin, has already commented negatively on the Twitter situation.[27] Musk may have given powerful regulators, and even legislators, the opportunity they were looking for to impose greater control over social media. For better or worse, Twitter’s present troubles could lead to a new era of government involvement in digital social spaces.

Notes

[1] Adam Bankhurst, Elon Musk’s Twitter Takeover and the Chaos that Followed: The Complete Timeline, IGN (Nov. 11, 2022), https://www.ign.com/articles/elon-musks-twitter-takeover-and-the-chaos-that-followed-the-complete-timeline.

[2] Monica Potts & Jean Yi, Why Twitter is Unlikely to Become the ‘Digital Town Square’ Elon Musk Envisions, FiveThirtyEight (Apr. 29, 2022), https://fivethirtyeight.com/features/why-twitter-is-unlikely-to-become-the-digital-town-square-elon-musk-envisions/.

[3] Bankhurst, supra note 1.

[4] Potts & Yi, supra note 2.

[5] Drew Harwell et al., Racist Tweets Quickly Surface After Musk Closes Twitter Deal, Washington Post (Oct. 28, 2022), https://www.washingtonpost.com/technology/2022/10/28/musk-twitter-racist-posts/.

[6] Bobby Allyn, Elon Musk Says Twitter Bankruptcy is Possible, But is That Likely?, NPR (Nov. 12, 2022), https://www.wglt.org/2022-11-12/elon-musk-says-twitter-bankruptcy-is-possible-but-is-that-likely.

[7] Id.

[8] Keegan Kelly, We Will Never Forget These Hilarious Twitter Impersonations, Cracked (Nov. 12, 2022), https://www.cracked.com/article_35965_we-will-never-forget-these-hilarious-twitter-impersonations.html; Shirin Ali, The Parody Gold Created by Elon Musk’s Twitter Blue, Slate (Nov. 11, 2022), https://slate.com/technology/2022/11/parody-accounts-of-twitter-blue.html.

[9] Ali, supra note 8.

[10] Mehnaz Yasmin & Kenneth Li, Major Ad Firm Omnicom Recommends Clients Pause Twitter Ad Spend – Memo, Reuters (Nov. 11, 2022), https://www.reuters.com/technology/major-ad-firm-omnicom-recommends-clients-pause-twitter-ad-spend-verge-2022-11-11/; Rebecca Kern, Top Firm Advises Pausing Twitter Ads After Musk Takeover, Politico (Nov. 1, 2022), https://www.politico.com/news/2022/11/01/top-marketing-firm-recommends-suspending-twitter-ads-with-musk-takeover-00064464.

[11] Yasmin & Li, supra note 10.

[12] Katie Paul & Paresh Dave, Musk Warns of Twitter Bankruptcy as More Senior Executives Quit, Reuters (Nov. 10, 2022), https://www.reuters.com/technology/twitter-information-security-chief-kissner-decides-leave-2022-11-10/.

[13] Dorrian Horsey, How to Deal With Defamation on Twitter, Minc, https://www.minclaw.com/how-to-report-slander-on-twitter/ (last visited Nov. 12, 2022).

[14] Maksim Reznik, Identity Theft on Social Networking Sites: Developing Issues of Internet Impersonation, 29 Touro L. Rev. 455, 456 n.12 (2013), https://digitalcommons.tourolaw.edu/cgi/viewcontent.cgi?article=1472&context=lawreview.

[15] Id. at 455.

[16] Brett Snider, Can a Fake Twitter Account Get You Arrested?, FindLaw Blog (April 22, 2014), https://www.findlaw.com/legalblogs/criminal-defense/can-a-fake-twitter-account-get-you-arrested/.

[17] Bankhurst, supra note 1.

[18] Sarah Perez & Ivan Mehta, Twitter Sued in Class Action Lawsuit Over Mass Layoffs Without Proper Legal Notice, Techcrunch (Nov. 4, 2022), https://techcrunch.com/2022/11/04/twitter-faces-a-class-action-lawsuit-over-mass-employee-layoffs-with-proper-legal-notice/.

[19] Id.

[20] Natasha Lomas & Darrell Etherington, Musk’s Lawyer Tells Twitter Staff They Won’t be Liable if Company Violates FTC Consent Decree (Nov. 11, 2022), https://techcrunch.com/2022/11/11/musks-lawyer-tells-twitter-staff-they-wont-be-liable-if-company-violates-ftc-consent-decree/.

[21] Id.

[22] Scott Nover, Elon Musk Might Have Already Broken Twitter’s Agreement With the FTC, Quartz (Nov. 11, 2022), https://qz.com/elon-musk-might-have-already-broken-twitter-s-agreement-1849771518.

[23] Tom Espiner, Twitter Boss Elon Musk ‘Not Above the Law’, Warns US Regulator, BBC (Nov. 11, 2022), https://www.bbc.com/news/business-63593242.

[24] Nover, supra note 22.

[25] Espiner, supra note 23.

[26] Id.

[27] Kern, supra note 10.

Behind the “Package Insert”: Loophole in FDA’s Regulation of Off-Label Prescriptions

November 12, 2022
Administrative Law, Food and Drug Law, Healthcare, Industry, Pharmaceuticals, Public Health, Regulatory

Yolanda Li, MJLST Staffer

FDA Regulation of Drug Prescription Labeling and the “Package Insert”

Over the recent years, constant efforts have been made towards regulating medical prescriptions in an attempt to reduce risks accompanied with drug prescriptions. Among those efforts is the FDA’s revision of the format of prescription drug information, commonly known as the “package insert”.[1]

The package insert regulation, effective since 2006, applies to all prescription drugs. The package insert is to provide up-to-date information on the drug in an easy-to-read format. One significant feature is a section named “highlights”, which provides the most important information regarding the benefits and risks of a prescribed medication. The highlights section is typically half a page in length providing a concise summary of information including “boxed warning”, “indications and usage”, and “dosage and administration”.[2] The highlights section also refers physicians to appropriate sections of the full prescribing information. In this way, the package insert aims to draw both the physicians’ and the patients’ attention to the prescription of a drug, consequently accomplishing the ultimate purpose of managing medication use and reducing medical errors. Mike Leavitt, the Health and Human Services Secretary of the FDA commented that the package insert “help[s] ensure safe and optimal use of drugs, which translates into better health outcomes for patients and more efficient delivery of healthcare.”[3]

FDA Regulation of Off-Label Prescription and the Emergence of a Loophole

The FDA’s regulations relating to the labeling of prescription drugs, although systematic in its form, are cut short to a certain extent due to its lack of regulation on off-label prescriptions. Off-label prescriptions do not refer to a physician prescribing non-FDA approved drugs, a common misunderstanding by the public. Rather, off-label prescriptions are those that do not conform to the FDA-approved use set out in the FDA-approved label.[4] More specifically, off-label prescription generally refers to: “(1) the practice of a physician prescribing a legally manufactured drug for purposes other than those indicated on that drug’s FDA mandated labeling; (2) using a different method of applying the treatment and prescribing a drug, device, or biologic to patient groups other than those approved by FDA; and (3) prescriptions for drug dosages that are different from the approved label-recommended dosage or for time periods exceeding the label-recommended usage.”[5] For example if Drug A’s use, as mandated by the FDA, is to treat chronic headaches, and a physician prescribes it to treat a patient’s sprained ankle, that is an off-label prescription. However, such practice is common as estimated by the American Medical Association (AMA).[6]

The commonly approach is that the FDA and courts do not to interfere with physicians’ off-label uses.[7] Thus, when the FDA regulates the labeling of approved uses but does not regulate prescriptions for off-label uses, a loophole is formed. Andrew von Eschenbach, M.D., claims that because the FDA’s package insert regulation makes it easier for physicians to get access to important information about drugs, including drug safety and benefits, this regulation helps physicians to have more meaningful discussions with patients.[8] However, physicians’ discretion in prescribing off-label prescriptions would offset the proposed benefit of the FDA regulation because the regulation remains as guidance without force of law once physicians choose to go off from FDA’s approved uses of drugs. The easy-to-understand feature of the package insert and its benefit for a patient’s understanding of the drug becomes futile when physicians exercise discretion and prescribe drugs for uses not written on the inserts. In sum, when a patient receives an off-label prescription, the insert provides them little benefit as it addresses benefits and risks related to a different use of the drug.

It is undisputed that drug manufacturers have less discretion regarding drug labeling than physicians. If a manufacturer included an off-label use on a drug’s label, and promoted the off-label use of the drug, the drug would be considered misbranded. The manufacturer would then be subject to liability[9] as manufacturing a misbranded product in interstate commerce is prohibited.[10] However, the effect of regulations on manufacturers still fail to eliminate the loophole in off-label prescription: in response to the regulations, the manufacturer usually receives FDA approval for only a few drug uses and then relies on physicians prescribing off-label uses to ensure their profitability.[11] In this way, the manufacturer avoids liability under regulation and furthers the loophole in off-label prescription by encouraging physicians to prescribe more off-label uses in order to expand the manufacturer’s market.[12]

Why are Off-Label Prescriptions Difficult to Regulate?

One of the main reasons behind the lack of regulation of off-label prescriptions is the FDA’s objective in ensuring effective delivery of health care. Physicians are encouraged to use discretion and judgment in order to tailor prescription to patients’ individual conditions.[13] Another reason is to increase efficiency in treatments by avoiding the lengthy FDA approval process.[14] Aspirin was widely prescribed to reduce the risk of heart attack long before it was FDA-approved for this purpose; off-label prescriptions have also been proven effective in treatment of cancer, and off-label therapies have prolonged the lives of AIDS patients.[15] Another concern is drug prices in the United States, and promoting off-label uses has been found to help reduce drug prices as increased sales volume enables drug companies to lower their prices.[16] Indeed, off-label prescription has become a mainstream of medicine: “the FDA has long tolerated off-label drug use and has disclaimed any interest in regulating physicians’ prescribing practices.”[17] Today it is unclear whether the agency even has jurisdiction to regulate off-label prescription of drugs.[18]

In sum, there is clear guidance on the labeling of prescription drugs as a result of FDA regulation. However, because of difficulties in enforcement, the custom and widely accepted practice of off-label prescriptions and the inherent benefit of off-label prescription, the effects of the regulation are not as effective as what was firstly planned and proposed.

Notes

[1] The FDA Announces New Prescription Drug Information Format, U.S. Food & Drug Adm’ (Dec. 04 2015) https://www.fda.gov/drugs/laws-acts-and-rules/fda-announces-new-prescription-drug-information-format.

[2] Id.

[3] Id.

[4] Margaret Z. Johns, Informed Consent: Requiring Doctors to Disclose Off-Label Prescriptions and Conflicts of Interest, 58 Hastings L.J. 967, 968 https://plus.lexis.com/document?crid=35364c11-2939-4e58-bceb-dab7ae8f0154&pddocfullpath=%2Fshared%2Fdocument%2Fanalytical-materials%2Furn%3AcontentItem%3A4P0W-GY20-00CW-906B-00000-00&pdsourcegroupingtype=&pdcontentcomponentid=7341&pdmfid=1530671&pdisurlapi=true.

[5] Lisa E. Smilan, The off-label loophole in the psychopharmacologic setting: prescription of antipsychotic drugs in the nonpsychotic patient population, 30 Health Matrix 233, 240 (2020), https://plus.lexis.com/document/?pdmfid=1530671&crid=367cf8ad-295e-4f14-97fa-737618718d61&pddocfullpath=%2Fshared%2Fdocument%2Fanalytical-materials%2Furn%3AcontentItem%3A64BT-RR31-JWBS-61KV-00000-00&pdworkfolderid=5506aeec-9540-4837-89f0-5a1acfd81d8b&pdopendocfromfolder=true&prid=1d42abd0-b66e-43af-a61a-0d1fb94180f5&ecomp=gdgg&earg=5506aeec-9540-4837-89f0-5a1acfd81d8b#.

[6] Supra note 4.

[7] Sigma-Tau Pharms. v. Schwetz, 288 F.3d 141, 148, https://plus.lexis.com/document?crid=7d2a2b00-13ad-4953-968e-82a28724aa00&pddocfullpath=%2Fshared%2Fdocument%2Fcases%2Furn%3AcontentItem%3A45RF-5H50-0038-X1PB-00000-00&pdsourcegroupingtype=&pdcontentcomponentid=6388&pdmfid=1530671&pdisurlapi=true.

[8] Supra note 1.

[9] 21 CFR 201.5, https://plus.lexis.com/document/?pdmfid=1530671&crid=e02a99fb-be65-4525-b83c-a167f3e21b93&pddocfullpath=%2Fshared%2Fdocument%2Fadministrative-codes%2Furn%3AcontentItem%3A603K-BXD1-DYB7-W30Y-00000-00&pdcontentcomponentid=5154&pdworkfolderlocatorid=NOT_SAVED_IN_WORKFOLDER&prid=ff2b7e20-9dab-49b0-8385-627c16ee0ba2&ecomp=vfbtk&earg=sr2.

[10] 21 CFR 801.4, https://plus.lexis.com/document/?pdmfid=1530671&crid=721a586d-52a4-4228-b0c3-c464a77d6e6a&pddocfullpath=%2Fshared%2Fdocument%2Fadministrative-codes%2Furn%3AcontentItem%3A638R-X4S3-GXJ9-32FV-00000-00&pdcontentcomponentid=5154&pdworkfolderlocatorid=NOT_SAVED_IN_WORKFOLDER&prid=ff2b7e20-9dab-49b0-8385-627c16ee0ba2&ecomp=vfbtk&earg=sr6.

[11]  Supra note 4.

[12] Id.

[13]   Supra note 7.

[14]   Supra note 4.

[15]  Id.

[16] Supra note 4, at 981.

[17] ​​Kaspar J. Stoffelmayr, Products Liability And “Off-label” Uses Of Prescription Drugs, 63 U. Chi. L. Rev. 275, 279, https://plus.lexis.com/document?crid=a2181ffc-7f3e-4bce-b82e-08ba9111194f&pddocfullpath=%2Fshared%2Fdocument%2Fanalytical-materials%2Furn%3AcontentItem%3A3S3V-4CF0-00CV-K03W-00000-00&pdsourcegroupingtype=&pdcontentcomponentid=7358&pdmfid=1530671&pdisurlapi=true.

[18]  Id.

Electric Vehicles: The Path of the Future or a Jetson-Like Fantasy?

November 6, 2022
Administrative Law, Climate Change, Energy Law, Industry, Infrastructure, Social Welfare, Supply Chain, Transportation

James Challou, MJLST Staffer

Last week President Biden contributed to the already growing hype behind electric vehicles when he heralded them as the future of transportation. Biden touted that $7.5 billion from last year’s infrastructure law, Public Law 117-58, would be put toward installing electric vehicle charging stations across the United States. This mass rollout of electric vehicle chargers, broadly aimed to help the US meet its goal of being carbon neutral by 2050, constitutes an immediate effort by the Biden administration to tackle pollution in the sector responsible for the largest share of the nation’s greenhouse gas emissions: transportation. The administration’s short-term goal is to install half a million chargers by 2030. However, not all are as confident as President Biden that this movement will be efficacious.

The “Buy America” Obstacle

Despite President Biden’s enthusiasm for this commitment to funding widespread electric vehicle charging stations, many experts remain skeptical that supply can keep up with demand. Crucially, Public Law 117-58 contains a key constraint, dubbed the “Buy America” rule, that mandates federal infrastructure projects obtain at least 55% of construction materials, including iron and steel, from domestic sources and requires all manufacturing to be done in the U.S.

Although labor groups and steel manufacturers continue to push for these domestic sourcing rules to be enforced, other groups like automakers and state officials argue that a combination of inflation increasing the cost of domestic materials and limited domestic production may hamstring the push towards electric vehicle charging accessibility altogether. One state official stated, “A rushed transition to the new requirements will exacerbate delays and increase costs if EV charging equipment providers are forced to abruptly shift component sourcing to domestic suppliers, who in turn may struggle with availability due to limited quantities and high demand.”

Proponents of a slower implementation offer a slew of different solutions ranging from a temporary waiver of the Buy America rules until domestic production can sustain the current demand, to a waiver of the requirements for EV chargers altogether. The Federal Highway Administration, charged with oversight of the EV charger program, proposed an indeterminate transitional period waiver of the Buy America rules until the charger industry and states are prepared to comply with requirements.

Domestic Manufacturer Complications

Domestic manufacturers are similarly conflicted about the waiver of the Buy America rules, with some thinking they may not be able to meet growing demand. While many companies predict they can meet Buy America production requirements in the future, the Federal Highway Administration specified in its waiver proposal that a mere three manufacturers, all based in California, presently believe they have existing fast charger systems that comply with Buy America requirements.

Predictably, the waiver proposal is divisive amongst domestic manufacturers. Some companies are onboard with the waiver and requested even more flexibility. This includes automakers like Ford and General Motors, who say that a process of moving all supply chains to the US demands more time, particularly at the scale necessary to match the surge in federal funding. This is largely seen as the most stakeholder friendly move as it offers companies the opportunity to use the duration of the waiver to see if a clear competitive market materializes which in turn benefits stakeholders.

Contrarily, others have asked for the waiver period to be shortened to allow them to quickly recoup their investments into Buy America compliant manufacturing upgrades. Some companies are even more aggressive; they oppose the waiver altogether and argue that the waiver would disadvantage manufacturers that intentionally put money into meeting the Buy America requirements. These companies posit that domestic manufacturing provides immediate benefits like augmenting supply chain security and electric-vehicle cybersecurity and warn against dependency on foreign governments for electrical steel needs. They further add that the Buy America rule will fuel growth in the US market and create manufacturing jobs. Labor groups and some lawmakers have adopted this stance as one lawmaker from Ohio commented, “[f]ederal agencies should implement the new Buy America provisions as quickly as possible to give American companies the certainty they need to move forward with investments.”

Other Implementation Difficulties

 The inclusion of the Buy America rule in this legislation is not the only aspect of the EV charging project that has generated considerable debate. Regional challenges pose more of an issue than originally anticipated. Although many states reported common potential hurdles like vandalism, range anxiety, supply chain, and electricity challenges, unique geographic problems have also arisen. For example, Nebraska reported in its plan that a shift to electric vehicles could decrease revenue collection from gas tax. Iowa aired out concerns about stations being hit by and damaged by snow plows. Michigan cited rodent damage as a potential concern. Finally, Oklahoma flagged political opposition to the chargers as a problem that could be both pervasive and fatal to the overall electric charging process.

Moreover, the law caught a substantial amount of flak for a curious decision to skip interstate rest stops when installing the EV charging stations. Although at first glance this would appear to be a pivotal oversight, it stems from a 1956 law that restricts commercial activity, in this case including electric car charging, at rest stops. The Federal Highway Administration, to alleviate these concerns, issued guidance that says electric vehicle chargers should be “as close to Interstate Highway Systems and highway corridors as possible” and generally no more than one mile from the exit. Furthermore, some of the older rest stops are excluded from the 1956 guidance. However, this is not enough to sate critics as many continue to fight for the 1956 law to be changed. They claim that the existence of the restriction drastically inconveniences drivers, planners, and vehicles while potentially creating a wealth disparity by forcing low-income families, who traditionally rely more on public rest areas, to avoid purchasing electric vehicles.

Conclusion

President Biden deserves to be lauded for his ambitious plan for electric vehicles which attempts to square combating the effects of climate change with preserving American manufacturing while simultaneously improving infrastructure. It is worth questioning whether the law would be more effective if it simply focused its efforts on one of these areas. As a commentator at the Cato Institute noted, “The goal of infrastructure spending should be better infrastructure — and if you’re trying to pursue policies to mitigate climate change, well that should be the overall goal … Anything that hinders that should be avoided.”  Only time will reveal the answer to this question.

Beef (and Residual Hormones?). It’s What’s for Dinner.

November 6, 2022
Administrative Law, Agriculture, Environmental Law, Food and Drug Law, Health, Industry, Public Safety

Kira Le, MJLST Staffer

The beef industry in the United States has been using hormones, both natural and synthetic, to increase the size of cattle prior to slaughter for more than a century.[1] Capsules are implanted under the skin behind a cow’s ear and release specific doses of hormones over a period of time with the goal of increasing the animal’s size more quickly. Because the use of these hormones in the beef industry involves both drug regulation and food safety regulations, both the U.S. Food and Drug Administration (FDA) and the United States Department of Agriculture (USDA) are responsible for ensuring the safety of the practice and regulating its use.[2] According to the FDA, “scientific data” is used to establish “acceptable” safe limits for hormones in meat by the time it is consumed.[3] Agricultural science experts support the fact that the naturally-occurring hormones used in beef production, such as estrogen, are used in amounts much smaller than those that can be found in other common foods, such as eggs and tofu.[4] However, the debate within the scientific community, and between jurisdictions that allow the sale of hormone-treated beef (such as the United States) and those that have banned its importation (such as the European Union), is still raging on in 2022 and has led to significant distrust in the beef industry by consumers.[5] With the release of research earlier this year presenting opposing conclusions regarding the safety of the use of synthetic hormones in the beef industry, the FDA has a responsibility to acknowledge evidence suggesting that such practices may be harmful to human health.

Some defend the use of hormones in the beef industry as perfectly safe and, at this point, necessary to sustainably feed a planet on which the demand for meat continues to increase with a growing population. Others, such as the European Union and China, both of which have restricted the importation of beef from cattle implanted with growth-promoting hormones, argue that the practice threatens human health.[6] For example, a report out of Food Research Collaboration found that a routinely-used hormone in United States beef production posed a significant risk of cancer.[7] Such a finding is reminiscent of when, in the not-too-distant past, known carcinogen diethylstilbestrol (DES) was used in U.S. cattle production and led to dangerous meat being stocked on grocery store shelves.[8]

This year, research published in the Journal of Applied Animal Research discussed the effects that residual hormones left in beef and the environment have on human health in the United States.[9] Approximately 63% of beef cattle in the United States are implanted with hormones, most of which are synthetic.[10] Despite organizations and agencies such as the FDA assuring consumers that the use of these synthetic hormones in cattle production is safe, the residues that can be left behind may be carcinogenic and/or lead to reproductive or developmental issues in humans.[11] Furthermore, the National Residue Program (NRP), housed in the USDA, is not only the “only federal effort that routinely examines food animal products for drug residues,” but also only examines tissues not commonly consumed, such as the liver and kidney.[12] Researchers Quaid and Abdoun offer the example of Zeranol, a genotoxic synthetic hormone used in beef production in the United States that activates estrogen receptors, causing dependent cell proliferation in the mammary glands that may result in breast cancer.[13] They also noted the problem of residual hormones found in the environment surrounding cattle production locations, which have been found to reduce human male reproductive health and increase the risk of some endocrine cancers.[14]

Also this year, researchers published an article in the Journal of Animal Science claiming that despite the “growing concern” of the effects of residual hormones on human health, including the earlier onset of puberty in girls and an increase in estrogen-related diseases attributed to the excessive consumption of beef, research shows that cattle treated with hormones, “when given at proper administration levels, do not lead to toxic or harmful levels of hormonal residues in their tissues.”[15] The researchers concluded that the hormones have no effect on human health and are not the cause of disease.[16]

Perhaps it is time for the FDA to acknowledge and address the scientific disagreements on the safety of the use of hormones – synthetic hormones, especially – in beef production, as well as reassure consumers that players in the agriculture industry are abiding by safety regulations. Better yet, considering the currentness of the research, the inconsistency of the conclusions, and the seriousness of the issue, formal hearings – held by either the FDA or Congress – may be necessary to rebuild the trust of consumers in the U.S. beef industry.

Notes

[1] Synthetic Hormone Use in Beef and the U.S. Regulatory Dilemma, DES Daughter (Nov. 20, 2016), https://diethylstilbestrol.co.uk/synthetic-hormone-use-in-beef-and-the-us-regulatory-dilemma/.

[2] Id.

[3] Steroid Hormone Implants Used for Growth in Food-Producing Animals, U.S. Food and Drug Admin (Apr. 13, 2022), https://www.fda.gov/animal-veterinary/product-safety-information/steroid-hormone-implants-used-growth-food-producing-animals.

[4] Amanda Blair, Hormones in Beef: Myths vs. Facts, S.D. State Univ. Extension (July 13, 2022), https://extension.sdstate.edu/hormones-beef-myths-vs-facts.

[5] See Julia Calderone, Here’s Why Farmers Inject Hormones Into Beef But Never Into Poultry, Insider (Mar. 31, 2016), https://www.businessinsider.com/no-hormones-chicken-poultry-usda-fda-2016-3 (discussing the debate within the scientific community over whether the use of hormones in animals raised for human consumption is a risk to human health).

[6] New Generation of Livestock Drugs Linked to Cancer, Rafter W. Ranch (June 8, 2022), https://rafterwranch.net/livestock-drugs-linked-to-cancer/.

[7] Id.

[8] Synthetic Hormone Use in Beef and the U.S. Regulatory Dilemma, DES Daughter (Nov. 20, 2016), https://diethylstilbestrol.co.uk/synthetic-hormone-use-in-beef-and-the-us-regulatory-dilemma/.

[9] Mohammed M. Quaid & Khalid A. Abdoun, Safety and Concerns of Hormonal Application in Farm Animal Production: A Review, 50 J. of Applied Animal Rsch. 426 (2022).

[10] Id. at 428.

[11] Id. at 429–30.

[12] Id. at 430.

[13] Id. at 432–33.

[14] Id. at 435.

[15] Holly C. Evans et al., Harnessing the Value of Reproductive Hormones in Cattle Production with Considerations to Animal Welfare and Human Health, 100 J. of Animal Sci. 1, 9 (2022).

[16] Id.

New Congressional Bill to Fuel the Crypto Winter?

November 6, 2022
Administrative Law, Cryptocurrency, Economics, Industry, Regulatory, Securities Law, Tax Law

Shawn Zhang, MJLST Staffer

Cryptocurrency has experienced rapid growth over the past few years. Retail investors rushed into this market in hopes of amassing wealth. However, the current price of Bitcoin is sitting at roughly 30% of the all-time high. Investors dub this current state of the market as the “Crypto Winter”, where the entire crypto market is underperforming. This term signifies the current negative sentiment held by a large portion of the market towards cryptocurrency.

Cryptocurrency is a relatively new class of assets, bearing similarities to both currency and securities. Regulators are not quite sure of how to regulate this volatile market, and with the lack of regulations investors are more prone to risk. Nevertheless, legislators are still seeking to protect retail investors and the general public from risky investments, as they did with the 1933 Securities Act and 1934 Securities Exchange Act. The question is how? Well, the answer may be The Lummis-Gillibrand Responsible Financial Innovation Act which has recently been introduced into Congress. This bill seeks to “provide for responsible financial innovation and to bring digital assets within the regulatory perimeter.” If passed, this bill would address those concerns investors currently have with investing in the volatile crypto market.

Summary of the Bill

This legislation would set up the regulatory landscape by granting the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over digital assets, subject to several exclusions. One of the exclusions being that when the asset is deemed a security, the Securities and Exchange Commission (SEC) will gain jurisdiction and providers of digital asset services will then be required to provide disclosures. The bill would also require the Internal Revenue Service to issue regulations clarifying issues of digital assets and eliminate capital gains taxes through a de minimis exclusion for cryptocurrencies used to buy up to $200 of goods and services per transaction. Moreover, it would also allow crypto miners to defer income taxes on digital assets earned while mining or staking until they dispose of the assets.

Commodity vs Security

So, what’s the difference between CFTC and SEC? The CFTC governs commodities and derivatives market transactions, while the SEC governs securities. The key difference that these classifications make are the laws under which they operate. The CFTC was created under the 1936 Commodities Exchange Act, while the SEC was created under the 1933 Securities Act and 1934 Securities Exchange Act. Hence, giving the CFTC primary jurisdiction means that cryptocurrency will primarily be governed under the 1936 Commodity Exchange Act. The biggest advantage (or what one may think of as a disadvantage) of this Act is that commodities are generally more lightly regulated than securities. Under the 33’ act and 34’ act, securities are thoroughly regulated via disclosures and reports to protect the public. Issuers of securities must comply with a large set of regulations (which is why IPOs are expensive). This could be a win for crypto, as crypto was intended to be “decentralized” rather than heavily regulated. Though having some regulations may help invoke public trust in this class of assets and potentially increase the total number of investors, which may be a bigger win.

The question ends up being what level of regulation and protection is appropriate? On the one hand, applying heavy handed regulations may not be effective, and in fact might encourage black market activity. This may lead to tech savvy investors detaching their real life identity from the world of crypto and using their money elsewhere through the blockchain networks. On the other hand, investors hate uncertainty. Markets react badly when there is “fear, uncertainty, and doubt.” By solidifying the jurisdiction of CFTC on cryptocurrency, both investors and issuers may feel more at ease rather than wonder what regulations they must follow. As a comparison, oil, gold, and futures are also regulated by the CFTC rather than the SEC, and they seem to be doing fine on the exchanges.

Tax Clarifications & Incentives

Clarifications are always welcome in the complex world of federal taxes. Uncertainty can result in investors avoiding a class of assets purely due to the complexity of its tax consequences. Moreover, investors may be unexpectedly hit with a tax bill that was different from what they expected due to ambiguity or lack of clarity in the statutes. Thus, clarifications under the proposed Act would likely make lives easier for investors in this space.

Tax often incentivizes certain investor actions. For example, capital gains tax incentivizes investors to hold their investments for longer than a year in order to reduce their taxes. Tax incentives also often have policy rationales behind them, like the capital gain tax incentive aims to promote long term investment rather than short term speculation. This indirectly protects investors from short term fluctuations in the market, and also keeps more money in the economy for longer.

The proposed Act would eliminate capital gains tax for crypto used to purchase goods and services up to $200. That’s $200 of untaxed money that could be spent without increasing an investor’s tax liability. This would likely encourage people to conduct at least some transactions in crypto, and thus further legitimize the asset class. People often doubt the real world use of cryptocurrencies, but if this Act can encourage people to utilize and accept cryptocurrencies in everyday transactions, it may increase confidence in the asset class.

Conclusion

The Lummis-Gillibrand Responsible Financial Innovation Act could be a big step towards further adoption and legitimization of crypto. Congress giving primary jurisdiction to the CFTC is likely the better choice, as it strikes a balance between protecting consumers while not having too much regulation. Regardless of whether this will have a positive impact on the current market or not, Congress is at least finally signaling that they do see Crypto as a legitimate class of asset.

Whisky Is for Drinking, Water Is for Fighting

October 25, 2022
Administrative Law, Climate Change, Environmental Law, Public Health

Poojan Thakrar, MJLST Staffer

The American Southwest often lives in our imagination as an arid environment with tumbleweeds strewn about. This hasn’t been truer in centuries, as the Colorado River is facing its worst drought in 1200 years, in large part because of climate change.[1] The Colorado River is the region’s most important river, providing drinking water to about 40 million people.[2] In June, the federal government gave the seven states[3] that rely on the water two months to draft a water conservation agreement or risk federal intervention. The states blew past that deadline and the DOI’s Bureau of Reclamation imposed cuts to water usage as high as 21%.[4]

The History of the Modern Colorado River Allocation System

In 1922, the Colorado River Compact allocated an annual amount of 15 million acre-feet (maf) evenly between the Upper and Lower Basin states.[5] One acre-foot represents the volume of water that covers one acre in one foot of water and is about the amount of water that a family of four uses annually.[6] However, relying on 15 maf was already problematic; data from the past three centuries showed that the Colorado River has average flows of 13.5 maf, with some years as low as 4.4 maf.[7] 

Moreover, Arizona refused to sign this compact, arguing that water should be allocated amongst individual states instead of between river basins.[8] Tensions flared in 1935 as Arizona moved National Guard troops to the California border in protest of a new dam.[9] Arizona finally ratified the compact in 1944, but the disagreements were far from over.[10] 

Arizona also brought a case to the Supreme Court for a related dispute, asking the Supreme Court to allocate how each basin splits water according to the Boulder Canyon Project Act of 1928.[11] Originally filed in 1952, Arizona v. California was not resolved until a Supreme Court opinion in 1963.[12] In the end, the Supreme Court accepted the recommendations of a court-appointed Special Master, whose findings California disagreed with. Of the 7.5 maf allocated to the Lower River Basin, 4.4 maf was allocated to California, 2.8 maf to Arizona and 0.3 to Nevada.[13] The court affirmed each state’s use of their own tributary waters, which Arizona argued for.[14] The case also affirmed the Secretary of the Interior’s authority under the Boulder Canyon Project Act to allocate water amongst the states irrespective of their agreement to a compact.[15] Ultimately, this was a victory for Arizona. 

Colorado River water use has been less contentious since Arizona v. California. The Upper Basin states of Colorado, Utah, Wyoming, and New Mexico signed a contract to divide their 7.5 maf amongst themselves without the need for federal intervention.[16] However, because of comparatively less development in these Upper Basin states, they collectively only use 4.4 maf of their allocated 7.5 maf.[17] California has historically enjoyed the excess and has often historically surpassed its own allocation.[18]

Modern Water Allocation

Until this year, the seven Colorado River states have relied on voluntary agreements and cutbacks to manage water allocation. For example, in 2007, the states agreed to rules which decreased the amount of water that can be drawn from reservoirs when levels are low.[19] In 2019, they agreed to Drought Contingency Plans (DCPs) in the face of waning reservoir levels.[20] It was under this new DCP that the Bureau of Reclamation first announced a drought in August of 2021.[21] Later that December, the Lower Basin states were able to come to an agreement regarding the drought declaration to keep more water in Lake Mead, a reservoir on the Colorado.[22]

However, the December 2021 cutbacks were presumably not enough. In June of 2022, Bureau of Reclamation Commissioner Camille Calimlim Touton testified in front of the Senate Energy Committee about the dire situation on the Colorado.[23] She testified that Lake Powell and Lake Mead, both reservoirs on the Colorado, cannot sustain the current level of water deliveries.[24] Commissioner Tounton gave the seven states 60 days to agree how to conserve 2 to 4 maf.[25] 

Underlying this recent situation is the megadrought that the western United States has suffered since 2000.[26] The last 20 years have been the driest two decades in the past 1200 years.[27] The Colorado River states have become remarkably adept at conserving water in that time. For example, the Las Vegas basin’s population has grown by 750,000 in the past 20 years, but its water usage is down 26%.[28] Earlier this year, Los Angeles banned lawn watering to only one day a week, much to the chagrin of Southern California’s most famous residents.[29] 

Commissioner Tounton’s 60 day deadline came and went without an agreement.[30] During a speech on August 15th of this year, Commissioner Tounton mandated that the seven states have to cut their water usage by 1 maf, roughly the amount of water usage of four million people.[31] However, the cuts were not proportioned equally. Arizona was mandated to cut its water by 21% because of the old water agreements, while California was not required to make any.[32]

More recently on October 5th, several California water districts volunteered cuts of almost one-tenth of their total allocation.[33] California conditioned these cuts upon other states agreeing to similar reductions, as well as on incentives from the federal government.[34] California’s cuts are significant, representing roughly 0.4 maf of the 1 maf that Commissioner Tounton asked states to conserve in her August 15th statement.[35] This represents a bold, good-faith move considering California was not mandated to make any. However, there is no doubt that these ad hoc negotiations are unsustainable. As the drought continues, Colorado River water policy will have implications on how food is grown and where people live. The 40 million people that live in the American Southwest may see their day-to-day lives affected if a solution is not crafted. Ultimately, this situation is far from over as states are forced to come to grips with a new water and climate reality.

Notes

[1] The Journal, The Fight Over Water In The West, Wall Street Journal, at 00:50 (Aug. 23, 2022) (downloaded using Spotify).

[2] Luke Runyon, 7 states and federal government lack direction on cutbacks from the Colorado River, NPR (Aug. 27, 2022, 5:00 AM) https://www.npr.org/2022/08/27/1119550028/7-states-and-federal-government-lack-direction-on-cutbacks-from-the-colorado-riv.

[3] Wyoming, Colorado, Utah, and New Mexico are considered Upper Basin states and California, Arizona and Nevada are the Lower Basin states.

[4] The Journal, supra note 1, at 12:30.

[5] Joe Gelt, Sharing Colorado River Water: History, Public Policy and the Colorado River Compact, The University of Arizona (Aug. 1997), https://wrrc.arizona.edu/publications/arroyo-newsletter/sharing-colorado-river-water-history-public-policy-and-colorado-river.

[6] The Journal, supra note 1, at 8:08.

[7] Gelt, supra note 5.

[8] Id.

[9] Nancy Vogel, Legislation fixes borders wandering river created; Governors of Arizona, California sign bills to get back land the Colorado shifted to the wrong state, Contra Costa Times, Sept. 13, 2002.

[10] Gelt, supra note 5.

[11]  Arizona v. California, 373 U.S. 546 (1963).

[12] Supreme Court Clears the Way for the Central Arizona Project, Bureau of Reclamation https://www.usbr.gov/lc/phoenix/AZ100/1960/supreme_court_AZ_vs_CA.html.

[13] Arizona v. California, 373 U.S. 546, 565, 83 S. Ct. 1468, 1480 (1963).

[14] Id.

[15] Id.

[16] Gelt, supra note 5.

[17] Heather Sackett, Water managers set to talk about how to divide Colorado River, Colorado Times (Dec. 13, 2021) https://www.steamboatpilot.com/news/water-managers-set-to-talk-about-how-to-divide-colorado-river.

[18] Gelt, supra note 5.

[19] Lower Colorado River States Reach Agreement to Reduce Water Use, Renewable Natural Resources Foundation (Feb. 4, 2022) https://rnrf.org/2022/02/lower-colorado-river-states-reach-agreement-to-reduce-water-use/.

[20] Id.

[21] Id.

[22] Id.

[23] Marianne Goodland, Reclamation official tells Colorado River states to conserve up to 4 million acre-feet of water, Colorado Politics(June 15, 2020) https://www.coloradopolitics.com/energy-and-environment/reclamation-official-tells-colorado-river-states-to-conserve-up-to-4-million-acre-feet-of/article_376a907a-ece6-11ec-b0ba-6b2e72447497.html.

[24] Id.

[25] Id.

[26] Ben Adler, ‘Moment of reckoning:’ Federal official warns of Colorado River water supply cuts, Yahoo News (June 15, 2020) https://news.yahoo.com/moment-of-reckoning-federal-official-warns-of-colorado-river-water-supply-cuts-171955277.html.

[27] Id.

[28] The Journal, supra note 1, at 5:50.

[29] Id. at 6:10.

[30] Id. at 8:55.

[31] Id. at 10:05.

[32] Id.

[33] Marketplace, Why women have been left behind in the job recovery, American Public Media, at 11:35 (Oct. 6, 2022) (downloaded using Spotify).

[34] Id.

[35] Ian James, More water restrictions likely as California pledges to cut use of Colorado River supply, L.A. Times, (Oct. 6, 2022) https://www.latimes.com/california/story/2022-10-06/southern-california-faces-new-water-restrictions-next-year.

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