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VOL. 29, NO. 4 | FALL 2016


Regulators Want You Punching

the Clock on a Smartphone App
The Best Possible Zika
Prevention Kit Includes DEET
I ts not your grandfathers workplace
As anybody who has worked for 20 or
more years will tell you, the world of work
has changed. Twenty years ago only 5
percent of us ever telecommuted from home,
according to Gallup. That figure is now 37

8 percent. Franchise businesses employ a mil-

lion more people now than they did in 2008.
And increasing numbers of us are working
part-time or more with a sharing economy
How Ma Bell Suppressed platform, such as Uber. Thats great news for
Innovation for 30 Years people who value flexible schedules or seek
extra income. But now government regulators
threaten to bring it to a screeching halt.
A recent deluge of rulings and rulemak-
A recent deluge of
ing from the Department of Labor and the rulings and rulemaking
National Labor Relations Board seeks to turn
from the Department of
12 back the clockto the time of punch clocks.
The Department of Labors proposed
overtime rule is a case in point. Since the Labor and the National
Hostility to High Finance
last time the agency significantly raised the
wage threshold for its overtime requirement,
Labor Relations Board
Has Ancient Roots businesses have developed new practices to
give ambitious junior managers the chance
seeks to turn back the
to prove themselves by working longer hours clockto the time of
ALSO IN THIS ISSUE and by giving them more responsibility. In
franchise businesses, these are often the punch clocks.
people who become managers, then owners.
One Year Later, the Joint Employer Standard
Still Causing Confusion. . . . . . . . . . . . . . . . 6
Under the new overtime rule, these
aspirational people will no longer be able most people wont see much difference in
How Many Americans Will Die Because of to work longer hours in many cases and thus their paychecks as a result of the rule. Its
the FDAs Vaping Rule?. . . . . . . . . . . . . . . . 7
miss out on a chance to prove themselves. all about the department controlling hours
Persecuting Climate Skeptics: Managers will have to closely watch hours worked.
The Cover-Up Continues . . . . . . . . . . . . . . 11 worked, probably with automated assis- Things could be worse for the sharing-
The Good, the Bad, and the Ugly. . . . . . 14 tance, and may even require some former economy firms if regulators and courts desig-
Media Mentions. . . . . . . . . . . . . . . . . . . . 15 telecommuters to start showing up physically nate Uber and Lyft drivers as employees
at work. The Labor Department admits that (continued on page 3)
End Notes . . . . . . . . . . . . . . . . . . . . . . . . . 16
Fighting for Freedom, from the Saloon to
the Courtroom
by Kent Lassman

A mazing, powerful, and tremendously complex

systems can emerge from only a handful of initial
elements. For example, when you watch CEIs new
class members, the group of people whose rights are
traded away to settle a class action. Lawyers have
an interest in their fees, defendants have an interest in
feature film, I, Whiskey, you learn that the human cheaply disposing of a lawsuit, and the classs inter-
spirit is the result of water and grain combined and ests can take a back seat in the process. The Center

processed in countless different ways. In fact, one of works to address this situation by representing such
my favorites, ice cream, can be made at home with class members pro bono and presenting judges with
only three ingredients: heavy cream, condensed milk, the other side of the argument.
and fresh fruit. When the Center prevails, lawyers get less, class
A market economy is no different. Human action members get more, and the rule of law is strength-
and cooperative mechanisms for exchange com- ened. With over 40 victories in the Centers short
bine to produce the bounty of wealth that we see all history, courts have reduced or eliminated over $305
around. It also produces key instruments that facilitate million in requested attorneys fees in cases where it
economic growth, including contracts, systems for has objected, shifting money from opportunistic trial
liability, and property rights. lawyers to the consumers and shareholders they are
Unfortunately, however, our contemporary legal supposed to represent.
environment has been corrupted through abuses in the In addition, CCAF is helping to change the culture
class action tort system. It is not class actions them- surrounding class action settlements. The cases we
selves that are the problem, but aggressive attorneys win establish precedents that affect dozens of settle-
willing to sue on behalf of a classregardless of ments in cases where we never directly participate;
whether a true harm has been committedand claim hundreds of courts have cited CCAF victories in their
exorbitant fees while leaving everyone else the poorer opinions. Numerous panels at legal conferences and
for it. continuing legal education courses have covered the
Thats where CEIs Center for Class Action Fairness landmark 2014 decisions by Judge Richard Posner in
(CCAF) comes in. Redman v. RadioShack Corp. and Pearson v. NBTY,
CEIs Center for Class Action Fairness represents Inc. and CCAFs role in them.
class members against unfair class action procedures We currently have a caseload of 20 active cases
and settlements. Originally founded by Ted Frank in at the district court and appellate level, with a team
2009, the Center has won millions of dollars for con- of experienced attorneys ready to carry on the fight.
sumers and shareholders, and won landmark prece- Stay tuned.
dents that safeguard consumers, investors, the judicial In the meantime, help us celebrate the innovators
system, and the general public. CCAFs October 2015 and consumers driving todays global distilling renais-
merger with CEI has enabled it to take advantage of sanceand in the process are bringing people from
CEIs well-established marketing and administrative all around the world togetherby viewing I, Whiskey.
operations, freeing up CCAF staff to concentrate on The film tells their story, and shows how commerce
its core mission of reforming class action law, while drives other interpersonal relationships that make
increasing CEIs overall litigation capacity. civilization possible.
Unfair settlements generally serve self-interested
lawyers and third parties at the expense of absent

Publisher The CEI Planet is produced by the Competitive Enterprise

Kent Lassman Institute, a pro-market public interest group dedicated to
Editor free enterprise and limited government.
Marc Scribner
CEI is a non-partisan, non-profit organization incorporated in the
Editorial Director District of Columbia and is classified by the IRS as a 501 (c)(3)
Ph (202) 331-1010
Ivan G. Osorio charity. CEI relies upon contributions from foundations, corporations
Fax (202) 331-0640 Contributing Editor and individuals for its support. Articles may be reprinted provided
Keara Vickers they are attributed to CEI.
ISSN#: 1086-3036


Regulators, continued
rather than contractors. That would
open up a new world of employment
regulation and significantly cut into U.S. labor law, stuck
their competitive advantage. You
might need to punch the clock on
in the New Deal era,
your smartphone appif you can get
a job at all.
regards your employer
Other regulatory decisions as your master, and
threaten to kill off a growing form of
business ownership: the franchise. A you as his servant.
ruling from National Labor Relations
Board could force franchising corpo-
rations to take control over the indi-
vidual franchise businesses, remaking
stuck in the New Deal era, regards
your employer as your master, and R.M.
independent entrepreneurs into middle you as his servant. Employment regula-
managers. tion, most of it developed in the 1930s,
revolves around this distinction, with all
In effect, government regulators
are trying to halt the rise of modern the bureaucratic rigidities that entails.
But for most of the past 40 years,
business methods and models that
dont require a traditional employer- regulators had a measure of hands-off
employee relationship. That puts approach, often allowing economic
regulators directly at odds with the new forces to dictate changes in business Help the Competitive
American Dream. practices. No longer. Now the Obama Enterprise Institute
administration is trying to turn back
In just the past decade, people
the clock to reward its union allies.
carry on its work for
have found revolutionary ways around
old barriers to opportunity, what econ- Larger corporations are much easier to generations by joining the
omists call transaction coststhe unionize and regulate than hundreds R.M. Freedman society.
costs of making a transaction happen. of individual franchises, freelancers,
When those costs are high, the transac- or contractors. Its a win-win for unions
tion doesnt happen. But technology and regulators, not for people who In 2013, CEI established the R.M. Freedman
has helped reduce such costs, making value flexibility and independence at Society in honor of Robert M. Freedman,
work. a business owner from West Bloomfield,
it easier to run a franchise business or
A few years ago, entrepreneur Tim Michigan, who placed CEI in his estate
offer telecommuting and flexible work
Ferris explored the possibilities of this and, in 2009, sadly passed on and gave
options. In todays sharing economy,
new unbundled workplace in his CEI its first legacy gift. We named the
people are brought together in market society in appreciation of his generosity.
transactions through a simple app on best-seller, The 4-Hour Workweek.
your smartphone. Today, if regulators have their way, Many of CEIs extended family choose to
Is your boss your master? Today, we may all be stuck with the 40-hour include CEI in their estate plans through:
that seems a nonsensical idea. People workweekworking 9 to 5, what a Bequests,
regard their boss as a colleague, per- way to make a living.
Charitable Remainder Trusts,
haps even a friend. But U.S. labor law,
Charitable Lead Trusts, or as a
Life insurance beneficiary.
Iain Murray ( is Vice President of Strategy at CEI. A version
of this article originally appeared in Investors Business Daily. If you make the decision to include CEI in
your estate plans, please reach out and let
us know.

While these sorts of decisions should be

undertaken with the help of an estate
planner, Lauren Avey and Al Canata of
CEI can be a resource to you. You can
reach them anytime at 202-331-1010.


The Best Possible Zika Prevention Kit
Includes DEET
their key active ingredient is a bacteria Environmental Protection Agencys
BY ANGELA LOGOMASINI rather than a synthetic chemical. The (EPA) guidelines on repellents, which
repellents are also pesticides. Mercola apparently cites, applies to all

I n late July, Broward Country, Florida,

recorded the first two Zika cases
transmitted by mosquitos in the United
Used properly, these products
pose little risk, and can be effective in
preventing mosquito and tick trans-
repellentsincluding botanical prod-
ucts Mercola recommends. And while
the EPA recommends DEET as safe for
States. The Centers for Disease Control mitted diseases like Zika, West Nile children, it points out: According to
and Prevention (CDC) is urging preg- virus, Lyme disease, and many others. the label, oil of lemon eucalyptus prod-
nant women to assemble and deploy a Unfortunately, many people may be ucts should not be used on children
Zika Prevention Kit, which is a good afraid to use these products because of under the age of three. Other ingredi-
idea. unsupported hype about their alleged ents do not have an age restriction.
The CDCs suggested kit includes: risks. This indicates that this allegedly more
bed nets; insect repellent; mosquito For example, the health news natural product may pose greater
dunks, which are added to stand- website maintains: Most risks than DEET.
ing water to prevent development of insect repellants out there are loaded In fact, there are no documented
mosquito larvae; permethrin spray with toxic chemicals, including the cases of anyone dying or suffering
for clothing; and condoms to pre- pesticide DEET, which is so poisonous serious long-term health effects from
vent transmission of Zika through that even the Environmental Protection the proper use of DEET. There have
intercourse. Agency (EPA) says you should wash it been concerns that excessive appli-
The fact that four out of five of these off your skin when you return indoors, cation of DEET on children caused
items use pesticides is illustrative of avoid breathing it in and not spray it seizures, but these claims were based
their importance. Bed nets are usually directly on your face. on a handful of inconclusive cases.
treated with pesticides to keep insects Yet pretty much any product In 2003, Researchers published a
away. The mosquito dunks are a reg- manmade or naturalrequires review of these cases in the Canadian
istered pesticide as well, even though care in how it is used. In fact, the U.S. Medical Association Journal. They


could only find 10 case reports of normal use of DEET does not present a recommend it. In fact, a 2002 study
children suffering from seizures pos- health concern to the general popula- published in the New England Journal
sibly related to DEET, and none were tion, including children. of Medicine that evaluated the effec-
conclusive. Given that 3 to 5 percent Regarding the benefits of DEET, the tiveness of various insect repellents on
of children suffer from such seizures EPA notes: the market found that: DEET-based
for a variety of reasons and that 23 DEETs most significant benefit is its products provided complete protection
to 29 percent of children are exposed ability to repel potentially disease- for the longest duration. In fact, DEET
to DEET, it is possible that the cases carrying insects and ticks. The effectiveness lasted 15 times longer
were incorrectly attributed to DEET. Centers for Disease Control and than natural botanical products. The
Nonetheless, these case reports Prevention (CDC) receives more study also noted that DEET has been
have been widely quoted and have than 30,000 reports of Lyme in use for decades with few health
led regulatory agencies and pediatric disease (transmitted by deer ticks) repercussions. Accordingly, researchers
societies to limit use of DEET in young and 80-100 reports of La Crosse dubbed DEET as the gold standard for
children, the researchers note. encephalitis virus (transmitted by protection against dangerous insect-
In contrast, the insect-borne dis- mosquitoes) annually. A total of 48 borne diseases.
eases that DEET applications can pre- states and the District of Columbia Zika, West Nile, Lyme, and other
vent levy a heavy toll on public health. have reported West Nile virus infec- insect-transmitted illnesses pose serious
For example, the CDC reports that last tions in people, birds or mosquitoes risks, and DEET is among the best tools
year alone there were 2,060 reported to CDC. available to prevent their transmis-
West Nile virus cases, 119 deaths, and sion. Expecting mothersor anyone
1,360 cases of neuro-invasive illnesses Each of these diseases can cause elseshould not fear DEET and other
that can have long-term debilitating serious health problems or even death EPA-approved pesticides as long as
effects. In 2014, there were more than in the case of encephalitis. Where these they follow the directions on the label.
25,000 cases of Lyme disease, which diseases are prevalent, the CDC rec- The real danger lies in remaining
the CDC says is the most commonly ommends use of insect repellents when inadequately protected because of
reported vector-borne illness in the outdoors. Studies in the EPAs database misinformation about DEET and other
United States. And now we must also indicate that DEET repels ticks for about pesticide risks.
be concerned about Zika and the birth two to 10 hours, and mosquitoes from
defects it may produce. two to 12 hours depending on the per-
The EPA has long maintained that centage of DEET in the product. Angela Logomasini, Ph.D. (angela.
DEET poses very low risk, while provid- Insect repellents containing DEET is a Senior Fellow
ing important health benefits. Its most have the longest record of demon- at CEI. A version of this article originally
recent evaluation, in 2014, explained: strated safety and effectiveness, which appeared on The Huffington Post.
We continue to believe that the explains why both the CDC and EPA

Realclear Radio offers listeners a

fresh perspective on political and
social issues of the day through
informative interviews and dis-
cussions. Brought to you by the
Competitive Enterprise Institute
and RealClearPolitics, and hosted
by CEI Fellow Bill Frezza.
Learn more at


One Year Later, the Joint Employer
Standard Still Causing Confusion
hypothetical situation in which the
BY TREY KOVACS Board might be called on to make a
joint-employer determination. Nor Its an injustice that
A ugust marked the one-year
anniversary of the National Labor
has the NLRB issued any guidance in
the year since to clarify the new stan-
dard. This leaves the business commu-
one business can
Relations Boards (NLRB) Browning-
Ferris decision, which radically rede- nity near-clueless as how best to avoid now be charged
fined employment rules for businesses
joint employer liability.
Meanwhile, another recent NLRB
with labor violations
Under the new definition, which case indicates how unpredictably committed by
overturned 30 years of precedent, a the Boards joint employer stan-
company may be held liable for labor dard can be applied. In September another business
violations by other employers they 2015, President Obama applauded
contract with, by merely exercising Microsoft for implementing a supplier and be railroaded
code of conduct, which requires that
indirect control or possessing unex-
ercised potential control over work the company only do business with into bargaining with
conditions like hiring, supervision, and
wages. This is a far-reaching change
suppliers that offer workers 15 days of
paid leave.
a union trying to
from the prior standard on when two No good deed goes unpunished. organize another
companies would be deemed a joint Shortly after that, in October 2015, the
employer. The previous standard Temporary Workers of America (TWA) employers workers.
required an employer exhibit direct requested Microsofts presence at a
and immediate control over another collective bargaining meeting as a joint
companys employees. employer with Lionbridge, a Microsoft seeking information on the relationship
Labor regulators have a goal in supplier. The TWA cited the Browning- between Microsoft and Lionbridge.
mind: to make it far more likely that Ferris decision to argue that Microsofts Incredibly, the Boards majority notes
larger businesses are found liable placing of eligibility criteria on sup- that the NLRB may issue subpoenas
for the labor violations of smaller pliers establishes a joint employer without an objective factual basis.
businesses. relationship with LionBridgedespite The Board does not need facts to sub-
That means higher costs for larger Microsoft never exercising any control poena MicrosoftTWAs allegations
businesses. The NLRB also desires to over LionBridge workers. are enough.
saddle larger companies with greater Never before had placing general It is no wonder that the business
bargaining responsibilities of smaller standards been used to qualify as a community is up in arms over the
businesses they contract with. Its an supplier establish joint employment. But Browning-Ferris decision. Even when
injustice that one business can now be Microsoft recently noted that its sup- businesses take actions that are praised
charged with labor violations com- plier code of conduct has led to sub- by President Obama they cannot win.
mitted by another businessand be stantial and growing legal expenses Many businesses will think twice about
railroaded into bargaining with a union and great uncertainty. And Microsoft contracting with small businesses or
trying to organize another employers may not be the only company get- placing any conditions on their suppli-
workers. ting caught in the NLRBs crosshairs. ers. That cant be good for small busi-
Even worse is the uncertainty Facebook, for example, requires sup- nesses or job creation, a consequence
caused by the vague and overly broad pliers offer 15 days of paid leave, a our slowly recovering economy does
joint employer standard. The NLRB $15 minimum wage, and a new child not need.
left undefined what constitutes indirect benefit for mothers and fathers esti-
and unexercised potential control. In mated to cost the employer $4,000.
Browning-Ferris, the majority at the What will the Microsoft case Trey Kovacs (
NLRB explained they will look at the reveal? Most recently, the NLRB is a Policy Analyst at CEI. A version
facts on a case-by-case basis and in July denied the companys peti- of this article originally appeared on
would not address the facts in every tion to revoke the Boards subpoena


How Many Americans Will Die Because of
the FDAs Vaping Rule?
Yet, since August 8, the FDA FDA flexible enforcement authority to
BY MICHELLE MINTON has treated these two very different ensure that there is effective oversight
products in functionally the same way. of the tobacco industrys efforts to

E -cigarettes could lead to a 21

percent decline in deaths from
smoking-related diseases for people
Manufacturers and importers will have
two years to gain FDA approval for
every device, component, and e-liquid
develop, introduce and promote less
harmful tobacco products, the FDA
indicated it doesnt have the authority
born after 1997, according to a study formula. This process takes hundreds to to change the grandfather date.
published in Nicotine and Tobacco thousands of man-hours and can cost To address the problem, Reps. Tom
Research. Even accounting for harms up to $1 million per application. By the Cole (R-Okla.) and Sanford Bishop
people might suffer from vaping who FDAs own estimate, 99 percent of the (D-Ga.) introduced an amendment
would have otherwise not smoked at current products on the market will not to the Agriculture Appropriations bill
all, the researchers found a net public receive approval. that would change the predicate date
health gain from the presence of e-cig- The purpose of the Tobacco Control to August 2016. While not a perfect
arettes. So why is the U.S. Food and Actwhich gave the FDA power to solution, grandfathering in most of the
Drug Administration (FDA) putting up regulate tobaccowas to provide products on the market now would just
big regulatory barriers for e-cigarettes new and flexible enforcement author- bring innovation to a screeching halt,
starting in August? ity and to aid the industrys attempts to rather than throwing it back nine years.
In the case of electronic cigarettes, develop, introduce, and promote less In the long term, lawmakers should
the agency is sacrificing the millions of harmful tobacco products. Yet, with enact legislation directing the FDA to
people who will certainly die because this new rule the FDA is doing is exactly issue rules that account for the relative
of their tobacco addiction for the the opposite. harm of products and make it easier
unknown number of people who might American health advocates should and cheaper for less harmful products
be harmed by the long-term effects of be raising a stink about the damage to get approval.
nicotine found in vaping products. these new rules will do to public health. FDAs fears about vaping products
The risks of smoking traditional But instead they worry about vaping are not baseless. Though theyve been
cigarettes far outweigh the risks of re-normalizing cigarette smoking. around for about a decade and are
vaping. Both contain nicotine, which is Its too bad they arent following safer than cigarettes, the long-term
an addictive substance, but itself may the lead of British health professionals, effects of vaping arent known. What
be no more harmful that caffeine and who embraced the scientific evidence is known, however, is that millions of
might even have some benefits. But that e-cigarettes are relatively safe and people will die because of their addic-
cigarettes kill 50 percent or more of its an effective way to quit smoking. They tion to traditional cigarettes unless they
users. Vaping, though a relatively new have even advised doctors to encour- quit or switch to another product. The
product category, is estimated to be age patients to switch to vaping. FDAs new rules will make switching
95 percent less harmful than traditional So, what can be done to stop the more expensive, less attractive, and
tobacco products. FDA for perpetrating this harm? less likely.
Smokers seem willing to make the First, Congress should enact legisla- Even if bureaucrats at the FDA dont
switch to vaping. A survey of nearly tion that would change the grandfa- get the blame, their failure to enact
30,000 European Union residents ther date within the Tobacco Control rules that preserve the electronic ciga-
concluded that of the 7.5 million daily Act (TCA) to 2016. The grandfather rette market will result in deaths that
vapers, 35 percent had completely or predicate date, which allowed could have been prevented.
switched from traditional tobacco tobacco products on the market
cigarettes. before February 2007 (or similar to
Applying these rates to American such products) to bypass the agencys Michelle Minton (michelle.minton@cei.
vapers, a conservative estimate is that pre-market approval process, is set at org) is a Fellow at CEI. A version of this
of the 9 million regular vapers in the February 2007. Because e-cigarettes article originally appeared in Newsday.
United States, 2.97 million of them didnt really exist before this date, no
have quit smoking traditional cigarettes products would qualify for this exemp-
by using e-cigarettes. tion. Though the TCA explicitly gives the


How Ma Bell Suppressed Innovation
for 30 Years
be regulated like a public utility, rather
BY BILL FREZZA than a competitive market.
The likely result? Reduced invest- Nothing could
O h, for the days of Ma Bell!
is not a lament were likely to
hear. And for good reason. Before the
ment in online communications infra-
structure, reduced competition, and
innovation slowing down to a crawl.
be worse for
breakup of AT&T, Americas telephone Technology companies in the American
system was a government-sanctioned United States are some of our econ-
monopoly characterized by stagnant omys most dynamic driversmaking competitiveness,
service offerings, high costs, and things better, faster, and cheaper
a glacial pace of consumer-facing while creating new jobs and economic or for consumers,
innovation. growth. Nothing could be worse for
Take it from me. I spent the early American competitiveness, or for con- than returning to
years of my career toiling for Ma Bells sumers, than returning to the golden
crown jewel, Bell Labs. age of Ma Bell. the golden age
So it was distressing when a federal Bell Labs gave us technology
appeals court engaged in a bit of breakthroughs like the transistor, the of Ma Bell.
1970s nostalgia last June by uphold- laser, the solar cell, and scientific
ing the Federal Communications advances in radio astronomy that
Commissions (FCC) ill-conceived net provided the first direct confirmation of we need to apply the most basic test
neutrality rules. Under the new FCC the Big Bang. While these are impres- for assessing economic policies, which
rules, Internet service will increasingly sive achievements, they are not the is to examine not only what is seen, but
whole picture. To see that fuller picture, also what is not seen.


Americans under the age of 30 focused on the network side, driven
never experienced our telecommunica- by an imperative to increase effi-
tions system when it was a statutory ciency and reduce costs. Meanwhile, The entire digital
monopoly. Thats fortunate for them as prices, set by government bureaucrats,
consumers, though it deprives them of remained constant. And why not? There universe had been
some important historical perspective. were no competitors to offer consumers
For seven decades, Bell delivered a better option. pent up behind a
the worlds most advanced, reliable, This is what 30 years of progress
ubiquitous telecom network in the looked like to consumers during Bell wall of suppressed
world, spitting out ample profits that Labs heyday.
funded what many called a national As for those prices, in 1972, my demand and legal
treasure. Problem was, it was the exact freshman year in college, a three-min-
same phone service for most of those ute long-distance call home to Mom barriers to market
seven decades. cost the same as two pitchers of beer
Until the waning years of Ma Bells and three bags of Beer Nuts ($3 at the entry.
monopoly, it was illegal to connect time, or about $17 in todays dollars).
anything but Western Electric equip- Hard to believe when todays college wasnt pretty. The data successor to
ment to the network. Customers could students can make free Skype calls the public switched telephone network
only lease telephones for a monthly halfway around the world. was going to be something called
fee. Phones were ruggedly designed For those reasons, so-called net X.25, and it would deliver videotex, the
and lasted for decades. The designs neutrality should give us pause. project I worked on while I was there.
themselves changed about as fre- What didnt get built during that Go dig up those papers and laugh. It is
quently. The idea of a new phone with golden age? Everything you know and exactly what you would expect if you
new features coming out every year love. The entire digital universe had turned over the Internet to a bunch of
would have been considered insanity. been pent up behind a wall of sup- central planners controlling a massive
Attempts to launch third party applica- pressed demand and legal barriers to hierarchy of cloistered engineers.
tions on the system would have landed market entry. It burst forth only after the For those reasons, so-called
you in jail. Bell monopoly was broken up in 1984, net neutrality should give us pause.
The phone my grandpa used in leading to historys most dazzling dash Innovation requires exactly the kind of
1923 would have worked just fine in of innovation. And this was done with disruption that government-enforced
1978, when I arrived at Bell Labs fresh little help from Bell Labsaside from equality is designed to prevent.
out of MIT. Push buttons had replaced the diaspora of talent its unwinding
rotary dials. But other than that, and the unleashed. Only then did we see the
fact that long distance calls could be impact of hoarding so many scientists Bill Frezza ( is
dialed directly rather than via a human and engineers. a Fellow at CEI and host of CEIs
operator, consumer-side progress Mercifully forgotten is Ma Bells RealClear Radio Hour. A version of this
moved at a crawl. All of Bells com- meticulously plannedand quite dif- article was originally published by the
mercial technology development was ferentvision for the digital future. It Foundation for Economic Education.

I, Whiskey: The Movie

Coming Soon from CEI



Wayne Crews Iain Murray Briefs

Discusses Regulatory Hill Staffers on the
Dark Matter Changing Workplace
On September 16, CEI Vice Also on September 16,
President for Policy Wayne CEI Vice President for
Crews participated on the Strategy Iain Murray was
panel, Ghost Rules, Agency featured as the first speaker
Action, and Regulatory in FreedomWorks new
Shadow-Boxing, part of the George Mason University FreedomWorks Presents,
(GMU) Antonin Scalia Law School conference, a series of discussions with thought leaders in the free
Environmental Law in the Administrative State. The market movement, held on Capitol Hill. Speaking to a
panel, moderated by Neomi Rao, Director of GMUs group of Hill staffers, he discussed the various economic
Center for the Study of the Administrative State, also forces that have changed the nature of work, and how
featured University of Utah law professors Lincoln Davies archaic definitions of employment, New Deal-era laws,
and Amy Wildermuth, Kirkland & Ellis partner Jeffrey and ideologically motivated regulators are hindering
Bossert Clark, and Richard J. Pierce, Jr. of the George the benefits of these changes flowing through to workers
Washington University Law School. The panel partici- and businesses. In doing so, Murray outlined the ideas
pants discussed how federal agencies use informal contained in his recent CEI study, Punching the Clock
policy making in the form of guidance to exercise control on a Smartphone Appwhich FreedomWorks Neil
over the private sectorwhat Wayne Crews describes Siefring, who facilitated the discussion, suggested should
as regulatory dark matter. be made into a movie.

Gregory Conko
Briefs Congressional
Staff on Freedom
in Agriculture
On June 28, CEI Executive
Director Gregory Conko
addressed a group of 80
congressional staffers at
the Heritage Foundation-hosted seminar, Reducing Sam Kazman Briefs Capitol Hill on
Major Regulatory Obstacles in Agriculture, held in
the Rayburn House Office Building on Capitol Hill.
the Targeting of Climate Skeptics
Conko discussed the regulation of genetically engi- On July 13, CEI General Counsel Sam Kazman spoke
neered crops and described how duplicative and on a panel at a Capitol Hill briefing on the targeting of
unnecessary testing and approval requirements have climate skeptics by a group of activist state attorneys
restricted innovation, concentrated the industry, and general (AGs). As part of the AGs campaign of intimi-
made it all but impossible for small seed companies dation, CEI was subpoenaed by the Virgin Islands AG in
and university researchers to introduce genetically early April. We have responded forcefully, both pub-
engineered products. The seminar was the first of five licly and in court. Also speaking at the event was Rep.
events held to promote the Heritage Foundations Mike Kelly (R-Penn.) The panel also included Heritage
study, Farms and Free Enterprise: A Blueprint for Foundation Senior Legal Fellow Hans von Spakovsky
Agricultural Policy, to which Conko served as an and State Policy Network Senior Policy Advisor Jennifer
advisor. Other speakers at the event included former Butler. Kazman discussed the unconstitutional attempt to
U.S. Secretary of Agriculture John Block, Reason shut down the climate science debate by the coalition
Foundation scholar Brian Seasholes, and Hunton & of State Attorneys General for Clean Power, and how
Williams attorney Deidre Duncan. CEI is fighting the subpoena it received from the Virgin
Islands AG.


Persecuting Climate Skeptics:
The Cover-Up Continues
have been able to obtain and blocking
BY CHRIS HORNER efforts both show a clear pattern of
evasion. Attorneys general
S eventeen attorneys general got
more than they bargained for
when they held a March 29, 2016
Attorneys general in states including
Illinois, Kentucky, and Minnesota have,
sometimes comically, labored to deny
in states including
Illinois, Kentucky,
publicity stunt of a press conference to that the RICO records are public, or
announce, with former Vice President keep them secret by claiming that even and Minnesota have,
Al Gore at their sides, a campaign to invitations to happy hours are privi-
target opponents of the global warming leged law enforcement records. sometimes comically,
Other responses of interest include
agenda under racketeering laws.
It wasnt long before several batches Rhode Islands AG office imposing labored to deny that
of Freedom of Information Act (FOIA)
emails, obtained by the Energy &
delays and hundreds of dollars in fees
before handing over records, which,
the RICO records are
Environment Legal Institute (E&E Legal) on their face, revealed the existence of
other responsive records not pro-
and Free Market Environmental Law
Clinic (FME Law), revealed the AGs duced. For example, these show Rhode
were working behind closed doors with Islands AG agreed to a second CIA the coordinated scheme to deny others
professional climate activists, from to exempt the AGs ongoing campaign First Amendment rights.
both pressure groups and law firms. If from FOIA laws. They withheld it, with- This campaign with outside activ-
that wasnt bad enough, they also show out admitting they did so, even though it ists is exactly the sort of sneaky misuse
a plan for the AGs to coordinate efforts was plainly an attachment to one of the of power that elected representatives
to stonewall public records requests that produced emails. adopted FOIA laws to protect against.
threaten to expose their scheme. Massachusetts shows no indica- Collectively, this behavior shows abu-
How do we know that? The ini- tion it is processing one FOIA request sive attorneys general going into the
tial batch of emails from the Vermont and, after being pressed on another, bunker to keep their pursuit of political
Attorney General office revealed that demanded approximately $4,000 to opponents from further exposure. This
RICO ringleader Eric Schneiderman, process it. It also threatened to withhold also represents chief law enforcement
New Yorks AG, created a legal most if not all of the approximately 700 officers organizing to subvert the same
document called a Common Interest emails and 400 attachments even if transparency laws they are sworn to
Agreement (CIA) that sought to write all paid, on the basis of the same exemp- uphold.
participating AG offices out from under tions already improperly invoked by its E&E Legal and FME Law have
their own open records lawsincluding partner AGs. already sued Vermont and the District of
their dealings with those same outside The capo di tutti capi, New Yorks Columbia AGs for refusing to process
activistsjust for this campaign. Schneiderman, is the most obstructionist RICO-related FOIA requests. Sadly, it
This cloak of invisibility extends to of all, taking every delay and extension appears more suits will be necessary,
other AGs, and certain outside par- the law permits and then some. and one record already obtained sug-
ties. Records obtained to date show The unwillingness of the AGs to gests this is the AGs strategy.
these include a Whos Who of the release even the secrecy pact itself Every aspect of the AGs campaign
global warming industry. let alone the records showing their is an outrage. But in the end, these
Subsequent emails indicate the AGs coordination, which they claim it tactics will not work, and the public will
indeed signed such an agreement. shieldscontrasts sharply with activist see what theyve been up to, and with
However, the very stonewall called claims that they have been open and whom.
for in the agreement has ensured that transparent about their involvement
no one has yet been able to confirm with the AGs. Further, both the AGs
it. AGs have denied requests for the and the activist groups have deigned to Chris Horner (
signed pacts outright, and are duck- respond only to Democrats on Capitol is a Senior Fellow at CEI. A version of
ing reporters questions. But emails we Hill, ignoring Republican concerns over this article originally appeared on


Hostility to High Finance Has
Ancient Roots
dangerously, risky, and so complex
BY FRED L. SMITH, JR. that even well-informed people find
them mystifying. Yet, that alleged Lending capital to
L ast July, the Republicans assembled in
Cleveland approved a platform that
disconnect between sophisticated
investment products and normal someone who can
includes some praiseworthy planks on
government reform, but one provision
business deals is not new. It is just the
latest version of an old story: Finance find a better use for it
stood out as a jarring case of one of
these things is not like the others. The
gets unfairly demonized when the
general public fails to understand how
is the bedrock of the
platform committee called for the return
of banking regulation from the New
it works.
For millennia, mankind lived at
modern economy.
Deal era by reviving the Glass-Steagall subsistence levels in tribal cultures (I
Act of 1933, which barred commer- told you it was an old story). Wealth with others. In a largely closed system,
cial banks from investment banking. creation was minimal, and the rule anyone accumulating enough material
Why, when it comes to government of economic behavior was a kind of possessions to be considered rich
intervention in the economy, are banks proto-mercantilism that called for any was assumed to be unfairly withholding
different? exchanges to benefit the tribe as a from his fellow tribe members, regard-
One oft-cited justification for reviv- group, rather than individual produc- less of who actually produced what.
ing Glass-Steagall is that financial ers. In societies that emphasized group That tribal sense of unfairnessthat
innovations since the original law was identity, this led to a leveling-down someone is rich only because others
repealed in 1999 are unusually, even where successful producers were have been made pooris still with us
forced to share the fruits of their labor today. As most of us know, trade and


investment are positive-sum proposi- deliver benefits to both producers and
tions, but the fact that some have more consumers, but the Michael Moores
wealth than others leads people to and Naomi Kleins of the 18th century What people most
think that theres something wrong with were still convinced that some shady
the system. Even when absolute living financial shenanigans were going on worry about is not
standards and material prosperity are
increasing, capitalisms critics insist
behind the scenes.
Hostility to pure finance, as that a risky investment
that statistical constructs of income
inequality are somehow more impor-
opposed to investments in physical
assets, has a similar, unfortunate
will cause high-flying
tant. However, it is the quality of life of
actual people, not mathematical ratios,
pedigree. If people get upset that
youre making money off of merely
millionaires to lose
that matters.
Many people find the process of
moving grain from Wiltshire to
Northumberland rather than cultivat-
their shirts, but that
wealth creation confusing. Only some-
one who physically alters or improves
ing it, you can imagine how suspi-
cious they become when the source of
dangerous levels
something, the old prejudice goes, can your profits is money itself. of risk, assumed by
make a legitimate profit off of it. We The lending of money at interest,
see the skill involved when a craftsman known throughout history by the pejo- others, will hurt them
turns a pile of wood into a table, but rative term usury, was reviled for
when it comes to the middleman who centuries as an unnatural and vicious and their families.
advertises, warehouses, or resells that practice. Lending capital to someone
table, the value added is less obvious. who can find a better use for it is the
In truth, those intermediate steps and bedrock of the modern economy. But Rather than dig up outdated regula-
business processes help fill in gaps in because one must have capital in order tory theories of the 1930s, we need a
the market and reduce transactions to provide it to someone else, skeptics policy that says that U.S. taxpayers will
costs, bringing benefits to the final con- have long seen lending as part of a not be on the hook for big investments
sumer. But because those activities are corrupt game played by the already gone wrong, and that no institution is
less relatable to the average person, wealthy. Todays anger at Wall Street is too big to enter bankruptcy court.
more eyebrows are raised about the similar. People who feel economically Refusing to countenance future
legitimacy of the resulting profits. powerless are suspicious of others who bailouts may not persuade the Occupy
Adam Smith, the father of modern seem to be able to create money out of Wall Street crowdor even some
economics, described two kinds of thin air. Republicans these daysthat hedge
middlemen who plied their trade in This ignorance of market processes funds and investment banks are pillars
agricultural markets in the 18th century, is dangerous and corrosive. It breeds of their community, but it will go a long
and the skepticism and hostility they suspicion and mistrust among otherwise way toward reassuring the majority of
often encountered. These men, known peaceful and law-abiding people. We Americans who simply dont want to
as forestallers and engrossers, need to work harder to educate the pay for someone elses mistakes. I may
were the progenitors of todays com- public on how the world of banking not think its a smart financial decision
modity traders. Forestalling consisted of and investing actually works, and the for a Wall Street trader to buy Greek
buying grain during times of plenty and real-world benefits of some of Wall corporate bonds or increase his hold-
low prices, and warehousing it until it Streets more exotic instruments. ings in mortgage-backed securities, but
could be resold at a profit. Engrossing What people most worry about is I also dont think its a good idea for
involved purchasing grain in a region not that a risky investment will cause him to spend $3.4 million for a limited
where prices were low and transport- high-flying millionaires to lose their edition Bugatti Veyron. As long as its
ing to one where prices were higher, to shirts, but that dangerous levels of risk, not my money hes using, though, I
resell at a profit. assumed by others, will hurt them and dont need to worry.
Traditional merchants fiercely their families.
opposed the arbitrage role of these That doesnt mean we need more
innovators, whom they saw as inter- burdensome regulations like Glass- Fred L. Smith, Jr. ( is
lopers manipulating the market and Steagall. It means we need real Founder of CEI and Director of CEIs
local conditions for their own profit banking reform that frees companies to Center for Advancing Capitalism. A ver-
without actually producing anything. pursue innovative investing strategies sion of this article originally appeared in
In reality, these transactions are useful while ensuring they bear the financial Forbes.
price-smoothing mechanisms that cost of their own failures.



CEI Appeals Fat Reward Rail Regulators Threaten Arizona Supreme Court
for Lawyers in Subway Innovation with New Upholds Forced Taxpayer
Footlong Agreement Mandate Giveaway to Unions

On September 8, CEIs Center for On July 15, the Federal Railroad On September 13, the Arizona
Class Action Fairness (CCAF) argued Administration (FRA) held a hearing Supreme Court upheld the practice of
in court against a class action settle- on a proposed rule that would require union release time, whereby taxpayers
ment involving Subways footlong freight trains to maintain minimum are forced to pay government employ-
sandwiches. The settlement awards crew sizes of two engineers. Despite ees to perform private union business.
over half a million dollars to the class claiming that enhanced safety was The 3-2 ruling rejected arguments
attorneys, while the class members the goal behind the proposal, the that such arrangements violate the
get nothing. The original class action agency admitted it had no evidence state constitutions Gift Clause, which
lawsuit had alleged that sandwiches that a two-person crew mandate requires that public funds be used
sold by Subway sometimes fell short of would enhance safety. Worse, such only on activities that primarily serve a
the chains footlong marketing claims. an action threatens advances in public purpose. The practice of union
No one disputed the fact that the actual automated rail technology and digital release time, which allows government
weight of the dough and the amount of communications systems, some of employees to stop working for the tax-
ingredients was uniform for each sand- which have been mandated by the payer and perform union activity, only
wich, and even the named plaintiffs in same agency and have already cost benefits government unions, said CEI
the lawsuit conceded the exact length the railroad industry billions of dol- Policy Analyst Trey Kovacs. Activity
of the sandwiches didnt affect their pur- lars. The proposed two-person crew performed on release time should be
chases or change their future plans to rule is a naked attempt by the FRA to a cost incurred by the unions that profit
eat at Subway. In this class action, the codify union featherbedding practices. from it, not taxpayers. Now it is up
principal effect is to force the defendant Not only does the FRAs arbitrary and to legislators to end this multi-million
to give money to the lawyers with noth- capricious rule threaten innovation dollar wasteful practice in the Grand
ing going to the class at all, said Ted in the railroad industry, in the long- Canyon State.
Frank, CCAFs director and the Subway run it could perversely harm safety
customer objecting to the settlement. as error- and injury-prone humans
This is an abuse of the class action are forced into the field by federal
system meant to protect people. Judge regulators when available technol-
Diane Sykes agreed, calling the settle- ogy makes them, at best, redundant,
ment, a racket in every sense and said CEI Senior Fellow Marc Scribner.
drawing comparison to CEIs recent Administrator Feinberg should do the
successful challenge to the Walgreens right thing and discontinue this danger-
settlement before the same court. ous rulemaking.


The Wall Street Journals editorial Reuters reports on CEIs successful behalf of a share-
board notes CEIs lawsuit against objection to a settlement by the holder, and kudos
New York AG Eric Schneiderman: utility Pepco: for them.
When Eric Schneiderman and Two weeks after an objection by August 12,
16 other Democratic state attorneys the Competitive Enterprise Institute The Wall Street
general announced in March that killed a disclosure-only M&A share- Journal
they were targeting Exxon Mobil for holder settlement under review at the
its alleged heresy on climate change, 7th U.S. Circuit Court of Appeals, Iain Murray
they called themselves AGs United for CEIs Center for Class Action Fairness comments on
Clean Power. A better name would has drawn fresh blood from the share- Britains decision to leave the
have been AGs United for More Power. holder M&A bar. European Union:
To great media fanfare, they unleashed [] The settlement, announced in Iain Murray, vice president for
a series of broad subpoenas designed June in Delaware Chancery Court, strategy at the Competitive Enterprise
to intimidate dissenters from the Obama granted shareholders only supple- Institute, a Washington public policy
orthodoxy on climate change. mental disclosures in proxy materials. organization, said Britains surprising
One such dissenter was the Plaintiffs lawyers were due to receive vote to leave the EU is only the start of
Competitive Enterprise Institute, a free- $405,000. Instead, in Tuesdays filing, uncertainty and opportunity.
market think tank that was hit in April the lawyers agreed to dismiss the case. Negotiations over the terms of exit
with a subpoena from Virgin Islands August 24, Reuters will take at least two years, and no one
AG Claude Walker. Mr. Walker sought knows what form they will take or what
a decades worth of emails and donor The Wall Street Journals editorial deal can be struck, he said
names regarding the think tanks climate board weigh in on CEIs recent June 24, USA Today
and energy work. But CEI fought back win in the Walgreens case, in
in the press and in court, and Mr. which renowned judge Richard The Wall Street Journals editors
Walker withdrew his subpoena after he Posner wrote the opinion: CEIs pushback against the climate
was countersued. In a so-called strike suit, plaintiffs inquisition by a group of activist
August 31, The Wall Street Journal attorneys demanded that Walgreens state attorneys general:
provide additional disclosures to its There are few more rewarding sights
Marc Scribner discusses autono- voluminous proxy statement or face than a bully scorned, so lets hear it for
mous vehicle deployment: litigation. The company quickly settled, the recent laments of Attorneys General
It remains to be seen if deploying and the lawyers took home $370,000 Claude Walker (Virgin Islands) and Eric
the technology was a right decision in fees. Shareholders got nothing. Schneiderman (New York), two ring-
or if Tesla was too fast to market, says Thats closer to blackmail than leaders of the harassment campaign
Marc Scribner, research fellow at the justice, as Judge Posner suggested in a against Exxon and free-market think
Competitive Enterprise Institute, a public sharply worded 12-page opinion. The tanks over climate change.
policy organization. Teslas rapid data type of class action illustrated by this Consider Mr. Walkers recent retreat
collection period was able to blow casethe class action that yields fees in District of Columbia superior court. In
other developers out of the water, for class counsel and nothing for the April he issued a sweeping subpoena
Scribner says. classis no better than a racket. It must to the Competitive Enterprise Institute,
[] Based on that advice and end, he wrote. On remand, the lower demanding a decade of emails, policy
growing data showing the real-world court should give serious consider- work and donor names. The goal is to
capabilities of these vehicles, states and ation to either appointing new class intimidate anyone who raises doubts
developers will determine if the existing counsel, or dismissing the suit. about climate science or the policy
traffic and transit laws are sufficient or Judge Posner noted that the addi- responses.
if changes are needed. Over the next tional disclosures were somewhere CEI fought back. It ran a full-page
10 years it will be anyones game, between trivial and worthless. The newspaper ad highlighting the Walker-
Scribner says. No one has commer- merger between the companies, the Schneiderman effort to criminalize
cialized the higher levels of automation, judge notes, was already approved by speech, and it counter-sued the Virgin
and it will be interesting to see who the 97 percent of Walgreens shareholders. Islands, demanding sanctions and
first one will be. The settlement was challenged by attorneys fees.
August 25, Scientific American the Competitive Enterprise Institute on June 16, The Wall Street Journal


Nonprofit Org.
U.S. Postage
Permit 425
Southern MD

Imprisoned Former Illinois Governor Cites Prison Police Officer Stealing Marijuana Busted by Own
Band in Defense Body Camera
In August, disgraced former Illinois Governor Rod Criminal justice reform advocates have been proposing
Blagojevich sought early release from his 14-year prison numerous ideas to improve policing quality, accountability,
sentence for public corruption. His attorneys, seeking a and law enforcements relationship with the public. One pro-
2017 release date, cited Blagojevichs good behavior, as posal that has gained support from many is mandating lapel
is typical in such hearings, but also noted the former gover- cameras for police officers, the idea being that others will be
nors recent foray into the music world. Blagojevich was the able to scrutinize officer actions and the actions of members
lead singer for a prison band called The Jailhouse Rockers. of the public with whom they interact after an incident. In
Earlier this summer, a former inmate-bandmate identified New Mexico, state police recently arrested Grants Police
only as Ernie described Blagojevichs vocal abilities to the Department Sgt. Roshern C. McKinney. The crime? Theft of
press. Ernie said they played numerous special events, marijuana from the police department evidence room with
including prison graduations and holidays. The Rockers, intent to distribute. It was all caught by McKinneys own
however, took a hiatus from the stage when Ernie, the lead lapel camera, which also recorded him stealing $785 in
guitarist and convicted drug smuggler, was released this cash and delivering both the marijuana and money to his
past summer. girlfriend, who was also arrested and charged.

Americas Prohibition Hangover Continues to Politician Pursues Pokmon Go Regulations until

Subside Fad Ends
Despite Prohibition having ended more than eight Pokmon Go briefly captured public attention in the
decades ago, small pockets of the United States continue summer of 2016, becoming the most popular mobile video
to greatly restrict or outright prohibit the sale of alcoholic game to date. Some players engaged in bad behavior, like
beverages. The good news for those who choose to imbibe trespassing on private property, which led to a media fire-
is that these holdouts are becoming fewer and farther storm of pearl-clutching. Of course, media hype frequently
between. In August, two other holdouts bit the dust. On begets political opportunism, and Pokmon Gos popular-
August 19, Bridgewater, Connecticut, poured its first publicly ity proved no different. Enter New York Assemblyman Felix
sold beer since 1935 at the 65th Bridgewater Country Fair. Ortiz. Ortiz, a Brooklyn Democrat, has previously launched
Even though the small town has allowed alcohol sales in nanny-state crusades against sugar, alcohol, and strip clubs.
restaurants since 2014, a restaurant has yet to open. On For his latest cause, Ortiz warned that the augmented-reality
the same day, a Giant Eagle store in suburban Pittsburgh smartphone game involving cartoon monsters could have
became the first privately owned retailer in the state to sell a tragic real-world consequences and accused Nintendo
bottle of wine in 94 years. Pennsylvania recently legalized of shirking its corporate responsibility. One problem
private wine sales, which previously could only be pur- for Ortiz is that Nintendo did not produce the game, but
chased through state-run liquor stores. merely licensed the monster characters to another devel-
oper. But then the fad soon faded and everything continued
on as if Pokmon Go never happened. We eagerly await
Assemblyman Ortizs next manufactured moral panic.