New Report: Big Business Gaming the Rules Against Public Protections and Small Businesses

Board Room Table and Chairs

On Nov. 12, the Center for Effective Government released a new report finding that trade associations and their big business members are hijacking small business advisory panels that are part of the regulatory process. The panels are intended for small businesses to provide direct, early input to federal agencies about forthcoming health, safety, environmental, and consumer financial protections, but we found that small business voices are being drowned out.

The Small Business Regulatory Enforcement Fairness Act tasks three federal agencies – the U.S. Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA) and Consumer Financial Protection Bureau (CFPB) – with convening small business advocacy review panels before issuing new rules that may have a significant economic impact on a substantial number of small businesses. These panels are intended to ensure that actual small businesses have an opportunity to provide the agencies with input about their unique concerns regarding how these rules might impact their businesses and how those impacts could be addressed.

However, our analysis of 20 panels revealed that trade associations and their big business members have manipulated the panel process. Trade associations help identify many of the representatives chosen to advise the panels, participate in meetings with the representatives to coordinate the content of comments, and even help write comments the representatives submit to the panels.

We also found that the agencies often fail to reach out to actual small businesses or to encourage their participation as advisors to the panels. The agencies also lack formal procedures to verify that the small business advisors they select do, in fact, represent actual small businesses directly affected by the rule.

To make matters worse, the Office of Advocacy, a little-known but powerful independent office housed within the Small Business Administration, encourages trade association representatives to participate in the panel process in a variety of roles, including serving as informal “helpers.” Advocacy also collaborates with trade association representatives and small business advisors in developing comments submitted to the panels, even though Advocacy is a formal member of the panels.

Our assessment of the Office of Advocacy’s role in this process reinforces findings from our 2013 report on Advocacy’s inappropriate interference with the non-regulatory, scientific assessments of three cancer-causing chemicals at the behest of big business and the trade associations that represent them. Our 2013 report led to an investigation by the Government Accountability Office, which confirmed many of our initial findings.

As a result of extensive involvement by trade associations in the panel review process, we found that the comments submitted to the panel often do not address small business-specific issues, and agencies have sometimes weakened public protections for the benefit of big business.

The agencies can ensure they are hearing from actual small businesses about their unique concerns by adopting the recommendations outlined in our report, which include:

  • The agencies should develop written eligibility criteria that define who qualifies as a small business representative  and should require each nominee to certify that he or she meets that criteria;
  • The agencies should limit the involvement of trade associations in identifying potential small businesses and avoid selecting trade association representatives as small business advisors or “helpers”;
  • The Office of Advocacy should help agencies identify actual small business representatives to advise the panels and should be precluded from collaborating with advisors in the development of comments submitted to the panels; and
  • Agencies should screen the panel recommendations and comments submitted to the panel and only consider changes to a rule that specifically address the impacts on small businesses subject to the rule.

“Small business leaders are ready, willing, and able to give agencies the input they need to ensure that strong national standards and safeguards take the interests of small businesses into account,” wrote David Levine, president and CEO of American Sustainable Business Council, in a forward to the report. “When done correctly, business and government can work together to build our economy while advancing our shared economic, social, and environmental priorities.”

Unless meaningful improvements are made to the small business review panel process to ensure that genuine small businesses participate and share their unique concerns, the process will continue to be a waste of public funds and agency resources. We hope the agencies and Office of Advocacy take Levine's words to heart and implement the much-needed improvements to the small business review process recommended in our report.

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