Check the Fine Print: The Hidden Cost of Reading Regulations 

Andrew Blackburn

Of all the categories of government-issued documents, regulations should be the easiest to access.  Regulations represent the rules of the road, and anyone looking to operate a business in the United States is obligated to adhere to them, lest they incur the wrath of the executive branch.  Unfortunately, over 2,000 federal regulations, key standards under which businesses are expected to operate, are held behind paywalls.  How does this happen, and shouldn’t the laws of this country be freely accessible to all who are expected to comply with them? 

Incorporation by reference and the unexpected price tag 

Regulations end up behind paywalls due to a practice regulators commonly use called “incorporation by reference.”  Incorporation by reference (IBR) is when a law or regulation references another document and makes it a part of the law or regulation.  This is a regular occurrence in state and federal laws and regulations.  For example, state regulations will often reference portions of federal regulations, rather than create either a duplicate set of regulations on the state’s books or create a new standard.  Federal and state agencies also commonly incorporate documents developed by third-party rule-making bodies, such as standards developed by trade associations.  Importantly, when regulatory agencies use IBR in regulations, it usually means that the secondary document is given the full force of the law.  In other words, these external documents become regulations. 

Consider this example.  486 different federal regulations refer to the Boiler and Pressure Vessel Code, which is produced by the American Society of Mechanical Engineers (ASME).  The Boiler and Pressure Vessel Code, which is 19,808 pages long, describes modern standards used in the safe design, manufacture, inspection, testing and maintenance of boiler and pressure vessels, power-producing machines and nuclear power plant components.  If prevailing price is any indicator, then it must be a useful set of standards, because it costs about $20,000 to purchase.  In fact, if these standards were free to all, they’d arguably be a public good. 

But these and many other privately developed standards are not without cost, and that’s understandable.  Their production requires the inputs of engineers, scientists, and other subject matter experts from an array of companies and organizations.  The governance problem arises when the standard is transformed into law by government decree and the price tag remains, which is the case for a shocking number of incorporated standards. 

The prominence of paywalled standards 

A cursory examination of the Code of Federal Regulations (CFR) reveals the extent to which federal agencies rely upon the IBR process to set rules.  The term “incorporation by reference” appears in the CFR over 23,000 times.  This means that, with or without a paywall, the text of over 23,000 legally enforceable documents is not directly accessible in the CFR.  Also, keep in mind that this only accounts for federal regulations.  This practice is also prevalent at the state and local levels, and businesses must account for all three levels of government to remain compliant.  

Given that IBR is widely used by federal agencies, it’s worthwhile to consider data from the external standard setters themselves.  The National Institute for Standards and Technology (NIST) maintains a database that lists standards incorporated by reference within federal regulations.  That database has about 25,000 entries, which matches fairly closely with the explicit use of the term in the CFR mentioned above.  Many of these entries are duplicates, with the average standard in this database incorporated by reference about five different times.  When accounting for the duplicate entries, there are 5,689 standards which are incorporated by reference at least once.  2,269 of these standards, or about 40%, are behind paywalls.  The average cost to access the paywalled standards is $122.09, and if one wanted to purchase all 2,269 paywalled standards, it would cost about a quarter-million dollars. 

The government shouldn’t add more cost to the regulated 

The true cost of regulations is comparable to an iceberg, where there is some visible portion sticking out above the water, but there is also a hidden part of the iceberg lurking beneath the waves.  For regulatory costs, there are some obvious and visible costs, such as paperwork hours or the outlays related to the purchase of new safety equipment.  But there are hidden costs—innovation that didn’t happen, for example.  Apparently, the iceberg analogy can also be used to describe the body of regulations themselves.  At the federal level, many are readily visible in the Code of Federal Regulations, but many others are at least somewhat hidden in the sense that you have to look into some other document to find them. 

If each of the standards listed in the NIST database is 10 pages long (in reality, they’re probably much longer on average), that means 56,890 pages of regulations are not actually on the books but have legal force.  Further, that would mean that 22,690 pages of the legally enforceable code require a fee to access.  The CFR is about 190,000 pages long, so if the 10-page assumption is anywhere close to right, that means about 30% of federal regulations are not actually printed in the Code and 12% of federal regulations are behind a paywall.  

The bottom line is this: Law should be accessible to all, not just those with the ability to purchase it.  If regulatory agencies want to use privately developed industry standards as regulations, they should ensure the standards are freely accessible.  That might mean compensating the standard developers in another way, but not via paywalls on the public. 

Andrew Blackburn is Program Manager for the Regulatory Studies Project at the Mercatus Center at George Mason University