Small Businesses Might Not be Getting a Say in Rules That Affect Them

At least three major regulatory agencies are allowing lawyers, lobbyists and trade groups representing big firms inordinate influence over a process designed to let small businesses review rules that might affect them, according to a study released Wednesday by the nonprofit Center for Effective Government (formerly OMBWatch).

The study, titled “Gaming the Rules: How Big Business Hijacks the Small Business Review Process to Weaken Public Protections,” criticized the inclusion of lobbyists from for-profits affected by pending regulations on panels convened by the Environmental Protection Agency, the Occupational Safety and Health Administration, and the Consumer Financial Protection Bureau.

“None of the three rulemaking agencies has policies in place to ensure that the individuals selected as small business representatives to advise their review panels do in fact represent small business,” the study said. “We found extensive involvement by trade associations, their lobbyists and their big business members throughout the panel process.”

The study also faults the Small Business Administration’s Office of Advocacy and the White House Office of Information and Regulatory Policy for intervening to soften rules affecting the environment, health and safety.

Small business review panels have been required since 1996 as a way of giving firms with fewer than 100 employees an opportunity to weigh in on the prospective economic impact of a proposed rule.

After reviewing 20 small business review panels from 1998 to 2012, the study found the process “costly, resource-intensive, and duplicative of other agency outreach efforts to the business community.” Of 23 rules covered in the case studies, 17 have been finalized, the analysts wrote, and “some of the public protection provisions in at least eight of the 17 final rules were, in our judgment, weakened as a result of the panel review process. In every case, the review process delayed the publication of the rule.”

In an introduction, David Levine, president and CEO of the American Sustainable Business Council, said the study “confirms my organization’s belief that the Office of Advocacy has seriously strayed from its mission of representing the interests of small businesses before federal agencies.” He cited a recent case in which the SBA unit asked EPA to withdraw a rule designed to help EPA and the Army Corps of Engineers reduce water pollution. But an independent poll of 550 small businesses commissioned by Levine’s group “found that 80 percent of them supported the rule.”

To ease any bias in the review panels, the center recommended that EPA, OSHA and CFPB better screen comments from panel participants to ensure that they address only impacts on small businesses; that the agencies create written and enforceable eligibility criteria for the panels; that trade associations not be permitted to send representatives to the panels; that panel membership be diversified to reflect the entire small business community; and that panel membership lists be posted a month before meetings to allow scrutiny for conflicts of interest.

In addition, the report recommended that SBA’s Office of Advocacy be “precluded from collaborating in the development of comments submitted to the panel to avoid a conflict of interest,” and that the Government Accountability Office and Congress monitor the effectiveness of such panels.

CORRECTION: This story has been corrected to state that small business review panels have been required since 1996, rather than 1974. 

(Image via Zerbor / Shutterstock.com)