The role of economics in judicial review

The following is an excerpt from Despoina Mantzari’s book Courts, Regulators and the Scrutiny of Economic Evidence, now available from Oxford University Press.

One of the main reasons for working on this book was to shed light on the challenges that economic evidence and analysis pose to judicial review in an area adjacent to competition law, the area of ​​public utility regulation, which has been largely under-researched in both competition law and as well as in administrative law. law experts. It soon became clear that while there was a significant body of doctrinal analysis of judicial review of regulatory agency decisions, there was very little research that sought to systematically examine the interactions of both regulators and courts with economic evidence. This book aims to fill this gap in the literature by engaging deeply with economics and examining, for the first time, its impact on the exercise of regulatory discretion and judicial review in two common law jurisdictions: the US and the UK. It is a deeply comparative and interdisciplinary endeavor. This is not due to methodological ambitions. Rather, the point is that the issue of resolving economic evidence in regulatory disputes is a complex one. This depends in part on normative arguments about which institutions in the regulatory state (courts or regulators) should have the primary interpretative power to define the economic knowledge concepts on which our use of essential services depends. It also requires an understanding of how judicial and other institutions respond to the requirements of judicial review of economic evidence, how they view their role in the regulatory enterprise, and how their role evolves over time. Basically, it is about regulatory and judicial freedom, its limitations and boundaries at the intersection of two separate “rationalities”: legal and economic. To answer these questions, the book combines theoretical, doctrinal, comparative, and empirical analysis. It aims to stimulate and encourage productive dialogue between lawyers and economists, who typically talk alongside each other despite common interpretive challenges.

The prevalence of economic evidence in regulators’ outcomes raises an uncomfortable question: How can appellate courts, which include judges general, feel comfortable reviewing such decisions? This question becomes even more pressing if we consider that judicial review serves, among other things, as a key error-correction tool, i.e., a mechanism for ensuring the fairness and accuracy of regulatory decisions. So assuming that judicial review can minimize erroneous regulatory decisions, does the increased amount of economic evidence presented in regulatory disputes undermine the error-correcting function of judicial review? In other words, what are the limits of judicial review of economic evidence in appeals by utility regulators in the US and UK? How should such constraints be addressed from an institutional design perspective?

The main argument presented in the book is grounded in the case law of American and British courts and contains both descriptive and normative elements. The book shows that courts not only should, but in most cases do, adopt a modest and deferential attitude toward agencies’ discretionary economic assessments. In fact, the recourse to economic evidence and analysis has fundamentally changed the scope, process and intensity of review of regulatory decisions in both jurisdictions. In the United States, there has been an evolutionary transformation in the scope and nature of judicial review: from the intrusive “hard review” epitomized in the 1980s to State Agricultural Farm decisions to a really undemanding version of rationality called the “thin rationality” review. (Chapter 5). In the UK, there has been an institutional response to the challenges posed by economic evidence, epitomized by the creation of a specialist CAT team (Chapter 6). At the same time, the introduction of statutory appeals marginalized judicial review as the main means of challenging the decisions of regulatory agencies. A by-product of this transformation is the gradual increase in the complementary relationship between the judge and the regulator. Instead of a state of institutional conflict between two actors in the sphere of law and politics, or a state of complete respect, one can observe a degree of judicial restraint based on relative institutional competences (chapter 7).

But how should we understand the concept of “relative institutional competence” and how does it affect the scope of control and the institutional design of regulatory appeals? At its most basic, considerations of relative institutional competence are based on the assumption that one authority (e.g., a regulatory agency) is better able to perform a particular function than another (e.g., a court). Incorporating Neil Komesar’s insights into the discussion about the appropriate scope of economic evidence review encourages an assessment of the relative attributes of both regulators and courts (or in some cases other entities such as the CMA), and which of these institutions allows for the broadest representation of interests , before deciding on the appropriate level of discretion or the optimal adjudication forum. Seen in this way, respect appears as an institutional choice between imperfect alternative decision-makers. It reflects an assessment of which candidate institution (e.g. court, regulator, specialist tribunal) is best placed, compared with other candidates, to assess the economic evidence contained in regulatory decisions. The weight given to comparative institutional competence depends on several factors at the macro level (e.g. constitutional factors) and micro level (e.g. the rules of the court and its access to epistemic competence); The book shows that when reviewing economic evaluations of regulatory agencies, courts do, and should, consider comparative considerations of institutional competence, in addition to the constitutional, institutional, and historical considerations that have traditionally determined the scope and intensity of substantive review of a regulatory agency’s discretion.

Comparative imbalances in epistemic competence provide the basis for judges to recognize a regulatory agency’s economic judgments as based on the latter’s “epistemic authority.” In such a situation, the judge admits that he has an “epistemic deficit” in the assessment of economic evidence contained in regulatory decisions and attaches greater importance to the authority’s assessment that is closer to the facts. Aileen Kavanagh calls this type of deference “substantial” deference, in which the judge acknowledges her “institutional deficiencies” on the issue. It follows that a court’s failure to show due deference to a regulatory authority will lead to the court rendering an erroneous judgment on the issue. In Chapter 5 we will see that considerable deference is reflected in the “thin rationality” review that has been adopted by US courts. Most importantly, it differs from the “minimum” deference that is owed to an agency on constitutional grounds.

However, comparative institutional analysis not only sheds light on the allocation of decision-making power among institutions when it comes to assessing economic evidence, but also provides insight into the institutional dilemma. The analysis of institutional alternatives for incorporating economic knowledge into the courtroom (e.g. specialist court, experts, assessors, court-appointed experts), carried out in Chapter 7, will reveal that a specialist court, having both subject specialization and a combination of specialist knowledge extra-legal/economic and legal, could constitute an optimal solution to the problem of epistemic asymmetry existing between the judge and the expert agency in regulatory disputes and could minimize the likelihood of error. In summary, normative recommendations regarding institutional choice and institutional design are not mutually exclusive, but are complementary. The “rule” for assessing economic evidence requires a balance in which regulators show deference on the basis of institutional competence and a degree of epistemic diversity is introduced in the courts.

Reprinted with permission from Courts, Regulators and the Scrutiny of Economic Evidence by Despoina Mantzari, published by Oxford University Press. © 2022 by Oxford University Press. All rights reserved.

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