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OpenMarket: April 2014

  • Republican Internet Gambling Ban Undermines States’ and Individual Rights

    April 28, 2014 4:19 PM

    Despite rhetoric that we need to “restore” the Federal Wire Act in order to protect states’ rights, Republican lawmakers are pushing a bill that would do the exact opposite. The bills would rewrite a U.S. federal law instituted in 1961, creating a de facto ban on Internet gambling, prohibiting states from legalizing and regulating the activity—something three states have already done with others in the process. Not only does the proposal trample states’ rights, but it will fail to eliminate illegal online gambling and actually make consumers less safe while eliminating millions of dollars in tax revenue for states. Worst of all, it sets an unsettling precedent whereby federal lawmakers can reverse state law if they have a personal problem with the activity.

    Today a coalition of free market groups, including CEI, expressed our opposition to such heavy-handed federal action. In the letter to the chairmen and ranking members of the House and Senate Judiciary Committees we declared our belief that an online gambling at the federal level would have unintended consequences that would be much worse than allowing states to choose if and how to legalize the activity. As we said in our letter:

    The legislation is a broad overreach by the federal government over matters traditionally reserved for the states. H.R. 4301 will reverse current law in many states and drastically increase the federal government’s regulatory power. As we have seen in the past, a ban will not stop online gambling. Prohibiting states from legalizing and regulating the practice only ensures that it will be pushed back into the shadows where crime can flourish with little oversight. In this black market, where virtually all sites are operated from abroad, consumers have little to no protection from predatory behavior.

    The bills, titled the Restoration of America’s Wire Act (S. 2159 and H.R. 4301) were introduced last month by Sen. Lindsey Graham (R-S.C.) and Rep. Jason Chaffetz (R-Utah), respectively. The bills would change the language of the Federal Wire Act, which in 1961 criminalized certain types of “wire” communications related to sports gambling. While Graham, Chaffetz, and others supporting the “restoration” bill claim that the original intent of the Wire Act was to ban all types of gambling, the U.S. Court of Appeals for the Fifth Circuit and the Department of Justice criminal division analyzed the letter of the law and came to the conclusion that insofar as it related to online communication it only prohibits gambling on sports.

    When the DOJ released its opinion on the Wire Act in 2011, it opened the door for states to begin legalizing the activity within their borders. Republicans, like Lindsey Graham are trying to sell their bill as a defense against Obama’s DOJ eroding existing law—but what they are doing is re-writing a 50 year old law to suit their own purposes. As Reason’s Jacob Sullum noted, “If you pay close attention to a statute's actual words, according to Graham, you are ignoring the law. Being true to the law evidently requires excising the inconvenient parts.”

  • Google's Self-Driving Cars Approach 700,000 Miles of Crash-Free Driving

    April 28, 2014 1:31 PM

    In a report released last week for CEI, I noted that developers need to be able to demonstrate automated vehicle safety benefits in order to justify releasing them to consumers. Based on road use and crash data, the critical milestone to reach is about 725,000 miles of crash-free driving in order to be 99 percent confident that automated vehicles are safer than manually driven ones.

    Today, Chris Urmson, director of Google's Self-Driving Car Project, announced the company had reached nearly 700,000 miles of crash-free driving across its fleet of self-driving cars. Google's self-driving fleet has been involved in a couple of minor accidents, but they either occurred when the self-driving car was being manually driven or were due to the fault of another driver.

    Google will be able to demonstrate safety benefits later this year when it hits the critical milestone. Once this occurs and research is published, expect even more private-sector investment and general public interest in automated vehicles to occur. But, as I've warned, this will also bring increased lawmaker and regulator attention.

    As I detailed in my report, policy makers should take care to exercise great restraint in regulating automated vehicle technologies. Overregulation, particularly at this very early stage, risks locking in inferior first-generation technologies, delaying consumer availability, and increasing prices. The results of these good faith but foolish efforts would be increased property damage, injury, and death, as consumers are stuck in less safe, manually driven vehicles for longer than they otherwise would be.

  • Education or Indoctrination?

    April 28, 2014 12:22 PM

    Bills are being introduced in Connecticut and Illinois that would require school curriculum to teach the history of the labor movement.

  • Ninth Circuit win in Apple MagSafe case

    April 28, 2014 9:30 AM

    The Apple MagSafe settlement paid the attorneys $3.1 million, but the class less than a quarter of that, yet the district court rubber-stamped settlement approval without addressing the objection to the self-dealing by class counsel, and, worse, imposed an illegal $15,000 bond to appeal the case. We posted the bond and appealed. (Briefing and oral argument here.) Thursday, the Ninth Circuit reversed and remanded for consideration under the appropriate legal standards, and was especially critical of the abusive appeal bond. The most comprehensive coverage is by Daniel Fisher at There are also stories at The Recorder and Law360 behind subscription paywalls.

    I'll note that three times now federal courts have imposed excessive appeal bonds on Center appeals on the non sequitur of a ground that the appeal had little chance of success, and we're two for two in such cases, with the third one pending.

    We're also four for four in Ninth Circuit cases, and nine for eleven in intermediate federal courts (eight for ten as appellants).

  • CEI’s Battered Business Bureau: The Week in Regulation

    April 28, 2014 9:10 AM

    84 new regulations, from spearmint oil to hot air balloons.

  • FCC's Internet Fast Lanes Should Outrun Net Neutrality Bias

    April 25, 2014 1:10 PM

    The Federal Communications Commission (FCC) will issue proposed rules May 15, rules expected expected to allow premium pricing for Internet fast lanes alongside the lane we have now, for those willing to pay.

    The open-access tech utopians aren't amused; They see the Internet as some kind of magical public resource, as something that popped fully formed out of nowhere, and need never change. In the modern style, they have demands that others must fulfill, and want to set the terms for others' property deployment.

    The New York Times wrote,

    Dividing traffic on the Internet into fast and slow lanes is exactly what the Federal Communications Commission would do with its proposed regulations, unveiled this week. And no amount of reassurances about keeping competition alive will change that fact.

    There's nothing wrong with many fast and many slow lanes on the "Splinternet" of tomorrow. We should have those without new FCC rules setting the terms as both content and infrastructure firms expand and can discipline one another. Anyone who stands in the way of that evolution is the threat to openness and information flow.

    As ever escalating premium services in multimedia emerge, particularly in tomorrow's world of 3D and holograms, today's average speed will pale in comparison. A mere background hum.

    That hum will resonate louder as the premium lane and lanes escalate, making everyone better off. All FCC is going to do is bog the process down.

    No, neutrality advocates seek their own control over the Internet's infrastructure and content, explicitly demanding common carriage (and presumably an end to investment). And the new rulemaking's veneer of liberalization aside, the real problem is that FCC actually seeks broader new forms of regulation over Internet technologies as such, and was granted that authority in court early this year.

  • A Victory for Taxpayers and Equal Protection: Supreme Court Upholds Michigan's Proposal 2

    April 25, 2014 1:08 PM

    Taxpayers of all races pay more when government contracts are doled out based on race, rather than awarded to the lowest bidder. That's one reason why it's great news that the Supreme Court reversed a ridiculous lower court decision claiming that it violates the Constitution for voters to ban racial preferences in state government. In its 6-to-2 decision Tuesday in Schuette v. Coalition to Defend Affirmative Action (BAMN), the Supreme Court overturned a contentious, 8-to-7 ruling by the Sixth Circuit Court of Appeals striking down a provision of the Michigan state constitution that rightly banned racial preferences in government contracts and employment, and in state college admissions.

    That provision (Article I, §26) was added to the state constitution by a 2006 ballot initiative, known as Proposal 2 or the Michigan Civil Rights Initiative, which passed easily with 58 percent of the vote. The Supreme Court's moderate and conservative justices, along with one of the court's four liberals (Justice Stephen Breyer), voted to uphold that provision. Justice Sotomayor, who was appointed by President Obama, dissented, joined by liberal Justice Ruth Bader Ginsburg.

    The Sixth Circuit's ruling, which claimed it violated the Constitution's equal protection clause to mandate that people be treated equally without regard to their race, defied common sense: It is nonsensical to argue that the Equal Protection Clause requires that people be treated unequally. The Sixth Circuit's ruling also conflicted with rulings the California Supreme Court and the Ninth Circuit Court of Appeals upholding a materially-indistinguishable provision added to California's state constitution, known as the California Civil Rights Initiative or Proposition 209. That provision, approved by California voters in 1996, was upheld in 1997 by the Ninth Circuit, and later upheld by the California Supreme Court in 2010 in a 6-to-1 vote.

    The Sixth Circuit’s strange ruling that voters cannot limit racial preferences through ballot initiatives risked harming taxpayers by increasing the cost of government contracts. Even fairly mild government affirmative action programs that do not impose racial quotas nevertheless impose substantial costs on taxpayers. For example, in the Domar Electric case, Los Angeles accepted a bid for almost $4 million to complete a contract rather than the lowest bid of approximately $3.3 million, at a cost to taxpayers of more than $650,000. The lowest bidder was rejected solely because it failed to engage in affirmative action in subcontracting. California’s Proposition 209 later limited this sort of racial favoritism by banning racial preferences, voiding a number of state affirmative-action programs, and thus saving taxpayers millions of dollars.

    Justice Sotomayor's dissent purported to rely on the controversial “political restructuring” doctrine, which holds that shifting a decision on a public policy issue from one level or branch of government to another is sometimes unconstitutional if it disadvantages minorities. (The Cato Institute's Walter Olson discusses the incoherent nature of this doctrine at this link.)

    As Justice Sonia Sotomayor put it in her dissenting opinion, the doctrine applies in cases where the state “reconfigur[es] the existing political process… in a manner that burdened racial minorities." But as law professor Ilya Somin notes, this begs the question, since racial preferences harm racial minorities, such as Asian-American college and magnet-school applicants (who often must meet even higher standards than white applicants to be admitted). Thus, Michigan's ban on racial preferences helped, rather than "burdened," many members of racial-minority groups. Like the Asian American Legal Foundation, which filed briefs in support of Michigan's Proposal 2, I look forward to the day when my Asian niece and nephew are judged by the content of their character, not the shape of their eyes or the color of their skin.

  • California Labor Board Obstructing Farm Workers Union Decertification Bid

    April 24, 2014 11:00 AM

    Outdated labor law has led to the problem of inherited unions. Research done by the Center for Union Facts has found that less than 10 percent of employees actually voted for their union representation.

  • CEI Sues National Park Service and Interior Department under FOIA over Government Shutdown Documents

    April 23, 2014 1:47 PM

    Last night, CEI filed suit against the United States Department of the Interior and the National Park Service for failing to produce documents in response to two pairs of Freedom of Information Act requests. Those requests, sent to them way back on October 9, dealt with these agencies' closures of private businesses and privately-run tourist attractions in the 2013 federal government shutdown, and also with their closures of public monuments and spaces, which are often open to the public even when no federal employee is on duty.

    The agencies have neither produced documents, nor set an estimated date for when they will be produced, nor indicated how many documents they might produce or withhold, even though FOIA contains a 20-day deadline for an agency to comply with a FOIA request. They have not provided the basic information that FOIA requires within that deadline, such as telling us how many documents they expect to produce (or, if the documents are exempt from production, how many they will withhold under a valid FOIA exemption), even though that information is required under the appeals court ruling in C.R.E.W. v. F.E.C., 711 F.3d 180, 186 (D.C. Cir.2013).

    During the shutdown in early October, these agencies closed down, or blocked access to, many private businesses that had apparently been allowed to operate in earlier shutdowns under prior Presidents (even as politically-connected businesses were allowed to remain open). After lawyers and legal commentators suggested that these closures of private businesses were illegal departures from past agency practice, I filed FOIA requests seeking to find out which officials were responsible for these improper closures, and how the decision to close them was made. Of all the agencies involved, the National Park Service was probably the worst offender, according to CEI's Myron Ebell. A judge later ruled against the National Park Service’s closure of a state park used by children, and against the U.S. Forest Service's suspension of timber operations.

    The Obama administration's behavior during the shutdown was controversial, to say the least. As part of the so-called "shutdown" (which did not actually shut down most of the government -- most federal workers kept working), it shut down tourist attractions -- even when doing so cost the government more money than leaving them open. It rented costly barricades to keep people out of open-air outdoor monuments that don't need to be manned, and are typically open even when unstaffed (like the World War II Memorial).

    And it sent Park Police to drive people out of privately-run tourist attractions on public land, like the Claude Moore Colonial Farm, endangering tourism-related jobs in the process. On October 2, PJ Media’s Bryan Preston reported that the federal government was “ordering hundreds of privately run, private funded parks to close,” using the government shutdown as an excuse.

  • CEI Podcast for April 23, 2014: Reforming Fannie and Freddie

    April 23, 2014 12:56 PM

    Senior Fellow John Berlau argues that a bill from Senators Tim Johnson and Mike Crapo intended to reform Fannie Mae and Freddie Mac would only make things worse.


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