Hounded Out Of Business

The Wall Street Journal had a overnice oped, "Hounded out of concern past times regulators" past times Dan Epstein who was, well, hounded out of concern past times regulators. Excerpts:

Last Friday, the FTC’s primary administrative-law justice dismissed the agency’s complaint. But it was besides late. The reputational harm together with expense of a six-year federal investigation forced LabMD to unopen terminal year.

...the committee opened an investigation into LabMD inward Jan 2010. ...the FTC refused to exceptional LabMD’s data-security deficiencies.... Eventually, the FTC demanded that LabMD sign an onerous consent gild admitting wrongdoing together with agreeing to xx years of compliance reporting.

Unlike many other companies inward similar situations, however, LabMD refused to cave together with inward 2012 went world amongst the ordeal. In what appeared to last retaliation, the FTC sued LabMD inward 2013, alleging that the fellowship engaged inward “unreasonable” data-security practices that amounted to an “unfair” merchandise practice.... FTC officials publicly attacked LabMD together with imposed arduous demands on the doctors who used the company’s diagnostic services. In precisely i example, the FTC subpoenaed a Florida oncology lab to hit documents together with look for depositions earlier authorities lawyers—all at the doctors’ expense.
Yet later years of investigation together with enforcement action, the FTC never produced a unmarried patient or physician who suffered or who alleged identity theft or harm because of LabMD’s data-security practices. The FTC never claimed that LabMD violated HIPAA regulations, together with until 2014—four years later its investigation began—never offered whatever data-security standards amongst which LabMD failed to comply.

...the instance illustrates the injustice of the federal organisation that allows agencies to moo-cow companies into submission rather than assay a 24-hour interval inward court. During its iii years of pre-suit investigation against LabMD, the FTC demanded thousands of documents, confidential employee depositions together with several meetings amongst management. LabMD—which at its apex employed thirty people—spent hundreds of thousands of dollars coming together demands. No federal courtroom would e'er permit such abusive tactics. But this isn’t federal court—it’s a federal agency.

Furthermore, the FTC is probable to merely disregard the 92-page decision—which weighed witness credibility together with the law—and side amongst committee staff. That’s the silent greater injustice: The FTC is non saltation past times administrative-law justice rulings. In fact, the way has disregarded every adverse ruling over the past times 2 decades, according to a Feb analysis past times quondam FTC Commissioner Joshua Wright. Defendants’ entirely recourse is appealing inward federal court, a fresh burden inward legal fees.

That’s what happens when a federal way serves every bit its ain detective, prosecutor, judge, jury together with executioner.

The anecdote has 2 larger implications, inward my view. First, many people including myself direct maintain a feel that this form of regulatory persecution is harming economical growth. But at that spot are no expert estimates of the total issue of companies reveal of business, jobs destroyed, investment made worthless past times regulatory persecution, or, fifty-fifty harder, projects non started from fearfulness of such persecution. For the moment, nosotros tin flaming entirely collect anecdotes, which is why I transcend this i on.  But the measuring enquiry is vital. Inequality is entirely a large policy effect because nosotros direct maintain statistics on it.

Second, authorities annotation the pretty clear accuse that the FTC retaliated against LabMD for challenging the FTC. In "The dominion of constabulary inward the regulatory state" (pdf, spider web log version here; excerpt at the insider here)  I started thinking virtually the political together with free-speech implications of this form of persecution.

With exceptions such every bit Lois Lerner at at that spot IRS, the agencies are silent commencement together with foremost interested inward protecting the agencies.

But it's slow plenty these days to figure out who donates to what campaign, or who blogs virtually what.  To imagine that this form of persecution volition non last used for partisan political purposes -- or that fearfulness of such persecution volition non drive fellowship owners to brand political friends, brand abundant contributions, pay for expensive speeches, together with and hence forth -- is to imagine that a plate total of cookies at a children's birthday political party volition rest untouched when mom together with dad tell consume your vegetables first.  LabMD clearly needed a friend inward high places to telephone band together with tell "make this work become away." Its successors volition non brand that mistake.