Airliners, E-Cigs Dent America’s Self-Regulating Credibility

(Bloomberg Businessweek) -- Just the barest facts are unsettling. A federal regulator in the U.S. routinely permits a major American manufacturer to certify that its products are safe. Then, in recent months, 346 people perish. The company, of course, is Boeing Co.; the regulator is the Federal Aviation Administration. And while both say they did nothing wrong, the finer points of how the agency relied on the jetmaker’s assurances about the safety of flight-control software suspected in the crashes of two of its 737 Max jetliners are now the subject of federal investigations.

The self-regulatory freedom enjoyed by Boeing is common in the U.S. And it raises questions about the efficacy of the nation’s consumer-protection system, long the envy of the world and part of the reason American products are trusted more than those of many other countries.

Virginia Haufler, an associate professor of government and politics at University of Maryland and author of A Public Role for the Private Sector: Industry Self-Regulation in a Global Economy, attributes the spread of self-regulation to a broader global embrace of deregulation. Also, she says, “there has been a rise of very complicated technologies and industries, and in many cases government regulators or policymakers say, ‘You guys know what you’re talking about, so you come up with the details, and you handle it.’ ”

Sam Berger, a former Obama White House adviser, says self-regulation is also the result of private-sector efforts, helped by parsimonious Congress members, to cripple federal agencies. “A lot of what we’re seeing is a realization by big business that if they couldn’t kill a regulation, they would work with allies in Congress to starve agencies of funding,” says Berger, now vice president for Democracy and Government Reform at the Center for American Progress.

Close cooperation between industries and their regulators can be eyebrow-raising. The federal government, for instance,leans heavily on standards developed by the American Petroleum Institute, the top oil industry trade group in Washington, D.C., when it comes to overseeing the design of offshore oil wells. The API says there’s no conflict, because it keeps its standards shop separate from its lobbying arm. Indeed, if ever there was a federal agency that could have used some outside assistance, it was the Department of the Interior’s perennially underfunded and understaffed Minerals Management Service, which, until 2010, oversaw offshore drilling.

The agency’s inspectors couldn’t keep pace with rapid technological advances that enabled drillers to venture into deeper waters. Then came the 2010 Deepwater Horizon disaster, which killed 11 workers and triggered the worst oil spill in U.S. history. After the spill, former President Barack Obama abolished the MMS and divided its duties among three separate agencies. The Trump administration is considering recombining two of them as part of its effort to lighten regulation of the oil and gas industry.

The auto industry’s chief regulator is similarly challenged when it comes to keeping up with technological advances. The National Highway Traffic Safety Administration requires automakers to certify that new vehicles comply with dozens of vehicle safety standards, but it has allowed manufacturers to freely introduce technologies. The year after Tesla broadly deployed a driver assistance feature known as Autopilot in 2015, a former Navy SEAL using it died when his Model S drove under a semi-trailer crossing a Florida highway. After the crash, Tesla said: “Autopilot is by far the most advanced driver-assistance system on the road, but it does not turn a Tesla into an autonomous vehicle and does not allow the driver to abdicate responsibility.”

A probe by the NHTSA cleared Tesla’s system of any design or performance defects. Yet a separate inquiry by the National Transportation Safety Board in 2017 found that the driver’s overreliance on Autopilot and its lack of built-in safeguards contributed to the crash. Consumer-safety advocates concluded that the National Transportation Safety Board’s findings were more persuasive. “The devastating conclusions of the board reveal what happens when the government takes a hands-off approach to hands-free driving,” said Cathy Chase, president of Advocates for Highway and Auto Safety, in a statement. “This should serve as an urgent alarm to the U.S. Department of Transportation and Congress to take immediate action to regulate autonomous vehicle technology.” The NHTSA disagreed, saying it was too early. “I don’t think it’s appropriate today to regulate this technology,” said Heidi King, the agency’s deputy administrator, last year.

The Food and Drug Administration has been trying to stem teen vaping, which health advocates worry is hooking a new generation on nicotine. But the FDA didn’t push for the ability to regulate e-cigarettes alongside other tobacco products until 2016. And the agency has postponed implementation of new regulations by several years. Meanwhile e-cigarette manufacturers can continue to advertise their products on television, where traditional cigarette advertising has been banned since 1971.

The FDA has tried to get tobacco companies to voluntarily take steps to reduce teen vaping. At first, it seemed to work. In October tobacco giant Altria announced it was discontinuing sales of its pod-style e-cigarettes and several e-cigarette flavors popular with the vaping crowd. Two months later, though, Altria invested $12.8 billion in Juul Labs, the maker of the most popular e-cigarette. The decision frustrated outgoing FDA Commissioner Scott Gottlieb. “I’m concerned,” he told CNBC in February. “Because they just made a very large commitment to support the expansion of pod-based products, which they said contributes to the youth epidemic.” Both Altria and Juul say they are still committed to lowering teen vaping numbers.

After the second crash of a Boeing 737 Max in March, former FAA employees told reporters how they’d been frustrated over the years by the FAA’s acquiescence to Boeing on safety checks. In 2012 a Transportation Department investigation found that the discontent created a “negative work environment” among FAA employees responsible for approving aircraft designs. Some said they’d faced retaliation if they raised their voices about it.

The tight relationship between Boeing and the agency continued during the 737 Max’s safety assessment. Unnamed FAA engineers told the Seattle Times they’d been pressured by their managers to sign off on the jet, relying on Boeing’s submissions understating the potential impact of the flight-control software designed to keep the plane from stalling by pushing down its nose. The software is now suspected as the cause of the crashes.

One reason people around the world buy American products is that they trust that these goods have been rigorously inspected by government regulators and are safe. If people no longer believe that, why would they buy American? —With Ryan Beene, Jennifer A. Dlouhy, Anna Edney, Ellen Huet, and Peter Robison

To contact the editor responsible for this story: Howard Chua-Eoan at hchuaeoan@bloomberg.net

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