The MTTLR Blog

On December 24, 2009, the Senate passed a landmark health care reform bill. Included within the Patient Protection and Affordable Care Act is the Biologics Price Competition and Innovation Act, which contains provisions for the regulation of cheaper versions of biologic drugs. While an abbreviated pathway already exists for generic chemical drugs to gain FDA approval, similar regulations are not in place to bring less expensive versions of biologic pharmaceuticals, known as biosimilars, to the market. However, differences in the structure and function of biologic as compared to chemical drugs preclude the simple extension of current legislative provisions for generics to also apply to biosimilars.

Chemical drugs are the traditional small-molecule pharmaceuticals, often compounded into tablets and capsules, that the public is most familiar with. Biologic drugs are relatively new, having only entered the market in the 1980s, and have revolutionized treatment for many serious diseases, including cancer and HIV. The two drug types follow separate pathways towards FDA approval. The approval of new chemical drugs is regulated under the Federal Food, Drug and Cosmetic Act (FDCA), while biologics fall under the Public Health Services Act (PHSA). Biologics are a fast-growing area of drug research, with over 250 biologic drugs already approved by the FDA, and hundreds currently in development.

Traditional pharmaceuticals are created from combining chemicals and reagents in inert reaction vessels, whereas biologics are made from proteins produced within living cells, plants, and animals. An important difference between chemical drugs and biologics is that biologics have the ability to elicit an immune response. Chemical drugs are not recognized as foreign by the body’s immune system, but biologics can stimulate the production of antibodies. An immune response can cause an allergic reaction and more seriously, deplete naturally occurring proteins in the body, causing serious and sometimes fatal conditions. For some patients, biologic drugs have provided therapeutic relief beyond what chemical drugs are able to achieve, but at a steep price. Biologics are on average over twenty times more expensive than chemical drugs per day and can cost up to hundreds of thousands of dollars per year for a patient. The cost can be attributed in part to the higher expenses associated with research and development. Raw materials for biologics cost 20-100 times more than for chemical drugs, and manufacturing facilities take years to establish and hundreds of millions of dollars for building and maintenance. The high price for biologics also results from a lack of competitor products on the market, which has contributed to the growing push for less expensive versions of branded biologic drugs.

In the 1980s, public concern grew over the rising cost of pharmaceuticals. In response, the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act (HWA), created two abbreviated pathways for the approval of generic pharmaceuticals. The HWA explicitly amended the FDCA only and not the PHSA, leaving no clear route for the approval of generic biologic products. The HWA has been successful in encouraging the entry of generics to the market and reducing drug prices. The Generic Pharmaceutical Association (GPhA) reports that generics comprise 69% of the total prescriptions dispensed in the US, but only 16% of dollars spent. However, even if similar provisions for biosimilars are created, they are not expected to yield the same cost savings as generic chemical drugs.

Differences between chemical and biologic drugs affect the ability of generic manufacturers to create similar products that can be sold more cheaply. For chemical drugs, innovator and generic companies can use different processes to synthesize identical molecules. For biologics, innovators maintain that “the product is the process” and since generic firms do not have access to proprietary information regarding manufacturing, they cannot produce an identical product. Adding to the difficulty in creating generic versions of biologic products is that biologic drugs are typically 100-1000 times larger than chemical drugs and unlike chemical drugs, the structure of biologic drugs cannot be fully characterized with current technology. Under the HWA, generic firms do not need to provide their own clinical data, which can result in significant cost savings that can then be passed on to consumers, but given the potential for biologic drugs to produce immune responses, biosimilars may need additional clinical testing to ensure safety. According to GPhA, generic versions of chemical drugs cost 30-80% less than brand-names, but the group predicts savings for biosimilars will be 10-25%. The Congressional Budget Office estimated that during the first year of competition, the discount on biosimilars would be 20-25% and increase to 40% by the fourth year.

The first bill for biosimilars was introduced in Congress in 2006. Since then, multiple bills have been introduced in both the House and Senate. Other nations, including the European Union and Canada, have already implemented regulation of biosimilars. The recently passed Senate bill allows for the approval of biosimilars that show no clinically meaningful differences in safety and efficacy from the innovator product, which must be established using analytical testing, animal data, and clinical trials. A biosimilar may be declared interchangeable with the innovator after it has been shown that the biosimilar drug produces the same clinical effects and there are no adverse effects from switching the products. Similar to the HWA, the Senate bill provides an accelerated route for litigation between innovator and generic firms to expedite the identification of patents that are potentially infringed. While the HWA provides 5 years of market exclusivity to innovator products, the Senate bill grants 12 years of market exclusivity to innovator biologic drugs. The Senate bill must be merged with the House bill passed in November to create a final health reform bill, but the key provisions for biosimilars are similar under both bills, so it appears that the US may soon have a pathway in place for the approval of cheaper biologic drugs.

New Jersey senators Joseph Vitale and Sean Kean have proposed legislation that would impose heavy fines on entities that sent unsolicited text message advertisements. Though the Telephone Consumer Protection Act was enacted prior to the advent of text messaging, such unsolicited text message ads have recently been found to fall under the TCPA. The 9^th Circuit has declared this interpretation of the FCC to be reasonable and other circuits are likely to follow. The FCC prohibitions, however, do not include all text messages; rather, they only prohibit those sent from an internet domain name. Messages sent from cell phone to cell phone are exempt.

Vitale and Kean’s bill provides that fines will only be levied in two instances: if the text message causes the recipient to incur a fee or decreases the number of text message the recipient is allocated by his cell phone provider. The fines, only imposed if the advertiser sends more than one per year, are very steep; $10,000 for the first offense, $20,000 for subsequent offenses, and $30,000 if the advertiser knew or should have known the recipient was disabled or elderly. The bill also contains a provision requiring all phone companies to offer New Jersey consumers the option of blocking all incoming and outgoing text messages. Senator Vitale explains the motivation of the legislation, “We have to do a much better job in New Jersey to protect consumers from unsolicited text advertisements which can drive their cell phone bills through the roof.”

Certainly the New Jersey bill correctly recognizes the need to close the loopholes in the FCC’s regulation; however, it is still deficient. Firstly, in many cases it would be impossible to determine whether an advertiser knew or should have known if the recipient was disabled or elderly. The bill contains no guidance on what type of inquiry, if any, the advertiser should undertake to determine if the recipient falls into one of those categories. In many cases, it seems unlikely the advertiser would have enough information to know the recipient’s status. If the bill’s intent is to protect these groups, the additional fee should be levied regardless of the advertiser’s knowledge; otherwise, it is unlikely they will ever be subject to this additional fine.

More importantly, under the terms of the bill, unsolicited text messages to a recipient who had an unlimited text messaging plan would be permitted; a consumer with an unlimited plan would not incur a fee or a decreased number of available messages. Thus, the bill does not properly deal with the nuisance of unsolicited texts, rather it only recognizes the monetary cost. Such a stance is unreasonable; a consumer would have to receive a massive amount of unsolicited ads for any real cost to be incurred. Sprint, AT&T and T-mobile charge only twenty cents per text message. Most consumers would not be aggravated by this minimal charge, but rather at the annoyance of unsolicited contact. The bill should be amended to prohibit all unsolicited text ads, even if the consumer suffers no monetary loss. With this alteration, the bill would operate as an effective deterrent.

Most people don’t think of TV when the subject of broadband internet comes up.  That may change if the FCC gets its way.  The commission is currently reviewing some of its TV policies as part of its National Broadband Plan to encourage nationwide adoption.  Last month, an FCC task force identified several current hurdles to overcome, including what it calls the “Television Set-Top Box Innovation Gap.”  The focus on television comes from a task force finding that 99% of American households have television sets, while only 76% have computers.  Despite the relative ubiquity however, the task force notes that current innovation is limited with regard to the convergence of video, TV, and internet-based services.

This may be due to the fact that cableCARD has yet to meet its goals under the  Telecommunications Act of 1996.  Under the act, the FCC has authority to ensure that cable and satellite television networks are open to third-party devices.  Similar to the earlier Carterfone decision (allowing customers to connect third-party phones to the AT&T network), the goal is to foster innovation through competition.  Roughly the same size and shape to a laptop PCMCIA card, a cableCARD can be inserted into a compatible device, like a TiVo,  and allows it to access encrypted video content such as video on demand or HD channels without requiring a separate cable box.  Since the TiVo could also be connected to the internet, the ability to combine the two sources has potential for a number of interactive applications.  Despite this, adoption has been slow and cableCARD devices have not yet achieved significant market share.

As a result, the FCC announced earlier this month that it is seeking public comment on methods to bridge the set-top box gap.  Specifically, it stated that cableCARD “has not achieved its intended result” and therefore the commission is considering other options.  This might result in a modification of the current standard, or may involve scrapping cableCARD in favor of a whole new standard.  The FCC has already received numerous suggestions, ranging from complete overhauls to tweaks of the existing standard.  It will be very interesting to see what direction the commission decides to take when they submit the final plan to Congress in February.

The proposed merger between Comcast and NBC Universal is a major test for the Obama administration’s positions on vertical mergers and media consolidation.  Comcast has already made some commitments to aid it during the review process, which is likely to take at least a year.  These commitments include continuing free over-the-air broadcast of NBC and Telemundo as well as enhancing availability of children’s programming and Hispanic-focused content through on demand capabilities and some use of the digital spectrum available to various channels.

The big questions left are how the Obama administration will react to the proposed merger and what conditions might be placed on the merger once its terms become more concrete.  The merger would see a significant combination of internet service provision, television programming distribution, television programming production, and news gathering into one entity.  At the very least, Comcast’s position as “one of the nation’s leading providers of cable, entertainment and communications products and services” is certain to raise a lot of questions during the review process.

An interesting effect of entering the review process is how Comcast’s need to enhance its image to aid in regulatory agency approval, and how this might affect the ability of other television networks to demand better retransmission terms from Comcast.  It is entirely possible that Comcast may have to take a softer line in its negotiations and pay more for local broadcasts than it has in the past, in order to help convince regulatory agencies that the merger will not have anticompetitive effects.

There is a growing trend of hobbyists and garage-entrepreneurs who experiment with genetic engineering.  Also known as “bio-hacking”, these enterprising individuals are able to buy biotech equipment very cheaply, usually from eBay or Craigslist to make their own makeshift labs complete with all the equipment necessary to tinker with the DNA of simple organisms.  These bio-hackers have a noble goal: to make the world a better place.  Synthetic DNA for a variety of organisms can be easily bought online, and bio-hackers are engaged in a wide range of activities, from trying to find a cure for cancer, to making harmless bacteria glow in the dark.

This amateur scientist community is thriving, and their blogs and experiences can be found on websites such as DIYbio.com, (which stands for do-it-yourself biology) an organization that helps amateurs and hobbyists share information regarding their bio-hacking pursuits.   However, there is a great deal of concern regarding this new brand of scientific experimentation.  An organism that is modified, even in a benign way, could severely disrupt the ecosystem if released into the environment.  At the moment, the oversight for this group of scientists is done through self-policing.  Many experts are concerned with the potential abuse of bio-engineering and the development of dangerous new pathogens and viruses.  Proponents of biohacking respond to security concerns by pointing out that hazardous DNA sequences are already public, whether it be Ebola, H5N1, and even the 1918 plague.

Organizations such as DIYbio argue that widespread, collaborative biohacking increases security by exposing lab work in a transparent public setting.  Furthermore, proponents of bio-hacking argue that their activities are aimed at making science more transparent, affordable, and beneficial for greater number of people. Regardless of these benefits, this type of amateur biology has security officials in the US very worried.  It will be interesting to see what steps the government will take, if any, to regulate these activities in the future.

European Union (EU) regulators closed their investigation of  Qualcomm Inc. after all of the companies accusing Qualcomm of charging excessive royalties on technology patents withdrew their complaints. In 2005, six technology companies filed complaints alleging that the royalties Qualcomm has charged since its patented technology became part of Europe’s 3G standard are unreasonably high. Two of the companies, Nokia and Broadcom, withdrew their complaints after reaching separate outside settlements. Ericsson said in a statement that it is withdrawing the complaint and continuing “its ongoing dialogue with competition authorities around the world in relation to Qualcomm’s licensing practices.” Since all complaints have now been withdrawn, the EU dropped its investigation and is focusing its resources elsewhere. Qualcomm still faces antitrust scrutiny elsewhere in the world. Japan’s Fair Trade Commission said in September that Qualcomm coerced Japanese mobile-phone makers into agreements that prevented them from asserting their intellectual property rights, impeding fair competition and ordered Qualcomm to rescind the restrictive provisions. Earlier this year Qualcomm was fined 260 billion Won ($220 million USD) by South Korea’s antitrust agency for deterring competition through unfair fees and is currently appealing the fine. While the EU closed its four-year old antitrust investigation without levying a fine, Qualcomm was not absolved of wronging and the investigation could be restarted if another complaint is filed.

Consumers’ money isn’t the only thing that needs protecting, at least if you ask the new head of the Bureau of Consumer Protection at the Federal Trade Commission. David Vladeck, former Georgetown law professor and attorney with the Public Citizen Litigation Group, thinks the FTC should protect consumers’ dignity, not just their money, and he may have a good point.

In an article for the ABA Journal, Debra Cassens Weiss discusses the FTC’s complaint against Sears Holding Management Company.  In the complaint, the FTC alleges that Sears disseminated software to consumers that ran in the background on the consumers’ computers and transmitted tracked information to Sears.  The software, which was purported to “confidentially track [the consumers'] online browsing,” went much further than what the consumers were led to believe (at least according to the FTC).

By downloading the software, the consumers allowed Sears to collect information on the configuration of their computer hardware and software, as well as on internet browsing activity.  That’s where the problem arises.  The FTC says that Sears did not do a good enough job of disclosing the types of information it would be gathering, and I agree.

Sears was not just tracking which store websites consumers were choosing, or which advertisements they were clicking–it was observing “both . . . normal web browsing and the activity . . . undertake[n] during secure sessions, such as filling a shopping basket, completing an application form or checking . . . online accounts, which may include personal financial or health information.”

To be fair, consumers sign long, complicated contracts all the time, often without reading them (or at least reading them very carefully).  Sears could argue that it is not doing anything new here.  Courts have long considered how far companies must go in disclosing contractual provisions, and what is expected of consumers in reading and understanding them.  There are many cases in which the consumers were expected to honor the contracts they signed.  But I think there is a pretty big difference between adequate disclosure regarding something that might happen in the future (e.g., having to arbitrate a disagreement in Florida), which a consumer can (perhaps unhappily) choose to avoid, vs. disclosure regarding gathering private information which the consumer believes is protected.

I can imagine the arguments against the FTC action.  If you don’t ever let consumers get burned by the contracts they sign without reading, they’ll never learn to be more careful.  But that’s assuming consumers will ever decide that it’s in their interests to read contracts carefully before accepting them.  I don’t think that’s likely, and I think to a certain degree that’s ok.  Customers expect low prices, and companies continue to look for ways to provide them, and if consumers are willing to give a little on the back end to save some money on the front end then who’s to say we should stop them?

But I think this is different.  My first thought upon seeing Weiss’s article was, “Is that even legal?”  I consider myself pretty Internet-savvy and, though I probably wouldn’t have accepted Sears’ agreement in the first place, if I did I certainly wouldn’t have thought that Sears could gather private information from my secure browsing.  I think most consumers would feel the same way, and I’m glad Vladeck is keeping an eye out for us.

Monday, President Obama signed an executive order intended to foster stem-cell research, reversing the policies of the previous administration that limited research to existing stem-cell lines. Further Congressional action will be necessary to remove all federal restrictions on embryonic stem cell research, and recent scientific developments have made research on other types of stem cells more productive. Nevertheless, many commentators see this development as an indicator of a sea-change in scientific-political attitudes in the Executive branch, and expect that U.S. embryonic stem cell research is about to expand significantly.

One area of significant speculation seems to be the effect changes in federal funding policies will have on individual states. As Hilary Libka discussed in a recent MTTLR Blog post, some states have developed their own funding regimes for human embryonic stem cell research. Commentators seem to think that states with existing infrastructure may be particularly well-situated to put federal funds to good use. Although Michigan is not one of the states with an independent funding regime, Michigan voters relaxed state restrictions on embryonic stem cell research via a Constitutional referendum in November, and the state may be posed to take a leadership role in future developments. Researchers at the University of Michigan and Wayne State University announced Monday that they have research projects ready to get under way.

by: Rodney Tolentino, Associate Editor, MTTLR

There is a current trend among states, including Texas, Georgia and South Carolina, to require computer forensic technicians to be licensed by state agencies as private investigators.¹ On May 28, 2008, Michigan joined these states in requiring persons performing computer forensic services to be licensed as private investigators.² Under the Professional Investigator Licensure Act,³ those who provide services regarding the “collection, investigation, analysis, and scientific examination of data held on, or retrieved from, computers . . . .”⁴ are required to have professional investigator licenses issued by the Department of Labor and Economic Growth before performing these services.⁵ If a person performs computer forensic work without being licensed, then the violator is guilty of a felony and subject to imprisonment for up to four years, a civil fine up to $25,000 or a criminal fine of up to $5,000.⁶

Why does this matter? The Recording Industry Association of America has been using an investigative company to help identify computer users who download songs illegally in order to file suit against those users for copyright infringement, but parties in Michigan have fought these efforts by alleging that the investigative company is unlicensed and thus conducting its investigations illegally.⁷ Additionally, the trend of requiring computer forensics experts to be licensed as private investigators is not ending with Michigan. The Private Protective Services Board, the state agency in North Carolina that regulates private investigators, is proposing a separate license category for “Digital Forensic Examiners” and will require 3,000 hours of digital forensics experience in order to obtain such a license.⁸

The American Bar Association is recommending that states refrain from requiring computer forensics experts to be licensed as private investigators.⁹ Among the reasons for opposing state licensing is that the licensing requirements create thorny jurisdictional issues.¹⁰ I will discuss some of the legal issues the Professional Investigation Licensure Act of Michigan raises, including due process, jurisdiction, and dormant Commerce Clause doctrine, and in what circumstances would the legislation regarding state licensing of computer forensics technicians as private investigators be permissible.

Commentators have noted that the Professional Investigation Licensure Act is so broad in its definition of “computer forensics” that it requires someone printing a Web page for use in court to be licensed as a private investigator.¹¹ In such an application of the statute, it could be argued that the definition of “computer forensics” is too broad and thus a violation of procedural due process. “[T]he guaranty of due process, as has often been held demands only that the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the object sought to be attained.”¹² A plaintiff burdened by this new law could argue that sanctioning someone with jail time or fines for printing out a Web page is a violation of due process because such information is easily accessible and has no “real and substantial relation” to the objection of protecting the public from incompetent private investigators.

In its recommendation the ABA poses the following hypothetical example of the jurisdictional issues the private investigation licensing regulations create: “For example, data may need to be imaged from hard drives in New York, Texas, and Michigan. Does the person performing that work need to have licenses in all three states?”¹³ Professor Bruce Boyden of Marquette University Law School would answer this question in the negative; he claims that states would not have jurisdiction over technicians performing computer forensic services out-of-state.¹⁴ To support this proposition, he cites Boschetto v. Hansing.¹⁵ In Boschetto, a California plaintiff purchased a car from a Wisconsin dealership through eBay and arranged to have the car delivered to California, but the Ninth Circuit held that the one-time transaction was not enough to establish the minimum contacts needed to support personal jurisdiction.¹⁶ A computer forensics expert gathering the digital information needed to identify a particular individual in a one-time transaction would not be enough to establish a “substantial connection” with the forum.¹⁷ Therefore, states that have enacted licensing statutes, such as Michigan, would be able to enforce them only on defendants with strong connections to those states.

However, if Michigan chooses to assert jurisdiction based on where the information is located, Boyden argues that the Private Investigator Licensure Act would violate the dormant Commerce Clause power.¹⁸ Requiring computer forensic technicians to be licensed as private investigators would require technicians to be licensed in all states where information could be located.¹⁹ Considering the “slim” benefit of requiring licensing for the gathering of easily attainable information, such licensing would be unduly burdensome on interstate commerce.²⁰

Professor Allan Stein has proposed a different approach to thinking about personal jurisdiction in the Internet era, which would solve the potential dormant Commerce Clause problem. He states that, with regard to “Internet-inflicted” injuries, because the entire conduct was electronic, it is difficult to determine jurisdiction because the defendant may not have known which states would experience the results of her actions, and the defendant may not have the ability to control the reach of the conduct.²¹ Stein proposes that in determining whether to assert jurisdictions, courts should ask themselves how hard it would be for defendants to tailor their conduct in response to the laws of different states.²² If defendants are able to avoid jurisdiction easily and if the state has an interest in regulating the prohibited conduct, then a state court’s assertion of personal jurisdiction can be justified.²³ Applying this “regulatory precision”²⁴ approach to Michigan’s Professional Investigation Licensure Act, if technology allows an unlicensed computer forensic expert to determine with minimal burden that it is gathering information on the resident of a state that requires computer forensic technicians to be licensed as private investigators, then a state court would be justified in asserting personal jurisdiction. Emerging technologies will make it easier to avoid such jurisdictions.²⁵

Absent such technologies, however, Boyden would argue that requiring private investigator licenses for computer forensic technicians would be a violation of dormant Commerce Clause doctrine.²⁶ Stein also cites a case where a state statute was invalidated because the benefit from the statute could not be justified against the “extreme burden on interstate commerce.”²⁷ Stein recognizes the conflict between states’ authority to “protect its inhabitants without excessively constraining extraterritorial conduct beyond its regulatory authority.”²⁸

Stein’s “regulatory precision” approach, assuming the existence of technology allowing companies to avoid jurisdictions where their conduct would be illegal, would allow the states to protect its residents from abusive and unethical private investigation as it relates to computer forensics without violating the Commerce Clause.

by: Joshua E. Ney, Associate Editor, MTTLR

Image Feeding Frenzy by 54east. Used under a Creative Commons BY-NC 2.0 license.

Under the Energy Policy and Conservation Act (EPCA), the National Highway Traffic Safety Administration (NHTSA) prescribes corporate average fuel economy (CAFE) standards for passenger automobiles and light-duty trucks.¹ The CAFE standards specify a minimum fleet-wide average fuel economy applicable to manufacturers in a given model year.²

Since the enactment of the EPCA, the NHTSA has exercised this authority with relatively unchallenged exclusivity. The EPCA’s express preemption clause forbids States to “adopt or enforce a law or regulation related to fuel economy standards.”³ Until recently, few states had sought to regulate automobile fuel economy, and no court had determined that a state or local law violated this preemption clause. That changed on October 31, 2008, when a federal judge blocked the implementation of a new rule promulgated by the New York City Taxi & Limousine Commission (TLC).⁴ The ongoing legal battle is giving courts their first opportunity to define the scope of EPCA preemption.

The 2007 Rule: Preemption of State-Mandated Fuel Economy Standards

On December 11, 2007,⁵ the TLC approved a rule (the “2007 Rule”) requiring all taxicabs coming into service on or after October, 1, 2008, to have “a minimum city rating of twenty-five (25) miles per gallon.”⁶ Beginning October 1, 2009, the 2007 Rule would require all taxicabs coming into service to have a minimum rating of thirty (30) miles per gallon.⁷ In contrast, most of the current taxicabs in the City achieve only 12–14 miles per gallon.⁸

In September 2008, a coalition of affected parties filed a complaint in the United States District Court for the Southern District of New York, asserting that the EPCA preempted the 2007 Rule.⁹ The plaintiffs included the Metropolitan Taxicab Board of Trade (MTBOT), a trade association made up of taxicab fleets in the City.¹⁰ The court granted the plaintiffs’ motion for a preliminary injunction, finding that the plaintiffs had “demonstrated a likelihood of success on the issue of preemption.”¹¹ In the court’s view, “Congress’s undoubted intent was to make the setting of fuel economy standards exclusively a federal concern.”¹² Thus, the 2007 Rule fell squarely within the “ordinary meaning” of the EPCA’s preemption clause.¹³ The court rejected the City’s argument that the preemption clause only applies to fuel economy standards as they relate to manufacturers or sellers (as opposed to consumers, such as taxi owners).¹⁴

The 2008 Rule: Preemption of Voluntary Fuel Economy Incentives?

Following the district court decision, New York City Mayor Michael Bloomberg announced that the City would replace the enjoined 2007 Rule with “a series of initiatives to increase the use of fuel efficient and environmentally friendly taxicabs, through new financial incentives.”¹⁵ The incentives proposed by the Mayor (the “2008 Rule”) involve the City’s taxicab “lease cap” system. Under the “lease cap” system, a taxicab owner leasing his or her licensed taxicab to a driver may not charge a lease rate greater than the Standard Lease Cap.¹⁶ The Standard Lease Cap currently ranges from $105 to $129 per shift, depending on the time of the shift.¹⁷ Under the proposed 2008 Rule, fleet owners leasing fuel efficient vehicles will be allowed to charge drivers an additional $3 per shift, while the lease cap applicable to owners of non-fuel efficient vehicles will decrease by $12.¹⁸ These incentives are intended to compensate for the higher cost of purchasing fuel efficient vehicles.¹⁹

The precise contours of the 2008 Rule will not be clear until the TLC completes a formal rulemaking process.²⁰ However, the president of the MTBOT has already voiced his intention to challenge the Rule.²¹ This legal challenge will tee up a novel question regarding the scope of EPCA preemption: May a State or political subdivision adopt voluntary incentive programs to encourage the purchase of fuel efficient vehicles where it could not have mandated the purchase of such vehicles?²²

To resolve this question, the court will need to determine whether the 2008 Rule is “related to fuel economy standards” within the meaning of the EPCA’s preemption clause. In general, where a federal statute contains an express preemption clause, the preemption determination rests on the “plain wording” of the clause.²³ In this case, however, the preemption clause’s use of “related to” language renders a simple “plain wording” analysis problematic.²⁴ The Supreme Court has pointed out that “[i]f ‘relate to’ were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes preemption would never run its course, [and the effect would be] to read the presumption against preemption out of the law.”²⁵ Rather, the court must “go beyond the unhelpful text and the frustrating difficulty of defining [‘related to’] and look instead to the objectives of the [EPCA] as a guide to the scope of the state law that Congress understood would survive.”²⁶

In light of this guidance, the court must answer the following question to determine whether the EPCA preempts the 2008 Rule: In enacting the EPCA, did Congress intend to withdraw from the States the authority to provide economic incentives influencing consumer choices with respect to vehicle fuel economy? If the answer is yes, then the 2008 Rule “relates to” fuel economy standards, and the EPCA preempts the Rule. If the answer is no, then the 2008 Rule does not “relate to” fuel economy standards and survives EPCA preemption.²⁷ This case will present a matter of first impression for the court. Furthermore, the Committee reports accompanying the bill that became the EPCA did not discuss the intended scope of the statute’s preemption clause.²⁸ Thus, it is difficult to predict how the court will rule. Stay tuned.