By some estimates the total freight for the U.S. federal regulatory burden is $3 trillion annually. That covers everything from the costs of the reams of paperwork employers fill out to satisfy bureaucrats who never read any of it to lost productivity and investment.
To those who make up the regulatory state, which includes not just federal bureaucrats but also attorneys, academics, scientists, researchers and actuaries to name but a few archetypes, the real costs of what they propose are ancillary concerns. The fact that their labors are being undertaken in the name of the people, of the consumer, of the children, at heart is enough to allow them to sleep peacefully.
Whether all that regulation is worth the cost is a question that should be asked before every decision on such matters is made. Unfortunately it is not asked often enough, meaning the economy is regularly saddled with expensive rules that do not produce benefits that outweigh the costs. It's the kind of thing that happens all the time. Federal courts and commissions and administrative law judges take actions that change the scope of American commerce through preemption and through enforcement in ways that often work against the very interests these same regulations are supposed to protect.
In one ongoing case, the U.S. International Trade Commission has been asked by NVidia Corp., to determine whether Samsung Electronics Co., and Qualcomm, Inc., infringed on patents it owned when manufacturing the graphics processors in the popular Galaxy line of smartphones and some tablets. On the surface it seems straightforward: Did they, or didn't they? Dig a little deeper and you'll see it's not so simple.
Patents are an important part of American commerce. In fact they are so important the founders wrote their protection into the U.S. Constitution. But what is being advertised as a patent dispute may more accurately be described as a disagreement over licensing and the revenues to be garnered from it.
What NVidia wants is for the U.S. ITC to determine an infringement has occurred and to then issue an exclusion order, meaning Samsung would not be able to sell any devices in the United States that contain the aforementioned processors. Late last month, the ITC staff recommended to the members of the commission, who will make the final determination later in the year, probably in October, that Samsung and Qualcomm be cleared.
This is the right move. NVidia does not make products that compete directly with Samsung, which makes the ITC an odd choice of venue unless, as some analysts have suggested, the real goal is to strengthen NVidia's negotiating position in the licensing dispute. In this scenario, NVidia is banking that the threat of a possible exclusion order on Samsung's products would provide enough leverage that the smartphone manufacturer would cry "uncle" on the licensing fees.
If an exclusion order were issued, consumers can expect a shortage of mobile phones to hit rapidly. Samsung is a leading provider of smartphones — nearly one in four smartphones sold in 2014 was a Samsung device — releases numerous new devices each year, and continually develops new features to make phones smarter. A shortage would leave consumers with fewer choices at fewer price points — all of which would drive up the cost of phones and tablets.
Other providers could not fill the gap — even if they really wanted to. The lead time required to step up production is just too long for it to make much of a difference given the diversity of carriers and markets that now exist and continue to grow. Just about everyone would be affected.
Licensing disagreements, for this is what the NVidia case really amounts to, should be settled in the board room not by the government. Using patents as a fig leaf for the dispute doesn't make the fight any more legitimate.
The whole business illustrates how badly the U.S. economy is over-regulated. If strategies for securing government intervention in order to squeeze the competition and the clients into giving better deals have become the order of the day then we all need to take a good long look at what we have wrought. These burdens will stifle innovation, kill jobs and deny consumers the choices they have every right to be able to make whenever new technologies come about.
Peter Roff is a former political analyst for United Press International who now provides commentary on public policy issues for One America News. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.