Who should pay when a person for a company suffers economic losses due to government regulation?
The answer to that increasingly relevant question is no closer now than it was when regulatory commissions first began to tell us all how to live, what to eat, how to heal ourselves, and just about everything else.
But at least someone is attempting to address the question. In a speech before a symposium on chronic hazards yesterday. Consumer Product Safety Commission Chairman S. John Byington outlined the issue of indemnification at some length.
"Historically, the federal governments response to those injured by its regulatory activity has been to give occasional expressions of sympathy, and not much more," Byington pointed out.
He did cite some early cases of government compensation, like payment to those wrongfully harmed in the cranberry scare of 1959. But he also gave an example of the government not responding, as in the cyclamate controversy, when canners and others lost more than $200 million as a result of the Food and Drug Administration's 1969 ban on that substance.
"Relief was withheld despite the canners' assertion that they relied on the FDA's placing of cyclamates on a list of products termed "generally recognized as safe," said Byington.
Byington called for a wideranging public discussion of the indemnification problem and the establishment of a consistent, comprehensive and fair government policy on this issue."
He said almost any system would be fairer than the current situation, "in which compensation is by and large awarded those with the political clout to get private relief acts through Congress"
Byington said that part of the solution "appears to lie in formulating eligibility criteria that afford parties protection against unforeseeable loss, but at the same time bar compensation for those who deliberately acted contrary to the public interest or knowingly assumed the risk of government regulation."
He suggested that a test of "reasonable reliance" could be applied to determine whether the injured party was "reasonable in his reliance" that the government would not regulate in such a way as to cause his losses.
"It is relatively easy to determine the legitimacy of awarding compensation when the losses are the result of erroneous actions." Byington suggested.
But he also stated that it is not so easy to deal with the problem of unforeseen product and environmental hazards.
"It is conceivable that a manufacturer could suffers severe losses as a result of regulation of a product which, at the date of manufacture, he had no reason to suspect would present a hazard to public health or safety," Byington said.
But the problems presented by the attempts to formulate an indeminification policy "do not justify the continuation of the present haphazard, inequitable system of distributing regulatory costs, he said.
"Rather, they make clear the need for thoughful planning and careful drafting of any indemnification initiative."