Beware Corporations Whining About a 'Patchwork of State Laws'
Meet Corporate America's favorite way to stop state regulations.
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Congressional Republicans are advancing a bill that, among its many, many provisions, would preempt — meaning supersede — any state or local regulation of artificial intelligence for a decade. It’s right there on page 6: “Except as provided in paragraph (2), no State or political subdivision thereof may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems during the 10-year period beginning on the date of the enactment of this Act.”
Big tech firms have been pushing hard for this sort of preemption language, which also exists in other industries such as banking and air transportation, to be applied to artificial intelligence. Facebook, Google, and OpenAI, among many others, have been begging the White House and federal officials to wipe out state efforts to rein in AI, which have indeed been quite significant.
Last year, 31 states and territories enacted some sort of legislation pertaining to artificial intelligence (although many of these are just resolutions, studies, or commissions that don’t actually change any current laws). State legislators introduced at least 1,000 bills collectively on the issue this year.
To push for broad preemption — leaving the federal government as the only legal regulator of artificial intelligence — tech firms and their allies are using an age-old tactic: Warning of a “patchwork” of state laws that will supposedly impede progress and imperil the nation.
Here’s Google complaining of a “chaotic patchwork of state-level rules” regarding AI. Here’s TechNet, a trade group representing large tech corporations, warning of a “developing patchwork” of state laws. Here’s the CEO of Scale AI complaining that “We cannot afford a patchwork of 50 different state standards that we have to execute against.” Here’s California Republican Rep. Jay Obernolte decrying “a complex patchwork of conflicting state laws.”
You get the idea. When you hear that phrase in the context of law and policy, beware.
Were it to become law (though it may be struck from the bill on process grounds), this provision would have wide-ranging consequences, potentially eliminating: state laws requiring the disclosure of the use of AI in health care and financial decisions; city ordinances that prevent landlords from using algorithms to collude on rental prices; laws that protect against AI discrimination in the job application process; laws that restrict the tactics social media platforms use to addict users; and laws that bar the use of digitally altered images and videos in elections.
The phrase “automated decision systems” could apply to loads of things in the health care, financial services, or even gambling spaces, and you better believe corporate leaders would rush to “automate” anything that would enable them to get out from under a regulation they deemed inconvenient.
You may find this story vaguely familiar if you’re a close watcher of politics and policy, because tech titans are certainly not the first to use “patchwork of state laws” as a bogey-man to scare away legislators from the prospect of reining in their excesses. It’s come up in my work on junk fees and other state pricing powers. Manufacturers have used it to fight state recycling laws. Gun advocates have used it to try to preempt state gun control efforts. Tech firms recently tried the exact same tactics to preempt state digital privacy laws.
Even Big Tobacco used a version of this playbook, in that case getting states to preempt city ordinances banning smoking in certain locations, because a “patchwork of local laws” was apparently unworkable.
But here’s the thing: Corporations and smaller businesses comply with differing state, local, and federal laws across a host of areas, all the time, be it tax rates, labor rules, consumer protection standards, environmental standards, licensing regimes, etc. etc. Our federalist system of government is built in such a way that this reality is simply inevitable.
Look, there are certainly instances in which is makes sense to have one overriding national standard, which is the reason “preemption” of state law exists at all, and I am certainly in favor of things like a national minimum wage. My point is not to deride the idea of a national standard when it’s compelling, but simply to note that corporate leaders only seem to complain about “the patchwork” when they see an opportunity to blow up a set of state-level rules they particularly don’t like. They then turn around and exploit it when they see an opportunity for profit or to take workers down a peg.
For example, a slew of corporations and trade groups sued to block a national rule eliminating the enforcement of non-compete agreements for all but the richest executives, and have been going around state-by-state attempting to weaken their respective standards.
Sounds like a patchwork to me! But corporate executives would rather the patchwork than one unifying standard protecting workers from abuse.
Corporations also frequently locate their key functions in places such as Delaware, with its uniquely lax rules regarding corporate transparency, and South Dakota, with its lack of limits on usury, explicitly to take advantage of their respective state laws and evade stronger protections elsewhere. And they have no qualms about exploiting different state economic development programs or other corporate tax systems to initiate a race to the bottom, pitting states against each other in a way that would be impossible if there were one national standard.
The added benefit of preemption, if you’re a corporate lobbyist, is that once states are taken out of the equation, you can focus all of your lobbying resources on ensuring that Congress crafts weak rules, or preferably no rules at all, for your industry. Having to run around the country influencing dozens of different bills is (take my word for it) hard, exhausting, and complicated, as every state legislative process is just a little bit different from the others and involves a host of different personalities and different styles of politicking. But that’s how it’s meant to be.
It’s become cliche to cite Supreme Justice Louis Brandeis’ “laboratories of democracy” phrasing to defend state laws — “It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country,” he said in a dissent — but cliches become so for a reason. Corporations absolutely use the differing levels of American government, the “laboratories,” if you will, to their advantage when it suits them.
It’s only when states are seeking to protect consumers or workers that, suddenly, state laws become a problem and a national standard becomes imperative. So again, when you hear the phrase “patchwork of state laws” used derogatorily, beware, because those laws very likely protect you from some kind of corporate excess.
SIMPLY STATED: Here are links to a few stories that caught my eye this week.
Maryland partially closed a sales tax loophole that benefitted rental car corporations. (Read the background on this issue here.)
The Indiana legislature approved a bill initiating a process that could eventually result in non-profit hospitals having to adhere to price caps or lose their non-profit tax status.
New Hampshire will be the first state to allow its public funds to be invested in cryptocurrency. (Read why I think this is a very bad idea here.)
Montana successfully repealed a law that benefitted monopoly utilities at the expense of ratepayers.
A new study of nine U.S. states and large cities found that publicly-funded universal pre-K is a good investment.
Minnesota House Republicans are trying to roll-back the state’s ban on non-compete agreements.
“Turns out hospital parking is a helluva business.”
Nevada is the latest state advancing a multi-billion dollar film/TV production tax credit boondoggle.
Iowa’s legislature is the latest to send a bill regulating pharmacy benefit managers to the governor.
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— Pat Garofalo