The U.S. Environmental Protection Agency (EPA) released on March 20, 2019, a list of 20 chemicals that EPA has suggested as candidates for high priority designation under the Toxic Substances Control Act (TSCA), as reported in our March 22, 2019, memorandum "EPA Releases List of 40 Chemicals Undergoing Prioritization for Risk Evaluation." Should those chemicals go forward as high priority, they will be subject to risk evaluation under TSCA Section 6. Industry stakeholder responses to this candidate list proposal and follow up actions with EPA related to risk evaluation work optimally will be conducted under existing or potentially newly formed chemical consortia.
But what if your chemical is not on the list of 20? If you want to protect or even increase your business market advantage, consider inviting your commercial rivals to join an industry advocacy group anyway. This is particularly important if you have a chemical of commercial interest on the TSCA Work Plan Chemicals list.
In today’s regulatory environment, engaging in advocacy opportunities with your company’s competitors makes sense. Consolidating experience, knowledge, and finances allows a company to achieve far more and faster than it could individually. Given that amended TSCA requires EPA to look to the TSCA Work Plan Chemicals to identify chemicals for future prioritization consideration, we know those chemicals will be subject to regulatory scrutiny eventually. So setting up and working under a consortium umbrella now makes sense. Even if your chemical is not yet on the proverbial radar screen, there is benefit of organizing with others early. Groups that wait to organize will deplete valuable limited time to form, leaving less time to engage effectively and comprehensively on EPA’s proposed actions. Organizing industry groups now means reduced cost, greater flexibility, increased time for strategic planning, and less aggravation in the long run.
Beyond prioritization and risk evaluation under Section 6, we also know that EPA anticipates industry group engagement for testing under TSCA Section 4. Within the risk framework rulemakings, EPA expressed repeatedly and clearly that it anticipates TSCA obligations will be shared collaboratively and addressed by consortia groups. Even within a general regulatory advocacy context, in many respects, EPA appropriately prefers working with industry coalitions to save time, obtain greater use and exposure information, and leverage more efficiently its own resources.
Congress explicitly included the concepts of industry consortia as part of amended TSCA legislation under Section 4, as it relates to efforts to reduce animal testing, and Section 26, in anticipation of increased Agency fee payments.
So working under a consortium umbrella makes sense. But before proceeding with group formation, there are some important factors to consider:
- Antitrust Protection: Members of an industry group must consider the need to protect against antitrust concerns. It is reasonable to anticipate that outsiders may be concerned with key competitors working together. It could be perceived as opportunities for dishonest companies to pursue unfair market activities, such as price fixing or monopolization efforts. To address such concerns, industry consortia must be managed in a way that ensures federal antitrust laws are followed. This can be achieved through a third-party management service, which provides administrative structure to the group, including specific meeting agendas and minutes, and competent antitrust counsel at meetings to ensure discussions or exchanges of prohibited information do not occur.
- Regulatory Experience: Today’s regulations are complex. It is nearly impossible for today’s company representatives to have in-depth knowledge of the myriad of regulatory statutes impacting their commercial chemical products. Having easy access to experts to assist the consortium in understanding the regulatory pressures for a specific chemical, as well as insight on strategic approaches, is invaluable.
- Financial Experience: As organizations consider management service providers, they should appreciate that for many regulatory programs, the amount of money to collect and disburse is not insignificant. Under TSCA Section 6, industry consortia will need to collect over $1,000,000 to cover anticipated EPA fees. TSCA Section 4 requires fee payments of about $10,000 to $30,000 -- PLUS costs associated with the specific testing required. Costs under the EPA Endocrine Disruptor Screening Program, while still in hibernation but potentially could progress soon, could be over $1,000,000. A consortium should consider whether its management service provider has the ability to collect and disburse funds needed to cover required industry fees, contract testing, administrative management, and other costs associated with consortium work. In some cases, there may be federal tax implications. As such, it is recommended that consortium financial management be conducted under the auspices of a certified public accountant.
- Sunset Provisions: While details on the why, when, and how of setting up a new industry group is important, companies should also think about the parameters for shutting down the group when its work is completed. A consortium should be maintained only if additional work is needed. Otherwise, there should be an easy option for members to disband when the work is done.
As mentioned, companies should be thinking ahead if chemical products important to them were not on the March 20 list. The new normal is not what you think and going it alone is not smart. The time to prepare for the future of your company’s products is now, and to do that, you will need to coordinate with others in your commercial space.