THE REGULATORY PROCESS
Chapter 15
“The rise of the administration bodies
probably has been the most significant
legal trend of the last century and
perhaps more values today are affected
by their decisions than by those of all
the courts . . . .They have become a
veritable fourth branch of the
government. . . . Supreme Court in F.T.C.
v. Ruberoid Company (1952)
The Rise of
Administrative Agencies
• The first federal agency: The Interstate Commerce
Commission (ICC,1887)
• Early 1900s: The Federal Trade Commission (FTC) and the
Food and Drug Administration (FDA)
• 1930s: Securities & Exchange Commission (SEC) and Federal
Communications Commission (FCC)
• 1960s & 1970s: Environmental Protection Agency (EPA), Equal
Employment Opportunity Commission (EEOC), and
Occupational Safety & Health Administration (OSHA)
• Agencies: Tools for local, state & federal regulatory functions
Creating An Administrative Agency
• Congress gives an agency power &
authority through legislative
delegation
• Congress delegates power to the
agency to perform the regulatory
purpose
• Congressional statute delegates
powers an enabling statute
• Agencies are created to have
expertise and supervision over
special problems about which
Congress is concerned
• If voters unhappy with regulations,
the can pressure representatives in
Congress to make changes
Administrative Law
• Administrative law consists of legal rules that define
authority & structure of an agency
• Sources include
– Enabling statutes of administrative agencies
– Administrative Procedures Act (APA, 1946)
– Rules issued by administrative agencies
– Court decisions Review validity of agency actions
• The structure of administrative law created by the APA
• An agency must abide by APA requirements
• Congress may impose different requirements than APA
ADMINISTRATIVE REGULATORY
POWERS
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Legislative (or Rulemaking)
Investigative
Adjudicatory
Enforcement
Part of the powers of all
three branches of
government are
incorporated into an
agency
See Exhibit 15.2
Rule Making
• Formal rules and regulations
• Informal policy guidance documents
• Substantive or Legislative
– Same force as statutes of Congress
– Agency usually must give public notice of these rules so parties
have opportunity for written comment
• Interpretative
– Issued by an agency to give guidance regarding interpretation of
a substantive rule or statute
– May be created without public notice
• Procedural
– Rules outline the method of agency operation
– Procedures for enforcement, investigation & adjudicatory review
Rulemaking Procedure
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Proposed rule drafted by the agency staff
Internal review of proposed rule
Rules approved by the head of the agency for public consideration
Publishing of the proposed rules in the Federal Register
Interested parties may submit written comments to agency
After public comment period (60-90 days), agency reviews comments
and finalizes the rule
• Some statutes require rulemaking must be “on the record.” Agency
must hold hearings for witnesses to testify about proposed rule.
• Once agency issues final rule, it may be appealed through agency, then
to the U.S. Court of Appeals
• Courts uphold rules if reasonable given language of authorizing statute
Chevron, USA v. Natural
Resources Defense Council
• The Clean Air Act requires states with “nonattainment” (dirty air)
areas to create permit program
• Program regulates “new or modified major stationary sources” of
air pollution
• EPA regs. state a plant with multiple sources of pollution are
treated as one source of pollution
• The “Bubble Concept” – as if multiple sources are under “bubble”
• The whole “bubble” is measured (rather than each source)
• National Resources Defense Council (NRDC) challenged EPA’s
“Bubble Rule”
• Said rule was inconsistent with Clean Air Act
• Court of Appeals overturned the EPA regulation
• Decision was appealed
Continued
Chevron, USA v. Natural Resources
Defense Council, cont.
• HELD: Reversed. Regulation is appropriate.
• Two questions asked:
– 1. Has Congress directly spoken to the precise question at issue?
– 2. If statute is silent or ambiguous re: an issue, was the agency’s
answer based on permissible construction of the statute?
• Agencies allowed to fill gaps left by Congress
• Unless agency decisions are “arbitrary, capricious or manifestly
contrary” to statute, regulations given controlling weight
• Legislative delegation may be implicit or explicit – often implicit
• Court usually defers to administrative interpretations
• Question is not whether the “bubble concept” is inappropriate
• Question is if Administrator’s view is appropriate and reasonable
regarding the Bubble Program
• EPA’s use of the concept is reasonable policy for it to make.
Enforcing Rules
• Gathering information and investigating violations
• Broad investigative powers of agencies by:
– Monitoring and self reporting by business
• Business is concerned with 5th Amendment
violations re: self incrimination
– Direct observation by agency
• See Dow Chemical v. U.S. (within text)
– Agency obtains information through subpoena power
• Directs person receiving subpoena to appear and
testify or to produce documents
General Principles of 4th Amendment Search &
Seizure Guidelines of Administrative Agencies
• Need Warrant – “Routine
inspections”
• No Warrant – “Open field
observation”
• No Warrant – Consent by
management for agency to
look over or search the
premises
• No Warrant – Closely
regulated industries, i.e.
– Pharmaceuticals industry
– Nuclear facility
– Even junk yards (if
protection of evidence
needed)
Enforcement Power
• Agencies have array of enforcement tools in civil and criminal
penalties, plus the use of injunctions
• Possible sanctions:
– Prohibitions, requirements, limitations
– Withholding of relief; penalties & fines
– Destruction, taking, seizing, withholding of property
– Assessment of damages, reimbursements, restitution,
compensation, costs, charges or fees
– Requirement, revocation, suspension of license
• Informal procedures (i.e. tests, inspections, permits,
negotiations, advice, settlements)
• Formal procedures (i.e. adjudicatory hearings that may lead
to litigation)
Adjudicatory Hearing
• Formal agency process under APA rules
• Similar to those followed in a trial
• Business must respond to complaint that alleges
violation of agency regulation
• Administrative Law Judge (ALJ) presides
• ALJ is a civil service employee who is usually an
attorney
• Witnesses may be cross examined
• Less formal than a court trial
• Hearing must meet due process guarantees of the
Constitution
• There is no right to trial by jury
Judicial Review
• APA sets out procedural requirements for court review
• Jurisdiction is needed by the court to hear the case
• Action must be reviewable by the courts (review may be
prohibited by statute, i.e. VA actions regarding benefits for
veterans, dependents or survivors)
• Party must have standing to seek court review of an
agency action
– See Lujan v. Defenders of Wildlife (within text)
• The agency action must be final to warrant judicial review
under the ripeness doctrine
• Parties must complete all agency appeals before turning
to the courts under the exhaustion doctrine
Lujan v. Defenders of Wildlife
“Legal Standing”
• Environmental groups argued that U.S. should stop providing
aid to Egypt to build dams on Nile River.
• Building of dams endangers the rare Nile crocodile.
• Groups asserted providing aid should comply with U.S.
Endangered Species Act.
• Court held: Plaintiffs lacked standing and have suffered no
“injury in fact”.
• Concern about crocodiles in Egypt is too remote.
• Disagreement with agency policy is not = to an injury.
Reviewability
• Review of substantive determination
– Courts usually yield to agency’s •
judgment unless decisions are
arbitrary, capricious, or an abuse
of discretion or rulemaking is
vague or unduly burdensome on
business
•
• Review prohibited by Statute
• Congress may specify in the
statute which court has
jurisdiction for review
• Can prohibit certain judicial
review
Review of statutory
interpretation
– Courts determine if the
agency has gone beyond
Congressional authority
Review of procedural
requirements
– Courts ensure an agency
has not acted unfairly or
disregarded procedures
(has not violated
“procedural fair play”)
CONTROLS ON AGENCY POWERS
• Direct Controls
– Congressional budget process
– Agency Appropriations & Reporting Requirements
– Cost-Benefit and Risk Analysis
• Example: Office of Management and Budget may send
proposed regulation back to agency if scientific, technical
and economic information standards are not met
– Presidential Executive Orders instructing tasks to
be undertaken by agencies
• Example: Pres. Johnson’s order to agencies re: affirmative
action programs
Indirect Controls
– Freedom of Information Act
– Privacy Act
– Government in the Sunshine Act