ADMINISTRATIVE LAW: AN INTRODUCTION
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Administrative Law is the body of rules, orders, and
decisions issued by administrative agencies, such as the
federal Securities and Exchange Commission or a state’s
public utilities commission.

Enabling Legislation: Legislative action specifying the
name, purpose(s), function(s), and power(s) of the agency
created by the legislation.

As a general rule, an agency lacks the power to act
beyond the scope of its enabling legislation.

Administrative Agencies: Agencies authorized by federal or
state legislation to make and enforce rules to administer and
enforce legislative acts (e.g., the Social Security
Administration).

Executive Agencies: Agencies formed to assist the President
or, at the state level, the Governor, in carrying out executive
functions (e.g., the Justice Department).

Independent Regulatory Agencies: Agencies neither
designed to aid nor directly accountable to the legislative or
executive branches (e.g., theSecurities and Exchange
Commission).
Ch. 43: Administrative Law - No. 1
West’s Business Law (9th ed.)
AGENCY POWERS AND THE CONSTITUTION
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Delegation Doctrine: Article I, Section 8 of the Constitution
empowers Congress to make all laws necessary for executing
its specified powers. The courts have interpreted this passage
as empowering Congress to establish administrative agencies
and vest them with rulemaking, enforcement, and
adjudicative powers.
Rules vs. Statutes: While the Constitution empowers only
Congress to make statutory laws, administrative agencies, to
whom Congress delegates the responsibility for enforcing
many of its statutory laws, are empowered to make rules,
which are as legally binding as the statutes passed by
Congress (and, perhaps, more likely to be vigorously
enforced because the power to enforce agency rules generally
lies with the same agency that made the rule in the first place,
whereas the power to enforce Congressional statutes
generally rests with some arm of the Executive Branch).
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West’s Business Law (9th ed.)
ADMINISTRATIVE RULEMAKING

Rulemaking: The process of formulating new regulations.
Rulemaking by federal agencies typically occurs in the
following steps:

Notice of Proposed Rulemaking: A proposed rule and
some discussion of its rationale are published by the
agency in the Federal Register. The notice invites
public comment and notifies the public of the times and
places of any hearings on the proposed rule.

Comment Period: Following publication in the Federal
Register, the agency must allow ample time for public
comment. The agency need not respond to all
comments, but it must respond to any significant
comments that bear directly on the proposed rule by
either modifying the proposed rule or explaining why
the modification was not made.

Final Rule: Once the final version of the rule is decided
upon by the agency, it will be published first in the
Federal Register and then compiled annually in the
Code of Federal Regulations.
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West’s Business Law (9th ed.)
AGENCY INVESTIGATIONS
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Both as part of the rulemaking process and as part of the
enforcement of the rules, agencies conduct inspections of
regulated entities’ facilities or business records.


While many businesses voluntarily comply with agency
requests for an inspection, those that do not may face:
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a subpoena compelling the entity to produce
records (subpoena duces tecum) or to provide
testimony (subpoena ad testificatum), or

a search warrant compelling the entity to make its
facilities available to the agency for inspection.
To determine if an agency is overstepping its bounds in
conducting an investigation, courts may consider:
(1) whether the investigation has a legitimate purpose;
(2) the relevance of the information sought;
(3) the specificity of the agency’s demand for
testimony or documents; and
(4) the burden the demand places on the entity.
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West’s Business Law (9th ed.)
AGENCY ADJUDICATION
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If an agency determines that an entity has violated one or
more rules, the agency may take administrative action against
the entity. When possible, the agency will seek to secure the
entity’s voluntary compliance, thus avoiding the expense and
inconvenience of full-blown judicial or quasi-judicial
proceedings. If voluntary compliance is not forthcoming,
agency adjudication proceeds as follows:

A formal complaint is filed by the agency, to which the
subject entity files an answer.

Following a period permitted for discovery, the agency
and the entity will appear before an administrative law
judge (ALJ) who will conduct a quasi-judicial (or
“court-like”) proceeding, the exact nature of which
varies from agency to agency.

The ALJ issues an initial order, which is subject to
appeal to the agency’s governing board (e.g., the actual
commissioners of the Federal Trade Commission).
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After disposing of any appeal, the agency issues a final
order, which may be appealed to a designated court
(e.g., the U.S. Court of Appeals for the D.C. Circuit)
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West’s Business Law (9th ed.)
LIMITATIONS ON AGENCY POWERS
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Judicial Controls: Most agency decisions are subject to
judicial review, provided that the party seeking review can
establish that
(1) it has standing to sue the agency,
(2) there is an actual controversy between it and the
agency, and
(3) it has exhausted all administrative remedies.

Courts defer to agency fact-finding and actions, and
generally review agency decisions only for procedural
irregularities, failure to properly interpret applicable
statutes, lack of evidentiary support, constitutional
issues, and abuse of agency power.
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Executive Controls: A president or governor generally has
the power to appoint agency officials and to veto enabling
legislation as well as appropriations.
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Legislative Controls: Congress or a state legislature must
enact and may review and amend enabling legislation, and
generally controls appropriations (subject to executive veto)
to an agency. Congress may also “freeze” the implementation
of new rules before they take effect.
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West’s Business Law (9th ed.)
PUBLIC ACCOUNTABILITY
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Freedom of Information Act (FOIA): Requires federal
agencies to disclose certain records to any person on request,
subject to restrictions as to time and place, and to make their
records available electronically – including, but not limited
to, via the Internet. Some states have similar legislation.

“Sunshine” Legislation: Subject to certain specified
exceptions, agency meetings must be (1) noticed to the public
in advance and (2) open for public observation, if not
participation.
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Regulatory Flexibility Act (RFA): Provides that, whenever
a new regulation will have a “significant impact” upon a
“substantial number” of small businesses, the agency must
consider less burdensome alternatives, notify small businesses
about forthcoming regulations, and reduce the record-keeping
responsibilities of small businesses.

Small Business Regulatory Enforcement Fairness Act
(SBREFA): Empowers federal courts to enforce the RFA,
requires federal agencies to explain new regulations in “plain
English,” provides ombudsmen to receive comments and
complaints from small businesses, and entitles small
businesses to recover expenses and legal fees incurred due to
“excessive” agency demands.
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West’s Business Law (9th ed.)