THE LEGAL ENVIRONMENT
OF BUSINESS
A Critical Thinking Approach
Fourth Edition
Nancy K. Kubasek
Bartley A. Brennan
M. Neil Browne
© 2006 Prentice Hall
Ch. 17-1
THE LEGAL ENVIRONMENT OF BUSINESS
CHAPTER 17
The Law of Administrative Agencies
© 2006 Prentice Hall
Ch. 17-2
THE LEGAL ENVIRONMENT OF BUSINESS
Administrative Agencies
Created by Congress in response to
economic problems of monopoly and
stock market crash of 1929
Examples: ICC, FTC, SEC NLRB, FCC,
CPSC, NHSTB, EPA
© 2006 Prentice Hall
Ch. 17-3
THE LEGAL ENVIRONMENT OF BUSINESS
Introduction to Administrative Law
Definition:
Rule, regulation, or statute
Procedural or substantive
Originates in any branch of government
Affects an administrative agency
© 2006 Prentice Hall
Ch. 17-4
THE LEGAL ENVIRONMENT OF BUSINESS
Administrative Agencies
Created by legislation
Given specific duties
May have power to
Make rules
Adjudicate
Investigate and
enforce
© 2006 Prentice Hall
Ch. 17-5
THE LEGAL ENVIRONMENT OF BUSINESS
Types of Administrative Agencies
Independent
Executive
Run by
appointed board
Attached to
executive branch
CFTC, CPSC,
EEOC, NLRB
FDIC, NASA,
OSHA, VA
© 2006 Prentice Hall
Ch. 17-6
THE LEGAL ENVIRONMENT OF BUSINESS
Growth of Administrative Law
Need for more flexible enforcement
proceedings
Need for subject matter expertise
Relieve court backlog
Need to solve national issues quickly
Countertrend: Deregulation
© 2006 Prentice Hall
Ch. 17-7
THE LEGAL ENVIRONMENT OF BUSINESS
Creation of Administrative Agencies
Created by Congress or state
legislature
Enabling legislation
Delegation of legislative, executive
and/or judicial power
Criticism: Such delegation is unconstitutional
© 2006 Prentice Hall
Ch. 17-8
THE LEGAL ENVIRONMENT OF BUSINESS
Functions of Administrative Agencies
Rule making
Adjudication
Administrative activities
Advising
Reporting
Issuing guidelines
© 2006 Prentice Hall
Ch. 17-9
THE LEGAL ENVIRONMENT OF BUSINESS
Rule Making
Rule Making—Formal

Under APA

Notice via Federal Register

Public hearing and live
testimony

Publication of findings
© 2006 Prentice Hall
Ch. 17-10
THE LEGAL ENVIRONMENT OF BUSINESS
Rule Making
Rule Making—Informal

Agency drafts rules

Notice via Federal Register

Public comment period 30 days

Publication of final draft

Agency considers comments…
decides to modify or not
© 2006 Prentice Hall
Ch. 17-11
THE LEGAL ENVIRONMENT OF BUSINESS
Judicial Review of Rule Making
Generally, courts accept
administrative rules as law
Subject to constitutional
challenges:
Vagueness
Violation of minimum
constitutional standard
Beyond scope of authority
© 2006 Prentice Hall
Ch. 17-12
THE LEGAL ENVIRONMENT OF BUSINESS
Adjudication
1. Investigate complaint
2. Negotiation with alleged violator
3. File with ALJ
4. Hearing and decision by ALJ
5. Appeals taken to full commission
or court
© 2006 Prentice Hall
Ch. 17-13
THE LEGAL ENVIRONMENT OF BUSINESS
Limitations on Administrative Agencies
Statutory
APA, FOIA, FPA
Institutional
Executive

Appointment power, budget control, executive
orders
Legislative

Oversight, investigation, termination, advise and
consent
Judicial

© 2006 Prentice Hall
Court review of agency decisions
Ch. 17-14
THE LEGAL ENVIRONMENT OF BUSINESS
State and Local Administrative Agencies
Each state and territory has
analogous local agencies
State: utility commissions, universities, tax
collection
Local: land planning boards, zoning
commissions, school boards
© 2006 Prentice Hall
Ch. 17-15
THE LEGAL ENVIRONMENT OF BUSINESS
Global Dimensions of Administrative
Agencies
Some other countries have more powerful
agencies, with broader scope and purpose
Examples
Japan’s MITI, China’s MOFTEC
There is general cooperation at the
ministerial level among agencies of
different countries having similar
duties
© 2006 Prentice Hall
Ch. 17-16