Chapter 6a Like statutory law, administrative law is created by legislatures

Document Type
Test Prep
Book Title
The Legal Environment of Business: Text and Cases: Ethical-- Regulatory-- Global-- and Corporate Issues 8th Edition
Frank B. Cross, Roger LeRoy Miller
1. Like statutory law, administrative law is created by legislatures.
1. State regulation, when not preempted, may cover many of the same
activities as federal regulation.
1. Federal administrative agencies can regulate beyond the powers
granted by enabling legislation.
1. Federal executive agencies are outside the federal executive
1. Administrative agencies can not make legislative rules, or substantive
rules, that are as legally binding as laws that the Congress passes.
1. A court will not review an administrative agency’s decision until the
case is “ripe for review.”
1. A party can challenge an administrative regulation as so irrational as to
be arbitrary and capricious.
1. Rulemakingthe formulation of new administrative regulationsis a major
function of Congress, not administrative agencies.
1. Final administrative rules have binding legal effect unless the courts
later overturn them.
1. The period for persons to comment on a proposed administrative rule
must be at least thirty days.
1. If the meaning of a statute’s language is unclear and an agency inter-
prets it, a court must overturn the interpretation.
1. Informal agency actions are exempt from the Administrative Procedure
Act’s requirements.
1. Many agency rules require compliance reporting from regulated entities,
and such a report can not trigger an enforcement investigation.
1. There are no limits to the information that an administrative agency can
demand from an individual or organization.
1. In most instances, an agency is not required to obtain a search
warrant before a physical search for evidence is conducted.
1. If an investigation reveals a suspected violation of an administrative
rule, the agency can not issue a formal complaint against the
suspected violator.
1. Frequently, disputes over violations of administrative rules are resolved
through informal adjudication proceedings.
1. The federal government must disclose certain records to any person or
entity on written request only if there is a rational reason for the
1. Every portion of every meeting of a federal administrative agency does
not have to be open to public observation.
1. An agency must conduct a regulatory flexibility analysis whenever a
new regulation will have an impact on a “small number of substantial
1. Boxy’s Packaging Materials Company is subject to regulations issued by
the Occupational Safety and Health Administration (OSHA). Like other
federal administrative agencies, the OSHA was created by
a. Congress, through enabling legislation.
b. the Federal Trade Commission, through the rulemaking process.
c. the president, through an executive order.
d. the U.S. Department of Labor, through a final order.
1. Independent regulatory agencies such as the Federal Trade
Commission are
a. not part of the government’s executive branch.
b. outside the major departments of the government’s executive
c. subagencies of executive agencies.
d. subject to more executive authority than executive agencies.
1. Executive control over the Federal Communications Commission, and
other agencies, may be exercised through a presidential veto of
a. Congress’s modifications of the agency’s authority.
b. the agency’s final rules.
c. the agency’s final orders.
d. none of the choices.
1. Pure Water Company is subject to a decision by the Environmental
Protection Agency. Pure Water appeals the decision, arguing that it is
arbitrary and capricious. This could mean that the decision
a. changed the agency’s prior policy without justification.
b. followed a consideration of all relevant factors.
c. was accompanied by a rational explanation.
d. was plainly warranted by the evidence.
1. The Federal Aviation Administration uses notice-and-comment rulemak-
ing. The final rule in such a proceeding has binding legal effect
a. after a court affirms it.
b. until the next presidential election.
c. once Congress approves it.
d. unless a court overturns it.
1. To notify the public of a proposed rule, the Food Safety and Inspection
Service, like other federal agencies, publishes the proposal in
a. the news media.
b. a trade journal available to members of the industry.
c. the Federal Register.
d. an office memo that employees are free to take home.
1. The Securities and Exchange Commission decides to create a new rule
relating to the dissemination of material nonpublic information through
corporate blogs, tweets, and Web sites. The first step is to
a. compile the rule with others in the Code of Federal
b. conduct an on-site inspection.
c. publish a notice of the proposed rulemaking.
d. solicit public comment.
1. Before adopting new regulations to govern Internet-based phone serv-
ices, the Federal Communications Commission may not
a. hold hearings to acquire facts pertinent to the proposed rules.
b. ignore the Administrative Procedure Act to streamline
c. order manufacturers to provide certain documents.
d. solicit testimony from interest groups and consumers.
1. The Federal Aviation Administration uses notice-and-comment rulemak-
ing. The final rule in such a proceeding is sometimes referred to as
a. a legislative rule.
b. an interpretive rule.
c. an adjudicatory order.
d. an executive edict.
1. The Merit Systems Protection Board issues a rule. Like other adminis-
trative agencies’ “legislative rules,” this rule is as
a. binding as a law passed by Congress.
b. persuasive as an expert’s opinion.
c. suggestive as a newspaper’s editorial.
d. unenforceable as a salesperson’s puffery.
1. The U.S. Fish and Wildlife Service uses notice-and-comment rulemak-
ing. This involves a period during which
a. judges, legislators, and the president are asked about a proposed
b. potential violators of a proposed rule are notified and publicized.
c. the administrators “notice” a problem and “comment” on it.
d. the public is asked to comment on a proposed rule.
1. After notice-and-comment rulemaking, the U.S. Bureau of Land
Management (BLM) issues a new rule and applies it to Clearcut Timber
Company. Clearcut appeals the application to a federal court. The court
will most likely defer to the BLM’s interpretation of
a. the facts and the law.
b. the agency’s authority.
c. procedural requirements.
d. the Constitution.
1. The Federal Trade Commission (FTC) orders GR8 Steaks Company to
reveal certain information. GR8 Steaks complains to a court, arguing
that the order is an abuse of the FTC’s discretion. Like other
agencies, the FTC can use a subpoena to
a. compel a party to testify, but not to obtain documents.
b. obtain any information except what a party refuses to reveal.
c. pressure a party to settle an unrelated matter.
d. reveal violations of the law.
1. The Consumer Product Safety Commission (CPSC) wants Monster Toy
Company to produce certain records for review. To obtain the records,
the CPSC will issue
a. an order for specific performance.
b. a rule for parol evidence.
c. a formal complaint.
d. a subpoena.
1. The Internal Revenue Service (IRS) wants to seize certain documents
of Mortgage Bank, Inc. Deciding whether it is permissible for the IRS to
request or seize the documents depends on whether the documents are
a. incriminating.
b. relevant.
c. technical.
d. valuable.
1. The Food and Drug Administration (FDA) is investigating reports that
Caplets Pharmaceutical Corporation is putting potentially harmful addi-
tives in Doze, a new pain-relief medication. The FDA’s demands for
particular documents from Caplets
a. must be specific and adequately describe the material being sought.
b. must be non-specific so an incriminating item is not overlooked.
c. must be general so as to force an uncooperative party’s compliance.
d. may, but need not, be specific because the FDA is a federal agency.
1. The Nuclear Regulatory Commission (NRC) files a complaint against
General Construction Corporation (GCC). GCC may want to settle the
dispute, before formal adjudicatory proceedings begin, to avoid
a. appearing uncooperative.
b. eliminating the need for additional proceedings.
c. rectifying the problem to the NRC’s satisfaction.
d. saving the expense of formal proceedings and later appeals.
1. Guard Personnel Company is charged hiring practices that do not meet
requirements set by the Transportation Safety Administration (TSA). The
administrative law judge orders Guard to comply with the TSA’s
regulations. Guard may
a. appeal to the commission that governs the TSA.
b. appeal to Congress, which created the TSA.
c. appeal to a different, separate agency.
d. ignore the order.
1. With some exceptions, every portion of every meeting of the Federal
Reserve System Board of Governors and other federal administrative
agencies must be open to public observation under
a. no federal or state law.
b. the Freedom of Information Act.
c. the Government-in-the-Sunshine Act.
d. the Public Accountability Act.
1. The Regulatory Flexibility Act has helped reduce record-keeping bur-
dens for Hometown Gas Company and other small business firms in
the area of
a. accounting practices.
b. asset acquisition.
c. hazardous waste management.
d. tax reporting.
1. Administrative agencieslike the Securities and Exchange Commission,
the Federal Trade Commission, and the Food and Drug Administration
make rules. What are the two basic types of rules called, and how
binding are they? What must an administrative rule NOT do?
1946. Interpretative rules declare an agency’s interpretation of its
1. Grapple Market Share Corporation would like to know what information
federal agencies have about Grapple’s operations, so that the firm will
know what its competitors may be able to learn about it. Can Grapple
require the agencies to disclose whatever information they may have
concerning it? If so, how should the firm make its request? What
federal law applies? Is any information exempt?

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