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Chapter 15 – The Regulatory Process
15-1
Chapter 15
The Regulatory Process
Learning Objectives
The purpose of this chapter is to show students the power of the federal government to regulate
business. State and federal regulatory powers will be discussed along with the purposes and
functions of administrative agencies. Finally, the courts role in reviewing administrative
decisions will be examined. Ultimately, students are encouraged to make their own judgments
regarding the regulatory process.
References
Aman, A.C., Aman and Mayton’s Handbook on Administrative Law, 2nd Edition. West
Publishing (2001).
Parpworth, N., Constitutional and Administrative Law. Oxford University Press (2006).
Riley, D. and B. Brophy-Baermann, Bureaucracy and the Policy Process: Keeping the
Promises. Rowman & Littlefield (2006).
Resources Defense Council. LFB Scholarly Publications (2002).
http://www.whitehouse.gov/government/independent-agencies.html (for an alphabetical
listing of federal administrative agencies)
Teaching Outline
I. Regulatory Process—Administrative Agencies (LO 15-1)
Emphasize:
What the term administrative agencies and what it constitutes.
That agencies may have quasi-legislative and quasi-judicial powers.
Examples of state agencies in your state. Note their functions.
A. Reasons for Agencies
Chapter 15 – The Regulatory Process
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Emphasize:
That there are a variety of reasons that agencies are created.
Sidebar 15.1—“Major Federal Agencies
Providing Specificity
Emphasize:
That the legislative branches often cannot legislate in sufficient detail to cover all
aspects of many problems.
That it is impossible for Congress to enact a securities law that covers every possible
issue that might arise.
Providing Expertise
Emphasize:
business.
Providing Protection
Emphasize:
That many governmental agencies exist to protect the public, especially from the
business community.
That agencies often replace competition with regulation.
How regulation is often a substitute for competition.
Providing Services
Chapter 15 – The Regulatory Process
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Emphasize:
That many agencies arise simply out of necessity.
How Congress relies on regulatory bodies to fulfill legislative mandates.
B. Functions of Agencies
Emphasize:
That agencies have been delegated many of the functions of the three branches of
government.
The different types of functions that are possessed by administrative agencies.
Rule Making
Emphasize:
That rule making is an agency’s quasi-legislative power.
That rules may apply to general business practices regardless of the industry or to a
particular industry only.
That agencies may publish guidelines to supplement and explain rules.
Figure 15.1—“The Powers of Administrative Agencies”
Adjudicating
Emphasize:
That the agency’s quasi-judicial function applies to the agency’s right to conduct fact
finding and to apply law to facts.
That agencies may issue a cease and desist order to prohibit illegal acts or
objectionable behavior under their jurisdiction.
opinions to aid businesses regarding compliance issues.
That advisory opinions are not binding and do not carry the same weight as actual
rules.
The advisory opinion is a unique device generally not available in the judicial system,
as courts deal only with actual cases and controversies.
Chapter 15 – The Regulatory Process
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Investigating
Emphasize:
That administrative agencies, boards, or commissions usually have between five to
seven members, one of whom is appointed as chair.
That no more than a simple majority may belong to a single political party.
That federal appointments require Senate approval.
Figure 15.2—“Organizational Chart of Typical Agency, Board or Commission”
In General
Emphasize:
That the chairperson is appointed by the president and is the presiding officer at
agency meetings.
That the general counsel is the agency’s chief legal officer and is usually approved by
a Senate vote.
That the executive director for administration is the agency’s chief operating officer.
Quasi-Judicial Staff
Emphasize:
Chapter 15 – The Regulatory Process
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The role of the Office of Administrative Hearings in states where it is implemented.
proposed rules.
That each branch of government does have some element of control over agency actions
and decisions.
II. Judicial Review of Agency Decisions (LO 15-2)
Emphasize:
be able to prove standing to sue.
Reviewability
Emphasize:
That the two cases where the Federal Administrative Procedure Act does not provide
judicial review include statues preclude judicial review or when agency action is
decision to have standing.
Sidebar 15.3—“Standing to Sue or Who May Challenge an Administrative Policy”
Cases for Discussion:
Chapter 15 – The Regulatory Process
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1. Members of wildlife conservation and environmental organizations filed a lawsuit
against the Secretary of Interior. This suit challenged the Secretary’s decision that the
Endangered Species Act governed the spending of funds within the boundaries of the
United States and not the allocation of funds to be spent in foreign nations. The
plaintiffs argued that the government must take into consideration the impact on
endangered species of the expenditures of funds in foreign nations. The Secretary
argued that the plaintiffs lacked standing to sue.
Issue: Do these plaintiffs have the standing to challenge the Secretary’s rule making?
apart from the members’ special interest in the subject. Lujan v. Defenders of
Wildlife, 112 S.Ct. 2130 (1992).
2 Physicians brought suit challenging the validity of Medicare regulations under Part B
of Medicare, which authorize payment of different amounts for similar services.
Issue: Can the courts review this administrative ruling?
overcome by specific language or specific legislative history or by inferences drawn
from statutory scheme. Bowen v. Michigan Academy of Family Physicians, 106 S.Ct.
2133 (1986).
B. Review of Rule Making
Emphasize:
Chapter 15 – The Regulatory Process
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The two constitutional limitations to the delegation of quasi-legislative authority to
administrative agencies.
That delegation of discretion is to the agency and not to the judiciary.
Sidebar 15.4—“Standard of Review of Agency Actions”
Authority Exceeded?
Emphasize:
That courts do find that agencies exceed their authority.
How the rules of administrative law assist in reaching a decision.
The policy of courts to defer to the political process in giving sufficient weight to the
administrative decision-making process.
Case 15.4: Food and Drug Administration v. Brown & Williamson Tobacco
Corporation 120 S. Ct. 1291 (2000)
Cases for Discussion:
1. The National Credit Union Administration (NCUA) approved amendments to the
charter of AT&T Family Federal Credit Union. These changes allowed members of
this credit union to be employees of a variety of companies. First National Bank &
Trust Co. and other banks challenged NCUA’s approval of these charter
amendments.
Issues: (1) Did the banks have standing to challenge NCUA’s actions? (2) Did
NCUA’s actions exceed its authority?
National Credit Union Administration v. First National Bank & Trust Co., 118 S.Ct.
927 (1998).
2. NationsBank sought permission from the Comptroller of the Currency to sell
annuities. When this permission was granted as “incidental to the business of
Chapter 15 – The Regulatory Process
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authorized to sell annuities?
deference. NationsBank of North Carolina, N.A. v. Variable Annuity Life Insurance
Company, 115 S.Ct. 810 (1995).
3. The FCC, relying on statutory authority to modify rate-reporting requirements, issued
regulations that exempted every non-dominant long-distance telephone company
from filing its rates. The impact of the FCC’s actions was that only AT&T had to file
its long-distance rates with the FCC. AT&T challenged this exemption as being
beyond the authority of the FCC.
Issue: Did the FCC exceed its statutory authority?
condition. MCI Tel. Corp. v. American Tel. & Tel. Co., 114 S.Ct. 2223 (1994).
4. Amtrak sought to purchase 48.8 miles of railroad track from the Boston and Maine
Corporation (B&M). When a purchase price could not be reached, Amtrak asked the
ICC to acquire this track via the power of eminent domain. B&M objected to the
ICC’s right to acquire this track since Amtrak intended to convey the ownership
interest to the Central Vermont Railroad (CV). CV agreed to grant trackage rights to
Amtrak.
Issue: Was the exercise of eminent domain by the ICC reasonable and subject to the
court's deference?
112 S.Ct. 1394 (1992).
Chapter 15 – The Regulatory Process
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That judicial review of agencies’ adjudications by its very nature is quite limited.
Administrative agencies develop their own rules of procedure unless mandated
otherwise by an act of the legislature.
Exhaustion of Remedies
Emphasize:
What is meant by the doctrine of exhaustion of remedies.
How judicial review is available only for final actions by an agency.
Why the doctrine of remedies is not an absolute principle.
Sidebar 15.1—“Major Federal Agencies”
Primary Jurisdiction
Explain:
The concept of primary jurisdiction.
The situations that require the application of exhaustion and primary jurisdiction.
How primary jurisdiction ensures uniformity and consistency in dealing with matters
entrusted to an administrative body.
Additional Matter for Discussion:
The following summary on the doctrine of exhaustion of administrative remedies.
Cases for Discussion:
1. McNeil filed a lawsuit against the United States for harm caused to him while he was
a prisoner. Four months later, McNeil submitted a claim for these damages to the
Department of Health and Human Services. This claim was promptly denied. The
government moved to have McNeil’s claim dismissed since he failed to exhaust his
administrative remedies prior to filing the lawsuit. McNeil argues that the
administrative remedy was denied to him prior to any substantial action being made
in the litigation process.
Issue: Must the administrative remedies be exhausted before the lawsuit is filed?
