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Chapter 18
The Law of Administrative Agencies
Introduction
Chapter Eighteen addresses these questions:
• What is administrative law and what are administrative agencies?
• How are administrative agencies created?
• What are the functions of administrative agencies?
• What laws limit the power of administrative agencies?
• How are the state and local administrative agencies created and regulated?
• What are the global dimensions of administrative agencies?
Achieving Teaching Excellence
The Importance of “Why” Questions
If instructors want to modify their teaching style to demonstrate Teaching Excellence, one
major change could yield significant results in the classroom. This major change requires
instructors to ask students why they believe their particular conclusion is correct.
Many students have strong views about particular legal issues. For example, some students
feel strongly that we must change the legal system so fewer people can sue. Other students feel
In Asking the Right Questions, M. Neil Browne and Stuart M. Keeley remind instructors that
“[i]t is the mark of a rational person to support his or her beliefs by adequate proof, especially
when the beliefs are of a controversial nature.” Instructors should ask their students, “Why do
you say that?” Browne and Keeley also remind instructors to ask why, no matter whether they
The Legal Environment Of Business: A Critical Thinking Approach
Depending upon a particular student’s past learning experiences, he or she might be
surprised when instructors ask why questions. Surprisingly, many are not used to the professor
asking them to explain their reasons. Instructors should make sure that they practice their wait
References
• M. Neil Browne & Stuart M. Keeley, ASKING THE RIGHT QUESTIONS: A GUIDE TO
CRITICAL THINKING (Seventh Edition).
Chapter Overview, Topic Outline, and Discussion Questions
Chapter Overview
The impact of administrative agency regulations on business and society is a primary focus
of this text. Although the text emphasizes the role of federal administrative agencies, each of the
50 states, the District of Columbia, and Puerto Rico, as well as counties, cities, and some towns,
have administrative agencies that also regulate business and societal conduct. This chapter
defines administrative law and administrative agencies and discusses the reasons for their
Topic Outline
I. Introduction to Administrative Law and Administrative Agencies
A. Administrative Law
B. Administrative Agencies
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1. Types
2. Reasons for Growth
II. Creation of Administrative Agencies
III. Functions of Administrative Agencies
A. Rulemaking
2. Informal Rulemaking
4. Exempted Rulemaking
5. Judicial Review of Rulemaking
a. City of Arlington v. Federal Communications Commission
B. Adjudication
2. Formal Complaint and Hearing
4. Appeal to the Full Commission
5. Judicial Review of Adjudicative Proceedings
a. Fox Television Stations, Inc. v. Federal Communications Commission
C. Administrative Activities
IV. Limitations on Administrative Agencies’ Power
A. Statutory Limitations
B. Institutional Limitations
2. Legislative Branch
3. Judicial Branch
V. State and Local Administrative Agencies
VI. Global Dimensions of Administrative Agencies
VII. Summary
Discussion Questions for Chapter Eighteen
1. Explain relationships between procedural and substantive rules.
2. Explain relationships between administrative agencies and alternative dispute resolution.
The two share a goal of preventing overcrowding in courts. In the absence of administrative
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3. Explain why someone might think this statement is true: Administrative agencies are not
really a “fourth branch of government.”
4. Explain relationships between informal and hybrid rulemaking.
Informal rulemaking requires the agency to give prior notice of a proposed rule by
5. How is adjudication in administrative agencies similar to civil litigation? How is it different?
6. Evaluate this statement: In administrative agencies, the burden of proof is the same as the
7. Explain why someone might think this statement is true: Some of the most important
functions that administrative agencies serve are helpful to businesses.
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8. Explain relationships between the Freedom of Information Act (FOIA) and the Federal
Privacy Act (FPA).
9. Evaluate this statement: Politics does not affect the work of administrative agencies.
Politics does affect the work of administrative agencies. The President appoints the heads of
Answers to Critical Thinking about the Law Questions, Case Summaries,
Answers to Review Questions, Review Problems, and Case Problems
Suggested Answers to Critical Thinking about the Law Questions
1. The critical thinking question that could be applied to this disagreement is, “What does the
2. Some individuals may argue that the creation of regulations by administrative agencies
3. Matt would not want to fund administrative agencies. Why fund an agency that cannot make
Case Summary—City of Arlington v. Federal Communication Commission
This case addresses a provision of the Telecommunications Act of 1996 which requires state
and local governments to act “within a reasonable period of time” after an application for a
wireless tower or antenna site is filed. An organization representing various wireless service
providers petitioned the Federal Communications Commission (FCC) to clarify the meaning of
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“reasonable period of time.” In 2009, the FCC issued a declaratory ruling that a reasonable
period of time is 90 days when the application requests permission to place a new antenna on an
existing tower and 150 days for all other applications. The cities of Arlington and San Antonio,
Case Summary—Fox Television Stations, Inc. v. Federal Communications Commission
Demonstrating the importance of judicial review of adjudicative proceedings, this case is
about a new definition of “indecent speech” created by the Federal Communication Commission.
Fox Television Station appealed to the court to have the new FCC order reviewed. The court
Case Summary—Vonage Holdings Corp. v. Minnesota Public Utilities Commission
This case deals with the power of a state agency. Vonage is a private phone company that
uses the Internet to route calls. Traditional phone companies use a switchboard. The company
has about 500 customers in Minnesota. They were investigated regarding a claim that they did
Answers to Review Questions
18-1. The United States Congress typically creates federal administrative agencies. It does so
18-2. The two major functions of administrative agencies are rule making and adjudication. It
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18-3. Independent administrative agencies are headed by a board of commissioners who are
appointed for a specific term of years by the president with the advice and consent of the
18-4. Courts can curb excesses of the administrative agencies’ rule making and adjudication
18-5. Administrative agencies have proliferated rapidly since the late 1890s for the following
reasons:
• Flexibility—unlike the court proceedings, administrative agency hearings are not
governed by strict rules of evidence.
18-6. Section 553(c) of the APA requires formal rulemaking when an enabling statute or other
legislation states that all regulations or rules must be enacted by an agency as part of a
formal hearing process that includes a complete transcript. This procedure provides for:
• An agency notice of proposed rulemaking to the public in the Federal Register
As provided by Section 553 of the APA, informal rulemaking applies in all situations in
which the agency’s enabling legislation or other congressional directives do not require
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another form. The APA requires that the agency:
• Give prior notice of the proposed rule by publishing it in the Federal Register
Answers to Review Problems
18-7. The court would determine whether the new rules unduly limited the due process rights
of the affected parties. It would particularly address the following limitations: a) parties
18-8. Cross-examination is a fundamental due process right. A court would favor food
producers if it determined that by denying the producers an opportunity for cross-
18-9. Sabo & Zahn acted on behalf of Holabird & Root and for this reason they can be
18-10. The DOT’s findings must be sustained if they are supported by substantial evidence on
the record viewed as a whole. This rule was learnt from the Warner Lambert case. The
18-11. Probably not. The court will be reluctant to tell the FTC that they must resolve disputes in
18-12. In theory, the ICC has jurisdiction to regulate CEO pay. However, this agency’s work has
been significantly curtailed by deregulation, so it is unlikely that the ICC would take
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Answers to Case Problems
18-13. The appellate court affirmed a review board’s reversal of benefits awarded to the widow
of the coal miner under the Black Lung Benefits Act, holding that a physician’s
18-14. According to the court, NTSB precedent requires consideration of a pilot’s subjective
understanding of questions on a medical certificate application. The Board’s unexplained
failure to adhere to this precedent rendered its action arbitrary and capricious. The court
18-15. The court reviewed and vacated portions of the order of the Federal Motor Carrier Safety
Administration (FMCSA) regulating the hours of long-haul truck drivers and other
18-16 Informal rulemaking is the model most often used by administrative agencies because it
is efficient in terms of time and cost. The APA requires that the agency
• Give prior notice of the proposed rule by publishing it in the Federal Register
18-17 The main issues of this case are whether the EPA has the right and knowledge to declare
18-18 The court granted Lion Raisins its bid proposal costs because the court did consider the
USDA’s immediate suspension of Lion Raisins arbitrary and capricious. The USDA was
Thinking Critically about Relevant Legal Issues
1. The author is very pro-democracy and believes in equality. All people should have a say in
all the ways they are governed. Equality is very important to the author because she believes
2. The author ignores the fact that agencies, especially local ones, are made up of citizens, not
3. Basically, the opposition would talk about what the author ignored. The opposition would
argue that in a large democratic country, efficiency is very important. Without it, many