legal environment

Business Law Today COMPREHENSIVE EDITION TEXT & CASES, 11th Edition

Roger LeRoy Miller

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Administrative Law

• Chapter 37


• Chapter Outline

• 37-1 Practical Significance

• 37-2 Agency Creation and Powers

• 37-3 The Administrative Process

• 37-4 Judicial Deference to Agency Decisions

• 37-5 Public Accountability



Learning Objectives

1. How are federal administrative agencies created?

2. How do the three branches of government limit the power of administrative agencies?

3. What are the three basic functions of most administrative agencies?

4. How do administrative agencies enforce their rules?




• Administrative Law is the rules, orders, and decisions of federal, state, and local government agencies established to perform a specific function.




37-1 Practical Significance

• 37-1a Administrative Agencies Exist at All Levels of Government

• 37-1b Agencies Provide a Comprehensive Regulatory Scheme



37-2 Agency Creation and Powers

• 37-2a Enabling Legislation—An Example

– Federal Trade Commission Act 1. Create “rules and regulations for the purpose of carrying out the Act.”

2. Conduct investigations of business practices.

3. Obtain reports from interstate corporations concerning their business practices.

4. Investigate possible violations of federal antitrust statutes. (The FTC shares this task with the Antitrust Division of the U.S. Department of Justice.)

5. Publish findings of its investigations.

6. Recommend new legislation.

7. Hold trial-like hearings to resolve certain kinds of trade disputes that involve FTC regulations or federal antitrust laws.



The Practical Significance of Administrative Law

• Administrative law is created by administrative agencies which regulate many areas of our government, community, and businesses.

– A significant cost of ‘doing business’ requires compliance with administrative and agency laws. 




The Practical Significance of Administrative Law

• Administrative Agencies Exist at All Levels of Government.

• Agencies Provide a Comprehensive Regulatory Scheme.

– Given high cost of regulations, many businesses have incentive to influence the regulatory environment.




Administrative Process

• Administrative process include three functions:

• 1. Rulemaking.

• 2. Investigation.

• 3. Adjudication.




37-2b Agency Powers and the Constitution

– Executive Controls

– Legislative Controls

– Judicial Controls

– The Administrative Procedure Act

• The Arbitrary and Capricious Test

• Fair Notice



Case 37.1

• Loving v. Internal Revenue Service (2014)

• As a policy matter, some observers might argue that the IRS should be allowed to regulate tax-return preparers more strictly. Under the reasoning of the court, who has the authority to give effect to such a policy, and how would it be accomplished?



Agency Creation and Powers

• The study of administrative law requires an understanding of:

– Enabling Legislation. 

– The Types of Agencies. 

– Agency Powers and the Constitution. 




Agency Creation and Powers

• Enabling Legislation – An Example.

– Laws passed by Congress to specify the name, purposes, functions, and powers of administrative agency.

– Federal Trade Commission (FTC) granted power to:

• 1. To create “rules and regulations for the purpose of

carrying out the Act.”

• 2. To conduct investigations of business practices. 




Agency Creation and Powers

• Enabling Legislation (cont’d).

– Federal Trade Commission (FTC) granted power to:

• 3. To obtain reports from interstate corporations

concerning their business practices.

• 4. To investigate possible violations of federal antitrust


• 5. To publish findings of its investigations.




Agency Creation and Powers

• Enabling Legislation (cont’d).

– Federal Trade Commission (FTC) granted power to: • 6. To recommend new legislation.

• 7. To hold trial-like hearings to resolve disputes.

• Agency Powers and the Constitution.

– Executive Controls. President appoints federal officers and veto power.




Agency Creation and Powers

• Agency Powers and the Constitution (cont’d).

– Legislative Rules: act as legally binding as laws passed by Congress. Agencies also pass interpretive rules.

– Judicial Controls: court review of agency action. Plaintiff must exhaust administrative remedy before filing suit.




Types of Agencies

• There are two basic types of administrative agencies:

– Executive Agencies.

• Cabinet-level departments of the Executive Branch and their sub-departments.

– Independent Regulatory Agencies.

• Agencies outside the major executive departments such as the Federal Aviation Administration or the Federal Communications Commission.




Spotlight on Fox Television: Case 37.2

• Federal Communications Commission v. Fox Television Stations, Inc. (2012)

• Technological advances have made it easier for broadcasters to “bleep out” offending words in the programs that they air. Does this development support a more or less stringent enforcement policy by the FCC? Explain.



37-3 The Administrative Process

• Administrative process: The procedure used by administrative agencies in the administration of law.

• 37-3a Rulemaking – Rulemaking: The actions of administrative agencies

when formally adopting new regulations or amending old ones.

1. Notice of the proposed rulemaking.

2. A comment period.

3. The final rule.



37-3b Enforcement

– Inspections and Tests

– Subpoenas

1. The purpose of the investigation

2. The relevance of the information being sought

3. The specificity of the demand for testimony or documents

4. The burden of the demand on the party from whom the information is sought

– Search Warrants



37-3c Adjudication

– Adjudication: A proceeding in which an administrative law judge hears and decides issues that arise when an administrative agency charges a person or a firm with an agency violation.

– Negotiated Settlements

– Formal Complaints

– The Role of the Administrative Law Judge

– Hearing Procedures

– Agency Orders



Case 37.3

• Craker v. Drug Enforcement Administration (2013)

• Why should a court wait to review an agency’s order until the order has gone through the entire procedural process and can be considered final?



The Administrative Procedure Act

• In the absence of clear Congressional direction, all federal agencies must follow APA procedural requirements in notice, rulemaking, and adjudication. 




Agency Powers and the Constitution

• Administrative agencies make legislative rules, or substantive rules, that are as legally binding as laws that Congress passed.

• Administrative agencies are sometimes referred to as the “fourth branch” of the U.S. government.

• Article I of the U.S. Constitution authorizes delegating such powers to administrative agencies.




The Administrative Procedure Act

• Arbitrary and Capricious Test. The APA gives courts power to hold agencies’ actions “arbitrary and capricious” if they are not in compliance with constitutional due process.




The Administrative Procedure Act

• Rulemaking: is the formulation of new regulation. Notice and Comment Rulemaking involves three steps: – Notice of the Proposed Rulemaking.

– Comment Period.

– The Final Rule.

• Informal Agency Action: exempt from APA, do not establish legal rights.




37-4 Judicial Deference to Agency Decisions

• 37-4a The Holding of the Chevron Case 1. Did Congress directly address the issue in dispute in the

statute? If so, the statutory language prevails.

2. If the statute is silent or ambiguous, is the agency’s interpretation “reasonable”? If it is, a court should uphold the agency’s interpretation, even if the court would have interpreted the law differently.

• 37-4b When Courts Will Give Chevron Deference to Agency Interpretation



37-5 Public Accountability (slide 1 of 2)

• 37-5a Freedom of Information Act – FOIA 1966

• 37-5b Government in the Sunshine Act – Open meeting law, 1976

1. The subject of the meeting concerns accusing any person of a crime.

2. Open meetings would frustrate implementation of future agency actions.

3. The subject of the meeting involves matters relating to future litigation or rulemaking.



37-5 Public Accountability (slide 2 of 2)

• 37-5c Regulatory Flexibility Act

• 37-5d Small Business Regulatory Enforcement Fairness Act




Profundity ?

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