PART

PART

Regulation of Business

Administrative AgenciesThe Federal Trade Commission

Actand Consumer Protection Laws

Antitrust: The Sherman Act

11

McGraw-Hill/Irwin Business Law, 13/e

© 2007 The McGraw-Hill Companies, Inc. All rights reserved.

PART

PART

Regulation of Business

The Clayton Act,The Robinson-Patman Act, and

Antitrust Exemptions and Immunities

Employment LawEnvironmental Regulation

11

McGraw-Hill/Irwin Business Law, 13/e

© 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Administrative Agencies

PA ET RHC 47

“The execution of the laws is more important than the making of them.”

Thomas Jefferson

Learning Objectives

Creation of administrative agencies Agency types and organization Agency powers and procedures Controlling administrative agencies Information controls Issues in regulation

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The administrative agency, created by enabling legislation, implements and enforces statutes enacted by Congress Has legislative, executive, judicial

functions Federal and state agencies must operate

within the constitutional guarantees of due process, equal protection, and freedom of speech See Pearson v. Shalala

Overview

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Two types of federal administrative agencies: Executive: within Office of President or

executive departments of president’s cabinet Administrative heads appointed and

removable at President’s will Independent: still executive in function, but

headed by board or commission whose members are appointed by President “with the advice and consent of the Senate”

Agency Types

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Basic discretionary powers: rulemaking power, investigative power, and adjudicatory power

Agency also has significant informal power through agency advice, suggestions, guidelines Lack legal force of formal agency

regulations or rulings, but very persuasive in shaping behavior of regulated industries

Agency Powers

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Agency rulemaking power derives from enabling legislation and must comply with Administrative Procedure Act (APA)

Informal rulemaking (notice and comment) is most common method and the process is: Publication of Notice of Proposed

Rulemaking in Federal Register, comment period, publication in Federal Register of regulation (after review of comments) in final form

Rulemaking Power

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Formal rulemaking also begins with a Notice of Proposed Rulemaking published in Federal Register, but unlike informal rulemaking, the formal notice must state time and place at which a public hearing will be held Hearings resemble trials: agency must

produce evidence and justify proposed regulation; interested parties may present evidence in opposition

Rulemaking Power

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Agencies need accurate information about business activities for rules and enforcement

Agency investigations must be authorized by law and conducted for a legitimate purpose

Two most important investigative tools are subpoenas and searches and seizures Subpoena duces tecum (compels documents) Subpoena ad testificandum (compels testimony)

Investigative Power

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Agency may seek information only available by entry upon private property

Fourth Amendment prohibits unreasonable search and seizure and requires a warrant based on probable cause Typically, no warrant required for

routine administrative inspections

Investigative Power: Search & Seizure

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Agencies conduct judicial hearings to decide whether a regulation has been violated

In a hearing before an administrative law judge (ALJ), testimony and evidence are allowed, but no jury is present

ALJ issues decision with findings of fact and conclusions of law and penalty if required

ALJ decision may be appealed

Adjudicatory Power

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Executive shapes agencies by President’s: (a) power to appoint/remove

administrators, (b) power to veto legislation about agencies, (c) influence over executive budget

Congress shapes agency action by its: (a) advice and consent role in agency

appointments, (b) power to amend enabling legislation , (c) power to pass laws changing agency procedures

Control of Agencies

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Courts arguably exercise greatest control over agency behavior since APA allows judicial review of most agency action

Individual or organization seeking judicial review must demonstrate that the: Agency action being challenged is

reviewable, challenging party has standing to sue, all required administrative remedies exhausted, and dispute ripe for judicial review

Judicial Review of Agencies

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Legal bases for challenging agency action:1. Ultra vires doctrine

2. Agency deviated from necessary procedures

3. Agency action was unconstitutional

4. Agency action unsubstantiated by facts Judicial deference: if question of fact or

policy is at issue in the case, courts generally defer to agency decision

Challenging Agency Action

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Three statutes regulate flow of information held or gathered by administrative agencies

Freedom of Information Act (FOIA): enables citizens to access government documents

Privacy Act of 1974: citizens may inspect files agencies have on them and request corrections

Government in the Sunshine Act of 1976: “every meeting of an agency shall be open to public observation”

Information Controls

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Test Your Knowledge

True=A, False = B Agencies are created by Congress

through enabling legislation. Federal Procedure Act constrains

agencies. An agency subpoena may request

information that is privileged as long as it is necessary to the investigation.

An Administrative Law Judge’s opinion may not be appealed.

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Test Your Knowledge

True=A, False = B Informal rulemaking is also known as

notice and comment rulemaking. Under the Freedom of Information Act,

the plaintiff/requester bears the burden of proving the denial was wrongful.

If an agency decision is challenged, courts generally defer to the agency decision.

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Test Your Knowledge

Multiple Choice The basic discretionary powers agencies

may possess are: (a) Rulemaking power (b) Investigative power (c) Adjudicatory power (d) All of the above (e) A and B only

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Test Your Knowledge

Multiple Choice Which of the following is not a legal

basis for challenging agency action? (a) Ultra vires doctrine (b) Agency failed to obtain advice and

consent (c) Agency action was unconstitutional (d) Agency failed to comply with the APA (e) None of the above

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Test Your Knowledge Multiple Choice

An individual or organization seeking review of an agency action must show: (a) The challenged agency action is

reviewable (b) Challenging party has standing to sue (c) All required administrative remedies

have been exhausted (d) The dispute is ripe for judicial review (e) All of the above

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Thought Questions Do you think that federal agencies have

enough power to do all they are expected to do or too much power? What ethical issues might arise for a business that receives a subpoena or warrant from an administrative agency?

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