Chapter 36 Administrative Law

1. Chapter 36Administrative Law

2. Learning Objectives • How are federal administrative agencies created? • What are the three operations that make up the basic functions of most administrative agencies? • What sequence of events must normally occur before any agency legislative rule becomes law? • How do administrative agencies enforce their rules? • How do the three branches of government limit the power of administrative agencies?

3. Agency Creation and Powers • Under the U.S. Constitution, Congress may delegate the task of implementing its laws to government agencies. • By delegating the task, Congress may indirectly monitor an area in which it has passed legislation without becoming bogged down in the details relating to enforcement of the legislation.

4. Enabling Legislation • Administrative agencies are created by enabling legislation, which usually specifies the name, composition, and powers of the agency.

5. FTC Organizational Chart

6. Types of Agencies • There are two basic types of administrative agencies: • Executive agencies • Independent regulatory agencies • The significant difference between the two types of agencies lies in the accountability of the regulators.

7. Executive Departments and Important Subagencies

8. Executive Departments and Important Subagencies (cont.)

9. Administrative Process Three functions of administrative process are: Rulemaking Enforcement Adjudication

10. Rulemaking Agencies are authorized to create new regulations. • This power is conferred on an agency in the enabling legislation, and these rules are as important as formal acts of Congress.

11. Rulemaking Notice-and-comment rulemaking is the most common rulemaking procedure. • Notice of Proposed Rulemaking—Begins with the publication of the proposed regulation in the Federal Register. • Opportunity for Comment—After notice is published, time is allowed for private parties to comment on the proposed rule. • Publication of the Final Rule—After the agency reviews the comments, it drafts the final rule and publishes it.

12. Investigation • Administrative agencies investigate the entities that they regulate. • They conduct investigations during the rulemaking process to obtain information and after rules are issued to monitor compliance.

13. Investigation The most important investigative tools available to an agency are the following: Subpoenas Orders that direct individuals to appear at a hearing or to hand over specified documents. Inspections and Tests Used to gather information and to correct or prevent undesirable conditions.

14. Limits on Administrative Investigations Limits on administrative investigations include the following: • The investigation must have a legitimate purpose. • The information being sought must be relevant. • The demand for testimony or documents must be specified. • The burden of the demand is on the party from whom the information is sought.

15. Adjudication • After a preliminary investigation, an agency may initiate an administrative action against an individual or organization by filing a complaint. Most such actions are resolved at this stage, before they go through the formal adjudicatory process. • If there is no settlement, the case is presented to an administrative law judge in a proceeding similar to a trial.

16. The Process of Formal Administrative Adjudication

17. Limitations on Agency Powers • Combining the functions normally divided among the three branches of government into an administrative agency concentrates considerable power in a single organization. • As a result, several controls exist to place such power in check, including: • Judicial Controls • Executive Controls • Legislative Controls

18. Judicial Controls • Administrative agencies are subject to the judicial review of the courts. However, such review is not automatic. Parties seeking review must show: • The action is reviewable (the APA presumes this). • The party must have standing to sue. • The party must have exhausted all possible administrative remedies. • There must be an actual controversy.

19. Judicial Controls A court may review whether: • An agency has exceeded the scope of its enabling legislation. • An agency has properly interpreted the laws. • An agency has violated the U.S. Constitution. • An agency has complied with all applicable procedural requirements. • An agency’s actions are arbitrary or capricious, or an abuse of discretion. • An agency’s conclusions are not supported by substantial evidence.

20. Business Opportunity Scams • Promises that sound too good to be true usually are. One way to tell whether a business opportunity is legitimate is to request the document that the FTC requires under its business opportunity disclosure rule. • This document must include audited financial statements and other disclosures important to a decision to invest. • What should a potential entrepreneur do to protect himself or herself from fraudulent business opportunities?

21. Executive Controls The president can control administrative agencies through appointments of federal officers and through vetoes of legislation creating or affecting agency powers.

22. Legislative Controls • Congress can give power to an agency, take it away, increase or decrease the agency’s finances, or abolish the agency. • The Administrative Procedure Act of 1946 also limits agencies. • Specific statutes also make agencies accountable to the public.

23. Public Accountability • As a result of growing public concern over the powers exercised by administrative agencies, Congress passed several laws to make agencies more accountable through public scrutiny. • Three of the most significant of these laws are: • Freedom of Information Act of 1966 • Government-in-the-Sunshine Act of 1976 • Regulatory Flexibility Act of 1980

24. Government-in-the Sunshine Act of 1976 • Requires the following: • “[E]very portion of every meeting of an agency” must be open to “public observation.” • Procedures must be implemented to ensure that the public is provided with adequate advance notice of the agency’s scheduled meeting and agenda.

25. Regulatory Flexibility Act of 1980 • Concern over the effects of regulation on the efficiency of business, particularly smaller ones, led Congress to pass the Regulatory Flexibility Act in 1980. • The act requires a regulatory flexibility analysis whenever a new regulation will have a “significant impact upon a substantial number of small entities.”

26. State Administrative Agencies • States create agencies that parallel federal agencies to provide similar services on a more localized basis. • If the actions of parallel state and federal agencies conflict, the actions of the federal agency will prevail.