Butterton – Spring 2011
1. Agency: each authority of the government of the US whether or not it is within or subject to review by another agency. Freestanding government units or subunits within agencies.
2. What is a government agency and what connections does it have to the government?
a. Modern life organized partly by agencies
b. 15 million workers (federal, state, local levels). E.g. Commerce: 40,000.
c. Cave dwellers v. social organization. Form of authority: self/family/community/tribe. Sovereign: law as orders backed by threats.
3. Regulation
a. Regulation of Conduct/Behavior
b. Cave Dwellers
i. Internal/Self-regulating (superego)
ii. Family
iii. Community/Tribe
c. Ordering of Relationships
4. Background
a. American politics and law
b. Government Structures/Administrative Procedures
5. Administrative Functions
a. Regulation of Private Conduct: pricing, business practices
b. Government Exactions: collect taxes, build roads, impose obligations
c. Disbursement of Benefits: welfare, elderly
d. Direct Provision of Goods/Services: USPS, Amtrak
6. Structure
a. Executive Branch Agencies
i. Report to the President
ii. Normally single head at the top
iii. DOT, DOC, DOI
b. Independent Agencies
i. Headed by Collegial Bodies
ii. FTC, SEC, FERC
iii. Advantage: agencies can develop expertise and govern a given industry better than legislature/judiciary.
7. Situations that Might Call for Regulation:
a. Information Problems. Market participants may not have all helpful information available to them to make decision. Frequently don’t know if products are undesirable/harmful. Example: FDA requires food producers to put info on packaging, so that consumers don’t suffer from the lack of information.
b. Externalities. (spillover costs) Transaction costs, effects on people not part of exchange. Example: pollution. Does the costs of electricity probably does not reflect the full price of energy. This is a shortcoming of the traditional cost/benefit analysis.
c. Monopoly Power. Lack of competition (consumers like competition). Solution: set up agency that decides the price. Concern: fairness. Monopolistic price is higher than one that is fair. DOJ and FTC approve mergers and acquisitions, concern with creation of monopolies.
d. Windfall Profits. Redistribution of wealth.
e. Human Rights. Labor laws (min. wage, max. hours) are concerned not with economics, but with human rights.
f. Excessive Competition. Industries with large fixed costs need protection from predatory pricing (selling below costs)
g. Scarcity. Changing prices of commodities to alleviate hardship on consumers
h. Other. Conserving resources, unequal bargaining powers, paternalistic need to protect the weak.
8. History
a. 1875 – 1930
i. Inadequacy of state regulatory system was a catalyst for federal regulation
ii. In 1887, ICC is created to prohibit monopoly and discrimination by railroads.
iii. Traditional administrative law model:
1. Agency procedures designed to assure compliance with legislative directives.
2. Judicial review is essential to ensure agency actions are fair/impartial
3. Agencies need to develop record to facilitate judicial review.
b. FDR’s New Deal (1932-1945)
i. Created administrative agencies taking over regulatory functions to neutralize court system’s prejudicial behavior (courts favored businesses).
1. AIDS/blood company hypo: processing of blood requirement imposed. Contaminated blood sold, people died. Lawsuits filed by survivors of victims. Courts (7th cir) disallowed class action case as damages are too large. The company will go out of business and that cannot happen.
ii. Before the Great Depression, the common law included rights of property and freedom from the government, but not rights to individual “security.”
iii. The new deal included social and economic guarantees.
iv. Some of the agencies created: FDA, FTC, FCC, FDIC, SEC, SSA, NLRB, FHA.
c. Administrative Procedure Act (1946):
i. Comprehensive measure establishing procedural requirements for virtually all federal agencies
ii. Sections:
1. 552: Publication and public availability of agency decisions
2. 553: Rulemaking. Notice and comment.
3. 554: Adjudication. “On the record” procedures
4. 556-557: Trial-type procedures
5. 701-706: Judicial review
iii. Accomplishments/Goals:
1. Implementation of checks and reviews
2. Right to transparency
3. Formalized decision process
legislature may not delegate its power to make laws to any other body.
ii. Duties may be administrative and executive in nature.
iii. While only legislature may make laws, it has large discretion as to means by which laws may be executed, and may vest administration of law in an administrative agency.
e. Some essential governmental functions are so complex that it is impractical for the legislature to perform them.
f. Why regulate the railroad industry? Monopoly potential.
g. Public policy: shipping is a public good. Also: low prices create high entry barriers.
4. Views on Delegation:
a. Delegation disallowed. The vesting of all legislative powers in Congress is not only an initial allocation, but also a final one. Congress cannot transfer its legislative powers to any institution.
b. Delegation is ok if scope not too broad. When Congress enacts a statute granting authority to the executive (or private parties), the statute amounts to or effects a delegation of legislative power if the scope of the grant is too broad or if it vests too much discretion in the executive.
c. There is no delegation at all. When Congress enacts a statute granting authority to the executive or private parties, there is no “delegation” of legislative power no matter how broad the grant or how much discretion it confers.
5. Panama Refining v. Ryan (1935):
a. Great Depression. NIRA established to stabilize wages, prices, create jobs.
b. Section 9(c) enables the president to prohibit transportation of petroleum products in excess of certain amounts.
c. Ruling: president cannot ban certain oil sales as there are no guidelines.
d. The absence of standards governing exercise of power could allow legislature to delegate virtually any commercial activity to the President.
e. 293 U.S. 388; FDC: enjoins president; 5 Cir: reverses; USSC: reverses.
