rulemaking power of independent agencies

Citation: 54 Am. J. Comp. L. 615 2006

Content downloaded/printed from HeinOnline (http://heinonline.org)Wed Sep 16 04:34:21 2015

-- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and Conditions of the license agreement available at http://heinonline.org/HOL/License

-- The search text of this PDF is generated from uncorrected OCR text.

-- To obtain permission to use this article beyond the scope of your HeinOnline license, please use:

https://www.copyright.com/ccc/basicSearch.do? &operation=go&searchType=0 &lastSearch=simple&all=on&titleOrStdNo=0002-919X

DOMINIQUE CUSTOS*

The Rulemaking Power of IndependentRegulatory Agencies

The legal regime of the rulemaking power of the American Inde-pendent Regulatory Agencies (IRAs) is mostly similar to that of theirexecutive counterparts. Its peculiarity is essentially confined to itsrelative insulation from the President. Therefore, its study' providesa substantial appraisal of the rulemaking power in the United States,in general.

I. DEFINITION AND CHARACTERISTICS OF INDEPENDENTREGULATORY AGENCIES (IRAs)

Similar to some European constitutions, the U.S. constitutionaltext has no provision dealing with independent regulatory agencies.Its 'necessary and proper clause' merely confers the authority to cre-ate the government on Congress.2 Apart from a constitutional refer-ence to the cabinet departments,3 the design of the U.S. federalgovernment is Congress's responsibility. Therefore, the establish-ment of the category of independent regulatory agencies, at theAmerican federal level, as in European countries, results fromlegislation.

The definition and characteristics of American independentagencies must be articulated against the backdrop of the structure ofthe U.S. government. Beside the presidency, the study of the struc-ture of the U.S. government stresses a main distinction between exec-utive regulatory agencies and independent regulatory agencies. Thedistinction is based primarily on their respective location in the ad-ministrative architecture and secondarily on their distinct type ofleadership.

The executive agencies are cabinet agencies directly locatedwithin one department in the Executive Branch whereas the inde-

* Professor of law at Loyola University New Orleans; Ph.D, Panthdon-SorbonneLaw School, 1989, Agr6gation, Droit public, Paris, 1994; Fulbright Visiting Scholar,Columbia, 1997-1998. My thanks to Professor John Reitz for his comments on anearlier version of this report.

1. This paper follows the outline drawn by the general reporter although it hasbeen abbreviated to comply with the publisher's space requirement.

2. Art. I, Sec. 8, cl. 18 of the U. S. Constitution.3. Art. II, Sec. 2, cl. 1. of the U.S. Constitution.

615

THE AMERICAN JOURNAL OF COMPARATIVE LAW

pendent agencies are placed outside such presidential realm.4 Asmulti-member agencies, the independent agencies are headed by acollege of commissioners and are otherwise referred to as 'commis-sions'. Comparatively, the executive agencies are under the leader-ship of a single administrator.

The rules governing the appointment and the removal of thecommissioners guarantee their independence. Commissioners arenominated by the President and confirmed by Congress. Bipartisan-ship, staggered dates and fixed term of appointment, are designed toprevent a perfect political consonance between the President and agiven independent agency. Removal of commissioners 5 is confined toa non political cause,6 thus making it, at least in principle, impossiblefor the President to censor or sanction political disagreement.

In light of the two aforementioned criteria, the independentagency is defined as a form of administrative government that isplaced outside any cabinet department and under the leadership of acollege of commissioners independent of the President. Such a defini-tion in structural and relational terms must be completed by an in-quiry into the functions of the independent agency. Thus amended,the definition becomes: a form of administrative government that isresponsible to regulate human activities 7 and is placed outside any

4. There is some uncertainty as to the nature of two agencies that are generallycharacterized as independent agencies even though it is located in a department: Fed-eral Energy Regulatory Commission (Department of Energy) and Occupational Safetyand Health Review Commission (Department of Labor). In the case of the FERC,Professor Schwartz questioned the independent nature; Professors Davis, Pierce andStrauss do not : Bernard Schwartz, A decade of Administrative Law: 1986-1997, 32Tulsa Law Review, 493, 579 (1997); Kenneth Davis and Richard Pierce, Administra-tive Law Treatise, Vol. 1, 47, 1994; Peter Strauss, An introduction to AdministrativeJustice in the United States, 133, 2002. The OSHA is listed under the category ofindependent regulatory commissions by Professor Straus who indicates that theagency is 'associated with the department of Labor' which may be read as differentfrom placed in the given department: Peter Strauss, idem.

5. There is one exception: removal of the president of the independent commis-sion or agency falls under the ad nutum category, typical of the head of the executiveagency.

6. Removal for cause may be justified by: inefficiency, neglect of duty, or malfea-sance in office. See Humphrey's Executor v. United States 295 U.S. 602, 629-632(1935), Wiener v. United States 357 U.S. 349, 356 (1958).

7. The diversity of areas of regulatory activities may be assessed by the followinglist:

Economic regulation: Interstate Commerce Commission (established in 1887 butrepealed by a 1994 statute), Federal Reserve Board, Federal Trade Commission(1914), Federal Communications Commission (1934), Securities and Exchange Com-mission (1934), National Labor Relations Board (1935), Civil Aeronautics Board (es-tablished in 1938 abolished in 1978), Federal Energy Regulatory Commission(replaced, in 1978, the Federal Power Commission which was established in 1920)Commodity Futures Trading Commission (1974), Nuclear Regulatory Commission(1974).

Social Regulation: Equal Employment Opportunity Commission (1963-1964), Oc-cupational Safety and Heath Review Commission (1970), Consumer Products SafetyCommission (1972).

616 [Vol. 54

RULEMAKING POWER

cabinet department and under the leadership of a college of commis-sioners independent of the President. The significance of the func-tional dimension of the independent agency must be properlyassessed. Historically, it was both an element of definition and, alongwith location and its oversight implications, a fundamental feature ofdistinction from the executive agency. Nowadays, it still has a defini-tional value but it is no more a source of differentiation from the exec-utive agency. Originally,8 the independent agency symbolized thevesting in idealized9 experts of regulatory powers over the economy,that challenged the common law notions of property and contractualfreedom, in the name of the public interest. It contrasted with theexecutive agency which theoretically was confined to managerialtasks10 and could not venture into decision making as far-reachingand encompassing as congressional action. Accordingly, it wastermed the independent regulatory agency. The regulatory missionwas translated into "the model of combined-function agency"" whichmakes the rules, investigates, prosecutes, and adjudicates. Neverthe-less, de facto, this functional distinction proved not to be fully opera-tional. First, executive agencies carry out regulatory functions also.12Second, some independent agencies simultaneously devote a substan-tial part of their action to non regulatory functions.13 In other words,it has now become clear that the two institutional categories bothcarry out regulatory and executive missions and enjoy intermingledpowers. Therefore, if as a matter of definition, the independentagency is regulatory, as a matter of differentiation it is not exclu-sively such.

The original value of the functional criterion as a way to differen-tiate the then new independent agency from its existing executivecounterpart mirrored one of the current criteria of distinction amongexecutive and regulatory agencies in Europe either at the national

Political Regulation: Federal Election Commission (1975).8. Frank Goodnow, The Principles of the Administrative Law of the United

States, 1905, James Landis, The Administrative Process, 1938.9. They were idealized in that they were presumed to resort to science and be

insulated from the failings of politics.10. "When Congress enacts a statute that is complete in policy aspects and ready

to be executed as law, Congress has recognized that enforcement is only an executivefunction and has yielded that duty to wholly executive agencies" See Justice Jackson'sdissent in Federal Trade Commission v. Ruberoid Co. 343 U.S. 470, 489(1952).

11. Michel Asimow, The Administrative Judiciary: ALJs in Historical Perspec-tive, 20 J. Nat'l A. Admin. L. Judges 157, 158 (2000).

12. For example, adjudication has always been a great bulk of the work of theSocial Security Administration, which until 1994 was viewed as an executive agency.

13. In addition to the performance of its regulatory duties, "[tihe Nuclear Regula-tory Commission, for example, awards and oversees the performance of contracts forresearch into issues of safety in the operation of nuclear power plants", Peter Strauss,An introduction to Administrative Justice in the United States, 133, 2002.

2006] 617


level' 4 or at the European Union level.' 5 The difference of historicalstratification of the development of independent administrativestructures in the U.S. and Europe certainly explains the discrepancybetween the American and the European conceptions. The questionraised by this comparative historical perspective is whether Europewill experience another age in the study of regulation whereby thediffusion of the regulatory function across the administrative govern-ment will be fully recognized.

Although it reflects the main feature of the American adminis-trative architecture the dual account of the American governmentalstructure is not quite faithful to the diversity of its forms. Mid-waybetween the main two categories, exist the independent executiveagencies which was pioneered in the 1970s with respect to environ-mental protection.' 6 In other words, beside the independent regula-tory agency, there is a second type of independent agency. In bothcases, the independent characteristic is based on the lack of locationin a cabinet department. But in this second type, the independence isreduced for two reasons. First, the independent executive agency isstill part of the Executive branch despite its non incorporation into adepartment. Second, the independent executive agency is headed byan administrator who can be discharged at will by the President.

II. DEFINITION OF RULEMAKING POWER IN NATIONAL LAW

A legislative definition of rulemaking power may be derived fromthe 1946 Administrative Procedure Act (or APA) which provides forthe two forms of agency action. Under the APA dichotomous divisionof government action, IRAs as well as executive agencies may engageeither in rulemaking or adjudication. Agencies resort to rulemakingas they carry out general policy. They employ adjudication whentheir administrative action affects individual rights. Additionalsources of administrative procedure may be found in legislation ad-dressing a specific aspect of rulemaking or enabling a particularagency as well as in agency regulations. Among the additionalsources, some statutes are exclusively applicable to IRAs, thus consti-tute a specific source of administrative procedure for IRA'srulemaking.

14. For instance, regulatory function, besides structural independence, of FrenchAutoritis Administratives Ind~pendantes is employed as a criterion of differentiation.

15. European Commission, The Operating Framework for the European Regula-tory Agencies, COM (2002) 718 final, 4, 12/11/2002; White paper on European Gov-ernance COM (2001) 428 final, 7/25/2001.

16. Environmental Protection Agency (1970), National Credit Union Administra-tion (1982), Farm Credit Administration (1982), National Science Foundation (1982),Social Security Administration (since 1994), Surface Transportation Board (substi-tuted for the ICC in 1995).

618 [Vol. 54

RULEMAKING POWER

The rulemaking power may be defined as the authority to issuerules or regulations.17 According to the APA, a rule is "the whole or apart of and agency statement of general or particular applicabilityand future effect designed to implement, interpret, or prescribe lawor policy."18 From a comparative standpoint, besides the confusingmention of'particular applicability,'1 9 this definition sounds familiardue to its reference to the impersonal and prospective character ofrulemaking.

Less familiar to the comparative mind is the encompassing na-ture of the American definition of rulemaking. As a matter of fact,rulemaking describes not only the binding law-making power ofagencies but also a non binding component of their normative powerwhich in other legal systems, such as French administrative law, areclearly excluded from the rulemaking sphere. 20 To this effect, theAPA distinguishes between, on the one hand, legislative rules whichmodify the legal landscape and are binding, on the other hand, nonlegislative rules which do not have the force and effect of the law.

III. SOURCE OF IRAs' RULEMAKING POWER

The source of the IRAs' rulemaking power is legislative. Each en-abling statute assigns a specific set of powers to a given agency. Agrant of rulemaking power does not exist in every governing statuteand even though it elects to confer rulemaking power, Congress maychoose to vest only a power to make rules with no force of law.

However, the delegation may cover the entire range of the IRAsmission or may consist in specific grants of authority. 21 Moreover, thewide spread of rulemaking does not necessary derive from a cleardelegatory congressional intent. In fact, Congress has very often em-ployed ambiguous language, vaguely referring to the authority to pro-mulgate rules and regulations, which potentially may or may not bebinding.22 Faced with the determination of the extent of the delega-

17. 5 U.S.C.A. 551 (5): ""rule making" means agency process for formulating,amending, or repealing a rule"

18. 5 U.S.C.A. 551 (4). 5 U.S.C.A. 551 (6): "Any other agency action is an 'order'."19. For Continental European scholars and the Administrative Conference of the

U.S., the mention of 'particular applicability' sounds erroneous because of the generalcharacteristic normally associated with rulemaking.

20. For instance, the definition of the French rulemaking power includes onlywhat in the U.S. is referred to as legislative rulemaking.

21. Some statutes such as the Clean Water Act contain both general and specificprovisions of delegations to the EPA. Thomas W. Merill, Kathryn T. Watts, AgencyRules with the Force of Law: The Original Convention, Harvard Law Review, 116Harv. L. Rev. 467, 584 (2002).

22. Two formulas account for this ambiguity. The first one: power "to make suchrules and regulations. . .as are necessary to carry out the provisions of this chapter" isillustrated by the governing acts of the ex-ICC, and the FTC. The second one: power"to make, amend, and rescind such rules and regulations as may be necessary to carry

20061 619


tion,23 since the 1970s, courts have been inclined to presume 24 thatsuch a language conveys the intent to confer a legislative rulemakingpower. With such a presumption, the post-APA case-law favors a gen-eralization of the delegation of legislative power.

Typically, such assignment differs from the allocation of govern-mental functions among the three named branches in the Constitu-tion. Congress ascribes power to agencies in a manner that allowsthem to partake in legislative, executive and judicial powers. As partof this conjoining of responsibilities in a single entity, rulemakingpower symbolizes the delegation of legislative power by the Legisla-tive branch without explicit constitutional authorization.

Although the text of the Constitution does not explicitly supportthe conferral of rulemaking power to IRAs, it contains principleswhich can accommodate the latter. In fact, the U.S. constitution doesnot precisely allocate rulemaking power per se. Even though it explic-itly vests the executive power in the President, it leaves this execu-tive power wholly undefined. It merely indicates that "[the President]shall take care that the laws be faithfully executed";25 which may callfor direct responsibility or control over those who actually execute thelaws through rulemaking. In fact, there is "a continuing tension be-tween a view of the President as politically responsible for all acts ofgovernments, and a view of the other officers of government, who op-erate pursuant to statutory authority, as legally responsible for alldecisions respecting their particular programs."26 The recognition ofrulemaking power to the President results from an inference basedon the conferral of executive power but not from a clear constitutionalallocation. Moreover, this inference only addresses the question of theexistence of a presidential rulemaking power it does not solve that ofthe monopoly over, or sharing of, such a power to make regulations.

The uncertainty of the textual framework of the allocation ofrulemaking power in the U.S. contrasts with the precision of the con-stitution in other presidential 27 or in semi-presidential 28 regimes.The question that arises from this observation is whether such an

out the provisions of this title", is exemplified by the enabling acts of the SEC, theFCC, the ex-FPC, and the Federal Reserve Board.

23. The issue of interpretation was raised in particular regarding the FTC andthe NLRB. Thomas Merill and Kathryn Watts, at 504-520.

24. Thomas Merill, Kathryn Watts, at 467. The authoro "argue that throughoutmost of the Progressive and New Deal eras, Congress followed a convention for signal-ing when an otherwise ambiguous rulemaking grant was intended to confer delegatedauthority to make rules with the force of law. Under this convention, rulemakinggrants coupled with a statutory provision imposing sanctions on those who violate therules were understood to authorize rules with the force of law."

25. Art. II of the U.S. Constitution.26. Peter Strauss, Administrative Justice in the U.S., Op. Cit. 87.27. Such as the presidential regime of Argentine.28. In France, the Prime Minister is the explicit recipient of the rulemaking

power.

620 [Vol. 54

RULEMAKING POWER

uncertainty lends a propitious context to the empowerment of IRAswith rulemaking capacity. Two other characteristics of the U.S. gov-ernment may have a similar favorable effect. First, the federal natureof the state determines a decentralization of the rulemaking poweramong different levels of government. Second, the principle of checksand balances embedded in the Constitution supports a diffuse distri-bution of a given power.

In fact, as in Europe, the constitutionality of the design of inde-pendent agencies has been a matter of controversy. The reasons forthe controversy have been similar. The organizational separation andthe correlative degree of independence, on the one hand, seem not tosquare with the constitutional vision of the presidential leadership ofadministration, 29 the delegation of legislative, executive and adjudi-catory powers,30 on the other hand, seems to flout the separation ofpowers enshrined in the Constitution. Since the New Deal, and de-spite a threat of destabilization in the 1990's,3 1 the legal acclimationof the IRAs has been ensured by case law. The finding of a statutoryintelligible principle providing sufficient guidance to the agencyserves as evidence of the preservation of the substance of the consti-tutional assignment of legislative capability to the Congress. 32 Thedetermination that the conjoining of powers does not amount to a fa-tal encroachment adduces proof that the balance of powers devised bythe Framers is not disturbed.33 The Supreme Court also validatedthe limitation of the President's power to remove their commission-ers,34 although independence from the President seems to establishindependent agencies as competitors with the chief of the Executivebranch. Nevertheless, the existence of the IRAs still stirs up a legalcontroversy 35 despite these judicial pronouncements.

IV. ORIGINS OF IRAs AND THEIR RULEMAKING POWER

The American IRAs are deeply-entrenched in the national gov-ernmental landscape, in contradistinction to the recent independentagencies that have been proliferating elsewhere - in Europe in partic-ular - owing to the privatization of network industries. Practically,

29. Art. II, Sec.1 cl. 1 of the U.S. Constitution. Peter Strauss, Administrative Jus-tice in the U.S., at 87.

30. Art. I, Sec. 1 cl. 1 of the U.S. Constitution. Art. III, Sec.1, cl. of the U.S.Constitution.

It is worth noticing that the questions raised by the non-delegation doctrine con-cerns equally the executive agencies.

31. American Trucking Associations, Inc. v. Environmental Protection Agency,175 F. 3d 1027 (DC Cir. 1999)

32. J.W. Hampton, Jr & Co. v. United States, 276 US 394 (1928). Whitman v.American Trucking Associations, Inc., 531 US 457 (2001).

33. Mistretta v. United States 488 US 361 (1989).34. Humphrey's Executor v. United States 295 U.S. 602, 629-632 (1935), Wiener

v. United States 357 U.S. 349, 356 (1958).35. Infra VI. 1.

6212006]


congressional delegations of rulemaking power started as early as1789.36 Throughout the nineteenth century the President mostly, theSecretaries, occasionally, were the beneficiaries of this empower-ment, in areas such as the military, foreign affairs, tax and internalgovernment.37 In the late nineteenth century, in connection with theexpansion of the administrative hold over the economy, agencies, sin-gularly independent agencies, became the favorite recipients of thelaw-making authority. They emerged at the end of the XIXth centuryas essential instruments of discipline of free enterprise, in the nameof public interest.38 Sometimes, in this tempering of wild capitalismendeavor, they came into existence with the blessing of the regulateesthemselves.39 They represent, in other words, the American model ofpublic economic intervention. It is one that reluctantly engages intodirect management 40 and preferably exercises oversight. This modelof indirect intervention was later used in other areas where it hasnow morphed into a model of protection of fundamental rightS41 orelections regulation. 42 Such a migration from the economic and socialregulatory spheres to the constitutional and political regulatoryrealms is sufficiently indicative of the adaptability of the AmericanIRAs. It is also explicative of the large borrowing they gave rise to.

V. EXTENT OF THE AUToNomous RULEMAKING POWER OF IRAs

In the U.S., the independent rulemaking power was meant to ad-equately empower those structures designed to regulate, according tothe public interest, the functioning of a horizontal aspect of the na-tional economy or of a specific industry. In the pro-agency parlance ofthe 1930s, 43 it was a means designed to allow the expert-regulator toissue the rules of proper conduct for the regulated parties. Thus de-signed, the rulemaking power encompasses a broad discretion whichis to be exercised under the guidance of an intelligible principle laid

36. Thomas W. Merill, Kathryn T. Watts, at 495. Cornelius M. Kerwin, Rulemak-ing: How Government Agencies Write Law and Make Policy, 1994. Pp. xii, 321, 11-15.

37. Thomas W. Merill, Kathryn T. Watts, at 795.38. The first independent commission, the Interstate Commerce Commission

(ICC), was originally placed in the Department of the Interior on Feb. 4, 1887. TheInterstate Commerce Act of 1887, ch. 104, S 11, 24 Stat. 379, 383 (1887) (codified asamended at 49 U.S.C. S 10301 (2005)). Id. S 21, 24 Stat. 387. Congress, however,amended these provisions on Mar. 2, 1889, relocating the ICC outside that depart-ment and making it independent. Act of Mar. 2, 1889, ch. 382, 25 Stat. 855 (1889)(codified as amended at 49 U.S.C. S 10761 (2005)).

39. As in the case of the Federal Communications Commission's precursor, theRadio Regulatory Commission. Dominique Custos, La Commission F~ddrale Am6ri-caine des Communications A l'Heure des Autoroutes de l'Information, 34-35,L'Harmattan, 1999

40. At the federal level, there are just a few public corporations such AMTRAK,Tennessee Valley Authority.

41. EEOC.42. FEC.43. James Landis, The Administrative Process, 1938.

622 [Vol. 54

RULEMAKING POWER

down by the Congress. As a result of the vagueness of this intelligibleprinciple combined with the logic of the delegation of legislativepower itself, the corpus of substantive laws governing the regulatedmatter is mostly of administrative origin as opposed to legislative ori-gin. This observation would indeed apply to the European expressionof the phenomenon. On the other hand, the comparative evaluation ofthe distribution of the rulemaking power offers more contrasting re-sults. Unlike the French IRAs who may be confined to a secondaryrulemaking power, the American IRA enjoys a primary rulemakingpower. Indeed, the French IRAs involvement in rulemaking may belimited (to a secondary role) by a substantial rulemaking power re-served to the Government, or subject to approval by a Minister.4 4

Comparatively, even though an executive agency may partake in theregulatory task, the effectiveness of the authority to issue rules ofAmerican IRAs cannot be subject to presidential assent. To this ex-tent, the reference to a real autonomous rulemaking power seemsparticularly justified in the case of American IRAs.

Yet, the use of the legislative veto45 against American IRAs deci-sions, i.e., a resolution by which Congress nullifies a regulationbefore it takes effect, offers some degree of similarity to the approvalpower vested in ministers elsewhere. In both cases, the effectivenessof agencies' rules depends on the good will of an overseer/ co-decision-maker, either a legislator or a minister. To this extent, the autonomyof the IRAS' rulemaking authority is curtailed. However, the func-tional resemblance does not have the same significance. The legisla-tive veto appears to be exercised by the author of the delegation ofrulemaking power, as a form of legitimate congressional oversight,whereas the approval power wielded by a minister is indicative of anoversight by an executive branch opposed to the diffusion of rulemak-ing power outside the realm of the original administrative govern-ment. At least, in principle, American IRAs are spared by this kind ofpresidential control.

V.1. Adoption of the regulation

Until 1946, no general text prescribed a particular method of ad-ministrative decision-making. Rulemaking procedure was shapedmostly through litigation. In 1946, the APA purported to set out pro-cedural limits in order to ensure protection of liberty against thethreats associated with the development of the administrative state.It is worth noticing that the statute deals with agencies in general.Therefore, it does not contain a specific set of provisions for rulemak-

44. Dominique Custos, Autorit6s Ind6pendantes de R~gulation Am6ricaines etAutorit6s Administratives Frangaises, 20 Politique et Management, 66 (2002).

45. Infra VI. 1.

2006] 623


ing conducted by IRAs. Under the APA, 4 6 the procedure of adoption ofa regulation pursuant to a grant of legislative rulemaking authorityvaries depending on the type of rulemaking, not on the independentor executive nature of the agency involved. Informal rulemaking47

and formal48 are the two sub-procedural forms which apply whenproceedings are not exempted from the APA's proceduralrequirements.

Informal rulemaking is the basic model which is applicable bydefault. In the informal rulemaking, the proceedings go throughthree phases: notice, comment and publication. It is considered 'one ofthe greatest inventions of modern government.'49 The first phase hasan informational purpose: the agency apprises the public that it in-tends to promulgate a rule. To this end, it publishes a 'notice ofrulemaking'50 in which it indicates the legal basis of the proceedingsand presents the proposed rule or the issues involved. With this re-quirement, American rulemaking process is initiated with trans-parency, although the APA does not deal with what occurs prior tothe publication of the notice of intended administrative action. 51

Since the 1990s, new information technology serves as a tool for en-hanced transparency in the form of e-rulemaking. 52 The second stepof the informal rulemaking process is a comment phase during whichthe public submits 'written comments'53 to the agency's contemplatedrule. It symbolizes the participatory characteristic of American infor-mal rulemaking which is indicative of a relaxed command-and-con-trol approach to rulemaking and calls to mind a kind of congressionaldebate without verbal sparring. The effective participants are theregulated industries and other interest groups. The third phase is adecisional and explanatory phase whereby the IRA issues the finalrule along with "a concise general statement of basis and purpose."54

However, due to the transfiguration of informal rulemaking by thehard look review,55 this last phase has become a time-consuming and

46. The APA is the general source of procedural rules applicable to the IRAs. Theenabling statute of each IRA may supplement this general set of rules.

47. It is also referred to as or notice-and-comment rulemaking. 5 U.S.C.A. 553.48. 5 U.S.C.A. 553 (c).49. See Kenneth Culp Davis, Administrative Law Treatise § 6.15, at 283 (Supp.

1970).50. 5 U.S.C.A. 553 (b). The notice of proposed rulemaking or NRPM is published

in the Federal Register.51. "Much, if not most, of the work takes place prior to the publication of the

NPRM." Cary Coglianese, E-rulemaking Information Technology and the RegulatoryProcess, 56 Admin. L. Rev. 353, 358 (2004).

52. See Cary Coglianese, supra note 51 at 54; Cary Coglianese, Stuart Shapiro,Steven J. Balla, Unifying Rulemaking Information: Recommendations for the NewFederal Docket Management System, 57 Adm. L. R. 621 (2005). Beth Simone Noveck,The Electronic Revolution in Rulemaking, 53 Emory L.J. 433, 470-471.

53. 5 U.S.C.A. 553 (c).54. Id.55. Infra VI. 3.

624 [Vol. 54

2006] RULEMAKING POWER 625

meticulous exercise of rational justification of the given decision. Theso called "concise statement" can now stretch several tens of pagesbecause the agency must not confine itself to the articulation of itsreasoning but must also address the major objections raised in thecomments. The exigencies judicially imposed on the writing of thestatement of a rule by an American IRA seem to be unparalleled. Inparticular, they clearly contrast with the exceptional nature of the'motivation'56 requirement in French administrative law. They alsoremain distinct from the duty to provide reasons for their interven-tion imposed on European Union institutions:5 7 even though theCommission engages into a relatively thorough explanation, it is notrequired to discuss alternate options that might have been submittedby interested parties.

Because the advent of the new information technology facilitatesthe resort to public electronic consultations by other IRAs over theworld and the European Commission, the participation afforded inthe American rulemaking runs now the risk of being overlooked.However, when it was introduced in 1946 in the executive as well asin the executive agencies it clearly stood out as its openness to thepublic at large and its sophistication contrasted so manifestly withthe mandatory or optional consultations of specific institutions thatwere required from administrative decision-makers elsewhere at atime when the U.S were the only country that could showcase IRAs.Even now, the participation voluntarily allowed by other IRAs andthe European Commission since the 1990s does not quite comparewith a requirement imposed by a statute such as the APA since 1946.First, foreign IRAs may decide to discontinue their practice. Second,participants have no cause of action in law against the discontinu-ance or the shortcomings of such a practice. Lastly, the appreciationof the rulemaking power of American must heed the fact that theAPA applies to both executive and independent agencies. Conse-quently, the detected elements of transparency and participation donot distinguish American IRAs from their executive counterparts.Comparatively, the participatory practice promoted by French IRAsappeared to originally differentiate their rulemaking proceedingsfrom that of the rest of the administrative world until ministries em-braced the practice.

Even though the APA sketches out the three steps of informalrulemaking, its language, if taken literally, affords the agency a cer-tain degree of procedural flexibility for the exact design of each

56. The 'motivation' is the procedural requirement consisting in the statement ofthe factual and legal reasons for issuing the regulation or the order. In rulemakingproceedings, it is exceptionally required as for example in the case of rules by profes-sional bodies. Under the French Act of July 11, 1979, it is mandatory in case of anadverse individual decision, which in the U.S. would be considered an adjudication.

57. Art. 253 of the Treaty of the European Community.


phase. Thus, it appears to be informal. In contrast, formal rulemak-ing is tightly defined. It is called formal because it borrows severalfeatures of the formal adjudicatory process. Instead of the commentsand the concise general statement, a hearing over which administra-tive law judges53 or the commissioners preside is held by the agency.To ensure decisional independence59 and impartiality, administra-tive law judges, as agency employees, are structurally separated fromthe rest of the personnel60 and enjoy special career guarantees.6 1

In addition to documentary evidence, parties resort to testimonyand cross-examination to adduce proof of their arguments. The recordproduced at the hearing is the exclusive record for the issuance of thefinal rule. Off-the record communications with outside parties areprohibited to officers presiding over or participating in the decisionmaking. Thus, formal rulemaking is, like adjudication, an oral proce-dure although it may exceptionally and partially take a writtenform.6 2 In fact, the possibility of restriction to documentary evidenceconstitutes a departure from the typical trial-like administrative pro-cedure. Other dissimilarities include a relaxed requirement of sepa-ration of adjudicatory functions from investigative and prosecutingfunctions. The administrative law judges, who must observe the exparte communication prohibition within the agency when engaging inthe most stringent model of formal adjudication,6 3 are exempt fromthis aspect of the requirement in a formal rulemaking. They are al-lowed to enter into such consultations with the very staff membersdefending the agency's position in the proceedings over which they

58. Administrative law judges (ALJs) are to be differentiated from Article IIIjudges, the only federal judiciary which reviews agency action including rules derivedfrom formal rulemaking. ALJs are appointed pursuant to 5 U.S.C. 3105. They makethe recommended or initial decision which is reviewed by the agency. They must belicensed lawyers with a seven-year experience, including two in an agency. See C.Koch Administrative Law and Practice § 6.4 (1985). Unlike Article III judges, ALJsmay not constitutionally impose imprisonment as a penalty for violation of a statuteor regulation or consider felony cases.

59. In Ramspeck v. Federal Trial Examiners Conference, the Supreme Courtfound that Congress intended ALJ's to be "a special class of semi-independentsubordinate hearing officers". Ramspeck v. Federal Trial Examiners Conference, 345U.S. 128 (1953).

60. Administrative law judges serve in a separate office and are under no supervi-sion within the agency except the administrative supervision exercised by the ChiefAdministrative Law Judge.

61. A professional merit selection of applicants is made through a competitive ex-amination administered by the Office of Personnel Management (independent agencywithin the executive branch). Appointment is made on the basis of a list drawn by theOPM and not subject to a probationary period. Salary-related disputes or disciplinarymeasures are the responsibility of a distinct agency, the Merit Systems ProtectionBoard, which must hold a hearing. Discharge is possible only upon a showing of goodcause.

62. 5 U.S.C.A. 556 (d): when it is not prejudicial to parties' interest, written sub-missions may be substituted for oral testimony but cross-examination remainsavailable.

63. Infra V. 2.

626 [Vol. 54

2006] RULEMAKING POWER 627

preside. 64 As a whole, formal rulemaking is a hybrid proceduralmodel: 'highly individualist from one perspective (thus strong proce-dural and participatory claims), yet polycentric and non-adversaryfrom another.'65

Formal rulemaking applies only if there is a clear indication ofcongressional intent in this regard.66 Ratemaking falls within thelimited scope of application of the formal rulemaking procedure. In-deed, because of the cumbersome nature of the procedure agenciestend to avoid using it if the language of their enabling statute sup-ports such strategy. However, with respect to the availability of for-mal rulemaking, the general normative power of American IRAsdiffers from that of their foreign counterparts. IRAs elsewhere em-ploy rulemaking tools that are limited to procedures more or lessreminiscent of legislative proceedings. When they engage in rulemak-ing proceedings American IRAs utilize procedural means that eitherespouse the initiative-discussion-decision steps typical of a delibera-tive institution or an attenuated trial-type process. It follows that for-mal rulemaking, in its very principle, seems to be specific to theAmerican IRAs. If one pursues the comparative inquiry, one findsthat foreign IRAs like American IRAs can avail themselves of a regu-latory polycentrism which makes them independent rule-makers.But, as a result of this re-distribution of rulemaking power outsidethe sphere of the Executive branch, American IRAs appear to bemore broadly empowered than their foreign counterparts. This is truenot only because of the substantive breadth of the authority vested inthem but also because of the procedural diversity made available tothem. On the other hand, among the American agencies, the signifi-cance of the delegated power and the dualism of procedural forms ofrulemaking are not specific to the IRAs. This rulemaking proceduralversatility is equally available to American executive agencies. Infact, the availability or the lack of a plurality of rulemaking tools foragencies denotes different conceptions of rulemaking, depending onwhether a domestic theory of administrative law acknowledges botha pure and a hybrid type of rulemaking or accounts only for a puretype.67

64. "Unlike adjudications, rulemaking proceedings are generally not accusatory;consequently, there is less need to isolate the decision makers from a potentially ad-versary staff in order to assure fairness to the accused": Ernest Gellhorn, RonaldLevin, Administrative Law and Process, 1997, 317.

65. Peter Strauss, at 225. Thus, the formal rulemaking model appears to be simi-lar to that of initial licensing. See infra V. 2.

66. United States v. Florida East Coast Railway Co., 410 U.S. 224 (1973).Under 5 U.S.C.A. 553 (c) formal rulemaking must be used "when rules are required bystatute to be made on the record after opportunity for an agency hearing".

67. For instance, ratemaking, under French administrative law falls under thesame rulemaking category than the provisions regulating other aspects of industryconduct.

THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol. 54

Beginning in 1966, APA requirements relating to rulemakinghave been supplemented by a legislation which like the APA, gener-ally applies to all agencies. This supplementary legislation either pro-motes transparency, or cost-benefit analysis of administrative action.Towards the first end, IRAs are required to make their records avail-able to satisfy the right of information enjoyed by the public,68 to fol-low specific procedures when soliciting advice.69 In pursuance of thesecond goal, they are mandated to develop information on thepaperwork burden generated by their rules,70 to reduce the regula-tory burden on small businesses,' to assess the environmental im-pact of certain regulations. 72 However, one post-APA statute, bytargeting multi-member agencies exclusively affects the independentagencies rulemaking processes. The Government in the Sunshine Actof 197673 demands that multi-headed agencies hold open meetings.Thus, this statute introduces an additional layer of openness and op-portunity for public participation to rulemaking undertaken by IRAs.Nevertheless, the subsequent avoidance behavior adopted by com-missioners doing their utmost to reduce the number of meetings cov-ered by the act, is sufficient indication of the inhibitions caused by itsenactment. Moreover, despite their contribution to the democratiza-tion and rationalization of administrative action, these statutes havehad a cumulative side-effect. The additional obligations thus imposedon rule-makers by Congress contribute to the ossification, 74 whichplagues the independent and executive agencies rulemaking processindiscriminately. The independence attribute is powerless to sparethe IRAs such a burdensomeness or rigidity.

V.2. Comparison with adjudicatory powers of IRAs

Under the APA, adjudication constitutes the other proceduralmode of administrative action. In practice, although rulemakinggrants can be traced to 1789, until the 1970s agencies substantially

68. Freedom of Information Act of 1966, Pub. L. No. 89-554, 80 Stat. 383 (1966);Electronic Freedom of Information Act Amendments of 1996, Pub. L. No. 104-231, 110Stat. 3048 (codified at 5 U.S.C. § 552 (Supp. II 2005)).

69. Federal Advisory Committee Act of 1972, Pub. L. No. 92-463, 86 Stat. 770(1972) (codified as amended at 5 U.S.C. App. 2 §§ 1-16 (2005)). The Act purports tocombat agency capture due to the over-representation of certain interests in advisorycommittees.

70. Paperwork Reduction Act of 1980, Pub. L. No. 96-511, 94 Stat. 2812 (1980)(codified at 44 U.S.C. §§ 3501-521 (2005)).

71. Regulatory Flexibility Act of 1980, Pub. L. No. 96-354, 94 Stat. 1154 (asamended by SBREFA (1996) at 5 U.S.C. §611 (2005).

72. National Environmental Policy Act of 1969, Pub. L. No. 91-190, § 102, 83 Stat.852 (1970) (codified at 42 U.S.C. § 4332 (2005).

73. Government in the Sunshine Act of 1976, Pub. L. No. 94-409, 90 Stat. 1241(1976), (codified at 5 U.S.C. § 552b (2000).

74. E. Donald Elliot, Remarks at the Symposium on "Assessing the Environmen-tal Protection Agency After Twenty Years: Law, Politics, and Economics," at DukeUniversity School of Law (Nov. 15, 1990).

628

RULEMAKING POWER

resorted to adjudicatory procedure to conduct their policies. To besure, the organizational scheme of the independent agencies was de-signed with the adjudicatory function in mind."75 The domination ofrulemaking as a favorite regulatory tool occurred in response to aheavy advocacy by scholars, judges76 and other commentators77

stressing its superiority and urging agencies to systematically utilizeit. The shift, which affected both categories of agencies, stemmedfrom considerations of fairness and efficacy of rulemaking attached toits general and prospective characters. However, the increasing roleof IRAs as rulemakers poses the question of coordination of the over-all federal rulemaking activity by the President.78 Moreover, the sub-sequent ossification79 of the informal rulemaking process hascompromised the expectations attached to such a selection of regula-tory vehicle.

Two IRAs in particular resisted that trend for several decadesdevising policy through adjudication: the FTC and the NLRB. It isonly in the 1960s that the FTC, first cautiously in 1962, then aggres-sively from 1964, resorted to legislative rulemaking.80 The NLRBeventually turned to rulemaking in the 1970s and similarly employ-ing caution at first (in 1970) and firmness since 1987.81

To be fully assessed, the substitution of rulemaking for adjudica-tion as a preferred method of regulation must be examined againstthe backdrop of a comparison of the respective procedural modes. Sec-tion 551 (7) of the APA defines adjudication as agency process for theformulation of an order. The meaning of an order itself is articulatedin a residual manner under 551 (6): 'the whole or a part of a finaldisposition . . . of an agency in a matter other than rule making'.Concretely an order may take a positive form such as that of theaward or a license, or a negative form such as the infliction of a sanc-tion or a denial of request. The APA implicitly distinguishes a formaland an informal adjudicatory procedure. From a technical stand-point, informal rulemaking proves to differ from formal adjudication

75. P. Verkuil, The Purposes and Limits of Independent Agencies,1988 Duke L.J.257, 263 (1988).

76. United States v. Florida East Coast Railway 410 US 224 (1973).77. The main advocates were James Landis and Judge Henry Friendly. James

Landis, Report on Regulatory Agencies to the President-Elect, 22 (1960); Henry J.Friendly, The Federal Administrative Agencies, 5-6 (1962). For additional references,see Thomas W. Merill, Kathryn T. Watts, at 546-547 and accompanying notes.

78. P. Verkuil, supra at 265.79. Infra VI. 3.80. In 1973 the FTC's claim of legislative rulemaking authority was vindicated by

the courts. Nat'l Petroleum Refiners Ass'n v. FTC, 482 F. 2d 672, 674 (D.C. Cir. 1973).Thomas W. Merill, Kathryn T. Watts, at 549-557.

81. Its efforts to assert its legislative power were implicitly and explicitly upheldby judicial opinions. Implicitly: Wyman-Gordon, 394 U.S. 759 (1969); Explicitly: Am.Hosp. Ass'n v. NLRB, 499 U.S. 606, (1991). Thomas W. Merill, Kathryn T. Watts, at465-570.

2006] 629


but formal rulemaking resembles formal adjudication. Consequently,the evolution of policymaking methodology consisted in the replace-ment of formal rulemaking by informal rulemaking.

The APA scarcely provideS82 for informal adjudication althoughit covers a significant part of the adjudicatory proceedings. 3 Whendenying a request, the agency must meet only two requirements: itmust give prompt notice of the denial to the interested person and abrief statement of the decision's grounds. Parties rely on the Due Pro-cess Clause to supplement the paucity of these legislative proceduralexigencies. Comparatively, the APA's provisions governing the formaladjudication are detailed. 84 Modeled after a court trial, they greatlycontrast with those devoted to informal rulemaking but exhibits simi-larities with those dealing with formal rulemaking. IRAs must resortto formal adjudication 'in every case of adjudication required by stat-ute to be determined on the record after opportunity for an agencyhearing.'85

As in the case of formal rulemaking, the key procedural featurein both cases, is a hearing conducted by an Administrative LawJudge or the commissioners. With the IRA being assimilated to acourt, parties can avail themselves of means of argumentation typicalof a judicial proceeding. In particular, impartiality is sought througha separation of functions and a preservation of the on-the-recordcharacter of the proceeding.

In order to guarantee the adjudicatory decision-maker's indepen-dence within the agency, section 554 (d) (2) sets out two provisions.First, the officer presiding at the reception of evidence 'may not beresponsible to or subject to the supervision or direction of an em-ployee or agent engaged in the performance of investigative or prose-cuting functions for an agency.' Second, 'an employee or agentengaged in the performance of investigative or prosecuting functionsfor an agency in a case may not, in that or a factually related case,participate or advise in the decision, recommended decision, oragency review . . . , except as witness or counsel in public proceed-ings.' Impartiality is further served by two other provisions86 prohib-iting off-the-record conversations 'relevant to the merits of theproceeding' between presiding officers and 'interested persons outsidethe agency.'

This sophisticated procedure is not universally applicable to allformal adjudications. In fact, beside the general model of on-the-re-cord adjudication, two other models may be detected in the APA.

82. 5 U.S.C. 551 (e).83. Most benefactory programs are administered through informal adjudication.84. 5 U.S.C. 554, 556-557.85. 5 USC 554 (a).86. 557 (d) (1) (A) and (B).

630 [Vol. 54

RULEMAKING POWER

Thus, procedural requirements are alleviated when the agency en-gages into an initial license process87 or determines the validity ofclaims for money or benefits. 8 Conversely, the APA is more demand-ing when the agency issues license sanctions.89 The highly adver-sarial character of such a proceeding justifies two additionalguarantees for the prosecuted parties. Not only are they entitled towritten notice of the impugned facts or conduct90 but also they havean'opportunity to demonstrate or achieve compliance with all lawfulrequirements.'91

V.3. Hierarchy of norms

Three series of observations can be made. First, regarding theirrelationship with statutes enacted by Congress, rules issued by IRAspresent a lesser legal value than the congressional rules. They mustin fact conform not only to the relevant statutes but also to the Con-stitution and the case-law.

Second, as to reciprocal relationship among the regulations pro-duced by IRAs, because IRAs are not structured as a hierarchicalbranch of government, there is no hierarchy between the regulationsproduced by them. All the products of IRAs' legislative rulemakingshare the same legal status. Compatibility among those rules resultsfrom voluntarily coordination among agencies.

Third, the place of the binding norms formulated by IRAs rela-tive to the executive orders promulgated by the President is contro-versial.92 At first sight, it can be easily stated: due to theirindependence, IRAs, unlike executive agencies, are not subject topresidential pronouncements. Nevertheless, the claim for a unitaryPresidency that would incorporate executive as well as independentagencies, a certain realism in view of the implications of the Presi-dent's responsibilities in wartime and other exceptional circum-stances, challenge in whole or in part this apparently easydetermination.

87. Under 5 U.S.C. 554 (d) (A), the issuance of initial licenses is exempt from thetwo prohibitions relating to separation of adjudicatory functions from investigativeand prosecuting functions. Moreover, section 556 (d) allows for an exception to theright to oral evidence. Lastly, thanks to section 557 (b) (1), responsible members ofstaff instead of administrative law judges may recommend a decision.

88. Section 556 (d) allows the agency to limit the submission of evidence, in partor in all, to written submissions as long as the affected party is not prejudiced.

89. Such as the withdrawal, the suspension of a license.90. 5 U.S.C. 558 (c) (1).91. 5 U.S.C. 558 (c) (2).92. Infra VI. 1.

6312006]1


VI. CONTROL OF THE RULEMAKING POWER OF IRAs

The independence of IRAs is limited by the influence of the politi-cal branches of government and the regulated industries as well as byjudicial review.

VI.1. Presidential and congressional oversight

Congress as well as the President exerts political control overIRAs. The techniques employed for congressional oversight of inde-pendent agencies are similar to those used over executive agencies.But Congress's attempts to influence IRA action are made with a par-ticular sense of entitlement arising from the view that these agenciesconstitute its arms in confrontations with the President. Participa-tion in the appointment of commissioners, either through the Presi-dent's consultations with senators prior to nomination, or throughconfirmation after nomination, gives Congress a determining role inthe designation of IRAs. Once the IRA's membership has been deter-mined, congressional oversight may be as drastic as a reduction ofthe scope of the delegation to the agencies or a termination.93 Butordinarily, authorization, appropriation, regulatory review and inves-tigation furnish the means of formal congressional oversight.

Periodical authorization of a maximum level of expenditures asopposed to permanent authorization and annual appropriation weighsignificantly on agencies' activities.94 These congressional ritualswhich mobilize substantial agencies' resources, as they may result ina sanction or recompense for past action, force agencies to carefullyjustify their request for funding. Congress may include prohibitionsand instructions with respect to future action in the appropriationsbills.

Regulatory oversight may target a particular administrative ac-tion and during the 1970s legislative veto became a favorite tool inthis regard. Legislative veto allows Congress to review and nullify byresolution a rule before it becomes effective. However, a formalisticapproach to the bicameralism and presentment requirements led theSupreme Court to constrain the use of such tool, in 1983.95 From thenon, to constitutionally resort to legislative veto Congress must ensureinvolvement of both houses and of the President. If the Chadha opin-ion forced Congress to follow the key-principles of enactment of astatute when wielding regulatory oversight it did not deter or evendiminish its overseeing zeal. Indeed, the 1996 Congressional Review

93. The Aeronautics Board was abolished in 1978. The ICC was terminated in1995 and replaced by the STB.

94. The Congressional Budget Office plays a key-role in this process.95. INS v. Chadha, 462 U.S. 919 (1983)

632 [Vol. 54

RULEMAKING POWER

Act of 1996 provides that, before their rules can take effect,96 agen-cies must submit them to each House along with a cost-benefit analy-sis. In creating this quasi-systematic legislative filter, the Act addsanother procedural step to that articulated by the APA and contrib-utes to a cumbersome decision making. Apart from cost-benefit con-cerns, Congress may also pass or attempt to pass a statute designedto substitute its own judgment to that of an agency on a specific regu-latory policy question.97

Lastly, investigations conducted by congressional committeesconstitute another powerful device of formal political supervision towhich the submission of an annual report demanded from the foreigncounterparts of the American IRAs pales into insignificance. Thepublic legislative hearings, in which administrative action is care-fully scrutinized and a commissioner or staff member is plied withquestions, symbolizes the unparalleled sophistication of Americancongressional control over administrative action, in general and byIRAs, in particular. Individual oversight by representatives or sena-tors also takes place. Through correspondence or meetings, the latterconvey the concerns of their constituents.

The President resorts to a myriad of political pressures to keep acheck on IRAs. An abundant literature describes the diverse methodsof political influence98 over IRA's decision making.99 It seldom occursin adjudication but frequently in rulemaking.

The examination of presidential oversight from a legal stand-point is more complex. Despite their location outside the ExecutiveBranch, IRAs are subject to presidential oversight. However, the ex-tent of such a control is a matter of contention and therefore,uncertain.

The availability of certain legal presidential powers furnishes asufficient basis to determine the existence of such a control. Thepower of nomination 00 is an effective statutory tool of control which

96. Contract with America Advancement Act of 1996 or Congressional ReviewAct, codified at 5 USCA && 801-08. 'Major rules', i.e. rules whose implementationentail substantial costs, cannot take effect during the sixty days afforded Congress toperform its review. See 5 U.S.C.A. 801 (a)(3). Under 5 U.S.C.A. 801 (a)(4),' Except fora major rule, a rule shall take effect as otherwise provided by law after submission toCongress.'

97. The fairness doctrine and equal opportunity offer good examples of this con-gressional posture in the case of the FCC.

98. This may occur "either through the public submission of views or via sometype of off-the-record contact", Marshall J. Breger, Gary J. Edles 52 Admin. L. Rev.1111 (2000).

99. Illustrative of this literature are: Angel Manuel Moreno, Presidential Coordi-nation of the Independent Regulatory Process, 8 Admin.L.J.Am.U. 461 (1994)); PaulR. Verkuil, Jawboning Administrative Agencies: Ex Parte Contacts by the WhiteHouse, 80 Colum.L.Rev. 943 (1980)

100. In particular, the President appoints the chairperson of the independentagencies.

2006] 633


allows the president to choose commissioners who share his regula-tory philosophy while abiding by the bipartisanship rule.

Litigation furnishes another legal arm for oversight to the Chiefof the Executive branch. IRAs do not have an exclusive litigating au-thority. In quite a determining fashion, this responsibility also restswith the Solicitor General within the Department of Justice, which isan executive agency. Although this official does not control all IRA'slitigation, the authority to petition the Supreme Court is centralizedin him.' 0 Thus, through legal arguments, he has the ability to im-pose the unitariness of the executive branch. The litigation model atthe appellate level being diffuse, independent agencies may submittheir own brief before a court of appeals.102

Moreover, in 1939, statutory amendments made it clear thatIRAs were required to obtain clearance from the President for theirbudget and legislative proposals before submitting them to the Con-gress.103 As a result, although some exceptions were introduced inthe 1970s,10 4 the presidential Office of Management and Budget isallowed to sift through the IRAs' proposals and endorse, correct orreject them in consideration of the President's directives of themoment.

Notwithstanding these legal powers, the controversial questionof the applicability of executive orders to independent agencies blursthe limits of IRAs' independence. Although the principle of indepen-

101. There are some exceptions. Neal Devins, Unitariness and Independence: So-licitor General Control over Independent Agency Litigation, 82 Cal. L. Rev. 255, 275(1994): "Two independent agencies, the Interstate Commerce Commission (ICC) andthe FTC, may represent themselves before the Supreme Court whenever the SolicitorGeneral refuses to defend their position. This authority may also extend to the Na-tional Labor Relations Board (NLRB) and the Tennessee Valley Authority (TVA). Fi-nally, through the Hobbs Act, specified agencies may seek certiorari regardless ofSolicitor General approval, but only to defend an administrative order. Hobbs Actcases are rare, for the agency can break free from the Solicitor General only whenthere is an irreconcilable divergence of views. In those cases, the agency and the Solic-itor General each appear before the Court as named parties."Hobbs Act: ch. 1189, 64 Stat. 1129 (1950) (at 18 U.S.C. §§ 2341-2351 (1988) or 28U.S.C. 28 U.S.C. § 2348 (1994). The FCC, the NRC and FMC are among the IRCsbenefiting from this latter exception: Marshall J. Breger, Gary J. Edles, Establishedby Practice: the Theory and Operation of Independent Federal Agencies, 52 Admin. L.Rev. 1111, 1154.

102. "The SEC, Equal Employment Opportunity Commission (EEOC), and FERChave authority to litigate in the courts of appeals, and the CPSC has authority tolitigate in the district court": Marshall J. Breger, Gary J. Edles, Supra at 1154.

103. This requirement was originally imposed by the Budget and Accounting Act of1921. See Act of June 10, 1921, ch. 18, §§ 207, 213, 42 Stat. 20, 22-23 (codified asamended at 31 U.S.C. § 1108 (1994)); See Reorganization Act of 1939, Pub. L. No. 76-19, § 201, 53 Stat. 565. Marshall J. Breger, Gary J. Edles, Supra at 1151-1152.

104. A diversity of exceptions concerns the SEC, FERC, CFTC. Moreover, the Fed-eral Maritime Commission (FMC), FTC, Nuclear Regulatory Commission (NRC),STB, and U.S. International Trade Commission have developed the practice to ex-empt themselves from this requirement without any statutory basis. Marshall J. Bre-ger, Gary J. Edles, Supra at 1152-1153.

[Vol. 54634

RULEMAKING POWER

dence seems to naturally shield the IRAs from the supervisory con-trol of the President in the issuance of rules,105 the claim has beenrepeatedly made that the President could legally subject them to hismethodological instructions in this regard. Recently, an extensivehistorical study concluded that the constant rejection by successivepresidents of the attempts to full independence had prevented theformation of a customary rule upholding the so-called indepen-dence. 06 Other scholars 0 7 as well as the DOJ and the ABA108 havecontended that the limitation of the presidential removal power didnot entail an immunity from presidential oversight of the substanceof the IRAs' rulemaking as long as it remained short of a blunt substi-tution of decision. Such a conception would deprive the President of apower to remove IRAs' commissioners and to override their decisionsbut would entitle him to supervise rulemaking proceedings by IRAs.As it suggests more a difference of degree than that of nature be-tween executive and independent agencies, the successive and recentreiterations of its formulation leave the IRAs in an unstable positionin the American administrative government, despite the judicial vali-dation of the delegation of power and the limited removal power.

VI.2. Control by regulated industry

A complete assessment of independence must include the influ-ence of the economic forces targeted by their regulation. According tothe regulatory capture thesis, independent agencies are said to comeunder the influence of the regulated industries. This phenomenon isanalyzed either as an inherent feature of regulation 09 or an inevita-ble phase of the typical development. 10 It reflects a broader reality ofany administrative government, that of identification of a given unit- whether executive or independent - with the interests of the partic-ular industry that it regulates. In the U.S. as elsewhere, professional

105. Bernard Schwartz, Administrative Law 19 (3d ed. 1991). In support of thisthesis, two examples may be referred to. President Reagan's requested only voluntaryimplementation of Exec. Order No. 12, 291, 3 C.F.R. 127 (1982) (requiring federalagencies to conduct a Regulatory Impact Analysis) from IRAs. All declined to complywith it. President Clinton's Executive Order No. 12,866, 58 Fed. Reg. 51,735 (1993)requiring federal agencies to conduct cost-benefit analysis exempted independentagencies from conducting this analysis.

106. Christopher Yoo, Steven Calabresi, Anthony Colangelo, The Unitary Execu-tive in the Modern Era, 1945-2004, 90 Iowa L.Rev. 601 (2005).

107. Robert W. Hahn, Cass R. Sunstein, A New Executive Order for ImprovingFederal Regulation: Deeper and Wider Cost-Benefit Analysis, 150 U. Pa. L. Rev. 1489,1496, 1530-1537 (2002); Robert W. Hahn and Mary Beth Muething, The Grand Exper-iment in Regulatory Reporting, 55 Admin. L. Rev. 607, 630 (2003).

108. Peter L. Strauss & Cass R. Sunstein, The Role of the President and OMB inInformal Rulemaking, 38 Admin. L. Rev. 181 app. at 206 (1986)

109. George Stigler, The Theory of Economic Regulation, 2 Bell J. Econ. 3 (1971);Sam Peltzman, Toward a General Theory of Regulation, 19 J.L. & Econ. 211 (1976).

110. Marvel Bernstein, Regulating Business by Independent Commissions, 35-39(1955).

2006]1 635


organizations, interest groups serve as the formal and informal (exparte contact) media of such control. But one characteristic of theU.S. administrative law makes American independent or executiveagencies especially vulnerable to regulatory capture. To the extentthat the regulated companies possess the means to avail themselvesof the participatory guarantees of informal rulemaking, administra-tive procedure itself may be viewed as fostering a disproportionatepower of the industry over the agencies. The transparency legislationwas precisely designed to curb this trend. The rise of citizen groups,the complexity of each of the regulated industries, result in compet-ing strategies of instrumentalization of the agencies, that make thecapture phenomenon a dynamic process.

VI.3. Judicial review

Judicial review of independent agencies' action proves also to es-pouse the features of that of executive agencies' decisions. First, theindependence characteristic does not bear any implication in terms ofstandards of judicial review. What really matters for the determina-tion of the applicable standard of review is the type of question atstake: factual findings, legal determinations or policy questions. Thearbitrary and capricious standard"'1 is of general applicabilitywhereas the substantial evidence 1l 2 and de novo review113 standardshave a limited applicability. Traditionally the scale of judicial defer-ence ascribes a lesser intensity of judicial scrutiny to the arbitraryand capricious test than the substantial evidence test. However, aconvergence has been developing between the two tests. In fact, ineither case, courts engage in an inquiry of the reasonableness of theadministrative decision.

In itself, this textual failure to formulate distinct sets of rulesmay be viewed as indicative of the limited significance of the differ-ence among independence and executive agencies. The unitary visionretained by the APA for the conduct of rulemaking or adjudication iscarried over to the provisions relating to the control of administrativeconduct by courts. Although the validation of the limitation of thePresident removal power attests to the judicial endorsement of theconcept of independence, the caselaw provides a single regime of

111. U.S.C.A 706 (2)(A). The arbitrary and capricious standard is applicable to fac-tual and policy questions in informal rulemaking and to questions of law. Because ofthe shift to informal rulemaking, it concerns the bulk of the independent agencies'intervention.

112. U.S.C.A.706 (2) (E). The substantial evidence standard applies to formal pro-ceedings. It thus concerns the IRAs formal rulemaking power.

113. U.S.C.A. 706 (2) (F). The de novo standard covers factual questions in rarecases of non-adjudicatory action. It thus marginally concerns the IRAs' rulemakingpower.

636 [Vol. 54

RULEMAKING POWER

scope and availability of judicial intervention, regardless of the cate-gory of agency involved.

Thus, the rejection in principle of a public action1 4 which wouldallow an abstract review of regulations applies without distinction toexecutive and independent agencies. Quite significantly, when theSupreme Court refers to the President's responsibility for the execu-tion of the laws to justify its insistence on the case and controversyrequirement," 5 it does not draw any exception for agencies locatedoutside the executive branch. In the same vein, the relaxing of theprinciple through the introduction of an hybrid test, "the injury infact arguably within the interests protected by the statute,"116 en-sures access to administrative justice to public interest groups con-testing independent or executive agency regulatory intervention.

The presumption of reviewability of agency action" 7 enunciatedby courts as well as their elaboration on the two exceptions men-tioned in the APAn 8 do not make any distinction among the differentforms of the administrative government. Similarly, an ALJ's factualdeterminations in a formal rulemaking that involves eyewitness tes-timony or demeanor evidence will be afforded an equally significantweight whether she/he is employed by an agency which is within oroutside the executive branch." 9 Likewise, when examining the out-come of an informal rulemaking, courts observe the same strong def-erence if the interpretation of an ambiguous statutory language isfound to be a permissible construction of the law by an independentor an executive agency.120 The same penetrating probe, so-calledhard look,121 was applied to policy choices made by either category ofagencies by reviewing courts, which nevertheless stressed the illegal-ity of the substitution of judicial judgment for administrative discre-tion. This demanding judicial posture, which so expansivelyredefined the three steps of informal rulemaking as to transform thelatter into a cumbersome hybrid form of administrative action,equally affects executive and independent agencies. This court-man-

114. An exception to the principle is found in qui tam or whistleblower provisionsthat allow private parties to bring suits on behalf of the government as "relators", i.e.,private attorneys general, and grant these parties a share of any monetary recovery.

115. Lujan v. Defenders of Wildlife, 594 US 555 (1992).116. Association of Data Processing Service Organizations v. Camp, 397 US 150

(1970).117. Abbott Laboratories v. Gardner, 387 US 136 (1967. The presumption is based

on 5 U.S.C.A. 701, 702, 704.118. 5 U.S.C.A. 701.119. Universal Camera Corp. v. NLRB, 340 US 474 (1951).120. Chevron, Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984).121. Citizens to Preserve Overton Park Inc. v. Volpe, 401 US 402 (1971); U.S. v.

Nova Scotia Food Products Corp. 568 F. 2d 240 (2d Cir. 1977), Motor Vehicle Manu-facturers' Association v. State Farm Mutual Automobile Insurance Co., 463 US 29(1983).

2006] 637

THE AMERICAN JOURNAL OF COMPARATIVE LAw [Vol. 54

dated paper hearing indiscriminately ossified executive as well as in-dependent administrative action.

Of course, that the IRAs are subject to a judicial check is in fullkeeping with the rule of law. However, the failure to account for anydifference, via some adjustments of the intensity of the court inter-vention, 122 confines the independence of the so-called independentagency to their relationship to the President. In other words, agen-cies, regardless of their official placement in the overall administra-tive structure, appear to be on an equal footing in their relationshipwith the judiciary. Administrative independence does not warrantany specific restraint on the part of the reviewing courts. In light ofthe functional similarities among the two types of agencies, this indif-ference to independence is plausible.

VI.4. Soft-Law Practice

To bypass the stifling effects of the documentary hearing, inde-pendent as well as executive agencies tend to resort to informality. Ina way, this trend is consistent with an entrenched characteristic ofthe American administrative process, which survived the formalityintroduced by the APA and is now reactivated in light of the entan-glement caused by the accretion of procedural requirements. 123 Nego-tiated rulemaking and the use of non legislative rules exemplify thetrend.

Among the statutes supplementing the APA, the NegotiatedRulemaking Act of 1990124 deserves special mention. In fact, it codi-fied a practice that first emerged in labor and environmental regula-tion. Regulatory negotiation, as it is otherwise called, is a processthrough which the agency, the regulated industry and other stake-holders seek a consensus on a proposed rule. Rejecting a command-and-control approach to regulation, it purports to shorten therulemaking proceeding, to increase compliance, to reduce litigation,and to produce better rules. However, it simultaneously deprives theagency of the superiority attached to its nature of public entity,brings the public interest down to the level of private interests. Thus,it creates a context of confusion of status of the respective partici-pants and represented interests at stake, which offers a breedingground to regulatory capture. Nevertheless, the resulting disruptionin the conventional principles remains partial because the negotiated

122. As suggested in Justice Jackson's dissent in Federal Trade Commission v.Ruberoid Co. 343 U.S. 470, 491 (1952): "a determination by an independent agency,with 'quasi-legislative' discretion in its armory, has a much larger immunity fromjudicial review than does a determination by a purely executive agency".

123. Todd Rakoff, The Choice Between Formal and Informal Modes of Administra-tive Regulation, 52 Admin. L. Rev. 159, 162-170, (2000).

124. Negotiated Rulemaking Act of 1990, Pub. L. No. 101-648, 104 Stat. 4970, 6697(codified at 5 U.S.C. §§ 561-570 (1994 & Supp. IV 1998)).

638

RULEMAKING POWER

consensus does not possess any legal force. To acquire binding effect,the rule formulated by consensus must be subject to the notice-and-comment procedure, although it is assumed that it will be the eventu-ally promulgated rule. In law, it may, at the maximum, become theproposed rule published in the Federal Register. Moreover, it is not anew requirement but an option that agencies may ignore. Therefore,negotiated rulemaking may be categorized as soft law and it appearsto introduce an extra step into informal rulemaking. To this extent, itdoes not quite suffer from the same level of ambiguity that the macro-agreements experimented between the Institutions and the indus-tries in environment regulation in the E.U.12 5

The concern for the preservation of the rule-making power ofagencies that can be detected with the American legislator when de-vising new regulatory mechanisms, is also perceptible in other coun-tries. The search for regulatory consensus in lieu of the top-downconventional method echoes that underlying the establishment of theInternet Forum created in France in the early 2000s. However, a sig-nificant nuance exists, in the latter case, the informal process, sym-bolically called, co-regulation, is created outside the agencypossessing rulemaking power,126 whereas, the American negotiationis decided by the agency vested with the normative power although itis presided by an independent conveneer.

Beside the 1990 codified compromise between soft and hard law,agencies make use of some regulatory tools that are listed in theAPA, as a way to regain regulatory flexibility and efficiency. Interpre-tive rules and policy statements are employed towards this end be-cause they are not subject to the notice-and-comment requirement.As they interpret the applicable law or articulate how the agency willwield its discretion, they provide guidelines to which voluntary com-pliance is expected. To be successful in the resort to such a strategy,agencies must formulate and apply these non-legislative rules in anon-binding fashion. Otherwise, these rules run the risk of beingstruck down for subversion of the APA scheme.127 Lastly, apart fromthe opportunities of soft-rulemaking offered by legislation, agenciescan employ non codified informal techniques of their own such as let-ters, speeches, news media interviews, threats of enforcement,presentations at professional meetings to communicate the properconduct to be exhibited by regulated parties.

125. Richard Stewart, A New Generation of Environmental Regulation? 29 Cap. U.L. Rev. 21, 83 (2001).

126. The Telecommunications Regulatory Authority.127. Community Nutrition Institute v. Young, 828 F. 2d 943 (DC Cir. 1987).

20061 639

640 THE AMERICAN JOURNAL OF COMPARATIVE LAW [Vol. 54

rulemaking power of independent agencies

Documents

independent agencies

executive agencies

cabinet agencies

executive regulatory

asmultimember agencies

heinonline license

heinonline pdf

heinonline http