MGMT 209 Ch.6 Administrative Law, FDA, and product safety commission

For informal rule making
when the courts are reviewing a rule, the standard used is was the decision of the agency means previous ruling is invalid because it was made on unreasonable grounds or without any proper consideration of circumstances. Agencies have to show there is a rational reason for decision

- constitutional status of administrative agencies
- the ___________ of legislative powers was often challenged constitutionally especially during the New Deal
- powers given to administrative agencies that the judicial, executive, and legislative branches do not handle

The lifting of government restrictions on business, industry, and professional activities

do away with the governmental regulation
1) Advocates of this feel that business is better off without the governmental regulation
2) Market will be more efficient
3) Agencies create more problems than they solve
4) More popular under Republican administrations

- these agencies came about in the socially conscious era
- cover more than one industry
- federal trade commission (ftc), national labor relations board (nlrb), environmental protection agency (epa)
- not usually a victim of regulatory capture
- has the greatest impact on the OVERALL legal environment of business

- economy-wide regulatory agency that prevent unfair or deceptive advertising
- created during the HISTORICAL era

- economy-wide regulatory agency that regulates labor-management relations in all industries
- came about as a new deal agency (FDR)

the theory that industries dominate the agencies that regulate them

economy-wide regulatory agency

The US federal agency with a mission to protect human health and the environment

came about during the socially conscious era

economy-wide regulatory agency

a federal agency designed to regulate and enforce the provisions of Title VII

socially conscious era

economy-wide regulatory agency

came about during the socially conscious era

- Is an executive order, from Congress, or can be both
- Defines purpose of agency
- Enforcement power is specified
- Empowers the agency to create rules and regulations
- Often power is stated in broad terms
- Gives great flexibility to the agency

- Federal agencies that are part of the executive branch but outside the structure of cabinet departments
- Their heads typically serve at the pleasure of the president and can be removed at the president's discretion
- DEPENDENT (some are independent) agencies

- part of the executive branch
- appointed by the president and only sometimes has to be confirmed by the senate
- dependent on the president liking your work
- usually created by executive order
- enabling legislation still comes from congress and gives power to executive agencies
- usually called departments or administrations but can have other names such as "division"
- normally one person is in charge
- under direct control of the president

department of labor
- Head is the "secretary of labor"
- can also include several subdivisions such as the wage and hour division

- independent/dependent agencies
- still under presidential control, but it is not under a Cabinet-level position and acts on its own
- set up this way for political reasons

ex. NASA (beginning days) under department of defense
ex. EPA (FDR used it a lot)

agencies in the executive branch of the federal government formed by Congress to help enforce laws and regulations not covered by the executive departments
- created by congress
- boards and commissions
- independent of the president and can be extremely powerful
- members are appointed by the president
- receive advice and consent of congress
- appointed for terms
- only be removed with cause
- supposed to be non-political
- restrictions on make-up
- usually cannot be overly dominated by one political party (bare majority only)
- congress controls the money and so controls the agency

1) Agency identifies need for rule or regulation
2) Proposal rules are promulgated
3) "Notice of proposed rule-making" is published in the Federal Register
a) Must include
i) Hearing dates
ii) Time
iii) Place
iv) Nature of the proceedings
b) Legal authority
c) Must include description of the issues and subjects involved
d) Must give minimum of 30 days notice prior to the proceedings but can be longer
4) Formal trial-like hearing
a) Record made of oral evidence/testimony
b) Can introduce exhibits
c) Can call expert witnesses subject to cross-examination
d) Interested party can delay with long drawn out hearings
e) Some have taken over 10 years but that is rare.
5) Final draft published and can become effective no sooner than 30 days

- these procedures are required for substantive rules- change over time
- mandated by the APA
- in the interest of society to develop a record of the proceeding (ex. FDA approval of new drugs)
- can be used when expected to generate information that the agency could otherwise not obtain
- agencies sometimes try to hide substantive rules as interpretive or procedural to avoid this rule making process

- product safety standards
- CPSC can ban a product completely without a hearing
- the CPSC petitions an appropriate federal district court
- court can: issue seizure for all of the outstanding products and call for recall, repair, replacement, or refund

- type of agency that only goes after specific industries
- ICC, SEC, FCC
- tend to lose sight of the their mission over time
- interest is that regulation is done y individuals with expertise and often these are business insiders
- the regulated industry becomes in charge (fox in charge of hen house)
- industry also has the greatest interest in the regulation
- industry better represented and citizens or public lose out
- predominant in first half of century

industry specific regulatory agency

created to regulate railroads- huge trust monopolies-leads to antitrust laws

industry specific regulatory agency

regulates the sales of stocks and bonds

created to regulate securities industry- FDRs time

industry specific regulatory agency

created to regulate the communication industry

agencies _________ the perspective of the industry to be regulated.

result is that the targeted industry benefits from regulation

acts in favor of the industry

"public interest" is thus ignored

The Federal Trade Commission (FTC) establishes and administers mandatory labeling requirements that affect an apparel firm's product development activities

requires warning labels on products

1) Agency identifies need for rule or regulation
- Public demand
- Congressional mandate
- Industry request
2) Agency promulgates draft of the rule
3) Gives notice as required by APA to public by printing in the Federal Register (daily government publication)
- Includes legal
- Includes terms of the proposed regulation or a description of the issues and subjects involved.
- Public can send in written comments for usually 30 days
- Called "notice and comment" because written comments are normally all that is allowed
- Agency can
- Completely ignore the comments
- Final draft published in Federal Register and takes effect in 30 days
- Result is that the comments can be ignored or agency can take action on the comments

legitimate justification for bringing a civil case to court
- judicial review of administrative agency is found in the APA
- required by Article III of the constitution
- must have adversarial relationship to the agency
- must show: Members of the class that are affected by agencies decision + harmed by agency's decision

requires that an agency's decision be based not just on a scintilla (a tiny trace) of evidence, but on such relevant evidence as reasonable mind might accept as adequate to support a conclusion

since already heard before court usually yields to agency's judgment in technical or scientific matters

receives the lowest judicial review

- laws that automatically expire after a given time
- States, not federal government
- Require periodic review of the agency and may not extend them with new legislation to continue

- Administrative agency is given a "death day" on which it will expire
- Got to state legislature in 6 or 7 years to justify their need to exist and get an extension on time period to operate
- Easier to let something die a natural death
- Agency then must convince the Texas Legislature that it is doing the job expected
- Texas Legislature can either extend it or let it expire on the "death day"

the Supreme Court held that statutory language requiring OSHA to promulgate standards necessary to control health hazards "to the extent feasible" did not mean that OSHA was required to conduct a cost-benefit analysis prior to the imposition of such a regulation.

In order to get agencies to perform cost-benefit analysis,

Congress must be explicit in its language.

where the petitioner was fined $600 for having unsafe working conditions, the Supreme Court ruled that the Seventh Amendment's requirement that jury trial is to be "preserved" in "suits at common law" did not extend to statutory proceedings such as administrative adjudications

Closely regulated industries require no warrant

Investigatory / Enforcement Powers

Hearings are NOT required in an Administrative Regulatory Agency investigation that results in a Penalty

Hazardous industries often have statutes expressly providing for warrantless searches

- EPA had asked for an on-sight inspection of Dow's chemical plant
- Dow Chemical refused the request
- EPA hired a commercial aerial photographer to take photos of the Dow plant
- Dow claimed a violation of its 4th Amendment rights
- Supreme Court held it to be "open field"
- Not an area that Dow could claim to be private
- Government did not use sensory devices that were not available to the public, simply enhanced human vision

reasonable ignorance of a government regulation is not a defense to an agency action

Businesses' ignorance of rule is not a defense against government enforcement

a) Ruled the delegation of legislative power to be unconstitutional
b) Constitutionality of administrative agencies in question

- Confirmed the delegation of legislative powers was constitutional- SC went along with it
- Constitutional in existence and can still be constitutional in actions
People rarely bring up the constitutionality
- Therefore, administrative agencies held to be constitutional

- passed in 1947
- Act of congress through Truman admin.
- Defines procedural rules and formalities for all federal agencies
- Rule book for administrative agencies

- reform; accessibility to the administrative process
1) Federal agencies must make agency information available to" any person"
2) "Any person" can request the records of agency that produced the records
3) Agency can refuse under several exceptions
4) Otherwise agency must comply
5) If no can be hit with court actions to force the agency to comply

1) Agencies headed by two or more presidentially appointed people must hold "every portion of every meeting" in the open
2) Subject to public observation
3) Again there are exceptions and agency can close such meeting by a majority vote, subject to review by the appropriate U.S. district court
4) Day-to-day activities of agency personnel are not covered by the Act
5) Only applies to official business

a law enacted in 1933 to establish codes of fair practice for industries and to promote industrial growth

1) Key piece of New Deal Plan
2) Designed to stabilize falling prices and deter cutthroat competition
3) Used legislative powers delegated from Congress

- 1996
1) Permits Congress to review new federal regulations for at least 60 days prior to their effective date
a) New forum for adversaries to present arguments
b) More time for adversaries to fight regulations
2) Requires agency to prepare guidelines for small businesses in "plain English"
3) If courts feel agency fines are excessive, business can get legal expenses
4) created the National Enforcement Ombudsmen within the Small Business Administration (SBA)
a) Serves as a clearinghouse for comments from small businesses
b) Based on those comments, agencies are rated and result published