Tuesday, May 28, 2013

Chevron Deference and Regulatory Reform

There may be disagreement among scholars concerning the soundness of the Supreme Court's reasoning in its May 20 City of Arlington v. FCC opinion. Nevertheless, many agree that the Court's decision likely will give federal agencies somewhat more leeway in exercising administrative authority because courts are likely to accord the agencies' actions a broader scope of deference upon judicial review.
For my purposes here, the specifics of the City of Arlington case concerning the FCC's authority to set time limits for localities to act on tower siting applications are not important. What is important is that Justice Scalia, writing for the majority, held that so-called Chevron deference applies to agency interpretations of ambiguous statutory provisions concerning the scope of the agency's authority (or, as some put it, the agency's jurisdiction). According to Justice Scalia, the question "is always whether the agency has gone beyond what Congress has permitted it to do, [and] there is no principled basis for carving out some arbitrary subset of such claims as 'jurisdictional.'"
My own sympathies lie with the view espoused by Chief Justice Roberts in his dissent. According to the Chief Justice, "[a]n agency cannot exercise interpretative authority until it has it; the question whether an agency enjoys that authority must be decided by a court without deference to the agency." In other words, "[a] court should not defer to an agency until the court decides, on its own, that the agency is entitled to deference."
As tempted as I am to provide an explanation of why my sympathies, as a matter of law, lie with the Chief Justice, I resist the urge here. What I want to emphasize is that, putting aside the impact on the outcome of any one particular case, the Chief Justice is almost surely correct that the practical impact of City of Arlington will be to expand the power of the federal agencies. This is because when Chevron deference applies, the agency's interpretation of its statutory authority is entitled by the reviewing to "controlling weight." Unless the court finds the agency's interpretation "unreasonable," it must affirm.
Thus, Chief Justice Roberts has a good point when he declares that City of Arlington must be viewed against the backdrop "whether the authority of the administrative agencies should be augmented even further…."
With regard to the FCC, the agency whose authority was actually at issue in the Arlington case, the worry about "even further" augmentation of agency power is real. To support his expansive articulation of Chevron's domain, Justice Scalia relied heavily on the Communications Act's broad grant of general rulemaking authority to the FCC to "prescribe such rules and regulations as may be necessary in the public interest" to carry out the statute's provisions. You may rest assured that the Commission, and its lawyers, now will rely even more heavily than in the past on this general grant of rulemaking authority as they routinely invoke Chevron deference.
So, what, if anything, reasonably can be done, to serve as a check on such augmentation of agency power resulting from City of Arlington?
The answer lies, I think, in sensible regulatory reform measures. Indeed, such reform measures make sense even absent the potential impact of City of Arlington. This is especially so for the FCC which, despite the dramatic changes that have occurred in the past quarter century with the development of competition in most market segments, too often still is governed by an ingrained pro-regulatory disposition that distrusts the marketplace.
With regard to the FCC, here are some regulatory reform measures that could be adopted. None of these would alter the Communications Act's substantive statutory criteria, such as protecting consumers or the public interest, which govern the Commission's decisions. Rather, they are in the nature of process reforms that would have the effect of altering the Commission's decisionmaking framework in a way that makes it less likely that the agency will regulate absent evidence of market failure or consumer harm.
  • Congress could enact legislation along the lines of the "Federal Communications Commission Process Reform Act of 2012," which passed the House in March 2012, but which subsequently died in the Senate. The House bill had many good process reform features, and in testimony at a House hearing in June 2011, I urged adoption of many of the reforms included in the bill that ultimately passed the House. In my view, the most important provisions were the requirements that the Commission analyze any claimed market failure and consumer harm and employ cost-benefit analysis before adopting any new rules. While other measures in the House bill, such as "shot clock" and transparency requirements, were meritorious too, these analytical requirements would force the FCC to engage in a more rigorous economic analysis than it routinely presently does.
  • Congress could revise the forbearance and periodic regulatory review requirements added to the Communications Act by the Telecommunications Act of 1996 so that, in effect, the evidentiary burden is shifted to the Commission to deny regulatory relief. As I proposed in an April 2011 Perspectives paper entitled "A Modest Proposal for Regulatory Reform," this shifting of burden through a deregulatory evidentiary presumption could be accomplished with a modest revision to Sections 10 ["Competition in the Provision of Telecommunications Service"] and 11 ["Regulatory Reform"] of the Communications Act.
For example, the following sentence, or a similar one, could be added to the Section 10 forbearance relief provision: "In making the foregoing determinations, absent clear and convincing evidence to the contrary, the Commission shall presume that enforcement of such regulation or provision is not necessary to ensure that a telecommunications carrier's charges or practices are not unreasonable or unreasonably discriminatory or necessary for the protection of consumers and is consistent with the public interest."
Similarly, a sentence could be added to the Section 11 periodic regulatory review provision which says: "In making the foregoing determination, absent clear and convincing evidence to the contrary, the Commission shall presume that such regulation is no longer necessary in the public interest as a result of meaningful competition between providers of such service."
In neither instance would the substantive criteria set forth for considering regulatory relief be changed. Instead, as explained in my "A Modest Proposal for Regulatory Reform Paper," the revisions would simply establish a rebuttable presumption favoring regulatory relief absent clear and convincing evidence to the contrary. And, as I have made clear, regulatory relief under the forbearance and periodic regulatory review provisions should be available to all entities regulated by the Commission.
  • Congress could also amend the Communications Act's provision granting the Commission general rulemaking authority that was relied on so heavily by Justice Scalia in City of Arlington. Section 201(b) provides that the Commission "may prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this Act." [Query whether this sentence was ever intended to grant the FCC general rulemaking authority beyond Title II ["Common Carriers"] because it is located in a particular section of Title II rather than Title I's general provisions.] In any event, a proviso could be added at the provision's end to the effect that, before adopting a rule, the "the Commission must determine, based on a showing of clear and convincing evidence presented in the rulemaking proceeding, that marketplace competition is not sufficient adequately to protect consumer welfare." This would simply require the Commission to meet a higher evidentiary burden before adopting a new regulation.
  • Congress could add a general sunset provision to the Communications Act that provides that all rules will expire automatically after five [or X] years absent a showing by the Commission, based on clear and convincing evidence compiled after public notice, that it is necessary for such rule to remain in effect to accomplish its original objective or objectives.
  • Congress could adopt legislation specifying that the independent regulatory agencies, such as the FCC, are not entitled to Chevron deference upon judicial review of their action because they are not politically accountable in the same way as the executive branch agencies, such as the EPA. Chevron itself involved review of an EPA interpretation of the Clean Air Act, and in its decision announcing the Chevron deference doctrine, the Court relied heavily on the fact that EPA, an executive branch agency, was politically accountable to the President. In two separate law review articles published in the Administrative Law Review, I have suggested that the actions of the independent agencies not receive the same degree of deference on review as those of the executive agencies. The articles are here and here.
Again, these are process-oriented regulatory reform measures that should be considered in any event with respect to FCC reform. But the Supreme Court's City of Arlington decision ought to provide an impetus for Congress to take up the reform mantle in a serious way, at least with process-oriented reforms such as those suggested here.

You might say it's too bad Congress needs such an impetus to act. But given one, it should move forward with some urgency.