The substance & procedure of agency policymaking

1. The substance & procedure of agency policymaking • Agency Policy: General rules, principles or patterns that guide the agency’s staff as it carries out its daily functions. • Some questions to think about: • What vehicles for agency policymaking exist? • What procedures apply to agency policymaking? • Why would an agency choose one policy-making vehicle over another? • Does the law constrain the choice of policymaking vehicles in some instances?

2. Londoner, Bi-Metallic & procedural due process • Londoner (1908): BPW assessed tax on property along city street for purposes of paving a street. SCT said failure to provide oral hearing violated due process. • Bi-Metallic (1915): Tax Board increased taxes on all property in Denver pursuant to state law. SCT said failure to provide oral hearing did not violate due process. • How are Londoner & Bi-Metallic different – i.e., why were due process concerns implicated in the former but not the latter? • Why is it an important distinction that the Londoner tax “involved a relatively small number of persons” who were “exceptionally affected, in each case, upon individual grounds.”

3. The constitutional definitions of rulemakings and adjudications & the consequences that follow • After Londoner/Bi-Metallic, whether constitutional due process constraints apply to agency actions, depends on whether the agency’s action involves an “adjudication.” • Londoner/Bi-Metallic’s approach to whether action is a rulemaking or adjudication governs this determination in constitutional cases. • Rulemakings: general/prospective • Adjudications: particular/retrospective • Bottom line – different obligations attach depending on whether agency’s action is classified as a rulemaking or adjudication

4. What are the APA definitions of rules/orders & rulemakings/adjudications – in cases arising under federal statutory law? • Rulemaking – the agency process for formulating, amending or repealing a rule (5 USC § 551(5)) • Rule -- any agency statement of general or particular applicability and future effect designed to implement, interpret or prescribe law or policy [or procedure], including making or approval of rates or corporate structures (5 USC § 551(4)) • Adjudication – the agency process for the formulation of an order (5 USC § 551(7)) • Order – the whole or part of a final agency disposition [that results from something] other than rule-making, but including licensing. (5 USC § 551(6)) • How is the APA definition of a rule different from what we saw in Londoner & Bi-Metallic? And why might that difference be important?

5. APA procedures required for rulemakings – a sample of the basics (more detail later) Formal – Sec. 553, 556 & 557 Informal – Sec. 553 • Notice of proposed rulemaking (§553(b)) • Right to submit evidence and to conduct cross-ex (§556(d)) • Initial decision by an ALJ, the agency or qualified agency employee (§556(b)/557(b)) • No ex parte contacts (§557(d)) • Decision based on findings of fact, supported by substantial evidence in the record and conclusions of law (§557(c)) • Decision is appealable to the agency head(s) (§557(b)) • Notice of Proposed Rule (“NPR”) – Sec. 553(b) • Opportunity for Comment – Sec. 553(c) • Concise Statement of Basis & Purpose for Final Rule – Sec. 553(c)

6. APA procedures required for adjudications – a sample of the basics (more detail later) Formal – Sec. 554, 556, 557 Informal – Sec. 555(e) • Notice of hearing (§554(b)) • Separation of investigatory and adjudication functions (§554(d)) • Right to submit evidence and to conduct cross-ex (§556(d)) • Initial decision by an ALJ, the agency or qualified agency employee (§556(b)/557(b)) • No ex parte contacts (§557(d)) • Decision based on findings of fact, supported by substantial evidence in the record and conclusions of law (§557(c)) • Decision is appealable to the agency head(s) (§557(b)) • Prompt notice shall be given of denial in whole or part of a written application . . . of an interested person made in connection with any agency proceeding. • Unless the agency is affirming prior denial or it is self-explanatory, notice must contain brief statement of grounds for denial.

7. Choice of agency policy-making vehicles • Under the APA, the vehicle used to make agency policy can matter a lot: • FORMAL adjudications/rulemakings have more procedural requirements than do informal versions of same policy vehicles • Informal rulemakings have more procedures than informal adjudications • How much do these procedural requirements matter (i.e., affect policy-making)? Do these vehicles each have advantages & disadvantages agencies may want to utilize or avoid? • Choice of policymaking vehicles is somewhat dictated by whether an agency has the power to engage in an activity – rulemaking or adjudication. • If the agency literally has no rulemaking authority it cannot make rules on any topic.

8. Nat’l Pet. Refiners Ass’n v. FTC – the facts • FTC has the authority to regulate under the FTCA: • Sec. 12 - false & deceptive advertising of food, drugs . . . (15 USC § 52) • Sec. 5 – unfair methods of competition affecting commerce & unfair or deceptive acts or practices in commerce (15 USC § 45(a)) • Sec 5(b) of the FTCA: When FTC has reason to believe that a person “has been or is using any unfair method of competition or unfair or deceptive act or practice in commerce . . .” it shall hold a hearing and ultimately issue a “cease & desist” order if it believes that person is engaging in deceptive practices • Sec. 6(g) of the FTCA: FTC has the power to “make rules and regulations for the purpose of carrying out the provisions of sections 41-46 & 47-58 of this title.” (15 USC § 46(g)) • FTC enacted a rule pursuant to § 6(g) stating that failure to post octane levels at gas pumps was a deceptive practice

9. Nat’l Pet. Refiners Ass’n v. FTC – the FTC’s choice of policymaking vehicles • Does the FTC have the authority to regulate octane postings generally (regardless of the vehicle it chose to use)? Could it have regulated such postings without having rulemaking authority? • Why might the FTC have wanted to use rulemaking as the policymaking vehicle? What advantages does it have? • Why would gas stations prefer to have this issue raised on a case-by-case in adjudications (enforcement proceedings)?

10. Nat’l Pet. Refiners Ass’n v. FTC – the FTC’s authority to enact rules • Does the FTC have the power to enact rules pertaining to octane postings? • What does the language of Sec. 6(g) suggest? • Are there other relevant considerations that argue against the text of Sec. 6(g) giving the FTC rulemaking authority? Should they matter?