ADMINISTRATIVE AGENCIES (Update)

Administrative agencies make government work. A statute that calls for government to provide benefits or to regulate the private sector will not achieve its goals unless a unit of government is given responsibility for implementing the statute. Such units are called administrative agencies. There are thousands of them in federal, state, and local governments.

Before undertaking to regulate the private sector, Congress or a state legislature must first determine that the problem is not being dealt with adequately by the market or through common law litigation. Sometimes, regulation is the right answer—the private sector cannot handle certain problems (like deciding which of several applicants can telecast over Channel 4 or making sure that new drugs actually work or that doctors are qualified to practice medicine). But in other cases, private sector solutions work better than does government. Government bureaucracy can stifle initiative, and agencies can be captured by the bodies they are supposed to regulate. In those situations, we have recently seen a good deal of deregulation (for example, of railroad, trucking, and airline fares or stock brokerage fees).

A hypothetical regulatory statute will illustrate some of the choices that are available to policymakers. Suppose that Congress decides to regulate the naming of internet sites because it finds that the problem is not being handled adequately by the private sector. It might enact a statute ("The Internet Act") containing various vague provisions on the problem of internet site names. Most important, the Internet Act will create the Internet Board to administer the statute and will define the board's powers.

The Internet Board might have a single agency head (as does the Food and Drug Administration (FDA)) or it might have several agency heads who must act collegially (as does the Securities and Exchange Commission (SEC)). The board would probably be organizationally located within an executive branch cabinet department, as the FDA is situated within the Department of Health and Human Services. A few agencies, such as the SEC, are independent, meaning that they are not within an executive branch department. Generally, the president cannot discharge the head of an independent agency without good cause.

What will the Internet Board actually do? The board might have several powers. It might be especially concerned with cybersquatters—people who register popular names for their website, such as IBM.com, hoping to sell the name to IBM once IBM discovers that the name is taken. Thus the board might investigate the problem of cybersquatters, either commissioning studies from experts or performing research itself. It might operate a registry of internet names (a task presently performed in the private sector). It might also have a staff of investigators and prosecutors to receive complaints about violations of the act and to investigate those complaints.

Next the board might adopt rules (or regulations—the two words mean the same thing). For example, the board might adopt a rule defining cybersquatting, providing that the board can strip a name from the squatter without compensating the squatter. If the Internet Act delegates rule-making power to the Internet Board, the board's rules will have binding effect, just like statutes.

The Administrative Procedure Act (APA) requires all federal agencies to notify the general public and invite and consider their comments before adopting rules. The APA was passed in 1946. It is an important statute that governs all aspects of federal agency operations. All of the states have their own APAs, but generally local governments do not have APAs.

The hypothetical Internet Act may also delegate adjudicatory power to the Internet Board. Thus, if board investigators unearth a case of cybersquatting that violates its rules, it may take action against the squatter. For example, it may decide that Mary, who registered the name "IBM.com", is a cybersquatter and enter an order that strips her of that name without compensation and transfers it to IBM. In addition, it may penalize Mary by requiring her to pay a civil penalty either to IBM or to the government.

The Constitution provides that government cannot deprive anyone of life, liberty, or property without due process of law. The Fifth Amendment applies the due process clause to the federal government and the fourteenth amendment applies it to state and local government. Due process would require the Internet Board to give notice and a fair trial-type hearing before it takes adjudicatory action against Mary. Thus she would be entitled to present witnesses and to the right of confrontation of the witnesses against her. The APA supplements the requirements of due process; it contains detailed provisions that ensure impartial decisionmakers and fair administrative hearings.

The Internet Board's hearings probably would be conducted by administrative law judges (ALJs), board staff members whose only job would be to hear the board's cases and write proposed decisions. However, an ALJ would not make the final board decision; the head or heads of the board would make the final decision, based on the record of the hearing. They may agree or disagree with the ALJ's proposed decision.

judicial review of administrative acts is important and extremely common. Courts scrutinize agency rules and orders to assure that they meet standards of legality, rationality, and fair procedure. Again, the APA provides the ground rules for judicial review.

One section of the APA is called the Freedom of Information Act (FOIA). It was first passed in 1966 and has been repeatedly amended. The most important part of FOIA is that any person has the right to demand that any agency give it any document in the agency's possession. FOIA has some narrowly defined exceptions, but most information possessed by government agencies must be disclosed on demand. FOIA is rigorously enforced by the federal courts.

Under our constitutional system, an administrative agency shares power with each of the three branches. When it makes rules, it legislates in a way similar to enactments of laws by Congress. When it investigates and prosecutes violations of the rules, it enforces the law, much as would the President or a state governor. When it adjudicates cases, its actions resemble those of a court. For this reason, agencies are sometimes referred to as the fourth branch of government—a branch not provided for in the Constitution. Nevertheless, the Supreme Court long ago dispelled doubts about the power of Congress to delegate legislative and adjudicatory power to agencies. Administrative agencies are an essential element of modern government, which could not possibly function without them.

Michael Asimow
(2000)

Bibliography

Asimow, Michael; Bonfield, Arthur Earl; and Levin, Ronald M. 1998 State and Federal Administrative Law, 2nd ed. St. Paul, Minn.: West Publishing Co.

Davis, Kenneth C. and Pierce, Richard J. 1994 Administrative Law Treatise, 3rd ed. Boston, Mass.: Little Brown & Co.

Strauss, Peter L. 1981 An Introduction to Administrative Justice in the United States. Durham, N.C.: Carolina Academic Press.