5.7 Summary and Exercises

Summary

Administrative rules and regulations constitute the largest body of laws that directly affect business. These regulations are issued by dozens of federal and state agencies that regulate virtually every aspect of modern business life, including the natural environment, corporate finance, transportation, telecommunications, energy, labor relations, and trade practices. The administrative agencies derive their power to promulgate regulations from statutes passed by Congress or state legislatures.

The agencies have a variety of powers. They can license companies to carry on certain activities or prohibit them from doing so, lay down codes of conduct, set rates that companies may charge for their services, and supervise various aspects of business.

Exercises

  1. The Equal Employment Opportunity Commission seeks data about the racial composition of Terrific Textiles’ labor force. Terrific refuses on the grounds that inadvertent disclosure of the numbers might cause certain “elements” to picket its factories. The EEOC takes Terrific to court to get the data. What is the result?
  2. In order to police the profession, the state legislature has just passed a law permitting the State Plumbers’ Association the power to hold hearings to determine whether a particular plumber has violated the plumbing code of ethics, written by the association. Sam, a plumber, objects to the convening of a hearing when he is accused by Roger, a fellow plumber, of acting unethically by soliciting business from Roger’s customers. Sam goes to court, seeking to enjoin the association’s disciplinary committee from holding the hearing. What is the result? How would you argue Sam’s case? The association’s case?
  3. Assume that the new president of the United States was elected overwhelmingly by pledging in his campaign to “do away with bureaucrats who interfere in your lives.” The day he takes the oath of office he determines to carry out his pledge. Discuss which of the following courses he may lawfully follow: (a) Fire all incumbent commissioners of federal agencies in order to install new appointees. (b) Demand that all pending regulations being considered by federal agencies be submitted to the White House for review and redrafting, if necessary. (c) Interview potential nominees for agency positions to determine whether their regulatory philosophy is consistent with his.
  4. Dewey owned a mine in Wisconsin. He refused to allow Department of Labor agents into the mine to conduct warrantless searches to determine whether previously found safety violations had been corrected. The Federal Mine Safety and Health Amendments Act of 1977 authorizes four warrantless inspections per year. Is the provision for warrantless inspections by this agency constitutional?Donovan v. Dewey, 452 US 594 (1981).
  5. In determining the licensing requirements for nuclear reactors, the Nuclear Regulatory Commission (NRC) adopted a zero-release assumption: that the permanent storage of certain nuclear waste would have no significant environmental impact and that potential storage leakages should not be a factor discussed in the appropriate environmental impact statement (EIS) required before permitting construction of a nuclear power plant. This assumption is based on the NRC’s belief that technology would be developed to isolate the wastes from the environment, and it was clear from the record that the NRC had “digested a massive material and disclosed all substantial risks” and had considered that the zero-release assumption was uncertain. There was a remote possibility of contamination by water leakage into the storage facility. An environmental NGO sued, asserting that the NRC had violated the regulations governing the EIS by arbitrarily and capriciously ignoring the potential contamination. The court of appeals agreed, and the power plant appealed. Had the NRC acted arbitrarily and capriciously?Baltimore Gas and Electric Co. v. Natural Resources Defense Council Inc., 462 US 87 (1983).

Self-Test Questions

  1. Most federal administrative agencies are created by

    1. an executive order by the president
    2. a Supreme Court decision
    3. the passage of enabling legislation by Congress, signed by the president
    4. a and c

  2. The Federal Trade Commission, like most administrative agencies of the federal government, is part of

    1. the executive branch of government
    2. the legislative branch of government
    3. the judicial branch of government
    4. the administrative branch of government

  3. In the Clean Water Act, Congress sets broad guidelines, but it is the Environmental Protection Agency that proposes rules to regulate industrial discharges. Where do proposed rules originally appear?

    1. in the Congressional record
    2. in the Federal Register
    3. in the Code of Federal Regulations
    4. in the United States code service

  4. The legal basis for all administrative law, including regulations of the Federal Trade Commission, is found in

    1. the Administrative Procedure Act
    2. the US Constitution
    3. the commerce clause
    4. none of the above

  5. The Federal Trade Commission, like other administrative agencies, has the power to

    1. issue proposed rules
    2. undertake investigations of firms that may have violated FTC regulations
    3. prosecute firms that have violated FTC regulations
    4. none of the above
    5. all of the above

Self-Test Answers

  1. c
  2. a
  3. b
  4. b
  5. e