Business Law Chapter 4

Freedom of Information Act (FOIA) 1966

Federal legislation that mandates and facilitates public access to government information and records, including records about oneself. Sensitive information (e.g., on national security) is excluded.

Administrative Procedures Act (APA) 1946

Federal legislation that places limitations on how agencies are run and contains very specific guidelines on rule making by agencies. The two most common types of rule making are informal and formal; a third type is known as hybrid.

Substantial Evidence

Refers to evidence that a reasonable mind could accept as adequate to support a conclusion. It is defined as "more than a scintilla but less than preponderance" and consists of "such relevant evidence as a reasonable person would accept as adequate to support a conclusion."

Privacy Act of 1974

Under the Privacy Act of 1974, a federal agency may not disclose information about an individual to other agencies or organizations without that individual's written consent. This law guarantees three primary rights: -The right to see records about oneself, subject to the Privacy Act's exemptions. -The right to amend a nonexempt record if it is inaccurate, irrelevant, untimely, or incomplete. -The right to sue the government for violations of the statute, such as permitting unauthorized individuals to read your records. There are 10 exemptions to the Privacy Act under which an agency can withhold certain kinds of information from you. Examples of exempt records are those containing classified information on national security and those concerning criminal investigations.

Four Basic Limits on Agency Power

political, statutory, judicial, and informational

Order

A binding decision rendered by a judge.

Policy Statement

A general statement about the directions in which an agency intends to proceed with respect to its rule-making or enforcement activities; has no binding impact on anyone.

Administrative Law Judge (ALJ)

A judge who presides over an administrative hearing; may attempt to get the parties to settle but has the power to issue a binding decision.

Interpretive Rule

A rule that does not create any new rights or duties but is merely a detailed statement of an agency's interpretation of an existing law, including the actions a party is to take to be in compliance with the law.

Consent Order

A statement in which a company agrees to stop disputed behavior but does not admit that it broke the law

Enabling Legislation

A statute that specifies the name, functions, and specific powers of an administrative agency and grants the agency broad powers for the purpose of serving the public interest, convenience, and necessity.

Informal Rule Making

A type of rule making in which an agency publishes a proposed rule in the Federal Register, considers public comments, and then publishes the final rule. Also called notice-and-comment rule making.

Reg-Neg

A type of rule making in which representatives of concerned interest groups and of the involved government agency participate in mediated bargaining sessions to reach an agreement, which is forwarded to the agency.

Hybrid Rule Making

A type of rule making that combines features of formal and informal rule making; consists of publication in the Federal Register, a written-comment period, and an informal public hearing with restricted cross-examination.

Formal Rule Making

A type of rule making that is used when legislation requires a formal hearing process with a complete transcript; consists of publication of the proposed rule in the Federal Register, a public hearing, publication of formal findings, and publication of the final rule if adopted.

Informational Limitations

Agency power is limited by the Freedom of Information Act (FOIA), the Government in Sunshine Act, and the Privacy Act of 1974.

Hybrid Agencies

An agency that has characteristics of both executive and independent agencies (EPA, FERC).

Executive Agency

An agency that is typically located within the executive branch, under one of the cabinet-level departments. The agency head is appointed by the president with the advice and consent of the Senate (FAA, FDC).

Independent Agency

An agency that is typically not located within a government department. It is governed by a board of commissioners, who are appointed by the president with the advice and consent of the Senate, but these commissioners serve fixed terms and cannot be removed except for cause (FTC, SEC, FCC).

Judicial Limitations

An individual or business that believes itself harmed by an administrative rule may challenge that rule in federal court after all administrative procedures have been exhausted.6 This is probably the biggest constraint on agency power. If a rule is subjected to judicial review, the court will consider the following: The facts of the case: -Courts typically defer to an agency's fact finding. The facts must be supported by substantial evidence. -The agency's interpretation of the rule: Once again, the courts typically defer to the expertise of the agency and uphold the agency's interpretation of the rule. -The scope of the agency's authority: Has the agency exceeded the authority granted it by its enabling legislation?

Subpoena Duces Tecum

An order to appear and bring specified documents.

Subpoena

An order to appear at a particular time and place and provide testimony.

Administrative Agencies

Any government body created by the legislative branch to carry out specific duties involving applications, licenses, permits, available information, hearings, appeals, and decision making. Agencies have three types of power: legislative, judicial, and executive.

Political Limitations

Congress also has significant control over agencies because the Senate must approve presidential nominees for them to become the administrative heads of agencies. Moreover, Congress has control over the budgets of all agencies. If Congress decides that a particular agency is not performing as it wishes, that agency's budget may be cut or even defunded.

Statutory Limitations

Congress has the power to create or dissolve an agency. If Congress is unhappy with an agency, it may amend the agency's enabling legislation and limit the agency's power. Moreover, in 1996, legislation was signed into law that gives Congress 60 days to review proposed agency rules. Congress may override those rules before they become effective. In addition, the APA (passed by Congress in 1946) sets forth guidelines that all agencies must follow when engaged in rule making.

Adjudication

Enabling statutes delegate judicial power to agencies to settle or adjudicate individual disputes that an agency may have with businesses or individuals.

Rule Making

Enabling statutes permit administrative agencies to issue rules that control individual and business behavior. These rules have the same effect as laws. If an individual or business fails to comply with agency rules, there are often civil, as well as criminal, penalties. Agencies may enact three types of rules: procedural, interpretive, and legislative.

Exempted Rule Making

The APA contains an exemption from rule making that allows an agency to decide whether public participation will be allowed. Exemptions include rule-making proceedings with regard to "military or foreign affairs" and "agency management or personnel." Exemptions are also granted for rule-making proceedings relating to "public property, loans, grants, benefits, or contracts" of an agency. Military and foreign affairs often need speed and secrecy, which are incompatible with public notice and hearings. Other exemptions are becoming more difficult to justify in the eyes of the courts unless they meet one of the exemptions of the Freedom of Information Act (discussed later in this chapter). Also exempted from the rule-making procedures are interpretive rules and general policy statements. An interpretive rule is a rule that does not create any new rights or duties but is merely a detailed statement of the agency's interpretation of an existing law. Interpretive rules are generally very detailed, step-by-step statements of what actions a party is to take to be considered in compliance with an existing law. Policy statements are general statements about the directions in which an agency intends to proceed with respect to its rule-making or enforcement activities. Again, these statements have no binding impact on anyone; they do not directly affect anyone's legal rights or responsibilities.

Government in Sunshine Act

The Government in Sunshine Act requires agency business meetings to be open to the public if the agency is headed by a collegiate body. A collegiate body consists of two or more persons, the majority of whom are appointed by the president with the advice and consent of the Senate. This open-meeting requirement applies only when a quorum is present. The law also requires agencies to keep records of closed meetings.

Administrative Law

The collection of rules and decisions made by administrative agencies to fill in particular details missing from constitutions and statutes.

Interstate Commerce Commission (ICC)

The first federal administrative agency; created to regulate the anti-competitive conduct of railroads.

Federal Register

The government publication in which an agency publishes each proposed rule, along with an explanation of the legal authority for issuing the rule and and a description of how the public can participate in the rule making process, and later publishes the final rule.