Tales of Changing Technology and Jurisdiction from the FTC, FCC, and EPA

by Gus Hurwitz — Saturday, Jan. 3, 2015

Last month Professor Tribe filed comments with the EPA and wrote in the Wall Street Journal to argue that the EPA’s new Clean Power Plan rules are unconstitutional. I would like to expand upon and generalize his concerns. The basic issue – that the agency is asserting newfound and broad regulatory power based on general statutory authority long read not to grant such authority – is recurring at the interface of the law and changing science/technology. This is not a new issue. In many ways it is a rehashing of the non-delegation debates. But aspects of the modern setting add both novel considerations and some modicum of exigency.

To start, we should add the FCC and FTC to the EPA example. The FCC has spent most of the past decade trying to adopt network neutrality rules, which relate to how Internet service providers handle data that customers send over their networks – and also to update other telecommunications regulations (e.g., Inter-Carrier Compensation and the Universal Service Fund) for the Internet era. A central issue in these efforts is whether Section 706 of the Communications Act, which on its face empowers the FCC to encourage the deployment of advanced telecommunications capability by (inter alia) promoting competition, gives the FCC authority to enact rules that may indirectly promote competition in a way that may indirectly encourage deployment of Internet service. There are reasonable arguments on both sides; in all likelihood the drafters of the 1996 Telecommunications Act wanted to give the FCC such authority, but expressly avoided doing so to avoid involving a third committee in the drafting process.

The FCC initially read this language as not giving it authority to regulate the Internet, finding that Section 706 could not be read as an affirmative grant of regulatory power. It wasn’t until the FCC had a need for such authority that it revised its reading as part of its 2010 Open Internet (i.e., net neutrality) rules. In January 2014, the DC Circuit found this to be a permissible construction of Section 706 under Chevron. This re-reading of Section 706 was also the statutory basis for another recent FCC order (the ICC/USF Order), which was affirmed by the 10th Circuit over the summer. US Cellular, one of the parties to the unsuccessful 10th Circuit challenge, has a cert petition pending before the Court in which it challenges this reading of Section 706.

Turning to the FTC, the Commission has been concerned about online data security for most of the past two decades. In the 1990s it took the lead in organizing a number of workshops and legislative efforts to address issues relating to how online firms handle and protect consumer data. In this setting, FTC Commissioners expressed their view that the FTC did not have authority to regulate online data security practices and that Congress needed to enact legislation granting it such authority. This did not happen. In response to this vacuum, over the past decade the FTC has adopted a more aggressive reading of its authority under Section 5 of the FTC Act to proscribe “unfair or deceptive acts or practices.” The Commission’s data security efforts, including its statutory authority, are currently facing challenges in the 3rd and 11th circuits.

As with the EPA’s Clean Power Plan, both the FCC’s net neutrality rules and the FTC’s data security efforts, are based on previously disclaimed statutory authority. All three involve regulations that are of vast economic and political significance. All three involve statutory authority that is in one sense ambiguous, but also that could not have anticipated the agencies’ current use of it. At the same time, all three agencies are trying to address legitimate concerns that one may reasonably expect fall within their respective bailiwicks.

There are also, of course, differences between the examples. The EPA’s Clean Power Plan is based on an interpretation of Section 111 of the Clean Air Act that the agency argues is permissible due to what it identifies as an ambiguity created by the legislative process. Paraphrasing Professor Tribe, the Agency is effectively arguing that Chevron puts it in a position superior to that of Congress, the Courts, and the President in administering the legislative process.

At the same time, at least the EPA’s Clean Power Rule is related to the clear purposes of Section 111 – the regulation of stationary sources of air pollutants. The FCC’s use of Section 706 as the basis for its Open Internet and USF/ICC efforts requires re-interpreting the section, long read as not relating to the Internet and as being expressly deregulatory, both to apply to the Internet and to give it affirmative regulatory power. And the FTC’s claimed basis for authority is even further removed from the specific use to which it is putting it. Indeed, the FTC’s data security efforts relate to a more general push by the Commission over roughly the past decade to adopt an expansive understanding of its Section 5 authority. Data security is only one of the fronts on which the FTC is working to expand the scope of its very general statutory authority.

Each of these examples, therefore occurs in a different statutory setting, ranging from the EPA’s efforts to create a new regulatory regime based on very specific statutory authority to the FTC’s efforts to create a new regulatory regime based on very general statutory authority. But what the agencies are doing – what makes these cases problematic – is similar. In each case the agency is trying to create a broad new regulatory regime based on the barest of statutory authority.

The Court may have seemed to address these issues 15 years ago in Whitman (“the degree of agency discretion that is acceptable varies according to the scope of the power congressionally conferred”) andBrown and Williamson (“no matter how important, conspicuous, and controversial the issue, [regulation] must always be grounded in a valid grant of authority from Congress.”). But it’s clear that these issues are not settled.

The Court may have several opportunities to provide much needed guidance on these issues in the near future. As discussed above, there is already a petition pending relating to the FCC’s construction of Section 706 and there are challenges of the FTC’s efforts in multiple Circuits. It would not be surprising for the EPA’s Clean Power Plan to also end up before the Court.

In fact, two of the most relevant recent cases already come from the EPA and FCC. Last term the Court explained in Utility Air Regulatory Group that “When an agency claims to discover in a long extant statute an unheralded power to regulate ‘a significant portion of the American economy,’ we typically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.’” At the same time, the Court’s holding in City of Arlington, just one year earlier, that questions of ambiguous statutory jurisdiction are subject to Chevron suggests that it may be hard to find an agency’s construction of its ambiguous jurisdiction impermissible on Utility Air Regulatory Group grounds if the agency actually does have authority to regulate “a significant portion of the American economy” and make decisions of “vast economic and political significance.”

As we puzzle through these cases, we should keep in mind their shared territory. The EPA, FCC, and FTC’s efforts all arise as each agency struggles to address changing technological or scientific circumstances that do not fit clearly into its existing statutory authority. In each case the agency is attempting to bootstrap a new regulatory regime using statutory authority that predates, and that could not have anticipated, current circumstances. And in each case the agency is stretching that existing authority to meet this goal.

Importantly, these issues are not going away. To the contrary, with the continuing growth of the regulatory state, gridlock in Congress, and pace of technological change, we will only see increased pressure for agencies to push the bounds of authority granted in easier times to address today’s most complex problems. But just because a problem falls within an agency’s general bailiwick doesn’t mean that it falls within its statutory authority.

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