The Supreme Court's recent rulings, including the pivotal Chevron decision, will severely hamper federal agencies' ability to create and uphold rules governing businesses and industries.
In the last week, the Supreme Court decided three cases that cut federal agencies' regulatory power. In Loper Bright Enterprises v. Raimondo, the Supreme Court reversed the Chevron deference, a doctrine giving latitude to federal agencies to interpret the laws they administer. Corner Post, Inc. v. Board of Governors gives new businesses or entities the ability to challenge any rule an agency has ever adopted no matter its age, and SEC v. Jarkesy allows businesses a jury trial when agencies seek to impose penalties.
Together, the Supreme Court rulings spell trouble for federal agencies such as the U.S. Securities and Exchange Commission, the Federal Trade Commission (FTC) and the Environmental Protection Agency. It will be harder for agencies to get their rules upheld, such as the FTC's ban on noncompete agreements or the SEC's climate risk disclosure rules, said Jonathan Siegel, a law professor at George Washington University. The rulings will also make it easier for businesses to challenge agency rules. Business groups are already legally challenging and raising concerns about agency rules, particularly the SEC's new climate and cybersecurity reporting rules.
"Businesses are going to have an easier time preventing the federal government from making them do things they don't want to do," he said.
Supreme Court rulings challenge agency regulatory power
All three Supreme Court decisions will make it harder for federal agencies to pass and uphold rules, but Siegel said SEC v. Jarkesy will likely be the most impactful case for federal agencies.
An agency wanting to impose a monetary penalty on a regulated party might have to go to court, where the regulated party could face a jury trial, instead of imposing penalties through in-house administrative proceedings. That will make it more difficult for agencies to penalize violations of their rules, Siegel said.
The Supreme Court's decision in Corner Post, Inc. v. Board of Governors further diminishes agency power by eliminating a previously held time limit on when businesses can challenge an agency rule. The limitation was traditionally six years from the rule's passage. However, the Supreme Court decided businesses have six years not only from the rule's effective date but also from when the rule impacts a business.
"If you are an entity that didn't exist at the time the rule was passed, you can challenge it when you come into existence and it starts hurting you, even if that's more than six years after the rule was passed," he said. "That will give regulated parties more opportunities to challenge rules."
The Supreme Court's Chevron ruling in Loper Bright Enterprises v. Raimondo means courts won't always give deference to agencies and can challenge the agency's interpretation of Congressional statutes, Siegel said. However, courts will likely continue to respect agencies' views because of the technical expertise and understanding the agencies exercise in the industries they regulate.
"This will give courts more authority to hold that an agency has done something unlawful, and that will happen somewhat more frequently now than it has in the past," he said.
Siegel said the three Supreme Court rulings ultimately make it harder for federal agencies to penalize companies for violating rules and get their rules established in the first place while giving businesses more time and means to challenge agency rules.
Spotlight placed on Congress
Congress began establishing federal regulatory agencies to act as not just law enforcers but also interpreters of broad Congressional statutes and how they apply to businesses, said Robert Hockett, a law professor at Cornell Law School.
Businesses are going to have an easier time preventing the federal government from making them do things they don't want to do.
Jonathan SiegelLaw professor, George Washington University
By deferring to federal agencies, Hockett said Congress understood that the agencies, over time, would develop technical expertise when it comes to what area they're regulating, whether that's finance, competition, consumer or environmental protection. Given their expertise, agencies would then craft precise rules based on Congress' broadly stated statutes. For example, Congress created and tasked the Federal Communications Commission (FCC) with granting broadcast licenses that serve the public interest. The FCC had the ability to take Congress's mandate and make more specific rules for companies seeking broadcast licenses.
"What Congress has been doing right from the get-go, all the way from the late 19th century up to today, is essentially depending on the agencies to make determinations that are more specific as to what precisely a broadly stated rule actually applies to," he said.
Policymakers are not experts in every regulated industry, which is why federal agencies play a crucial role in regulating businesses, Hockett said. Federal agencies can fine-tune rules to their industries and engage in much more transparent rulemaking processes that involve notices of proposed rulemaking as well as a significant amount of stakeholder input, Hockett said.
"What the Supreme Court did in overturning Chevron was, in effect, to say that Congress can't even delegate to its own agencies that it itself creates -- that gap-filling authority," he said. "What that means is that Congress itself would have to legislate with respect to every tiny little question."
Hockett said the reason Congress established federal agencies was to keep up with fast-paced, modern economies -- a pace Hockett said Congress can't match.
While agencies like the FCC and FTC are already creating new rules and relying on existing regulations to crack down on businesses engaging in unlawful behavior with emerging technology such as artificial intelligence, Congress has yet to pass legislation governing the use of AI.
"Congress can't be on top of all of this stuff," he said. "Even if it could -- even if it had the time to handle all of this -- it doesn't have the expertise. They can't deal with every sort of fine, technical point of nuclear power regulation or petrochemical regulation [or] pharmaceutical regulation."
Makenzie Holland is a senior news writer covering big tech and federal regulation. Prior to joining TechTarget Editorial, she was a general assignment reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.
