Part 11- Regulation of Business, Chapter 47: Administrative Law, Doc 2

Regulation of Business: Administrative Agencies and the Constitution Administrative agencies are government bodies, and their actions are subject to constitutional limits such as due process, equal protection, and freedom of speech, similar to the three traditional branches of government. A central issue in administrative law is designing a system of control over agency action that balances preventing arbitrariness and harm with preserving the power and flexibility that make agencies effective tools for public policy. Constitutional Provisions That Limit Agency Power:    First Amendment (freedom of speech) Due Process (fair treatment in legal matters) Equal Protection (no discrimination in law enforcement) Case Summary: Pearson v. Shalala (FDA Health Claims Regulation) In Pearson v. Shalala, the Food and Drug Administration (FDA) prohibited marketers of dietary supplements from including health claims on labels unless those claims were pre-approved by the FDA. The FDA demanded "significant scientific agreement" to authorize such claims. The marketers (Durk Pearson and Sandy Shaw) sought FDA approval for claims about the effectiveness of their supplements in preventing diseases like cancer and heart disease but were denied. The FDA argued that while the evidence existed, it was not conclusive enough to meet the "significant scientific agreement" standard. Pearson, Shaw, and advocacy groups challenged the FDA’s decision, claiming that it violated their First Amendment rights by restricting commercial speech. They proposed using disclaimers to inform consumers that the evidence supporting the health claims was inconclusive. Court's Decision: The court found that commercial speech, such as health claims on product labels, enjoys some First Amendment protection. However, it also recognized the government's interest in preventing consumer fraud and protecting public health. The FDA's outright rejection of disclaimers as a cure for potentially misleading claims was questioned. The court argued that disclaimers could be a reasonable solution instead of banning the claims altogether. The court ultimately reversed the district court’s decision, directing the FDA to reconsider the health claims, with the possibility of including disclaimers. Separation of Powers and Delegation of Authority to Administrative Agencies One of the constitutional concerns in creating administrative agencies is the separation of powers. The Constitution allocates power among the three branches of government, with lawmaking power given to the legislative branch, lawenforcement power to the executive branch, and law-interpretation to the judiciary. Administrative agencies blur these distinctions by performing functions that resemble the work of all three branches. A key issue is whether Congress has unconstitutionally delegated too much legislative power to agencies. Early rulings required agencies to follow specific guidelines when exercising their discretion. However, modern courts tend to uphold broad delegations of power as long as Congress provides an "intelligible principle" to guide the agency’s decisions. Case Summary: Whitman v. American Trucking Associations (EPA's Delegation of Authority) The case examines the delegation of legislative power to the Environmental Protection Agency (EPA) under the Clean Air Act. The EPA was tasked with setting National Ambient Air Quality Standards (NAAQS) for air pollutants to protect public health. In 1997, the EPA revised the NAAQS for particulate matter and ozone. The American Trucking Associations challenged the EPA's decision, arguing that Congress had delegated too much power to the agency without clear guidelines. The Supreme Court's Ruling: The Court upheld the delegation of power, stating that the statute provided an "intelligible principle" for the EPA to follow. The statute required the EPA to set standards "requisite to protect public health" with "an adequate margin of safety." This was deemed sufficient guidance, as it allowed the agency discretion but still provided a clear framework for action. The Court emphasized that the Constitution allows Congress to delegate some degree of decision-making authority to agencies, particularly when there are significant policy concerns like public health. Key Takeaways: 1. Administrative Agencies and Constitutional Checks: Agencies are bound by constitutional principles, including the First Amendment, due process, and equal protection. 2. Commercial Speech and Regulation: The regulation of health claims by the FDA in Pearson v. Shalala highlights the balance between consumer protection and free speech, with the court suggesting that disclaimers might be an appropriate solution instead of outright bans. 3. Separation of Powers and Delegation: The principle of separation of powers limits how much legislative power Congress can delegate to agencies. In Whitman v. American Trucking Associations, the Court found that the EPA's broad delegation was constitutionally sound as long as Congress set an "intelligible principle" for guiding agency action. These cases illustrate the complex relationship between government regulation and constitutional protections, with courts often seeking to strike a balance between agency flexibility and preventing overreach or violations of individual rights.