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Supreme Court rulings like the Chevron ruling make regulation harder

Posted on by darion

Recent Supreme Court rulings, including the landmark Chevron decision, will severely limit the ability of federal agencies to create and maintain regulations that govern business and industry.

Last week, the Supreme Court decided three cases that limited the regulatory power of federal agencies. Loper Bright Enterprises v. RaimondoThe Supreme Court struck down the Chevron deference rule, a doctrine that gives federal agencies discretion to interpret the regulations they administer. Corner Post, Inc. v. Board of Governors gives new businesses or entities the opportunity to challenge any rule ever adopted by the agency, regardless of its age, and SEC vs. Jarkesy allows companies to hold a jury trial when agencies seek to impose a penalty.

Taken together, the Supreme Court rulings spell trouble for federal agencies like 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 rules on climate risk disclosure, said Jonathan Siegel, a law professor at George Washington University. The rulings will also make it easier for companies to challenge agency rules. Business groups are already challenging and raising concerns about agency rules, particularly the SEC’s new rules on climate and cybersecurity reporting.

“Businesses will have a much easier time keeping the federal government from forcing them to do things they don’t want to do,” he said.

Supreme Court rulings challenge agency’s regulatory authority

All three Supreme Court decisions will make it harder for federal agencies to pass and enforce regulations, but Siegel said SEC vs. Jarkesy will likely be the case with the greatest impact on federal agencies.

An agency seeking to impose a fine on a regulated site may have to go to court, where the regulated site could face a jury trial, rather than imposing penalties through internal administrative proceedings. That would make it harder for agencies to penalize violations of their rules, Siegel said.

The Supreme Court’s decision in the case Corner Post, Inc. v. Board of Governors further reduces the agency’s authority by eliminating the previous time limit on how long companies could challenge agency rules. Traditionally, the limit was six years from the enactment of the rules. But the Supreme Court ruled that companies have six years not only from the date the rules take effect but also from the time the rules affect the company.

“If you’re an entity that didn’t exist when the rule was enacted, you can challenge it when you come along and it starts harming you, even if that’s more than six years after the rule was enacted,” he said. “That gives regulated parties more opportunity to challenge the rule.”

Supreme Court Ruling in Chevron Case Loper Bright Enterprises v. Raimondo means courts won’t always defer to agencies and may question an agency’s interpretation of congressional statutes, Siegel said. But courts are likely to still defer to agencies’ views because of the expertise and understanding agencies have in the industries they regulate.

“This will give courts greater authority to find that an agency has committed an unlawful act, and that will happen a bit more often now than in the past,” he said.

Siegel said the three Supreme Court rulings finally make it harder for federal agencies to penalize companies for violating regulations and set their own rules, while also giving companies more time and resources to challenge agency rules.

Attention focused on Congress

Congress began creating federal regulatory agencies tasked not only with enforcing the law but also with interpreting broad congressional statutes and how they apply to businesses, said Robert Hockett, a law professor at Cornell Law School.

Businesses will have an easier time by preventing the federal government from forcing them to do things they don’t want to do.

Jonathan SiegelProfessor of Law, George Washington University

Hockett said Congress understood that by deferring to federal agencies, the agencies would eventually develop technical expertise in the area they were regulating, whether it was finance, competition, consumer protection or the environment. Given their expertise, the agencies would develop precise rules based on broadly worded congressional statutes. For example, Congress created and tasked the Federal Communications Commission (FCC) with granting broadcast licenses that served the public interest. The FCC had the opportunity to take over Congress’s mandate and create more specific rules for companies applying for broadcast licenses.

“What Congress has done from the very beginning, from the late 1800s to today, is basically for agencies to make more specific decisions about what exactly the general rule applies to,” he said.

Policymakers are not experts in every regulated industry, which is why federal agencies play a key role in regulating businesses, Hockett said. Federal agencies can tailor regulations to their industries and engage in much more transparent rulemaking processes that include notice of proposed regulations as well as significant stakeholder input, Hockett said.

“What the Supreme Court did in striking down Chevron was essentially say that Congress can’t even delegate to its own agencies that it creates that loophole-filling authority,” he said. “That means Congress itself would have to legislate on every little question.”

Hockett said the reason Congress created federal agencies was to keep pace with the rapidly growing, modern economy — a pace Hockett said Congress could not keep up with.

While agencies like the FCC and FTC are already creating new rules and building on existing regulations to clamp down on companies that engage in unlawful conduct using new technologies like AI, Congress has yet to pass legislation to regulate the use of AI.

“Congress can’t keep up with everything,” he said. “Even if it could — even if it had time to deal with all of this — it doesn’t have the knowledge. They can’t handle all of the little technical issues of nuclear regulation or petrochemical regulation (or) pharmaceutical regulation.”

Makenzie Holland is a senior reporter covering big tech and federal regulation. Before joining TechTarget Editorial, she was a general assignment reporter Wilmington Star News and a reporter covering crime and education in Wabash Plain Salesman.