Gus Hurwitz on A Policy Statement Is Not Enough

Gus Hurwitz —  1 August 2013

Gus Hurwitz is Assistant Professor of Law at University of Nebraska College of Law

Administrative law really is a strange beast. My last post explained this a bit, in the context of Chevron. In this post, I want to make this point in another context, explaining how utterly useless a policy statement can be. Our discussion today has focused on what should go into a policy statement – there seems to be general consensus that one is a good idea. But I’m not sure that we have a good understanding of how little certainty a policy statement offers.

Administrative Stare Decisis?

I alluded in my previous post to the absence of stare decisis in the administrative context. This is one of the greatest differences between judicial and administrative rulemaking: agencies are not bound by either prior judicial interpretations of their statutes, or even by their own prior interpretations. These conclusions follow from relatively recent opinions – Brand-X in 2005 and Fox I in 2007 – and have broad implications for the relationship between courts and agencies.

In Brand-X, the Court explained that a “court’s prior judicial construction of a statute trumps an agency construction otherwise entitled to Chevron deference only if the prior court decision holds that its construction follows from the unambiguous terms of the statute and thus leaves no room for agency discretion.” This conclusion follows from a direct application of Chevron: courts are responsible for determining whether a statute is ambiguous; agencies are responsible for determining the (reasonable) meaning of a statute that is ambiguous.

Not only are agencies not bound by a court’s prior interpretations of an ambiguous statute – they’re not even bound by their own prior interpretations!

In Fox I, the Court held that an agency’s own interpretation of an ambiguous statute impose no special obligations should the agency subsequently change its interpretation.[1] It may be necessary to acknowledge the prior policy; and factual findings upon which the new policy is based that contradict findings upon which the prior policy was based may need to be explained.[2] But where a statute may be interpreted in multiple ways – that is, in any case where the statute is ambiguous – Congress, and by extension its agencies, is free to choose between those alternative interpretations. The fact that an agency previously adopted one interpretation does not necessarily render other possible interpretations any less reasonable; the mere fact that one was previously adopted therefore, on its own, cannot act as a bar to subsequent adoption of a competing interpretation.

What Does This Mean for Policy Statements?

In a contentious policy environment – that is, one where the prevailing understanding of an ambiguous law changes with the consensus of a three-Commissioner majority – policy statements are worth next to nothing. Generally, the value of a policy statement is explaining to a court the agency’s rationale for its preferred construction of an ambiguous statute. Absent such an explanation, a court is likely to find that the construction was not sufficiently reasoned to merit deference. That is: a policy statement makes it easier for an agency to assert a given construction of a statute in litigation.

But a policy statement isn’t necessary to make that assertion, or for an agency to receive deference. Absent a policy statement, the agency needs to demonstrate to the court that its interpretation of the statute is sufficiently reasoned (and not merely a strategic interpretation adopted for the purposes of the present litigation).

And, more important, a policy statement in no way prevents an agency from changing its interpretation. Fox I makes clear that an agency is free to change its interpretations of a given statute. Prior interpretations – including prior policy statements – are not a bar to such changes. Prior interpretations also, therefore, offer little assurance to parties subject to any given interpretation.

Are Policy Statements entirely Useless?

Policy statements may not be entirely useless. The likely front on which to challenge an unexpected change agency interpretation of its statute is on Due Process or Notice grounds. The existence of a policy statement may make it easier for a party to argue that a changed interpretation runs afoul of Due Process or Notice requirements. See, e.g., Fox II.

So there is some hope that a policy statement would be useful. But, in the context of Section 5 UMC claims, I’m not sure how much comfort this really affords. Regulatory takings jurisprudence gives agencies broad power to seemingly-contravene Due Process and Notice expectations. This is largely because of the nature of relief available to the FTC: injunctive relief, such as barring certain business practices, even if it results in real economic losses, is likely to survive a regulatory takings challenge, and therefore also a Due Process challenge.  Generally, the Due Process and Notice lines of argument are best suited against fines and similar retrospective remedies; they offer little comfort against prospective remedies like injunctions.

Conclusion

I’ll conclude the same way that I did my previous post, with what I believe is the most important takeaway from this post: however we proceed, we must do so with an understanding of both antitrust and administrative law. Administrative law is the unique, beautiful, and scary beast that governs the FTC – those who fail to respect its nuances do so at their own peril.


[1] Fox v. FCC, 556 U.S. 502, 514–516 (2007) (“The statute makes no distinction [] between initial agency action and subsequent agency action undoing or revising that action. … And of course the agency must show that there are good reasons for the new policy. But it need not demonstrate to a court’s satisfaction that the reasons for the new policy are better than the reasons for the old one; it suffices that the new policy is permissible under the statute, that there are good reasons for it, and that the agency believes it to be better, which the conscious change of course adequately indicates.”).

[2] Id. (“To be sure, the requirement that an agency provide reasoned explanation for its action would ordinarily demand that it display awareness that it is changing position. … This means that the agency need not always provide a more detailed justification than what would suffice for a new policy created on a blank slate. Sometimes it must—when, for example, its new policy rests upon factual findings that contradict those which underlay its prior policy; or when its prior policy has engendered serious reliance interests that must be taken into account. It would be arbitrary or capricious to ignore such matters. In such cases it is not that further justification is demanded by the mere fact of policy change; but that a reasoned explanation is needed for disregarding facts and circumstances that underlay or were engendered by the prior policy.”).

8 responses to Gus Hurwitz on A Policy Statement Is Not Enough

  1. 

    A brief addendum: “So, what should we do?”

    Given my nay-sayer comments about the value of policy statements, what do I think we should do? Well, task #1 should be legislative reform. To this end, policy statements could be useful, either as a model for what statutory reform should look like, or as evidence that it is needed (e.g., when the Commission ignores or alters its prior statement).

    Also, contrary to my comments, a well constructed policy statement may actually be quite useful. The key to this is that what “well constructed” means. The focus of any policy statement should be at least as much about why alternative policies are problematic, as why any policy the Commission adopts is good. That is, to give a policy statement some semblance of binding effect, the Commission needs to use it to create roadblocks to changing the policy in the future.

  2. 

    Gus – Doesn’t the court in US v. Syufy find against the DOJ in part because it didn’t adhere to the Horizontal Merger Guidelines?

    • 

      Yes, but I’m not sure how relevant Syufy is. Most important, it was decades ago. Administrative law has changed a ton in the past 20+ years (wasn’t Syufy 1990?). There have been a number of important cases (e.g., Fox I, the DC Circuit’s Comcast opinion) shaping this area of law in the past decade. Second, DOJ isn’t an administrative agency, so the courts will treat it differently — it doesn’t have policy-making authority, so (even were this to happen today) the courts probably would be less tolerant of policy changes. And third, because DOJ can seek civil and criminal fines the courts to hold it to a higher standard of Due Process and Notice (even if that wasn’t at issue in Syufy, which was an injunctive merger challenge).

      • 

        That certainly may be right. But it’s not clear from the opinion that any of that mattered to the decision (I don’t think). Instead, it seems like the HMGs were cited for their incorporation of sensible economic understandings, and it was deviation from this basic logic, not the HMGs per se, that hurt the DOJ. In other words, even if you’re right that guidelines wouldn’t have any kind of “per se” precedential effect, if they are interpreted by courts as definitive statements of commonly accepted economic (or, presumably, other) learning relevant to the case, ignoring them might still lead courts to ding the FTC on that basis.

      • 

        (Responding to Geoff’s response):

        That’s exactly the conundrum admin law faces here, and what the Court has been working to resolve in cases like Fox I. Basically, if a statute is ambiguous, it is subject to multiple, possibly contradictory, interpretations, and one of which is just as statutorily-permitted as the others. Agencies are free to change policy between any of these permissible alternatives, even if the newly adopted policy contradicts the logic of the prior policy.

        To adopt one policy over another, the agency need only show that the preferred policy is a permissible construction, not that it is better than any (or all) alternative constructions.

        I’ll reuse the example I used in my initial post: “unfair” is an economically meaningless word. The FTC could interpret “unfair” to require a total welfare standard; or it could interpret “unfair” to incorporate distributive concerns, accepting some loss to total welfare to ensure a more “fair” distribution of wealth. Either of these is a permissible construction of “unfair,” despite conflicting in economic logic.

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