Jaffe, Louis L

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The Federal Regulatory Agencies In Perspective: Administrative Limitations in a Political Setting

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Boston College Law ReviewVolume 11Issue 4 The Federal Regulatory Agencies During TheDecade Of The 1960's A SymposiumArticle 25-1-1970The Federal Regulatory Agencies In Perspective:Administrative Limitations in a Political SettingLouis L. JaffeFollow this and additional works at: http://lawdigitalcommons.bc.edu/bclrPart of the Administrative Law CommonsThis Symposium is brought to you for free and open access by the Law Journals at Digital Commons @ Boston College Law School. It has beenaccepted for inclusion in Boston College Law Review by an authorized administrator of Digital Commons @ Boston College Law School. For moreinformation, please contact nick.szydlowski@bc.edu.Recommended CitationLouis L. Jaffe, The Federal Regulatory Agencies In Perspective: Administrative Limitations in a PoliticalSetting, 11 B.C.L. Rev. 565 (1970), http://lawdigitalcommons.bc.edu/bclr/vol11/iss4/2BOSTON COLLEGEINDUSTRIAL AND COMMERCIALLAW REVIEWVOLUME XI	MAY 1970	 NUMBER 4THE FEDERAL REGULATORY AGENCIES INPERSPECTIVE: ADMINISTRATIVE LIMITATIONSIN A POLITICAL SETTNGLouis L. JAFFE *The independent administrative agency has been the whippingboy of the American governmental establishment for the last 20 years.The usual complaint—at the moment very much emphasized by thosepressing for environmental controls—is that these agencies becomewilly-nilly the "captive" of the industries which they are charged withregulating. President Nixon's recent proposal to consolidate all admin-istrative powers relevant to environmental control into a new inde-pendent agency will probably raise once again questions as to theeffectiveness of the agencies. This Symposium reviewing the work inthe last decade of six agencies and of the antitrust division of theDepartment of Justice provides useful material for the debate.In 1954 in an article entitled The Effective Limits of the Admin-istrative Process: A Reevaluation,' I attempted to make an estimateof the role of the administrative process particularly as it is exempli-fied in the independent agency. I came to the conclusion, among otherthings, that the charge of industrial or corporate domination of theagencies was a gross exaggeration. But it has been very difficult tocounter the kind of simplistic thinking which is involved in the claim.It has been many times pointed out that American liberal and reformthinking relies heavily on the so-called "devil" theory. The common-est form of this theory is to attribute the ills of our society to the largecorporations. A subsidiary of the axiom is that when an attempt ismade to control the corporations by a public agency the agency iscaptured by them. Such co-option can no doubt take place and has inparticular instances taken place. Indeed, a certain degree of co-option* Byrne Professor of Administrative Law, Harvard Law School. A.B., Johns Hop-kins, 1925; LL.B. Harvard, 1928, S.J.D. 1932.1 Jaffe, The Effective Limits of the Administrative Process: A Reevaluation, 67Harv. L. Rev. 1105 (1954).565BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEWis inherent in the whole process of regulation. And the more inclusiveand detailed the regulatory scheme the more this will be true.The less loaded word for the phenomena of "capture" is coopera-tion. Two reasons can be given for both the likelihood and even thepropriety of cooperation. The first reason is indeed basic to all legalsystems. A legal system cannot function unless there is a high degreeof symbiosis, of living together and of acceptance. Where the enforce-ment of law requires the continuous imposition of sanctions against ahostile constituency the enterprise is apt to fail. Second, where regula-tion is intensive it inevitably tends to usurp the function of manage-ment. A government administration will not have the resources formanaging the large enterprises which it regulates, and in fact it isunder no responsibility for a successful issue. If, nevertheless, regula-tion is carried to the point where private managerial initiatives areseriously impaired, the enterprise will be robbed of its necessary drive.It may be surmised that this is what has happened to the railroads.Indeed, a much greater danger to effective administration than "cap-ture" is the hardening of administrative policies and the resultinginflexibility. This, in the opinion of many critics, is the case with theInterstate Commerce Commission.It is I think impossible to make out that the ICC has been cap-tured by anything other than its own rather rigid approach to ratecompetition. It is one of the ironies of the debate on this whole sub-ject that it arose originally out of the hypothesis that the ICC hadbeen captured by the railroads and that the hypothesis was proposedat the time when the Commission was putting road-blocks in the wayof effective railroad competition with automobile trucking. The sim-plistic approach would have told us to substitute the trucks for therailroads as the captor. But the true analysis, I think, was that theCommission had developed a so-called planning notion, then verypopular, pursuant to which the entire transporation industry was tobe coordinated. Each mode of transportation was to have its "share".There is, I think, an argument for the abolition of the InterstateCommerce Commission—though I dare say this approach too is over-simplified. At least the contribution to this Symposium discussing theICC does nothing to counter the argument for abolition. It shows aCommission still committed to hampering the railroad's ability to com-pete by imposing upon its rate structure the theory of fully distributedcosts, and for the rest engaged in a kind of caretaker regulation of anearly bankrupt railroad industry. Much of the Commission's energiesthese days have been devoted to approving or disapproving (but mostlyapproving) railroad consolidations. It is questionable whether thiswork requires the service of a standing regulatory commission. One has566THE FEDERAL REGULATORY AGENCIES IN PERSPECTIVEthe uneasy feeling that the consolidation movement is a kind of desper-ate make-shift. Given the absence of any coherent transporation policyI hasten to add that if these observations appear as a criticism of theICC they imply to a far greater degree a criticism of the failure ofour government as a whole to evolve a coherent transporation policy.My estimate of the railroad regulation situation is only anotherexpression of my abiding conviction that the criticisms so often madeof administrative agencies should much more often be directed towardCongress than the agencies. The notion so sedulously cultivated bymany of us during New Deal days that agencies, because they wereexpert, could go on spinning out of their own guts a continuing seriesof miraculous solutions was an absurd and a-historical illusion. Thestuff of great public policy controversies is basically political and canonly be solved in the political arena.•	 It is true that in the absence of a congressional solution, particu-larly where opposing forces are in stalemate, an administrative agencywith a broad delegation of power does have some leverage with whicha brilliant and energetic administrator can solve problems. And, con-trary to the jaundiced views taken of the agencies, the fact of thematter is that there have been in the past, and indeed in the recentpast, some striking examples of this phenomenon. Even so malignedan agency as the Federal Communications Commission has providedus with some striking examples, as witness its application of the fair-ness doctrine to require its licensees to broadcast a substantial volumeof anti-cigarette propaganda.The Symposium provides considerable material for demonstratingthat the "capture" hypothesis is based on a false premise, eitherexplicit or implied, which among other things obscures the diversityof administrations both of the independent and the departmentalvariety. The treatment of the independent agency as a distinct phe-nomenon has gone much too far and has confused thinking in the area.The independent agency does have certain distinct characteristics. Itsso-called independence—which is technically an independence fromthe constitutional Executive—has often been thought to weaken ratherthan strengthen it. Lacking presidential backing the agency may beforced into undue dependence upon Congress and its committees. Fur-thermore, it is thought that the desire for favorable budgetary treat-ment and for reappointment to positions does introduce a measure ofpresidential control. Nevertheless, certain agencies, of which the SECis an outstanding example appear to have maintained a very largeindependence.One of the defects of the capture theory is the premise that theobject of regulation is always a more or less gigantic corporate corn-567BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEWbination to whose pressure and power the agency is predominatelysubject. This of course is a simplified derivative of the classic Marxiananalysis. It either overlooks or denies the fact that even granting thevery great power of the industrial corporations there are other groups,some of them organized and some not, which demonstratively possessa very great power. The farm and union organizations are primeexamples. The article on the National Labor Relations Board docu-ments the proposition that union pressure for the extension of unionbargaining is persistent and effective, though one should make no claimthat it is the only force to which the Board is responsible. The Securi-ties and Exchange Commission, however, amply testifies to the powerof the unorganized investor interest. The Federal Power Commission,as it appears from the article describing its recent activities, has beenquite responsive to consumer pressure, perhaps, as recent events sug-gest, to the point where it has failed to allow returns to the industrysufficient to maintain the needed level of exploration and investment.It may be argued that the FPC's present sensitivity to the con-sumer interest is in part due to the prodding of the Supreme Court.That, I think, is true. But it in no way impairs my general point whichis that it is a mistake to isolate the institution of the administrativeagency from all of the other relevant forces and institutions, and thento characterize it as inevitably the captive of certain interests. Evena theory which accounts for agency action in terms of power musttake account of the fact that each agency operates within a complexof powers which is peculiar to that agency, and that even for any singleagency there is rarely a single interest which can dominate. The Mari-time Board, for example, which is indeed a power ridden agency, is atleast accessible to two sources of power—the unions and the shippingowners.The present day reformist, particularly the environmentalists,look to the courts to achieve their aims. In the•New Deal days whenI first went into government the courts were looked at as inherentlythe bulkwarks of reaction. We know that that was untrue and so shouldhave learned that such generalizations are likely to be wrong, includ-ing the generalization that administrations are inherently reactionaryand at the beck and call of the interests. It is true that the work doneby the courts. in the last few years in the area of administrative lawhas been of the greatest importance for the cause of reform. In aperiod in which many of the agencies have settled into unenterprisingroutines, the courts have set about to reawaken these agencies to theirresponsibilities for active and forward-looking decisions. Particularlysignificant are the decisions opening up the agency and judicial reviewproceedings to the direct representation of consumer and citizen inter-568THE FEDERAL REGULATORY AGENCIES IN PERSPECTIVEests. Theoretically these interests are in the keeping of the agenciesthemselves. But bureaucracies tend to become somewhat ingrown,attached to their own concepts of policy and resentful of outside pres-sures, particularly those which they feel they can ignore.The courts also have been broadly interpreting their law-makingpowers through the vehicle of statutory interpretation, and have man-dated more inclusive concepts of policy than the agencies were pre-pared to accept. Perhaps we might say of the phenomenon that thecourts have a more general fund of prestige out of- which to buildnovel theories, though agencies with bright new mandates have in thepast been as enterprising as the courts. These judicial activities con-tinue to be of great importance in stimulating and guiding the agenciesin their new endeavors. But ultimately the conflict of interests whichlie at the bottom of most of the great controversies must be resolvedby the more particular political process represented by administrativeand legislative power. The courts are not equipped, for example, towork out pollution control standards for the Delaware River Basin.We are not entitled at this point to assume that because in thepast agencies have had little regard to environmental protection theywill continue in that way in the future. The political situation hasradically changed. There is now a large public demand which it wouldbe suicidal for the agencies to ignore and which finds expression inimportant new legislation as well as in an aroused public opinion. Tosuch pressures the agencies responded in the past, and there are noa priori reasons why they should not respond to such forces in the fu-ture. This is not to say that every claim made by the environmentalistwill be accepted. There are real conflicts on every side of which thereare ranged great numbers of our citizenry. Pollution control is as muchas anything a matter of increased costs and it is the citizen who willfoot the bill.The articles of this Symposium testify to the fact that howeverwe may estimate the value of the decisions taken by these agenciesthey are not necessarily bogged down in routine or oblivious to newproblems. The article on the Federal Power Commission demonstratesthat once catapulted by the Supreme Court into the business of regu-lating the producer price of natural gas, and having been criticizedby Dean Landis for their failure to respond to the challenge, they havebecome most ingenious and flexible in designing theories to meet theadministrative load. The much maligned Federal CommunicationsCommission has been extremely active in the last few years. Giventhe massive failure of Congress, for example, to provide guidance forthe resolution of the CATV problem, the Commission has put out anenormous and continuing effort in dealing with this baffling and explo-569.BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW. REVIEWsive issue. The continuing initiative of the Securities and ExchangeCommission, its ready response to old and new problems in the areaof investment, is highly encouraging. The National Labor RelationsBoard, whatever ones feeling as to its biases, has not stood still.These instances demonstrate that the independent agencies, justas it is true of the departmental agencies, are capable of novel andsignificant initiatives. When compared with the Congress they do not,I think, come off a poor second; and it is difficult to argue that theirfailures have been more drastic than those of either Congress or theExecutive. The courts today, of course, are the darlings of the liberalsbut they have not always been so. In sum, any theory which attemptsto describe our administrative agencies, whether independent or de-partmental, in tight or simplistic terms is doomed to fail. In any ulti-mate sense they can only be understood as functions of our entiresystem of government and evaluated in terms which are relevant to ajudgment of that system.570

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