Judicial Deference and the Credibility of Agency Commitments

Abstract:     
Flexibility has long been thought essential to the effective operation of administrative agencies. The ability to adjust polices (and statutory interpretations) in accordance with technological or economic advances, scholars assume, is part of these agencies' very being. Consonant with this understanding, over the past two decades the Supreme Court has afforded administrative agencies ever greater authority to adapt regulations to changing circumstances. This trend culminated in the 2005 decision National Cable & Telecommunications Association v. Brand X, in which the Court announced that stare decisis would no longer serve as an impediment to an agency's authority to adjust its policies and statutory interpretations over time.

Yet for agencies, this latest grant of freedom may do more harm than good. Brand X strips administrative agencies of the last remaining mechanism by which they might have credibly committed themselves to a particular regulatory policy. By consequence, agencies are likely to have great difficulty inducing skeptical outsiders - both regulated private parties and Congress - to rely on the continued stability of agency rules. Regulated parties will refrain from investing resources or taking other actions that may well be critical to the success of regulatory initiatives, and Congress will be wary of delegating too much discretionary authority to an agency whose regulatory decisions can easily be overturned by future manifestations of itself. The solution is to allow agencies - at their option - to promulgate so-called "permanent regulations," rules that the agency could not later amend and upon which Congress and private parties could safely rely.

Number of Pages in PDF File: 60

Keywords: administrative law, Chevron, Brand X, credible commitment, contract, surplus, reliance

JEL Classification: K23

Accepted Paper Series