Federal Agency Guidance and the Power to Bind: An Empirical Study of Agencies and Industries

107 Pages Posted: 16 Jan 2019

Date Written: January 7, 2019

Abstract

The typical federal agency issues a vast amount of guidance, advising the public on how it plans to exercise discretion and interpret law. Under the Administrative Procedure Act (APA), the agency must follow onerous procedures to issue full-blown regulations (including notice and comment) but can issue guidance far more easily. What justifies this difference, in the familiar telling, is that guidance is not binding in the way regulations are. Agencies are supposed to use guidance flexibly. But critics claim that agencies are not flexible -- instead they follow guidance rigidly and thus pressure regulated parties to do the same. If true, this claim means agencies can issue de facto regulations simply by calling them guidance, threatening to make a dead letter of the APA’s constraints.

I evaluate this claim from a qualitative empirical perspective, drawing upon interviews I conducted with 135 individuals across government, industry, and NGOs in eight different regulatory fields. I make three findings. First, the critics have a genuine basis for their claim. Regulated parties often face overwhelming pressure to follow guidance, and agencies are sometimes inflexible. Second, pressure and inflexibility, though real, are not universal. One can identify regulated parties who feel little pressure and agencies who are open-minded. The degree of pressure and inflexibility can be predicted on the basis of certain organizational and legal factors that are present in some regulatory schemes but not others. Third, even when regulated parties are strongly pressured, or when officials are inflexible, this is normally not because agency officials are engaged in a bad-faith effort to coerce the public without lawful procedures. The sources of pressure on regulated parties are mostly hard-wired into the structure of the regulatory schemes Congress has imposed and are beyond the control of agency officials who issue or administer guidance. And when agencies are inflexible in the face of a regulated party’s plea to depart from guidance, that is usually because (a) officials face competing pressures from other stakeholders to behave consistently and predictably -- pressures that spring from rule-of-law values that agencies would be remiss to ignore; and (b) officials are trapped by organizational tendencies that cause rigidity, which the officials do not intend but cannot redress without costly reforms.

The problem with guidance, though real, is largely an institutional problem that calls for an institutional-reform response, not a problem of bureaucratic bad faith that calls for accusation and blame.

Keywords: administrative law, administrative state, guidance, interpretive rules, policy statements, rulemaking, Administrative Procedure Act, Environmental Protection Agency, Food and Drug Administration

JEL Classification: K23, K32

Suggested Citation

Parrillo, Nicholas R., Federal Agency Guidance and the Power to Bind: An Empirical Study of Agencies and Industries (January 7, 2019). Yale Journal on Regulation, Vol. 36, No. 1, pp. 165-271 (2019). Available at SSRN: https://ssrn.com/abstract=3311743

Nicholas R. Parrillo (Contact Author)

Yale University - Law School ( email )

127 Wall St.
New Haven, CT 06511
United States

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