Jurisprudential Challenges of FTC and FCC Case-by-Case Adjudication

Data security, privacy, and Open Internet regulation are important to the continued development of the Internet and information economy. If the agencies crafting these regulations are to be successful, it is important to understand the jurisprudential implications of their choice of procedure. This paper considers the issues that the FTC and FCC face in their choice of rulemaking versus case-by-case adjudication to develop legal norms relating to the Internet. Both the FCC and FTC have faced controversy for their actual or proposed use of case-by-case adjudication in recent years. The FTC has engaged in extensive case-by-case adjudication to develop what several commentators and Commissioners have taken to calling its “common law of privacy.” Several Commissioners are now advancing the same “common law” approach to data security jurisprudence, and Chairwoman Ramirez has recently advocated a “common law” approach to developing its Section 5 unfair methods of competition authority. Similarly, following the DC Circuit’s vacating of parts of its Open Internet Order, FCC Chairman Wheeler has discussed using case-by-case adjudication to develop the FCC’s Open Internet jurisprudence under Section 706. The Supreme Court has embraced a very permissive approach to agency choice of procedure over the past 65 years, first in Chenery II (1947) and again in Bell Aerospace (1974). Under these cases, administrative agencies are generally free to develop the legal norms under their statutory authority through either administrative rulemaking or case-by-case adjudication. This approach, however, has been the subject of constant scholarly criticism, with most administrative law scholars arguing that agencies should rely on administrative rulemaking wherever possible and use case-by-case adjudication only to fill interstices or where rulemaking is otherwise not possible. Indeed, critiques of the existing standard are so uniformly negative that many administrative law scholars don’t even characterize discussion of agency choice of procedure as a “debate.” While today the FTC and FCC (to the extent it chooses to rely on case-by-case adjudication to develop its Section 706 jurisprudence) are on sound precedential ground to use case-by-case adjudication, the Court’s recent administrative law cases suggest that it is increasingly concerned about agency choice of procedure. The FTC’s current approach to privacy, data security, and possible unfair methods of competition is almost certainly the most aggressive use that any agency has ever made of case-by-case adjudication to develop legal norms. While not as aggressive, should the FCC choose to develop its Section 706 authority through case-by-case adjudication, it too may draw jurisprudential scrutiny. This paper considers issues relevant to understanding the agencies’ approaches to developing legal norms related to the Internet, considers possible challenges that they may face, and discusses approaches that they agencies should consider to ensuring they develop jurisprudentially sound legal norms.Please do not consider this submission for the poster session.