Judicial Deference and the Credibility of Agency Commitments

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 incarnations of itself. The solution is to allow agencies-at their option-to promulgate socalled "permanent regulations," rules that the agency could not later amend and upon which Congress and private parties could safely rely. Introduction Consider the following situation: In late 2004, towards the end of President George W. Bush's first term, the National Highway Transportation Safety Administration ("NHTSA"), pursuant to its congressionally delegated authority, promulgates a rule that would relax inspection and testing regimes for automobile manufacturersthereby saving those firms substantial amounts of money-if the manufacturers independently deployed cutting-edge vehicle safety technology. The research and development of this technology will require significant up-front expenditures, and automobile manufacturers must decide whether to invest the funds necessary to bring the technology to market. However, the cost-benefit analysis is not so straightforward. The predicament, as the automobile firms understand it, is that this regulatory regime may not last long enough to result in long-term cost savings. Several of the potential Democratic nominees for the 2004 presidential campaign oppose this regulation, and, if President Bush were to lose the election, the incoming administration would possess the unilateral authority to discard this new rule in favor of the previous status quo (or any other reasonable arrangement).1 In light of this uncertainty, automobile manufacturers rationally may decide to decline the offer implicit in NHTSA's new rule and not invest in the costly (but socially productive) new technology, frustrating the agency's regulatory aims. Now consider the following situation: In late 2004, towards the end of President George W. Bush's first term, a consensus emerges that poorly functioning markets have caused prescription drug prices to spiral drastically out of control. While all parties agree that something must be done, Congress-lacking crucial information regarding the functioning of the prescription drug markets-is unable to reach internal agreement on which policy to pursue. Confronted by a technical issue about which they possess little expertise, a majority of members of Congress decides that the best available legislative option is to delegate authority to the Food and Drug Administration ("FDA") under the Federal Food, Drug, and Cosmetic Act2 to take steps to reduce prices, including the authority to impose price controls. However, a large number of congressional Republicans, whose votes are needed to pass this delegatory legislation, are willing to confer such broad governmental authority upon the FDA only if they can be assured that the agency will adhere to whatever regulations the Republican-controlled FDA initially adopts. …