Adverse Publicity by Administrative Agencies in the Internet Era

Nearly forty years ago, Ernest Gellhorn documented the potentially devastating impact that can occur when federal agencies issue adverse publicity about private parties. Based on his article, the Administrative Conference of the United States recommended that courts, Congress, and agencies hold agencies to clear standards for issuing such publicity. In the decades since, some agencies have adopted standards, but most have not, and neither the courts nor Congress has intervened to impose standards. Today, agencies continue to use countless forms of publicity to pressure alleged regulatory violators and to amplify their overall enforcement powers-all without affording due process or other procedural safeguards that attach to more formal actions. This Article renews the call for standards given four developments since 1973. First, agencies now have even more incentives to issue adverse publicity and eschew more formal statutory enforcement actions. Second, new media give agencies more ways to issue adverse publicity, for example, by making announcements via their websites, Facebook, or Twitter. Third, new media make it easier for audiences to misread or mischaracterize an agency's message. Finally, hyperresponsive capital markets now process adverse publicity more swiftly and hastily, multiplying the potential for damage. In light of these developments, and after reviewing agency practices and litigation since 1973, this Article revisits the earlier recommendations. It calls for agencies to constrain themselves with published standards, for Congress to recognize that publicity used as a sanction is "final agency action," and for courts to review adverse publicity for an "abuse of discretion." Agencies should retain wide discretion to communicate with the public, but should be held accountable if they abuse that discretion. To counterbalance this restraint on agencies, Congress should enhance their statutory enforcement powers and resources, so that agencies do not need to rely on extrastatutory tactics like adverse publicity. TABLE OF CONTENTS I. INTRODUCTION 1372 II. BOUNDLESS DISCRETION AND THE NEED FOR STANDARDS 1378 A. Agency Motivations and Public Benefits 1378 B. The Risks to Private Parties 1380 C. Recommendations by Gellhorn and ACUS 1388 III. Why the Problems Are Amplified Today 1391 A. More Incentives to Use Adverse Publicity 1391 B. More Ways to Issue Adverse Publicity 1392 C. More Opportunities to Misinterpret Publicity 1395 D. Hyper- Responsive Capital Markets 1396 E. Counterforces? 1398 IV. THE AFTERMATH: AGENCIES AND DISPUTES SINCE 1973 .. 1401 A. Case Study: The Food and Drug Administration ........ 1401 B. Other Agencies 1416 V. RENEWING THE CALL FOR STANDARDS 1427 A. Should Publicity Be Used to Punish? 1427 B. Agencies Should Articulate Standards 1429 C. Congress and Courts Should Hold Agencies Accountable 1439 VI. CONCLUSION 1453 I. INTRODUCTION In 2003, the Food and Drug Administration (FDA) publicly condemned a drug company for exaggerating the safety and efficacy of its cancer drug.1 The FDA communicated its objections via a Talk Paper posted on its website, calling the company's statements "misleading," "demonstrably false," and "particularly egregious. …