Court to Test Congressional Delegation to FCC

The Supreme Court will hear oral arguments today in Federal Communications Commission v. Consumers' Research, a case testing the limits of Congress's authority to delegate power to an administrative agency. In particular, the case tests whether Congress can delegate power to the FCC to determine the amount that communications providers must contribute to a fund to subsidize access to telecommunications in rural areas. Here's my preview, from the ABA Preview of United States Supreme Court Cases, with permission:

FACTS

In 1996, Congress amended the Communications Act of 1934 to make it easier for the Federal Communications Commission (FCC, or Commission) to ensure that affordable and reliable communications services remained available throughout the United States. The legislation sought to achieve this objective, known as “universal service,” by directing the FCC to establish a set of programs called the Universal Service Fund, specifying that telecommunication carriers must “contribute” to the Fund, and directing the FCC to use the balance in the Fund to subsidize universal service. (FCC previously achieved this same objective informally, by allowing telecommunications providers to charge above-cost rates in cities while charging below-cost rates in rural areas.)

The Act specifies six “principles” that direct the FCC’s use of this authority. First, services should be available at “just, reasonable, and affordable rates.” Next, “all regions of the Nation” should have access to services. Third, customers throughout the nation should have access to services that are “reasonably comparable” in quality and price to services in urban areas. Fourth, carriers should make “equitable and nondiscriminatory” contributions to universal service. Fifth, universal service subsidies should be “specific, predictable[,] and sufficient.” And finally, “schools,” “libraries,” and “health care providers” should have access to services. 47 U.S.C. § 254(b). The Act authorizes the FCC to adopt additional principles under certain circumstances. Moreover, the Act specifies the entities that must pay contributions, the entities that may receive subsidies, and the types of services that the Fund may subsidize.

Pursuant to the Act, the FCC established four universal service programs, which assist rural, insular, and high-cost areas; low-income customers; schools and libraries; and rural healthcare providers. All four programs subsidize telephone and high-speed internet services.

In 1997, the FCC directed the establishment of the Universal Service Administrative Company (USAC) to help it administer the Fund. The USAC is a private, not-for-profit corporation chartered in Delaware, but it operates under the FCC’s oversight and control.

The FCC appointed the USAC as the Fund’s “permanent Administrator.” 47 C.F.R. § 54.701(a). Under FCC regulations, the Administrator provides financial projections that the FCC uses in computing universal service contributions, and it bills and collects contributions. The Administrator also disburses money to program beneficiaries pursuant to FCC rules. But the Administrator exercises no independent regulatory power, and it must comply with FCC rules. Any party aggrieved by an Administrator decision can request review by the FCC.

Under FCC regulations, the Administrator must submit to the FCC its projected expenses for the universal service programs at least 60 days before the start of each quarter. The Administrator must also provide “the basis for those projections.” 47 C.F.R. § 54.709(a)(3). These projections “must be approved by the Commission before they are used” to calculate contributions. 47 C.F.R. § 54.709(a)(3).

Under FCC regulations, the Administrator must also project revenues for each quarter. It must report the total contribution base to the Commission at least 30 days before the start of each quarter.

Based on the Administrator’s projections, the FCC computes a “contribution factor”—a number based on the ratio of the projected expenses to the total revenues. The FCC publicizes the projections and contribution factor in a public notice and on its website. It retains the power to revise the projections and to set them “at amounts that the Commission determines will serve the public interest.” If the Commission takes no action within 14 days, the numbers are “deemed approved.” 47 C.F.R § 54.709(a)(3). Once the FCC approves the contribution factor, the Administrator calculates each carrier’s contribution and sets a percentage of each carrier’s revenue that it must pay. Carriers, of course, can pass the cost of their contributions to their customers.

In November 2021, the Administrator submitted its projections for program expenses for the first quarter of 2022. In December, it submitted its calculation of the total contribution base for that quarter. Based on those numbers, the FCC proposed a contribution factor of 25.2 percent.

A group of consumers, a nonprofit corporation, and a carrier (the respondents) filed comments with the FCC asking the Commission to set the contribution factor at 0 percent. They based their request on a claim that the Universal Service Fund was unlawful because Congress impermissibly delegated its legislative power to the FCC and the FCC impermissibly redelegated power to the Administrator. (The respondents filed similar claims with regard to other quarters’ contribution factors in the Sixth, Eleventh, and D.C. Circuits.) Several groups of Universal Service Fund beneficiaries intervened in support of the government.

The FCC took no action within 14 days, and the Administrator’s earlier proposed contribution factor was deemed approved.

The objecting group then filed a petition for review in the Fifth Circuit. A three-judge panel unanimously denied the petition for review, but a sharply divided en banc court reversed. The Court granted the petitions for a writ of certiorari filed by the government and the intervenors. It also directed the parties to brief this additional question: “Whether this case is moot in light of the challengers’ failure to seek preliminary relief before the Fifth Circuit.”

CASE ANALYSIS

As a general matter, Congress cannot delegate away its lawmaking authority to administrative agencies. This is called the nondelegation doctrine. But nevertheless, the Court has historically given Congress quite a bit of latitude in delegating authority to agencies to interpret, apply, and enforce federal law. So long as the law gives agencies an “intelligible principle” on which to act, the law does not impermissibly delegate away lawmaking power.

Also as a general matter, government departments, including administrative agencies, cannot delegate away their regulatory authority to private entities. Private entities can advise administrative agencies, but they cannot make ultimate administrative decisions. This is sometimes called the private nondelegation doctrine.

The parties wrangle over the application of the nondelegation doctrine, the private nondelegation doctrine, and the combination of the two doctrines. As instructed by the Court, they also wrangle over mootness.

The government argues first that the case is not moot. The government notes that “the FCC sets a new contribution factor each quarter” and argues that “because a quarter is too short a period for a challenge to the factor to be fully litigated, this case fits within the ‘capable of repetition, yet evading review’ exception to mootness.” According to the government, the respondents’ failure to seek preliminary relief does not change that conclusion, because the exception focuses on the nature of the lawsuit (and not the conduct of the parties) and because “this Court has applied the exception even when litigants have failed to move for preliminary relief.”

The government argues next that the Fifth Circuit erred in holding that the universal service contribution system violated the nondelegation doctrine. The government says that the Act provides a sufficiently “intelligible principle” for the FCC to act. The government points out that the Act includes six enumerated “principles” that “define[] the general policy that the FCC must pursue,” and that the Act “also defines the boundaries of the FCC’s authority,” for example, who pays the universal service contributions, the terms by which the funds must be used, and more. According to the government, the Act’s “detailed guidance far exceeds what this Court’s precedents require.”

The government argues that “[t]he FCC did not subdelegate legislative power to the private Administrator.” To the contrary, the government says that the Administrator, a private entity, merely proposes contribution rates to the FCC, and the FCC makes the ultimate decision to adopt those proposals or not.

Finally, the government argues that “[t]he combination of Congress’s grant of discretion to the FCC and the FCC’s conferral of responsibility upon the Administrator does not violate the nondelegation doctrine.” Again, the government contends that the Act provides a sufficiently intelligible principle, and that “it effects a grant of executive power.” “That executive power does not become legislative power simply because the Commission, in carrying out its universal service responsibilities, considers advice provided by the Administrator.”

Intervenors and petitioners in a companion case offer substantially similar arguments.

The respondent counter first that the Act impermissibly delegates taxing power to the FCC “without objective or meaningful limits on the size of the tax.” The respondents contend that this violates both the original understanding of the nondelegation doctrine and “the modern nondelegation framework test, which still requires Congress to ‘clearly delineate’ delegated power.” The respondents offer a “simple but meaningful” fix: “Congress could clearly add a specific tax rate or appropriate money directly.” They add that this “multi-billion-dollar social welfare program” is no “trifling detail that can be left to agency bureaucrats to fill up.”

The respondents argue next that the Act “violates the private nondelegation doctrine.” They say that the “FCC has abdicated substantive review and independent approval of USAC’s proposals, which are ministerially converted into a Contribution Factor that is ‘deemed approved’ after just fourteen days.”

The respondents argue that the combination of Congress’s delegation to the FCC and the FCC’s delegation to the Administrator “violates the Legislative Vesting Clause.” They say that this double-layered scheme—a “sweeping delegation of the taxing power, with a subdelegation of that power to private entities with a personal financial interest in the size of the tax”—represents an especially egregious violation of the separation of powers.

Finally, the respondents argue that the case is not moot. They say that the dispute is still live, because the courts could award restitution to them, and that in any event the dispute is likely to recur. Moreover, they contend that requiring a party to seek emergency relief would “cause serious repercussions,” like “an explosion of motions for emergency relief” and an increased chance that “the underlying dispute evades review.”

SIGNIFICANCE

Most immediately, this case touches on a key program to provide affordable and reliable access to telecommunications for rural communities and others who might otherwise lack access. The many amici who weighed in to support the Act reflect how critical this issue is to a wide range of diverse communities. A ruling that strikes the Act could significant restrict, or even wipe out, affordable access for these communities. As the respondents point out, Congress could amend the Act. But it’s not at all clear that an amendment could clear this Congress. In short, a Court ruling that strikes the Act could significantly restrict affordable access to rural communities.

Telescoping out, the case could mark a significant step in the Court’s longer-term move to limit the powers of administrative agencies, in this case by reinvigorating the nondelegation doctrine. That doctrine gives Congress quite a bit of flexibility to delegate broad authority to agencies to interpret, apply, and enforce the law. Indeed, the Court has not overturned a single piece of legislation as violating the nondelegation doctrine since 1935. As a result, Congress has been able to legislate broadly, leaving the details up to the agencies.

To many, this makes good sense. After all, Congress lacks the institutional expertise to legislate with details on every matter, whereas agencies have that expertise. Moreover, Congress can’t always legislate to respond with detail to new or evolving situations, whereas agencies can. To those who support a weak nondelegation doctrine, Congress should be able to legislate in broad terms, leaving the details to the agencies, so long as the legislation provides some guidance (an “intelligible principle”) to direct them.

But to others, a weak nondelegation doctrine allows Congress impermissibly to delegate away its lawmaking power, handing that power over to unelected agencies. After all, Congress is the branch of government that has the law-making power, not agencies. And Congress is directly accountable to voters; agencies, in contrast, are only accountable through the President. To those who support a strong nondelegation doctrine, broad congressional delegation is an even greater problem when agencies make decisions restricting liberty or when agencies re-delegate their authority to private actors, as the respondents argue here.

The Court’s relaxed approach to the nondelegation doctrine has been under attack in recent years and decades, along with other attacks on the powers of the administrative state. For example, in 2022 the Court ruled that in certain “extraordinary cases,” where the “history and breadth of the authority that [the agency] has asserted” and the “economic and political significance” of that assertion provide a “reason to hesitate before concluding that Congress” intended to delegate that authority, an agency must point to “clear congressional authorization” for its actions. West Virginia v. Environmental Protection Agency, 597 U.S. 697 (2022). The Court applied this “major questions doctrine” (a close cousin of the nondelegation doctrine) to restrict agencies’ authorities in some hot-button cases since. More recently, the Court reversed the decades-old “Chevron doctrine,” which said that courts defer to an agency’s reasonable interpretation of ambiguous federal law. Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024). A string of other rulings cabin agencies’ powers by restricting how the agencies are designed by Congress.

As to the nondelegation doctrine, the Court most recently applied its relaxed approach and upheld a broad congressional delegation just six years ago in Gundy v. United States. 588 U.S. 128 (2019). But in that case, just four justices—all from the progressive wing, and including Justice Ruth Bader Ginsburg—wrote to affirm the relaxed approach. Justice Neil Gorsuch dissented, joined by Chief Justice John Roberts and Justice Clarence Thomas, and argued for a robust nondelegation doctrine. Justice Samuel Alito wrote that he would be open to reconsidering the Court’s approach to the nondelegation doctrine in an appropriate case. Justice Brett Kavanaugh was recused.

Given the line-up in Gundy, the changed composition of the Court (Justice Amy Coney Barrett replaced Justice Ginsburg), and the justices’ votes in other cases restricting the powers of the administrative state, and given the nature of this case (which includes a congressional delegation to an agency, an agency delegation to a private entity, and the combination of those delegations), look for the Court to tighten up its approach to the nondelegation doctrine and further restrict how Congress can delegate power to agencies.