The Supreme Court heard a case earlier this month that could have a big impact on businesses in many areas regulated by federal agencies that use voluntary standards. In U.S. Department of Transportation v. Association of American Railroads, the Supreme Court is considering a D.C. Circuit decision that invalidated a law that gives Amtrak a large role in writing performance standards for passenger trains. The D.C. Circuit held that the law amounted to an unconstitutional delegation of authority. Similar standards are used by a number of federal agencies in their regular business, and by the companies regulated by those agencies.
The U.S. Consumer Product Safety Commission (CPSC), for one, relies quite heavily on voluntary standards to do its business. Under one provision of the Commission’s organic law, if the CPSC identifies a risk of injury associated with a consumer product and there is both a voluntary consensus standard that adequately addresses the risk and a likelihood of substantial compliance with the standard within the affected industry, the CPSC must defer to the voluntary standard. In some cases, however, Congress requires the CPSC to take voluntary standards and make them binding. This is the case for toys and durable nursery products under the Consumer Product Safety Improvement Act (CPSIA) § 106 and § 104, respectively. And the CPSC is just one example. Many federal agencies rely on outside groups to draft standards that govern businesses around the country, and federal agencies are generally encouraged to use such standards in lieu of creating government-designed rules.
As voluntary standards are typically created by private parties, the issue is whether such standards amount to private parties writing laws that govern the public generally (a set of concerns closely related to the non-delegation doctrine). These concerns were a hot legal topic in New Deal days, when the Supreme Court struck down key parts of FDR’s economic plans as violating the Constitution’s grant of law-writing power to the legislature.
After the argument at the high court concluded on December 8, however (listen here), it appears less likely that voluntary standards around the country will go down in flames, as the Supreme Court appears more concerned about due process concerns implicated by the performance standards at issue in the case. In response to Justice Breyer’s request to “calm me down” when he considered standards set by, for example, ICANN, being called into question as a result of a decision in this case, the attorney for the railroads assured him that no one envisioned such a broad ruling here. Instead, the question was whether Amtrak had been given “the pen” to write regulations with, to the disadvantage of competitors, and whether that was a problem. This, in the end, distinguishes this case from that of the CPSC and many other agencies. In the CPSC, some standards are deferred to (not adopted), and others are adopted with changes that the CPSC itself adds. Moreover, all of the recent standards have been written by standards-development groups that are broadly representative of regulated and other interested parties.
While it is always challenging to predict the outcome of a case based on oral argument, it seems unlikely that the Supreme Court will strike down the Department of Transportation’s rules on nondelegation grounds. And if the D.C. Circuit’s nondelegation holding is overturned, then businesses around the country – and the agencies that regulate them – will be able to breath a sigh of relief that industries won’t be turned upside down by a decision overriding voluntary standards incorporated by agencies that have binding effect on private parties. The nondelegation doctrine, then, may have to await another case to be reinvigorated.