Brace for new complications in big tech takedowns after Supreme Court upended regulatory rules

Analysis The US Supreme Court has ruled that the judges should no longer defer to government agency interpretations of ambiguous laws – a decision with potential ramifications for some of the biggest cases against tech companies.

That deference, known as Chevron deference, dates to 1984 when the court ruled in Chevron v. Natural Resources Defense Council that the US Environmental Protection Agency could define ambiguous terms in government legislation, provided the agency was trying to apply the law as Congress intended.

Last week, the Supreme Court reversed that 40-year-old precedent with a decision covering two cases – Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce – about whether the US National Marine Fisheries Service could force US fishing vessels to pay the wages of federal observers in the absence of specific rules to that effect.

“The Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous; Chevron is overruled,” the judges in the 6-2 majority wrote [PDF].

The majority today gives itself exclusive power over every open issue – no matter how expertise-driven or policy-laden

Justice Elena Kagan, in a dissenting opinion joined by Justice Sonia Sotomayor, characterized the ruling as a judicial power grab, because it invites judges to make determinations previously trusted to government agencies and expert staff.

(Bear in mind, for bonus irony points, Justice Neil Gorsuch, who wrote the majority opinion in the Supreme Court’s separate Ohio v EPA decision last week, mixed up nitrous and nitrogen oxide in his ruling. The error was corrected.)

“In one fell swoop, the majority today gives itself exclusive power over every open issue – no matter how expertise-driven or policy-laden – involving the meaning of regulatory law,” wrote Justice Kagan. “As if it did not have enough on its plate, the majority turns itself into the country’s administrative czar.”

Justice Ketanji Jackson Brown recused herself from the Loper decision – presumably due to prior involvement with the litigation at the appellate level – but joined the dissenting opinion as it applied to the 6-3 Relentless decision.

The ruling has the potential to severely curtail the effectiveness of US regulators like the Federal Trade Commission (FTC) and Federal Communications Commission (FCC) – and therefore to change the way the technology industry is regulated.

The FTC, for example, is engaged in fights with Adobe over subscriptions, all the big AI players on antitrust, and is being challenged for abolishing that mainstay of Silicon Valley, the non-compete agreement. With Chevron dismissed, that last one could prove to be a test case for the new order of business.

As for the FCC, many fear the whole issue of net neutrality could be up for grabs – again – if control of the issue is given to judges. Telcos aren’t fond of the FCC, and could be expected to contest every fine and reprimand, just to establish new rules.

Follow the money

The anglers in the Loper Bright case were, according to the New York Times, represented by lawyers working for Americans for Prosperity – a group funded by petrochemical billionaire Charles Koch, a frequent foe of regulation.

Patrick McLaughlin, director of policy analytics and a senior research fellow at George Mason University’s Mercatus Center – chaired and funded by Koch – framed the court’s decision as a positive step from a governance perspective.

“Under Chevron deference, if an agency interpreted an ambiguous statute in one way, and others (presumably regulated entities) interpreted it another way, the tie would go to the agency – the courts would defer to the agency’s presumed expertise,” he wrote in a post last week. “Now, in the post-Chevron world, regulatory agencies will have to justify their interpretation of ambiguous statutes without the advantage of deference to agencies in case of a tie.”

The National Taxpayers Union Foundation (NTUF) welcomed the Supreme Court’s decision, citing its potential impact on the Internal Revenue Service.

“Today’s decision will level the playing field for taxpayers and government agencies,” declared Joe Bishop-Henchman, executive vice president of the NTUF, in a statement. “Unreasonable IRS interpretations will no longer automatically win in court, which is as it should be, and reasonable interpretations will still have the force of law.”

The Natural Resources Defense Council (NRDC) – the progressive environment group that lost in the 1984 Chevron case – warned the end of Chevron deference is a recipe for chaos, because judges all over the county will be called upon to interpret ambiguous laws.

“The Supreme Court seized for both itself and lower-court judges a policymaking role that the Constitution did not intend for them to have,” the NRDC argued last week. “The court stripped many federal agencies tasked with protecting public health, public safety, and the environment – including the US Environmental Protection Agency and the US Food & Drug Administration, to name just two – of their power to interpret the laws they carry out. Instead, federal judges now get to call the shots.”

While the majority of the Supreme Court Justices offered reassurance that prior decisions based on Chevron – cited by about 18,000 federal court cases – won’t automatically be invalidated by their decision, Kagan has doubts about that.

“The majority says that a decision’s ‘[m]ere reliance on Chevron’ is not enough to counter the force of stare decisis; a challenger will need an additional ‘special justification,'” she wrote. “The majority is sanguine; I am not so much. Courts motivated to overrule an old Chevron-based decision can always come up with something to label a ‘special justification.'”

Kagan expects that rules for the environment, healthcare, finance, transportation, and artificial intelligence in the years ahead will be reshaped by judicial preference.

“In every sphere of current or future federal regulation, expect courts from now on to play a commanding role,” she wrote. “It is not a role Congress has given to them, in the [Administrative Procedure Act] or any other statute. It is a role this Court has now claimed for itself, as well as for other judges.” ®

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Thomas Claburn