The distinction between general statements of policy and the adoption of substantive rules has not proved an easy one to draw, but it turns on an agency's intention to bind itself to a particular legal policy position.
Section 503(b) of the Communications Act authorizes the Federal Communications Commission (FCC) to impose "monetary forfeitures" (fines) on licensees for violations of the Act or of regulations promulgated. The FCC was allowed to take into account "the nature, circumstances, extent and gravity of the violation and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and such other matters as justice may require. In 1991, the FCC decided to abandon its traditional case-by-case approach to and issued an order to "adopt more specific standards for assessing forfeitures. The forfeiture standards, set forth in a schedule appended to its order, contemplated a base forfeiture amount for each type of violation, which amount is calculated as a percentage (varying on the violation) of the statutory maxima for the different services. Petitioner, United States Telephone Association, unsuccessfully sought reconsideration before the agency and mounted a double-barreled challenge to the forfeiture standards. Petitioner claimed that the Commission violated the Administrative Procedure Act by issuing the standards without notice and an opportunity to comment. Petitioner also contested the substantive validity of the prescribed base forfeiture amounts, asserting that FCC's percentage-of-maxima approach arbitrarily discriminated against common carriers by subjecting them to greater fines than other licensees for the exact same conduct. On the other hand, the Commission claimed that the standards are only general statements of policy exempt from the notice and comment obligation that the APA imposes on the adoption of substantive rules.
Did the FCC violate the Administrative Procedure Act by issuing the standards without notice and an opportunity to comment?
The Court set aside the forfeiture standards, concluding that the FCC was obligated, under the Administrative Procedure Act, to put the forfeiture standards out for comment. The Court concluded that the standards were not general statements of policy exempt from the notice and comment obligation that the APA imposed on the adoption of substantive rules. The Court noted that in almost 300 cases decided pursuant to the standards, almost all followed the penalties set out, which indicated the lack of discretion and the FCC's intention to be bound by the standards. The Court further pointed out that the specific detail entailed in the standards did not fit within the paradigm of a policy statement.