Sunday, July 7, 2013

Independent Regulatory Commission



The Independent Regulatory Commissions are characteristic American institutions to undertake public regulation of private economic activity. They are much different from Indian Commissions who are not independent to the same extent. The American Independent Regulatory Commissions are totally independent of the Presidential Control. They are a manifestation of the distrust the US Congress harbours towards the political executive. The Congress, therefore, creates special bodies to regulate and control the private economic activity whenever it feels necessary to do so. The Congress creates these bodies under a statute which clearly keeps it out of the Presidential influence. The statute provides for a separate funding for the bodies so set up to ensure that they do not have to depend on the President for financial resources. These bodies, therefore, are answerable to legislature only which defines its functions and provides it the necessary resources for survival and effective functioning. Except to some extent the commissions created by constitution, none of the boards/commissions in India enjoy such independence. Moreover, these commissions do not enjoy the same wide powers and do not perform a range of functions as their American counterparts tend to perform.

The first regulatory commission was set up by the US Federal Government in 1887. It was the Inter-State Commerce Commission. A number of commissions were set up later, some of which functioning today are:

  1. Inter-State Commerce Commission

  2. Civil Aeronautics Board

  3. Federal Power Commission

  4. Federal Trade Commission

  5. Federal Communication Commission

  6. National Labour Relations Board

  7. Securities and Exchange Commission

  8. Tariff Commission

  9. Board of Governors of the Federal Reserve system, also called, Federal Reserve Board.



Main features of the independent regulatory commissions are:


(i) Appointment and Removal of Members

Members of these Commissions are appointed by the President, but their terms are staggered. This is deliberately done to ensure that no single President will be able to appoint all the members. Moreover, these appointments are subject to congressional approval. This makes the members more or less free from Presidential influence-specially as the members cannot easily be removed by the President.



Financial Arrangements


As already mentioned, the Congress makes allocation for these Commissions separate from that made for the President. Even in the management of the funds so set apart, the Commissions are not subject to any Presidential control or restraint. They are granted the status of body corporate with the rights to own, purchase, dispose off property, keep its own account in the bank and employee its own staff. Their expenditure is a direct change on the consolidated fund of the country. This arrangement is made to ensure the financial independence of the Commissions.

Functions of Independent Regulatory Commission

Their functions are of a mixed nature. They are administrative, quasi-judicial and quasi-legislative. The normal judicial, legislative and administrative processes may be time-consuming. It may, therefore, be desirable to place these functions relating to a particular important economic activity into the hands of an autonomous body. This body may then deal with all the aspects of that activity and develop expertise in all these aspects. Inter-State Commerce Commission is a good example to consider. The Commission is charged with the task of supervising inter-state (national) transportation system.

This involves policy determination through rules and regulations as to the just determination of rates. Promulgation of regulation is a quasi-judicial function. Having promulgated these rules and regulations, the Commission has to enforce these rules. This is surely an administrative process. Finally, both on their own initiative and on the complaint of interested parties, wherever in a given case, rules and regulations have been infringed, they have to take follow up action by launching prosecution etc. This is a quasi-judicial work. If the system of regulatory commissions does not exist, these functions would have to be performed by different bodies. For example, congress will have to make rules, some department of the Government will have to enforce them and the adjudication on infringement will have to be done by the judiciary. All these operations performed by separate bodies will take time. Moreover, congress in too big a body performing too wide tasks to be able to take care of the specialised needs of this Particular legislation and its rules and regulations. Similarly the judicial system will find it difficult to master the intricacies of these specialised activities.

For all these reasons, the commissions are the most suited organisations to perform these tasks in an integrated manner. We will hear something about the other side of this argument while giving a critique of the system.




Advantages of the Independent Regulatory Commissions

The system has many advantages which are discussed below:

  1. The very nature of function of the commissions, as explained above, has the advantage of bringing out these quasi-legislative and quasi-judicial functions from the bureaucratic structure. They are thus above to escape from the rigid hierarchical structure of the bureaucracy.

  2. The system puts the activities of national importance and technical nature out of the purview of partisan party politics. The matters requiring quasi-legislative and quasi-judicial functions do require to be considered by independent organisations who have the necessary expertise but are free from political bias.

  3. The system harmonises the interests of the generalists and specialists.

  4. The system has the advantage of bringing the different interest groups and shades of opinion on the related activities together. For example, in the normal judicial and legislative process, everyone does not get a chance and opportunity to express his views directly. The focus of activity is missing and many interested persons may not come to know of what is happening. Commission provides just such focus to which interest groups can always look up for presenting their problems.


Disadvantages of the Regulatory Commissions


The system is not free from problems. Some important ones are:

(i) The Commissions have too much autonomy. They are, in fact, responsible to none. They are in any case meant to be independent of President, but, even the control of Congress over the commissions is not very effective. The Congress makes annual appropriation for the commissions, can order investigation into the affairs of the commission and if necessary even abolish them. The time for budgeting gives some opportunity to discuss the activities of the commissions, but is hardly a substitute for a detailed review which normally takes place in a regular department of the Government. The power to abolish the commission is an extreme power which can be exercised only in extreme cases. This leaves only the power to order investigations. The Congress has in the past ordered some investigations and detected many irregularities and improprieties. But this again is a sort of management by exception. Things can go wrong for a long time and get detected only when much damage has been done.

Judicial control over the decisions of the Commission is of course there, but that too is very limited. The judicial review is, in fact, confined to only three principal aspects, viz.:

  • to ensure use of correct procedure in administrative action;

  • to prevent action in excess of powers conferred by the legislature;

  • to ensure that the action taken in any matter is based on the evidence on record.


In short, the judicial review is confined mainly to legal matters.

Thus, it has been said that the Commissions are almost totally free from administrative, legislative or judicial control. This may lead to some sort of complacency, lethargy and apathy towards the problem of the citizens.

  1. The combination of administrative, quasi-judicial and quasi-legislative functions puts too much power into the commissions. They become the law-makers, law- enforcers, the prosecutors and the judges. This arrangement may lead to arbitrariness endangering the rights of the individuals. In any case it violates the cordinal principle of a prosecutor not being the judges. Here he becomes much more.

  2. The Commissions have not been very effective in protecting the rights of the citizens and protecting public interest or in ensuring long-run progress of the industry. This is so, because the Commissions act through case by case procedure and these cases are separated from each other. In this connection, the Hoover Commission (1949) gave the example of Civil Aeronautics Board and the Inter State Commerce Commission to show that they approached the problem of building the route structure for the nature by the same case to case approach. The result was obvious. By and large these Commissions have failed to take an integrated approach to the problems of the industry although they were supposed to do that and much more.

  3. Regulatory Commissions have been charged to be unduly lax. This has happened, primarily due to the fact that they tend to depend too much on the interests with which they have to deal. These interests are highly articulate andbeing wealthy have a lot of influence in the executive as well as legislative wings of the Government. The public interest, on the other hand, goes by default, because it is the interest of the small man, which is not always well represented. Sometimes, of course, they are inhibited by the possibility of a judicial review. It is a healthy check, probably the only check, on the otherwise wholly independent Commissions.

  4. The Regulatory Commissions are also criticised on the ground that their administration is weak. Hoover Commission has recommended that this problem can be got over, to a large extent, by strengthening the role of the Chairman. This has been done to some extent. The Chairman how often looks after the administration through an Administrative Officer, while for other quasi-judicial, quasi-legislative functions, he works in a team with the other members of the Commission.

  5. It has also been argued that the existence of the Regulatory Commissions has resulted in making the US administration disintegrated. The President although being responsible for the executive wing of the government has no control over them. The chain of command breaks down in their case. They in fact operate as the fourth branch of the government which is headless. This really makes the co-ordination of administrative policy difficult.

  6. A natural corollary of the above problem is that the existence of the Commissions makes the centralisation of the auxiliary services like statistical, economic, legal, statutory, etc., difficult. This generates duplication and wastage.


Attempts at Reform


The Regulatory Commissions have been subjected to a lot of criticism by the individuals as well as by some committees. The President’s Committee on Administrative Management (Brownlow Committee) criticised them for forming centres of power without responsibility and reducing the President to the position of having responsibility without power. The Committee recommended that the work of the commissions should be reassigned to the administrative department with which they are concerned. The Commission may only retain the adjudicatory functions.

The Attorney General’s Committee on Administrative Procedure, reporting in 1941, did not agree with the Brownlow Committee. They felt that the life blood of the administrative process was negotiations and informed settlements. This would be seriously hampered if the prosecuting branch could not turn to deciding branch for guidance about law and procedures. This Committee, therefore, defended the Commission system.


The first Hoover Commission (1949) also disagreed with the Brownlow Committee. They argued that the Committee had based its arguments on theoretical grounds. In actual practice the Commissions performed an important function and should remain. It was, however, pointed out that quality of members should be improved and the administration of the Regulatory Commissions should be strengthened by making the chairman responsible for administration and by providing him the help of an Administrative Officer for this purpose.

The Second Hoover Commission (1955) also examined the question of length. It was by and large unsympathetic to Regulatory Commissions and recommended transfer of judicial functions to Courts or Administrative Courts. Nothing much came out of it. Regulatory Commissions appear to have come to stay.


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