Supreme Court decision to overturn Chevron Deference signals shift in regulatory abilities

On 28 June, the US Supreme Court overturned the ‘Chevron deference’, an administrative law principle allowing federal agencies to interpret and implement statutes with the understanding that federal courts would ultimately defer to those agencies’ interpretation of ambiguous laws. In this blog, we will go over the Supreme Court’s ruling and the implications it could have on the technology sector, with a particular focus on AI.

What is the Chevron deference?

The ‘Chevron deference’ stems from Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (1984), a Supreme Court case centred on the Environmental Protection Agency’s (EPA) interpretation of the word ‘source’ in the Clean Air Act of 1963. The Supreme Court ruled unanimously that federal agencies are allowed to interpret ambiguous laws and implement regulations, and that federal courts would defer to the agency in question and its interpretation so long as this is reasonable.

The Chevron deference also allowed Congress to rely on the federal government’s expertise when implementing laws — without Congress having to elucidate every minute definition or explain how the law should be specifically interpreted and implemented. Moreover, it allowed areas and issues to be addressed more quickly than Congress can act to pass legislation.

What has the Supreme Court ruled?

Loper Bright Enterprises v. Raimondo was brought forward by fishermen who sued the National Marine Fisheries Service for a fee imposed on them that was not authorised explicitly by Congress. The case made its way up to the Supreme Court, which decided to hear the case but only addressed the Chevron deference, disregarding all other legal matters of the case. 

The Supreme Court ruled 6-3, in Loper Bright Enterprises v. Raimondo, that federal courts cannot defer to an agency’s interpretation of a law solely because that law is ambiguous, and that federal courts can moreover offer their interpretation in such cases. The Supreme Court said the Chevron deference conflicted with the Administrative Procedure Act (APA), a 1946 law which states that federal courts should be granted the final say over all agency actions if the law being implemented or enforced is considered ambiguous. In the opinion of the Court, Chief Justice Roberts argued that past lawsuits should not be overturned solely because they relied on the Chevron deference. He added that federal courts may defer to a federal agency’s interpretation of a law if it is ‘long-standing or well-reasoned’. In her dissenting opinion, Justice Elena Kagan argued the ruling would give courts ‘the power to make all manner of scientific and technical judgements’ — and that AI was one sector which, due to gaps in current law and pending further legislation, would put courts at the forefront of regulation. 

The overturning of over forty years of norms by the Supreme Court has massive implications for administrative law and regulations implemented by federal agencies. Federal judges will now have far more power over how regulations are implemented in the US, despite potentially ruling on technical issues wholly unfamiliar to them.  

What impact will this have on the Executive Branch?

The US president’s power as head of the executive branch, which includes federal agencies, has been weakened. The president cannot rely on pushing through ambitious initiatives through federal agencies unless Congress passes supporting legislation — or the federal agency in question can win in court. Federal agencies may be cautious with their rulemaking in future, erring on the side of more technical regulations having less impact. Wide-sweeping regulations are less likely without clear accompanying instructions from Congress. Moreover, federal agencies will need to be prepared with ample evidence and data — and a strong potential legal defence — to prove their rationale for interpreting any ambiguous law that might be challenged. Particularly in the political context of upcoming elections, a president’s ability to administer fast-acting regulations will be hampered; only time will tell how future administrations will act. 

What impact will this have on Congress?

The primary burden to ensure laws are not ambiguous will fall to Congress, which will need to be as precise and specific as possible when passing new legislation in order to ensure federal agencies can implement regulations effectively without legal hurdles. Given Congress’ ineffectiveness in recent years at passing legislation, this ruling may lead to federal agencies’ regulating more slowly than previously, as agencies choose in future to wait for authorising legislation.

We may begin to see Democrats and Republicans shift how they write and negotiate legislation. Democrats in Congress may be more detailed when writing and passing legislation to ensure federal courts are less likely to intervene. Republican legislators may opt to legislate using broader language to allow the courts to dictate regulations and ‘reign in’ the powers of agencies. This will also depend, of course, on who controls both chambers of Congress and the White House. 

To effectively regulate, Congress must be able to pass more detailed legislation at a quicker rate than in the past to ensure that industries and sectors can be regulated, or deregulated, by federal agencies.

What impact will this have on industry?

The Supreme Court’s ruling drastically changes how various sectors will be regulated. For example, the Executive Order on AI issued by President Biden in October 2023 could be in jeopardy, as this was an initiative carried out without explicit direction from Congress. While the Executive Order was primarily focused on the federal government’s use of AI, its being overturned could also impact any future AI regulation for the private sector — issued, for instance, by the Department of Commerce or Federal Trade Commission (FTC).

The Federal Communication Commission’s (FCC) rule to reinstate net neutrality, to ensure broadband internet service is treated as an essential service and to ensure internet service providers treat all internet data and users equally could also be at risk. While net neutrality has been a contentious issue for the past few decades, the overturning of the Chevron deference could lead to a weakening of the FCC’s power. A US appeals court recently put the FCC neutrality rule on hold, until 5 August 2024, pending legal challenges. 

Other industries — such as renewable energy, multimodal transportation, online platforms and more — will be impacted; it will be key that Congress pass thorough, detailed legislation without ambiguity. Congress and federal agencies, to ensure intended regulations come into effect, will need input to guard against possible challenges by outside parties. Additionally, law firms and large corporations will now have additional methods to prevent regulations which could impact them negatively from being enacted through the judicial system. 

The Supreme Court ruling in Loper Bright Enterprises v. Raimondo is a watershed moment for administrative law and federal regulation. It presages drastic implications for how US policy is made. Inline can assist you should you have any questions or concerns regarding US regulations.