Adverse Publicity by Administrative Agencies in the Internet Era

Nathan Cortez, Southern Methodist University, Dedman School of Law

Abstract

Nearly forty years ago, Ernest Gellhorn documented the potentially devastating impact on private parties when federal agencies issue adverse publicity about them. Based on his article, the Administrative Conference of the United States recommended that courts, Congress, and agencies hold agencies to clearly identified standards. In the decades since, some agencies adopted standards, but most did not. And neither courts nor Congress has intervened. Today, agencies continue to use countless forms of publicity to pressure and punish alleged regulatory violators, and to amplify their overall enforcement powers—all without affording due process or other procedural safeguards that attach to more formal actions. Agency discretion remains virtually unchecked.

This Article renews the call for standards given four developments since 1973. First, agencies have even more incentives to issue adverse publicity and eschew more formal, statutory enforcement actions. Second, new media give agencies more ways to issue adverse publicity, for example by making announcements via their web sites, or more recently via Facebook or Twitter. Third, new media make it easier for audiences to misread, mischaracterize, or misunderstand the agency’s message. Finally, hyper-responsive capital markets now process adverse publicity more swiftly and hastily, multiplying the potential for damage.

In light of these developments, and after reviewing agency practices and litigation since 1973, this Article modernizes the earlier recommendations. It calls for agencies to give prior notice and a chance to appeal, for Congress to amend the Administrative Procedure Act to recognize that publicity used as a sanction is “final agency action,” and for courts to review adverse publicity for an “abuse of discretion.” Agencies should retain wide discretion to communicate with the public, but should be held accountable if they abuse it. To counterbalance the restraint on agencies, Congress should enhance their statutory enforcement powers and resources, so that agencies do not need to rely on extrastatutory tactics like adverse publicity.