Of particular importance is the fact that "rule" includes agency
statements not only of general applicability but also those of particular applicability applying either
to a class or to a single person. In either case, they must be of future effect ,
implementing or prescribing future law. Accordingly, the approval of a corporate reorganization
by the Securities and Exchange Commission, the prescription of future rates for a single named
utility by the Federal Power Commission, and similar agency actions, although applicable only to
named persons, constitute rule making. H.R. Rep. p. 49, fn. 1 (Sen. Doc. p. 283).
As applied to the various proceedings of Federal agencies, the
definitions of "rule" and "rule making", and "order" and
"adjudication" leave many questions as to whether particular proceedings are rule
making or adjudication. For example, the question arises whether agency action on certain types
of applications is to be deemed rule making or licensing (adjudication), in view of the fact that
there is apparent overlapping between the defini-
[Page 14]
tion of "rule" in section 2 (c) and of "license" in section 2 (e). Thus,
"rule" includes the "approval * * * for the future * * *", and
"license" is defined to include "any agency permit, certificate, approval * * * or
other form of permission."
An obvious principle of construction is that agency proceedings which
fall within one of the specific categories of section 2 (c), e.g., determining rates for the future,
must be regarded as rule making, rather than as coming under the general and residual definition
of adjudication. Furthermore, the listing of specific subjects in section 2 (c) as rule making is not
intended to be exclusive. It is illustrative only. H.R. Rep. 20 (Sen. Doc. p. 254). Thus, in deter-
mining whether agency action on a particular type of application is "rule making", the
purposes of the statute involved and the considerations which the agency is required to weigh in
granting or withholding its approval will be relevant; if the factors governing such approval are
the same, for example, as the agency would be required to apply in approving a recapitalization or
reorganization (clearly rule making), this circumstance would tend to support the conclusion that
agency action on such an application is rule making.
More broadly, the entire Act is based upon a dichotomy between rule
making and adjudication. Examination of the legislative history of the definitions and of the
differences in the required procedures for rule making and for adjudication discloses highly
practical concepts of rule making and adjudication. Rule making is agency action which regulates
the future conduct of either groups of persons or a single person; it is essentially legislative in
nature, not only because it operates in the future but also because it is primarily concerned with
policy considerations. The object of the rule making proceeding is the implementation or
prescription of law or policy for the future, rather than the evaluation of a respondent's past
conduct. Typically, the issues relate not to the evidentiary facts, as to which the veracity and
demeanor of witnesses would often be important, but rather to the policy-making conclusions to
be drawn from the facts. Senate Hearings (1941) pp. 657, 1298, 1451. Conversely, adjudication
is concerned with the determination of past and present rights and liabilities. Normally, there is
involved a decision as to whether past conduct was unlawful, so that the proceeding is
characterized by an accusatory flavor and may result in disciplinary action. Or, it may involve the
determination of a person's right to bene-
[Page 15]
fits under existing law so that the issues relate to whether he is within the established category of
persons entitled to such benefits. In such proceedings, the issues of fact are often sharply
controverted. Sen. Rep. p. 39 (Sen. Doc. p. 225) ; 92 Cong. Rec. 5648 (Sen. Doc. p. 353).
Not only were the draftsmen and proponents of the bill aware of this
realistic distinction between rule making and adjudication, but they shaped the entire Act around
it. Even in formal rule making proceedings subject to sections 7 and 8, the Act leaves the hearing
officer entirely free to consult with any other member of the agency's staff. In fact, the
intermediate decision may be made by the agency itself or by a responsible officer other than the
hearing officer. This reflects the fact that the purpose of the rule making proceeding is to
determine policy. Policy is not made in Federal agencies by individual hearing examiners; rather it
is formulated by the agency heads relying heavily upon the the expert staffs which have been hired
for that purpose. And so the Act recognizes that in rule making the intermediate decisions will be
more useful to the parties in advising them of the real issues in the case if such decisions reflect
the views of the agency heads or of their responsible officers who assist them in determining
policy. In sharp contrast is the procedure required in cases of adjudication subject to section 5(c).
There the hearing officer who presides at the hearing and observes the witnesses must personally
prepare the initial or recommended decision required by section 8. Also, in such adjudicatory
cases, the agency officers who performed investigative or prosecuting functions in that or a
factually related case may not participate in the making of decisions. These requirements reflect
the characteristics of adjudication discussed above.
The foregoing discussion indicates that the residual definition of
"adjudication" in section 2 (d) was intended to include such proceedings as the
following:
1.Proceedings instituted by the Federal Trade Commission and the
National Labor Relations Board leading to the issuance of orders to cease and desist from
unfair methods of competition or unfair labor practices, respectively.
2.The determination of claims for money, such as compensa-
tion claims under the Longshoremen's and Harbor Workers' Compensation Act,
and claims under Title II (Old Age and Survivors' Insurance) of the Social Security
Act.
[Page 16]
3.Reparation proceedings in which the agency determines whether a
shipper or other consumer is entitled to damages arising out of the alleged past
unreasonableness of rates.
4.The determination of individual claims for benefits, such as grants-in-aid and
subsidies.
5.Licensing proceedings, including the grant, denial, renewal, revocation,
suspension, etc. of, for example, radio broadcasting licenses, certificates of public
convenience and necessity, airman certificates, and the like.
[ENDNOTES]
1 The legislative history of section 2 (a)
illustrates clearly the broad scope of the term "agency." In the Senate Comparative Print
of June 1946, the term agency was explained as follows (p. 2) : "It is necessary to define agency
as 'authority' rather than by name or form, because of the present system of including one agency
within another or of authorizing internal boards or 'divisions' to have final authority. 'Authority'
means any officer or board, whether within another agency or not. which by law ha.- authority to take
final and binding action with or without appeal to some superior administrative authority. Thus,
'divisions' of the Interstate Commerce Commission and the judicial officers of the Department of
Agriculture would be 'agencies' within this definition." (Sen. Doc. p. 13). And in the Senate
Report the following appears at page 10: "The word 'authority' is advisedly used as meaning
whatever persons are vested with powers to act (rather than the mere form of agency organization
such as department, commission, board, or bureau) because the real authorities may be some
subordinate or semidependent person or persons within such form of organization." (Sen. Doc.
P. 196). See also H.R. Rep. p. 19 (Sen. Doc. p. 253).
2 This exception was added by Public
Law 30, 80th Cong., 1st sess.
3 This exception was added by Public
Laws 663 and 719, 79th Cong., 2d sess.
4 This exception was added by Public
Law 129, 80th Cong., 1st sess.
5 Note that section 4 (apart from 4(d))
in applicable only to substantive rules, i.e., rules issued pursuant to statutory authority to implement
statutory policy. as by fixing rates or defining standards.