It is a principle of black letter administrative law—dating back to A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935), and Carter v. Carter Coal Co., 298 U.S. 238 (1936)—that Congress cannot constitutionally give private, non-governmental parties the kind of rulemaking power that it gives to federal government agencies. The saga of the Horseracing Integrity and Safety Act (HISA) represents an interesting contemporary application of that doctrine.
Adopted by Congress in 2020, HISA established the Horseracing Safety and Health Authority, a “private, independent, self-regulatory, nonprofit corporation” with a nine-member board of directors to be chosen by a nominating committee also from outside the government. Congress gave the Horseracing Authority the power to adopt rules to protect the health and safety of horses and human participants in the horseracing industry. HISA also gave the Federal Trade Commission (FTC) certain oversight responsibilities, including arguably limited authority to “approve,” but not necessarily the power to modify, Horseracing Authority rules. And therein lay the difficulty.
In National Horsemen’s Benevolent & Protective Ass’n v. Black, 53 F.4th 869 (5th Cir. 2022), a Fifth Circuit panel concluded that HISA violated what it labeled the Constitution’s “private non-delegation doctrine” by giving the Horseracing Authority “sweeping” rulemaking power, backed by civil sanctions, with insufficient FTC oversight. Although HISA required the FTC to “approve” the Horseracing Authority’s rules, the court read that oversight as being limited to confirming that the rules were “consistent” with the statute. In other words, the court read the statute as denying the FTC the power to direct the Horseracing Authority’s policy decisions. Instead, the FTC could only make nonbinding recommendations. According to the court, such limited review of the Horseracing Authority’s proposed rules by the FTC “[fell] short of the pervasive surveillance and authority an agency must exercise over a private entity” and gave “a private entity the last word” regarding the requirements of federal law.
After the Fifth Circuit’s decision in National Horsemen’s, Congress amended HISA to give the FTC the power to “abrogate, add to, and modify” rules developed by the Horseracing Authority. See Consolidated Appropriations Act of 2023, Pub. L. No. 117-328, 136 Stat. 4459 (2022). Subsequently, in Oklahoma v. United States, 62 F.4th 221 (6th Cir. 2023), the Sixth Circuit upheld the amended statute as constitutional. Writing for that court, Chief Judge Jeff Sutton started his opinion by remarking, “Sometimes government works.”
The Sixth Circuit agreed with the Fifth that “unchecked delegations” of rulemaking authority to private entities would “violate core separation-of-power guarantees.” To avoid this problem, private entities must be “subordinate” to government agencies. Private parties may advise agencies in the rulemaking process, but they “may not be the principal decisionmaker[s] in the use of federal power, may not wield equal power with a federal agency, or regulate unilaterally.” The Sixth Circuit also clearly agreed with the Fifth Circuit’s analysis of the pre-amendment HISA as failing to make the Horseracing Authority sufficiently subordinate to the FTC to pass constitutional muster. For the Sixth Circuit, however, the amendments to HISA made all the difference. According to Chief Judge Sutton, the amendments giving the FTC “broad power to write and rewrite the rules” had “ma[de] the FTC the primary rule-maker, and [left] the Authority as the secondary, the inferior, the subordinate one.” The Sixth Circuit also noted the FTC’s power to review and reverse the Horseracing Authority’s enforcement decisions. “Whether the FTC becomes a demanding taskmaster or a lenient one, the FTC could subordinate every aspect of the [Horseracing] Authority’s enforcement,” which was enough to defeat the facial challenge to HISA before the court.
