Supreme Court Puts Biden Policies Like Net Neutrality and Ban on Noncompete Contracts at Risk

WASHINGTON—Some of the Biden administration’s top domestic priorities, from cracking down on power-plant pollution to bringing back net neutrality, are on shakier legal footing after a Supreme Court decision on Friday shifted power away from federal agencies.

“It’s hard to overstate the impact that this ruling could have on the regulatory landscape in the United States going forward,” said Leah Malone, a lawyer at Simpson Thacher & Bartlett. “This could really bind U.S. agencies in their efforts to write new rules.”

In a 6-3 decision written by Chief Justice John Roberts, the court abandoned a legal doctrine called Chevron deference, which has long helped federal agencies defend their regulations in court when challenged by industry groups.

The doctrine, created by the high court in a 1984 case, stood for the idea that judges should defer to executive branch agencies when it comes to interpreting gaps and ambiguities in the laws they implement, so long as those interpretations are reasonable.

Roberts said time has shown that approach was “fundamentally misguided,” and he instructed lower courts to “exercise their independent judgment in deciding whether an agency has acted within its statutory authority.”

The ruling was widely expected by many in the legal community, including regulators, who in recent years have relied less on Chevron deference to defend their policies. But the decision still marks a turning point, said Daniel Jarcho, a lawyer at Alston & Bird.

“The Court’s decision will unquestionably lead to more litigation challenging federal agency actions, and more losses for federal agencies,” Jarcho said.

Net neutrality’s uncertain fate

Now that Chevron deference is gone, the Federal Communications Commission is expected to have a harder time reviving net neutrality—a set of policies barring internet-service providers from assigning priority to certain web traffic.

Net-neutrality provisions introduced during the Obama administration were scrapped during the Trump presidency. But in April the Biden administration said they were coming back.

To do that, the FCC reclassified internet providers as public utilities under the Communications Act. There are pending court cases challenging the FCC’s reinterpretation of that 1934 law, and the demise of Chevron deference heightens the odds of the agency losing in court, some legal experts said.

“Chevron’s thumb on the scale in favor of the agencies was crucial to their chances of success,” said Geoffrey Manne, president of the International Center for Law and Economics. “Now that that’s gone, their claims are significantly weaker.”

The Federal Trade Commission, for its part, might struggle to defend its ambitious ban on noncompete contracts in court. That rule, which would take effect in September, prevents employers from using noncompete agreements to prevent workers from joining rival firms.

There are unsettled questions about whether the FTC Act—the law from 1914 creating the agency—gave it the authority to issue such broad competition rules. For much of its history, the FTC chose not to claim that it was granted such power by Congress.

“The Supreme Court’s decision overruling Chevron makes it more likely that courts could curtail the FTC’s recent attempts to expand its authority to regulate and bring enforcement actions against ‘unfair methods of competition,’” said Ryan Quillian, a former FTC lawyer now at the firm Covington & Burling.

After the Friday ruling, White House press secretary Karine Jean-Pierre said the high court was giving priority to special interests over ordinary Americans.

Executive branch lawyers, she said, would review the decision and “ensure that our administration is doing everything we can to continue to deploy the extraordinary expertise of the federal workforce to keep Americans safe and ensure communities thrive and prosper.”

Clean-energy rules in peril

The ruling also spells trouble for the Environmental Protection Agency, which has been trying to reduce pollution from coal-powered plants.

In 2022, an EPA plan to cap power-plant emissions was struck down by the Supreme Court. That decision said the EPA lacked authority to mandate a national shift to clean energy sources but left open the door to other regulatory approaches.

Undeterred, the agency completed new rules in April—known as the Clean Power Plan 2.0. The agency has said it is confident its new approach, which mandates emission reductions at individual power plants, is on solid legal ground.

But that is far from a sure thing now that Chevron deference is gone, said Michael Drysdale, an environmental lawyer at Dorsey & Whitney.

A coalition of 25 Republican-led states filed a lawsuit in May to block the latest Biden plan from going into effect. That case is pending before a federal court in Washington, D.C.

“The plan was already going to be facing some uphill challenges, given the history of that litigation,” Drysdale said. “And today’s ruling just makes it even trickier.”

Write to Jan Wolfe at [email protected]