Chinese Firms Seen in Uphill Fight on Deference Claims in FCC 'Covered Equipment' Suit

An attempt by subsidiaries of two Chinese companies to raise deference questions in a recent filing at the U.S. Court of Appeals for the D.C. Circuit (docket 23-1032) on FCC equipment authorization rules may not work, legal experts said. Dahua USA and Hikvision USA raised deference issues as part of their arguments on why equipment they make and sell in the U.S. doesn’t belong on the FCC’s list of “covered equipment” deemed to pose a threat to U.S. security.

The U.S. Supreme Court’s decision last year in West Virginia v. EPA (see 2206300066) emphasized the evolving major-questions doctrine, which many SCOTUS watchers see as the new standard for evaluating deference rather than the long-standing Chevron doctrine (see 2305050038). Some see an upcoming case, Loper Bright Enterprises v. Raimondo, expected to be argued in the fall, as likely to clarify the status of the Chevron doctrine (see 2305050038).

The FCC order appealed by the Chinese companies implements the 2021 Secure Equipment Act, which required the commission to deny new authorizations for covered gear (see 2111120058).

“Raising major questions will likely be a continual refrain in administrative law cases until the Supreme Court defines its contours some more,” predicted Joe Kane, Information Technology and Innovation Foundation director-broadband and spectrum policy.

Given national security, past FCC actions in this area and congressional action in passing the 2021 law, “this case would be one that traditionally would be covered by Chevron deference,” said TechFreedom General Counsel Jim Dunstan. The case isn’t similar to the EPA case, “where the EPA went far beyond the statutory language,” he said. The security act required the FCC to adopt rules, he said: “Nor is this a case like NAB v. FCC, where the FCC was handed specific statutory provisions related to foreign-sponsored programming, but then adopted rules that went far beyond what Congress required. I think this is a real uphill battle for the Chinese companies.”

The two Chinese gear makers could make a case the rules shouldn't apply to them for a variety of reasons, Dunstan said. “But suggesting that no deference should be accorded the FCC seems a total abdication of Chevron, which I don't believe the Supreme Court is willing to do,” he said.

Kane agreed the case doesn’t appear to be the “most obvious” for application of the major questions doctrine. Given that the FCC is supposed to publish a list of covered equipment, the question would appear to be whether the agency made a mistake when “checking all the statutory boxes,” he said: “It doesn't seem like they're proposing some vast expansion of their authority akin to what the EPA did in West Virginia v. EPA, claiming a clean energy statute can support authority over virtually every industry.”

“It's absurd how Chinese companies can use America’s laws designed to promote liberty to infiltrate the nation with authoritarian surveillance technology,” said John Strand of Strand Consult, who thinks more companies should be added to the covered list. “A proper implementation” would add “hundreds, if not thousands, of Chinese firms,” he said.

Lawyers across the U.S. “are giddy with the prospect of the deregulatory opportunities” created by the EPA case, Strand said: “There are indeed instances in which regulatory agencies, including the FCC, have overstepped their authority. But this is not the case here. Congress specifically strengthened the FCC’s authority” through the 2021 act “for this very purpose.” The idea behind the major-questions doctrine “is that regulatory agencies can’t invent policy that the Congress has not discussed,” he said. For the past decade, Congress and parliaments in democratic countries “have been sprinting to make laws to strengthen their defense from Chinese IT intrusion,” he said.

If this case ever reaches the Supreme Court, “Chevon already may have been overruled or substantially curtailed in the Loper case now before the Court,” emailed Free State Foundation President Randolph May: “I’m skeptical that the agency’s invocation of Chevron deference ultimately will be the determining factor. ... Petitioners’ argument invoking the major questions doctrine -- that Congress did not explicitly authorize the agency’s action on a question of political and economic significance -- might hold sway.” Regardless, the FCC’s order would likely be “accorded some deference in light of the claimed national security concerns implicated,” he said.