Case Note: FCC v. Consumers’ Research, No. 24-354 (S. Ct.)

On June 27, 2025, the U.S. Supreme Court upheld the constitutionality of the federal Universal Service Fund (USF), reversing a decision by the U.S. Court of Appeals for the Fifth Circuit. With Justice Elena Kagan writing for a 6-3 majority, the Court held that Congress’s delegation of authority to the Federal Communications Commission (FCC) to administer the USF did not violate the nondelegation doctrine, a constitutional principle that prohibits Congress from delegating its core legislative powers to other branches or entities. 

This case asks whether the USF system is an improper grant of legislative authority to the executive branch, especially given the role played by the Universal Service Administrative Company (USAC), a private corporation that administers the fund as to both collection and distribution of funds. 

Synopsis: Universal Service Fund

The modern USF regime was established in the Communications Act of 1934, as amended by the Telecommunications Act of 1996. Specifically, Section 254 of the Act requires telecommunications providers to contribute a portion of their gross interstate telecommunications revenue to the fund and directs the FCC to design and implement the Universal Service program based on six guiding principles:

1. Quality services should be available at just, reasonable, and affordable rates. 
2. All regions of the nation should have access to these services. 
3. Services in rural and high-cost areas should be reasonably comparable to those in urban areas. 
4. All providers should contribute equitably to the achievement of universal service. 
5. Funding mechanisms should be specific, predictable, and sufficient.
6. Schools, libraries, and healthcare providers should be covered by the Fund. 

To fund the program, every calendar quarter USAC sets, and the FCC approves, a contribution factor, which is the percentage of gross interstate telecommunications revenue that every carrier must contribute. For the First Quarter of 2022, the FCC set this factor at 25.2 percent. A group of plaintiffs led by Consumers’ Research sued the FCC, alleging that this rate was excessive and challenging the entire USF contribution regime as unconstitutional. 

Legal Challenge and Fifth Circuit Decision

At the Fifth Circuit, plaintiffs argued that the USF contribution scheme violated the nondelegation doctrine. More specifically, they argued that Congress gave the FCC too much discretion without clear limits, allowing it to effectively impose a tax–an action that only Congress can take. They also raised concerns about subdelegation asserting that the FCC unlawfully relied on USAC.

The Fifth Circuit agreed with the plaintiffs, holding that while Congress’s delegation to the FCC–and the FCC’s use of USAC–might each be lawful on their own, the combination amounted to an unconstitutional “double-layered delegation.” The court analogized this structure to Free Enterprise Fund v. PCAOB (2010), where the Supreme Court struck down a dual-layer removal protection scheme as unconstitutional. 

Supreme Court Reversal

The Supreme Court reversed. Justice Kagan, writing for the majority, rejected both the nondelegation and subdelegation claims. The Court reaffirmed that Congress can delegate authority to agencies so long as it provides an intelligible principle to guide their actions, as established in J.W. Hampton, Jr. & Co. v. United States (1928). 

A majority of six Justices found that Section 254 indeed provides an intelligible principle. They noted that the statute sets clear policy objectives, identifies specific beneficiaries, requires that rates be just and affordable, limits funding to what is sufficient but not excessive, and restricts support to essential and widely used services. Compared to precedent upholding broader delegations, such as Whitman v. American Trucking, the Court reasoned, Section 254 lays out even more specific requirements and detailed guidance. 

With respect to the role of USAC, the Court cited Sunshine Anthracite Coal Co. v. Adkins (1940), which allowed private entities to make recommendations as long as the government agency retained final authority. Here, the Court found that the FCC maintains authority to approve, modify, or reject USAC’s proposals. USAC, they found, merely collects data and submits nonbinding estimates. Because, the majority held, USAC does not make policy decisions or issue rules, there was no unconstitutional delegation of power to a private actor. 

The Court also rejected the Fifth Circuit’s “double-layered delegation” theory. Justice Kagan explained that two valid delegations do not become unconstitutional simply because they operate together. The Court noted that the analogy to Free Enterprise Fund was unconvincing because that case concerned limits on presidential removal power, not delegation of legislative authority.

Concurring and Dissenting Opinions

Justice Kavanaugh concurred. He defended the intelligible principle test as a longstanding doctrine consistent with both the Constitution and historical practice. However, he acknowledged that, in contrast to the FCC here, delegations to independent agencies could raise “a serious Article II delegation problem.” 

Justice Ketanji Brown Jackson, in a separate concurrence, questioned whether the private nondelegation doctrine – which limits the delegation of power to private entities – has independent constitutional grounding. 

Justice Gorsuch’s dissent, joined by Justices Thomas and Alito, argued that Congress gave the FCC too much unchecked discretion, effectively allowing it to set tax-like rates and to spend the proceeds without meaningful limits. He also criticized the current intelligible principle test as vague, unworkable, and unsupported by the Constitution’s text. Justice Gorsuch concluded that this decision amounts to “approving a delegation of Congress’s taxing power unprecedented in this Court’s history” and expressed a general concern that it would overly empower “small cadres of elites” in the executive branch.