Standard of Judicial Review
The APA requires that in order to set aside agency action not subject to formal trial-like procedures, the court must conclude that the regulation is "arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with the law." However, Congress may further limit the scope of judicial review of agency actions by including such language in the organic statute. To set aside formal rulemaking or formal adjudication whose procedures are trial-like (see APA, 5 U.S.C 556 - 557), a different standard of review allows courts to question agency action more strongly. For these more formal actions, agency decisions must be supported by "substantial evidence" after the court reads the "whole record," which can be thousands of pages long.
Unlike arbitrary and capricious review, substantial evidence review gives the courts leeway to consider whether an agency's factual and policy determinations were warranted in light of all the information before the agency at the time of decision. Accordingly, arbitrary and capricious review is understood to be more deferential to agencies than substantial evidence review. Arbitrary and capricious review allows agency decisions to stand as long as an agency can give a reasonable explanation for its decision based on the information it had at the time. In contrast, the courts tend to look much harder at decisions resulting from trial-like procedures because those agency procedures resemble actual trial-court procedures, but the Article III of the Constitution reserves the judicial powers for actual courts. Accordingly, courts are strict under the substantial evidence standard when agencies acts like courts because being strict gives courts final say, preventing agencies from using too much judicial power in violation of separation of powers.
The separation of powers doctrine is less of an issue with rulemaking not subject to trial-like procedures. Such rulemaking gives agencies a lot more leeway in court because it is much more like the legislative process reserved for Congress in Article II. Courts' main role here is ensuring agency rules line up with the Constitution and with agency's statutory commands from Congress. Even if a court finds a rule very unwise, it will stand as long as it is not "arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with the law."
Read more about this topic: Administrative Procedure Act
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