Reference no: EM131377404

Congress enacted the National Traffic and Motor Vehicle Safety Act of 1966 (the Act) for the purpose of reducing the number of traffic accidents that result in death or personal injury. The Act directs the Secretary of Transportation to issue motor vehicle safety standards in order to improve the design and safety features of cars. The Secretary has delegated authority to promulgate safety standards to the National Highway Traffic Safety Administration (NHTSA) under the informal rulemaking procedure of the APA.

The Act also authorizes judicial review under the provisions of the Administrative Procedure Act (APA) of all orders establishing, amending, or revoking a federal motor vehicle safety standard issued by the NHTSA. Pursuant to the Act, the NHTSA issued Motor Vehicle Safety Standard 208, which required all cars made after September 1982 to be equipped with passive restraints (either automatic seatbelts or airbags). The cost of implementing the standard was estimated to be around $1 billion.

However, early in 1981, due to changes in economic circumstances and particularly due to complaints from the automotive industry, the NHTSA rescinded Standard 208. The NHTSA had originally assumed that car manufacturers would install airbags in 60 percent of new cars and passive seatbelts in 40 percent. However, by 1981 it appeared that manufacturers were planning to install seatbelts in 99 percent of all new cars. Moreover, the majority of passive seatbelts could be easily and permanently detached by consumers.

Therefore, the NHTSA felt that Standard 208 would not result in any significant safety benefits. State Farm Mutual Automobile Insurance Company (State Farm) and the National Association of Independent Insurers (NAII) filed petitions in federal court for review of the NHTSA's rescission of Standard 208. What standard of review would apply to the rescission? Should it be set aside? Explain.