Roger that - FAA does not/not have a choice about issuing certificates, if/if you have completed all the hoops successfully. You pass the ride/physical/test, they don't have a choice, they have to issue. "Privilege" doesn't enter into it, and pretty sure a Federal judge would agree, if they were dumb enough to invoke that as a reason for denial. "Yeah, your honor, he's passed the check ride and physical, but he said mean things about us on the internet. . ."
But yeah, they do get to define the hoops, to a large degree. We need a check and balance on 'em, or some other method that doesn't leave them as the final arbiter; maybe an independent third party making the final calls. . .other than having to make a Federal case out of it. Definitely need a "penalty" when they start an action, figure out it doesn't have merit when the pilot gets a good lawyer, and then just drop it and walk away. Maybe triple fees, and a six month moratorium on the similar actions?