FTC Power Grab Lacks Legal Basis
Antitrust experts have expressed concerns that the FTC has been taking steps that would unilaterally boost its power and potentially allow for more politically motivated enforcement. Perhaps U.S. Chamber’s Sean Heather put it best when he said that “[b]y mixing antitrust and legislative rulemaking, you wind up with the worst of both worlds.”
Here are some key things to know:
The FTC has spent the past year attempting to expand its authority and diverge from bipartisan precedents.
The FTC’s Annual Regulatory Plan “exceed[s]” the FTC’s “legal authority and would recast the FTC as a mini-Congress, without any of the accountability that comes with it,” warns FTC Commissioner Noah Phillips. The regulatory plan “relies on unsupported assumptions and baleful rhetoric to support imposing substantial and counterproductive regulatory burdens across the economy. Its anti-growth scheme involves regulation after regulation that exceed our legal authority and would recast the FTC as a mini-Congress, without any of the accountability that comes with it. At the Commission’s July 1st open meeting, I expressed concerns about this; and here we are. This will not end well: not for the competition and consumers we are charged to protect, not for the businesses within our jurisdiction, and not for the FTC.”
Recent actions at the FTC have “erode[d] certainty regarding rules of the road, a central function of the rule of law,” cautions FTC Commissioner Christine Wilson. “Neo-Brandeisians have undermined transparency and predictability in other ways, as well. These actions erode certainty regarding the rules of the road, a central function of the rule of law. For example, the Neo-Brandeisians at the FTC have:
— Rescinded the Section 5 policy statement and foreshadowed a more expansive enforcement agenda while failing to issue a new policy explaining this agenda;
— Withdrawn support for the Vertical Merger Guidelines and characterized them as insufficiently aggressive, while declining to provide guidance on where the new lines will be drawn; and
— Failed to challenge mergers within the requisite statutory timeframes and instead issued threatening warning letters as waiting periods expire.”
Revisions to Section 18 rulemaking procedures could lead to a loss of public trust in the FTC, wrote Commissioners Wilson and Phillips. “The revisions to our Rules of Practice adopted by the majority last Thursday, without public input, undermine the goals of participation and transparency that Congress sought to advance when it enacted and amended Section 18. These changes will facilitate more rules, but not better ones. These changes will also provide additional opportunities for legal challenges in federal court, given that new rules will be formulated pursuant to an agenda-driven process that limits public input and facilitates a biased evidentiary record. When Section 18 was adopted, the FTC suffered from a loss of public trust and was on the brink of being shuttered. The majority would do well to heed lessons from this history, because those who fail to learn from the past are doomed to repeat it.”
However, the FTC is not a lawmaking body and was never intended to have unlimited rulemaking authority.
Congress did not intend for the FTC to have the rulemaking authority it claims to have, says the American Bar Association. “The Commission’s [6(g)] rulemaking authority is buried within an enumerated list of investigative powers, such as the power to require reports from corporations and partnerships, for example. Furthermore, the [FTC] Act fails to provide any sanctions for violating any rule adopted pursuant to Section 6(g). These two features strongly suggest that Congress did not intend to give the agency substantive rulemaking powers when it passed the Federal Trade Commission Act.”
— The ABA continues: “Given that Magnuson-Moss was enacted to address concerns raised by National Petroleum Refiners and similar cases, it’s hard to see Section 6(g), with its vague and broad language, as providing a firm footing for informal antitrust rulemaking by the Commission.”
Magnuson-Moss makes it clear that the FTC has narrow rulemaking authority, points out Former FTC Commissioner Maureen K. Ohlhausen. “Congress got involved and it issued the Magnuson-Moss Warranty and Federal Trade Improvement Act to explicitly give the FTC rulemaking authority, but it only mentioned unfair deceptive acts or practices. And it explicitly said this says nothing about unfair methods of competition, so what it did was give the FTC this rulemaking, but with a lot more procedural hurdles, or safeguards, maybe is a better way of putting it, guardrails in place. So it’s not streamlined APA notice and comment rulemaking; there’s a lot more things the FTC has to do.”
Competition rulemaking authority was never granted to the agency, explains the U.S. Chamber of Commerce. “[T]he FTC was never granted legislative style rulemaking to determine what is and what is not an unfair method of competition or an unfair and deceptive practice. The FTC, given its status as an administrative body, already serves as prosecutor, judge, and jury. Congress, instinctively, has understood the problem of extending rulemaking powers to the agency allowing the agency to write the rules it is empowered to enforce. Such a super concentration of power is ripe for abuse, as an agency empowered to write the rules it enforces severely limits the scope of judicial review.”
“The FTC lacks a valid legal basis for UMC rulemakings,” writes ITIF’s Aurelien Portuese. “The FTC intends to justify UMC rulemaking based on Section 6(g) of the FTC Act of 1914 (FTCA). Following the adoption in 1975 of the Magnuson-Moss Act, Congress authorized but conscribed the FTC’s rulemaking authority for consumer protection. Congress has not authorized the FTC to enact substantive rules on UMC, except for procedural and interpretive purposes. The Supreme Court has seminally expressed in the case of Gratz in 1920 that ‘it is for the courts, not the commission, ultimately to determine as a matter of law what [UMC] include.’ Consequently, absent congressional mandate and in line with settled case law, the FTC lacks a valid legal basis for UMC rulemakings. Therefore, the Neo-Brandeisians’ regulatory agenda to ignore the FTC’s institutional constraints amounts to engaging in unlawful UMC rulemaking activity likely to generate congressional and judicial consternation.”