ADventures in Law

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For those of you who worry about the partisan divide in our country, it’s nice to know that the Federal Trade Commission (FTC or Commission) has once again brought an often sharply divided Supreme Court to unanimity. Unfortunately for the FTC, that unanimity has again come at the agency’s expense. Two years ago, the Supreme Court unanimously held that the FTC lacked the redress authority it had often invoked under Section 13(b) of the FTC Act. That ruling, among other things, has resulted in the agency conducting an unprecedented amount of <a href="https://www.ftc.gov/news-events/news/press-releases/2022/10/federal-trade-commission-explores-rule-cracking-down-junk-fees">rulemaking</a> and blanketing the country with <a href="https://www.ftc.gov/news-events/news/press-releases/2023/04/ftc-warns-almost-700-marketing-companies-they-could-face-civil-penalties-if-they-cant-back-their">notice of penalty letters</a>.

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Late last week the Supreme Court held that a party seeking to challenge the constitutionality of the FTC’s administrative hearing process need not first raise those arguments in the administrative proceeding before moving to federal court. The case was consolidated with another, similar case involving the SEC. The decision can be reviewed <a href="https://www.supremecourt.gov/opinions/22pdf/21-86_l5gm.pdf">here</a>. The defendant in the FTC matter is arguing that the FTC’s administrative hearing process is unconstitutional because the tenure protections afforded to administrative law judges render them insufficiently accountable to the president, violating separation of powers principles, and also because of the combination of prosecutorial and adjudicatory functions in the FTC. These important substantive issues were not decided by the Supreme Court, but the decision expedites the ability of other federal courts to address these existential issues regarding the agency.

Pursuant to a congressional statute, a party objecting to the Commission’s initiation of administrative proceedings is supposed to bring those objections to the agency before bringing any such objections to federal court, and the agency argued that the plaintiff’s constitutional objections should have been brought initially to the Commission rather than to federal district court. (Gee, we wonder what the Commission would have decided.) The Court disagreed with the Commission, finding that deferring federal court review of the challenge would deprive the complainant of their right not to undergo protracted adjudicatory proceedings, that the challenge is collateral to the purpose of the administrative review process and that the claims were outside the Commission’s expertise.

Of course, the Court’s opinion is purely procedural and does not portend how the Court might rule on the constitutional challenges themselves, but two concurring justices hinted at their views. Justice Clarence Thomas suggested that he views it as objectionable whenever private rights are adjudicated administratively, while Justice Neil Gorsuch suggested that district courts should always have jurisdiction to entertain challenges to agency proceedings. It may be years away, but surely the Commission is hoping not to align all the justices against it again. An unfavorable ruling on the merits would complicate the Commission’s redress woes further, as proceeding administratively first and then obtaining redress in a separate federal court action was the primary redress path that the Court did not strike down in <em>AMG</em>.

FTC Brings the Supreme Court Together Again