ERROR
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed
ERROR
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed
search
Close Nav

Regulator Beware

back to top
eye on the news

Regulator Beware

Will FTC chairwoman Lina Khan’s aggressive posture invite a judicial rebuke? December 2, 2021
Politics and law

A century ago, congressman Dick T. Morgan advocated the creation of the Federal Trade Commission on the grounds that it would take “business matters out of politics.” Lina Khan, the FTC’s current chairwoman, thinks that “all decisions are political.” As Khan and her fellow progressives at the FTC pursue political ends, they undermine the traditional basis for administrative power—and they could eventually provoke a reaction from the conservative Supreme Court.

Five commissioners, each insulated from removal by the president, govern the FTC. Congress delegated to the commissioners the power to construe and apply the FTC Act, a statute that contains such nebulous phrases as “unfair methods of competition.” The commissioners can often confidently expect the courts to defer to any FTC reading of the law, even an unpersuasive one, that resides within the ragged bounds of reason.

If those who created the FTC 100 years ago could see today’s agency, many of them would be delighted. The original Progressives believed in the expert and his capacity for “scientific management.” Most questions of governance were, in their minds, questions of administration, and most questions of administration demanded the application of an apolitical “special knowledge.” Long before he signed the FTC Act into law, Woodrow Wilson asserted that “the greater part” of an administrator’s affairs were “outside of politics.” “Whatever we do in regulating business,” said Representative Morgan, one of the first proponents of an interstate trade agency, “should be removed as far as possible from political influence.” If experts can solve society’s problems, then the polity should establish independent agencies, endow these agencies with ample power, and defer to their pronouncements.

Today’s progressives still extol the virtues of expertise, but their grounds for supporting administrative authority are more cynical. In their eyes, conventional politics is too slow and too difficult, and it permits the wrong people to influence those who govern. Independent agencies, by contrast, can move quickly, reject compromise, and squelch dissent. As centralized bodies, they easily turn toward central planning and top-down control—the twin pillars of progressive statecraft. The administrative state appeals to the modern progressive precisely because governance and politics are inseparable, and agencies offer a shortcut to desired political results.

Khan’s statement about the ubiquity of politics, which appeared in a recent interview, is no offhand remark. Since Khan took her seat in June, the FTC has mowed down earlier commission policy statements and guidelines; discarded procedural protections for regulated parties; taken drastic measures against mergers and acquisitions; and consolidated authority in the chairwoman’s office. The agency’s progressive commissioners have changed policy in a string of party-line votes, often leaving the minority commissioners in the dark about the majority’s plans and activities. “The commission, if nothing else, has been revered for its bipartisanship and collegiality, and that has been destroyed in recent months,” says Commissioner Christine Wilson.

These progressives ultimately intend to change antitrust law. For decades, the agency has pursued its mandate through discrete prosecutions that adhere loosely to the courts’ consumer-friendly understanding of the Sherman Antitrust Act. Khan wants to supplement case-by-case enforcement with rulemaking, and to discard the consumer-welfare standard in favor of a “neo-Brandeisian” program of reform that targets big business. Ideally, in Khan’s view, the agency will in time shape markets, labor conditions, and even the democratic process.

But if the FTC was founded on the conceit of neutral, scientific, and apolitical “expertise,” and Khan’s FTC intends to use raw political power to reshape the economy, by what right can the FTC proceed? If the mask of neutrality has vanished, why shouldn’t the basis of the FTC’s authority face reexamination? If the Constitution’s separation of powers became deranged on false premises, why shouldn’t the present, haphazard system now undergo inspection, adjustment—and perhaps even correction?

The president cannot remove FTC commissioners at will, the commission has the authority to define open-ended words such as “unfair,” and the commission’s definitions are frequently granted by the courts a legally binding effect. Each of these components of agency power—removal, delegation, and deference—departs from the original constitutional design and could be undone with a single Supreme Court decision.

Start with removal. The FTC Act says that the president can remove a commissioner only “for inefficiency, neglect of duty, or malfeasance in office.” When President Franklin Roosevelt tried to remove a commissioner for political reasons, the Supreme Court, in Humphrey’s Executor v. United States (1935), ruled that the FTC’s special nature justified independence. “The commission is to be nonpartisan, and it must, from the very nature of its duties, act with entire impartiality,” explains the unanimous opinion. “Its duties are neither political nor executive,” because the commissioners “exercise the trained judgment of a body of experts.”

Of course, the Constitution vests executive power in a single president. Because “one man” could not “perform all the great business of State,” George Washington observed, executive officers must “assist the Supreme Magistrate in discharging the duties of his trust.” The first Congress confirmed that executive officers serve at the pleasure of the president in what’s known as the Decision of 1789. Congress passed several bills that contained no removal clause but discussed who would manage the papers of a removed officer. James Madison commented that the legislators had thereby affirmed the position “most consonant” to “the text of the Constitution” and “the requisite responsibility and harmony of the Executive Department.”

More recently, the judiciary has allowed Congress to delegate to the administrative state the job of legislating. So long as a statute provides an “intelligible principle,” the unelected agencies can do the rest. “In our increasingly complex society,” Justice Harry Blackmun wrote in Mistretta v. United States (1989), “Congress simply cannot do its job absent an ability to delegate power under broad general directives.”

Yet the Constitution grants “all legislative Powers” to “a Congress of the United States.” In Wayman v. Southard (1825), Chief Justice Marshall said that, though the legislature may leave to the executive the ability “to fill up the details”—the subjects “of less interest”—in a statutory scheme, all “important subjects” must “be entirely regulated by the legislature itself.” The Supreme Court affirmed this bar on “delegation” of legislative power as late as 1935, when it said in Schechter Poultry v. United States (1935) that Congress must establish “the standards of legal obligation” and that Congress may not “transfer that function to others.”

Finally, courts now defer to any reasonable interpretation advanced by an agency of a law that the agency is charged with implementing. In Chevron v. NRDC (1984), the Court held that when Congress speaks to an agency in broad statutory terms, “the court does not . . . impose its own construction on the statute.” This judicial abdication is warranted because agencies can, and should, “formulat[e] . . . policy” and “resolv[e] . . . competing interests.” Judges, who are neither policymakers nor experts in the field, must defer to the bureaucratic agents, so long as their reading of the law fits within a “gap left open by Congress.”

But what is the role of the judicial branch? “There is no liberty,” Alexander Hamilton argued, “if the power of judging be not separated from the legislative and executive powers.” And John Marshall’s soaring pronouncement in Marbury v. Madison that the courts must say what the law is finds confirmation in the mundane fine print of the Administrative Procedure Act, which directs a “reviewing court” to “interpret . . . statutory provisions” and “decide all relevant questions of law.” Even the Progressive-era politicians who created the FTC understood that the agency’s reading of the law would be subject to searching and definitive judicial review.

The FTC could soon find itself daring the Court to issue bold rulings that it has so far avoided: the full return of removal at will, the revival of non-delegation, or the end of deference to agencies.

Removal, delegation, and deference are live issues at today’s Supreme Court. In Seila Law v. CFPB (2020) and Collins v. Yellen (2021), the Court held that the president can remove at will an officer who commands an agency singularly, rather than as part of a board or commission. Though they do not revisit Humphrey’s Executor, these decisions repudiate “almost every aspect” (in Justice Thomas’s words) of that seminal decision. In Gundy v. United States (2019), the Court only narrowly upheld the “intelligible principle” test of delegation. Three justices called to overturn that test, a fourth suggested his willingness to do so in a future case, and Justices Kavanaugh and Barrett have joined the Court since the decision was issued. And in Kisor v. Wilkie (2019), the pre-Barrett Court could barely manage to affirm even “Auer deference,” a kind of lesser-Chevron rule for when an agency interprets its own regulations. Several justices have denounced Chevron deference as a devious novelty and called for its demise.

An overreaching FTC could prompt a landmark decision on deference. Khan herself argued before becoming chairwoman that “unfair methods of competition” rules issued by the FTC should receive Chevron deference. But “fairness” is an elusive goal. To limit the FTC to any reasonable definition of “unfair” is hardly to limit the FTC at all. Chevron is “properly understood,” legal scholar Cass Sunstein writes accurately, as a “counter-Marbury for the administrative state.” Inverting the enduring formulation of Chief Justice Marshall in Marbury, Sunstein notes that under Chevron, it is often “emphatically the province and duty of the executive branch to say what the law is.”

The FTC could also spur the justices to act on non-delegation. If the FTC can use unfair-methods-of-competition rules to shape “the distribution of power and opportunity across our economy”—to borrow a phrase from Khan—then who is doing the legislating? Schechter Poultry strikes down a statute that empowers the president to set “codes of fair competition” as an unconstitutional delegation of legislative authority. Yet Khan, undaunted, plans to set rules for “unfair methods of competition.” She seems willing to gamble that the justices will surrender an extraordinary chance to renew the separation between the elected and the unelected, the accountable and the unaccountable.

Finally, the Court may act to restore the removal power. In Humphrey’s Executor, the Supreme Court curtailed it on the FTC’s behalf, based on a theory of administration that the FTC’s new chairwoman now discards as an exhausted lie. The informed observer cannot pretend that the FTC is “nonpartisan,” that the FTC has no “political” duties, or that the FTC acts “with entire impartiality” when Khan declares that “all decisions are political.”

While Khan says that the dangers of going too far are not on her mind, a new majority of conservative justices want to preserve the Constitution’s separation of powers. While Khan seems unwilling to let stuffy notions of formalism obstruct a singular opportunity to create a more just society, the Supreme Court seems open to restoring constitutional government. How far will each side go? Perhaps if the FTC tests constitutional boundaries, the Court will flinch. Perhaps the Court, though willing to check the agency’s advance, will not dare to blunt its strength or break its independence. Perhaps—but the FTC proceeds at its own risk.

Photo by GRAEME JENNINGS/POOL/AFP via Getty Images

Contact

Send a question or comment using the form below. This message may be routed through support staff.

Saved!
Close