Supreme Court Hands Businesses a Big Win in Case Against FTC

UPDATE: A major victory for the business community in Axon Enterprise, Inc. v. FTC and SEC v. Cochran: The prospect of enduring years of costly and unconstitutional agency procedures before ever seeing a courtroom often forced businesses to settle even weak and unmeritorious enforcement actions. Today’s unanimous Supreme Court decision ensures businesses will get their day in court to challenge those procedures. They do not have to wait to raise constitutional claims until the end of the very unconstitutional procedures they seek to challenge.

The background

The U.S. Constitution requires federal agencies to respect due process. Due process, in turn, requires that those accused of wrongdoing must receive an impartial hearing before a neutral decision-maker. However, both in structure and in practice, the Federal Trade Commission (FTC) violates this basic principle of fairness—to the detriment of all Americans. 

In November, the U.S. Supreme Court is set to hear a major case, Axon v. FTC, that may help businesses vindicate their due process rights. 

The FTC administrative adjudication process 

To understand the Axon v. FTC case, one must first understand the FTC’s administrative adjudication process, which can be summarized in three parts:  

• First, the FTC’s five commissioners vote to initiate complaints. 
• Second, the staff investigates and tries those complaints before the agency’s Administrative Law Judge (ALJ). 
• And then those same commissioners sit as judges who evaluate the very complaints that they initially approved.  

In other words, the FTC serves as prosecutor, judge, and jury, and, of course, the FTC also sometimes acts as a legislator, promulgating rules that American businesses must follow. Only after all three steps of the adjudication process does an accused wrongdoer finally have a chance to appeal to an impartial federal court, often after years of delay and millions of dollars in legal fees.  

Given this structure, the FTC sides with its own complaint 100% of the time—odds that prompt most parties to settle. Over the last 25 years, the FTC’s commissioners have affirmed every single case where its ALJ has ruled for the FTC and overturned every single case where its own ALJ ruled for the defendant. 

Why it matters

These constitutional grievances are set to grow as the FTC seeks to expand its reach through new rulemaking and broad policy documents that exceed its statutory authority.  

Insulated from accountability, the FTC has usurped substantial power—investigating, adjudicating, and imposing remedies in unconstitutional ways. Yet, most parties haled before the FTC have no meaningful prospect of timely judicial review of their constitutional challenges to the agency’s structure. Faced with the threat of serious repercussions and odds loaded in the FTC’s favor, few private parties persevere through administrative proceedings in hope of vindicating their rights in court down the line.  

A legal challenge 

Relief may be in sight. In November, the Supreme Court will hear oral argument in Axon v. FTC, a case that raises the question of whether a defendant can challenge the constitutionality of the FTC’s structure directly in federal district court, without first wading through these cumbersome administrative processes.  

Our take

The U.S. Chamber supports efforts to hold the FTC accountable to the Constitution. The Chamber filed an amicus brief in support of the petitioner Axon – and in support of the principles of fairness and due process. With a victory, the business community will have more opportunities to go directly to federal court, but with a defeat, the FTC will be able to continue to bully private companies into settling cases of dubious legal validity.  

What to watch

The oral arguments in Axon v. FTC are scheduled for November 7. The Chamber will be closely watching to see if the justices challenge the government’s lawyers about the fairness of the administrative adjudication process. 

About the authors

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

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