SCOTUS Decision Sets Up Constitutional Challenges To FTC Administrative Proceedings

• Published date: 09 May 2023
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Litigation, Mediation & Arbitration, Compliance, M&A/Private Equity, Constitutional & Administrative Law, Court Procedure
• Law Firm: Akin Gump Strauss Hauer & Feld LLP
• Author: Mr Corey W. Roush, Gorav Jindal, Mitchell E. Khader and James Tysse

Key Points

• In a unanimous decision, the Supreme Court held in Axon v FTC that the FTC Act (and the SEC Act) do not prohibit a federal court from hearing challenges to the constitutionality of either Commission's structure and processes without first going through its administrative process. Despite a famously divided Court on many issues, this is the second unanimous Supreme Court ruling against the FTC in the last couple years (in 2021 the Court limited the FTC's ability to seek monetary remedies such as restitution or disgorgement).
• The decision is likely to touch off a wave of constitutional challenges to FTC (and SEC) authority to adjudicate matters through the administrative process. Although the Supreme Court declined to resolve those constitutional challenges at this time'it instead remanded the cases for further consideration in the lower courts'it found that federal courts can hear constitutional challenges to an agency's administrative process, without first going through that process, including whether
  • The dual layer system insulates an ALJ from sufficient Presidential oversight in violation of separation of powers.
  • The combination of prosecutorial and adjudicative functions at an administrative agency render all of its enforcement actions unconstitutional.
• In the months leading up to the Supreme Court's decision in Axon, parties in other cases had already begun to raise challenges to the FTC's structure and administrative processes but challenges like these are sure to proliferate. While the substantive challenges threaten the existence of the Commission as currently comprised, these challenges could, more immediately cripple the FTC's ability to effectively carry out its mission.

Axon's Challenge and the SCOTUS Decision

Axon's original suit arose from the Federal Trade Commission's (FTC) challenge to Axon's acquisition of Vievu, a supplier of police body cameras, for $13 million in 2018. Two years later, the FTC brought an administrative action to unwind the consummated merger. Axon sued the FTC in federal court to challenge the constitutionality of the administrative process, alleging that the FTC's administrative law judge (ALJ) was insufficiently accountable to the President, violating the separation of powers doctrine. Axon also claimed violation of its due-process rights by the combination of "investigatory, prosecutorial, adjudicative, and appellate functions within a single agency."

The U.S. District Court for the District of...