Three Options for Reforming Part 3 Administrative Litigation at the Federal Trade Commission

• Author: Keith Klovers
• Position: Member of the Bar of the District of Columbia
• Pages: 409-439

THREE OPTIONS FOR REFORMING PART 3

ADMINISTRATIVE LITIGATION AT THE FEDERAL

TRADE COMMISSION

K

EITH

K

LOVERS

*

INTRODUCTION ............................................... 409

I. THE COMMISSION’S ADMINISTRATIVE LITIGATION

PROCESS HAS LONG BEEN ATTACKED AS

PROCEDURALLY UNFAIR

.............................. 415

A. FTC A

DMINISTRATIVE

L

ITIGATION

P

ROCEDURES

T

ODAY

. . 416

B. P

RIOR

C

OMPLAINTS

................................... 419

C. T

HE

A

XON

C

ASE

...................................... 423

II. THE NARROW PROCEDURAL REFORM PACKAGE

..... 425

III. THE BROAD PROCEDURAL REFORM PACKAGE

....... 431

IV. THE NARROW STRUCTURAL REFORM PACKAGE

..... 433

CONCLUSION .................................................. 438

INTRODUCTION

Reform is in the air at the Federal Trade Commission. Since Chair Lina

Khan took her seat, the Commission has passed omnibus resolutions vesting

the chair with unprecedented authority in routine competition matters, revised

policy statements and guidelines, and pushed forward on an ambitious pro-

gram to issue substantive competition regulations. In these and many other

cases, the commissioners—or at least those now in the majority—have de-

clared a desire to “rethink” the scope of the Commission’s authority.

1

* Member of the Bar of the District of Columbia. While serving as Attorney Advisor to FTC

Commissioners Christine S. Wilson and Maureen K. Ohlhausen, Mr. Klovers was personally

involved in several Part 3 matters, of which one (Impax) involved an appeal from an ALJ deci-

sion, as well as pre-complaint stages of the Axon merger investigation. The author wishes to

thank the participants of this Antitrust Law Journal symposium for their helpful comments, and

is particularly grateful to Nick Grimmer, Bill Kovacic, Tina Miller, J. Robert Robertson, and

Marc Winerman. The views expressed in this article are mine alone and do not necessarily reflect

the views of my clients, my firm, or the firm’s clients.

1

See, e.g.,Statement of Chair Lina M. Khan Joined by Commissioner Rohit Chopra and

Commissioner Rebecca Kelly Slaughter on the Withdrawal of the Statement of Enforcement

409

410

A

NTITRUST

L

AW

J

OURNAL

[Vol. 85

Yet for every action, there is a reaction: many critics also seek to “rethink”

the Commission’s authority, either by clipping its wings or by abolishing it

altogether. Two distinct strands have emerged.

One group seeks to retain the institution but revise its procedures. For ex-

ample, Congress has long considered a bill dubbed the SMARTER Act that

would strip the FTC of its quasi-judicial functions by requiring it to litigate all

pre-merger challenges in federal district court.

2

A second group seeks to elim-

inate the FTC’s antitrust mandate.

3

This effort is exemplified by the proposed

One Agency Act, which would strip the FTC of antitrust authority and trans-

fer its existing competition assets to the Department of Justice.

4

As bill co-

sponsor Senator Mike Lee explains it, “[t]he Department is more politically

accountable, and its structure is better suited to the decisive enforcement we

need to better protect American consumers.”

5

Although these proposals differ by degree, if enacted, both would homog-

enize federal antitrust enforcement by superimposing the DOJ’s procedures

(and under some proposals, the agency itself) on the FTC. Although not al-

ways the primary motivation, these efforts would also impose a system that

more clearly distances the judge from the investigative process.

Today the Commission has the authority to vote to issue a complaint and

then—through its Part 3 litigation process—determine the validity of that

complaint. This path typically first runs through an administrative law judge

(ALJ), who until recently conducted a trial and issued both findings of fact

and conclusions of law that were appealable to the Commission. Earlier this

year,

6

the Commission changed its procedure; for future trials, “the ALJ will

issue only recommended decisions, not initial decisions” for the Commission

Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act, F

ED

.

T

RADE

C

OMM

’

N

7 (July 1, 2021), www.ftc.gov/system/files/documents/public_statements/

1591498/final_statement_of_chair_khan_joined_by_rc_and_rks_on_section_5_0.pdf (“[T]he

time is right for the Commission to rethink its approach and to recommit to its mandate to police

unfair methods of competition even if they are outside the ambit of the Sherman or Clayton

Acts.”).

2

Standard Merger and Acquisition Reviews Through Equal Rules Act of 2015, H.R. 2745,

114th Cong. (2016).

3

See generally P

HILIP

H

AMBURGER

, I

S

A

DMINISTRATIVE

L

AW

U

NLAWFUL

? (2014).

4

One Agency Act, S. 4918, 116th Cong. § 4(a) (2020).

5

Press Release, Sen. Lee Reintroduces One Agency Act to Streamline and Improve Antitrust

Enforcement (Mar. 9, 2021), www.lee.senate.gov/2021/3/sen-lee-reintroduces-one-agency-act-

to-streamline-and-improve-antitrust-enforcement.

6

This article was written before the FTC announced its sudden rule change. The article has

been revisited and updated in light of the Commission’s change.