The FTC at a Crossroads: Can It Be Both Prosecutor and Judge?

Posted by D. Daniel Sokol

David Balto asks, The FTC at a Crossroads: Can It Be Both Prosecutor and Judge?

ABSTRACT: Nearly 100 years ago Congress established the Federal Trade Commission (FTC) to protect consumers against unfair, deceptive, and anticompetitive practices. The goal of Congress was to create a single agency with a broad range of powers to address these important policy goals. When it was established in 1914, the FTC was designed to be an investigatory and adjudicative body empowered to clarify and enforce antitrust law. The agency was tasked with identifying and stopping “unfair methods of competition.”1 Part of the reason for the creation of the FTC was the dissatisfaction with the ability of generalist courts to enforce the antitrust laws. To strengthen the role of the FTC, Congress gave it the power to conduct studies, issue reports, and, most importantly, administratively litigate—to bring enforcement actions and serve as an administrative tribunal.

The FTC has met the goals of Congress in many respects. But the role of administrative litigation seems often unfulfilled. For years administrative litigation was criticized because of its glacial pace or the relatively minor cases that were litigated. In the mid-1990s, the FTC adopted a series of carefully structured time limits and other procedural reforms that have shortened and strengthened the litigation process and made it more like federal court litigation. Some observers have noted that FTC administrative litigation is akin to a “rocket docket.” Not surprisingly over the past decade, the FTC has concurrently increased the role of administrative litigation. In one important respect, the administrative litigation role is particularly unsettling. The FTC acts as both prosecutor and judge in administrative litigation. In the past, businesses, the American Bar Association, and former FTC Commissioners have all raised concerns about this appearance of unfairness. Those concerns were tempered in the past because administrative litigation was so slow that often the FTC’s five member Commission would change in composition after an administrative trial was held. And more importantly, the Commission frequently held that no law violation occurred. In the past 18 years, however, the Commission has found a law violation in every administrative case. This trend is unprecedented.

This LEGAL BACKGROUNDER addresses the FTC’s administrative process and the problem of procedural fairness. It highlights the recent history of the Commission’s decision-making and observes how some of the most important decisions were rejected by the federal courts of appeal. Finally, it observes the problems that arise from the appearance of unfairness and how those problems may undermine the FTC’s role in antitrust and consumer protection enforcement.