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Antitrust Law Journal

Volume 85, Issue 2

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

Keith Klovers


  • This article summarizes current and historical controversies regarding the FTC’s administrative adjudication (Part 3) process and proposes three reform options that would retain some of the specialized features Congress intended for the FTC.
  • First, the Commission could revise its Rules of Practice so that it reviews the ALJ’s findings of fact for clear error rather than de novo.
  • Second, the Commission could both adopt the clear-error standard of review and elevate the role of the ALJ by reforming the way that ALJs are selected and ensuring that an ALJ presides over each administrative trial.
  • Third, Congress could convert the Commission’s present administrative litigation process into a specialized Article III antitrust tribunal. The article explores several ways Congress could structure any such court.
Three Options for Reforming Part 3 Administrative Litigation at the Federal Trade Commission
Alan Schein via Getty Images

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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 program to issue substantive competition regulations. In these and many other cases, the commissioners—or at least those now in the majority—have declared a desire to “rethink” the scope of the Commission’s authority.

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 example, 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. A second group seeks to eliminate the FTC’s antitrust mandate. This effort is exemplified by the proposed One Agency Act, which would strip the FTC of antitrust authority and transfer its existing competition assets to the Department of Justice. 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.”

Although these proposals differ by degree, if enacted, both would homogenize federal antitrust enforcement by superimposing the DOJ’s procedures (and under some proposals, the agency itself) on the FTC. Although not always 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, the Commission changed its procedure; for future trials, “the ALJ will issue only recommended decisions, not initial decisions” for the Commission to “adopt, modify, or set aside.” Semantics aside, the process remains essentially the same: quite unlike the procedure for appeals in federal court, the Commission can—and frequently does—revise the factual record as it sees fit. Or, as Axon Enterprise recently put it in its Due Process Clause challenge, “if the FTC disagrees with the ALJ’s ultimate decision on either the facts or the law, the same Commissioners who voted to file the enforcement action against [a respondent] have the right to review these findings de novo and change them.” There is some force to the charge; over the past 25 years, the Commission found its own facts and assessed liability in essentially every one of the antitrust cases it heard through Part 3, though not always on every count. The Commission will retain this power under the new format.

While legislative efforts to increase due process protections are laudable, it is not clear that policymakers have considered the full range of alternatives that would achieve the desired result. To date, policymakers have considered what they view as “addition by subtraction”—eliminating either the Part 3 process or the FTC entirely. This article attempts to fill in some of the terra incognita by considering three other reforms that would retain some of the specialized features that Congress intended when it created the FTC in the first place.

Continue reading the full text of this article in PDF format.