by Jonathan M. Moses, Nelson O. Fitts, and Adam L. Goodman
From left to right: Jonathan M. Moses, Nelson O. Fitts, and Adam L. Goodman (Photos courtesy of Wachtell, Lipton, Rosen & Katz)
Recently, the FTC quietly issued a final rule modifying its internal procedures to diminish the role of its Administrative Law Judge. The ALJ adjudicates, among other things, the agency’s challenges to mergers and acquisitions under the antitrust laws. The move is of a piece with the agency’s agenda under Chair Lina Khan—on which we have commented here, here, and here—and underscores the significance of numerous pending challenges to the constitutionality of the FTC’s in-house adjudicative process.
Under the newly issued final rule, the ALJ will no longer render an “initial decision” that can become the decision of the agency in the absence of an appeal. Instead, the ALJ will issue a “recommended decision” that will be “automatically reviewed” by the same Commissioners who voted to authorize the administrative complaint in the first place. Parties will no longer “appeal” the ALJ’s decision, but rather submit “exceptions” to its recommendation. The rule also “eliminate[s] the ALJ’s ability to rule on motions for summary decision,” i.e., summary judgment. Whereas the Commission previously had discretion to refer summary judgment motions to the ALJ, now the Commission exclusively reserves decision on such motions, by rule, to itself. The FTC promulgated this new rule, which reworks a process that had been in place for decades, without notice and comment.
The FTC’s action follows high-profile losses the agency suffered in merger cases before the ALJ in the Altria/JUUL and Illumina/Grail matters, and the changes appear motivated by those adverse results. A “recommended decision” adverse to the FTC, which now has no legal capacity to become an enforceable ruling, may carry less weight on an eventual federal appeal than an “initial decision.”
The FTC’s new rule also comes in the wake of the Supreme Court’s recent opinion in Axon Enterprise, Inc. v. FTC, which paves the way for parties to bring constitutional challenges in federal court to ongoing FTC administrative proceedings. (We reported on the Supreme Court’s decision in Axon here.) The FTC’s marginalization of the ALJ appears intended to bolster the agency’s argument—at issue in many cases—that the ALJ does not possess a sufficiently significant role in the adjudicative process for restrictions on the ALJ’s removal to pose a constitutional issue. But weakening the ALJ’s role may in fact strengthen merging parties’ Due Process and Equal Protection challenges to the FTC’s merger review process, which tend to focus on the unfairness of FTC Commissioners fulfilling both prosecutorial and adjudicative functions.
That the FTC is pressing a muscular agenda at a time when it faces intensifying legal scrutiny makes the current regulatory moment all the more fraught. Sophisticated parties facing a potential challenge by the FTC, or gearing up to litigate one, will consider all litigation options in all forums, including the appropriate framing for any constitutional claims.
Jonathan M. Moses, Nelson O. Fitts, and Adam L. Goodman are Partners at Wachtell, Lipton, Rosen & Katz. This post first appeared as a client alert.
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