Featured Expert Contributor, Antitrust & Competition Policy—Federal Trade Commission
Gerald A. Stein, a former attorney at the Federal Trade Commission, currently is a partner at Norton Rose Fulbright US LLC, and is a member of the firm’s Litigation and Disputes Group Antitrust and Competition Group. The opinions expressed herein are his own. Zachery Newton is an associate in Norton Rose Fulbright’s Houston office and a member of the firm’s Antitrust and Competition Group.
On Friday, April 14, 2023, a unanimous U.S. Supreme Court in Axon Enterprise, Inc. v. Federal Trade Commission held that Federal District Courts maintain primary jurisdiction over existential constitutional challenges to agency structure and authority.
In Axon, Axon Enterprise, Inc. (Axon) sued to challenge and enjoin enforcement proceedings brought by the Federal Trade Commission (FTC) on the grounds that combining the adjudicative and prosecutorial functions of the FTC violates core due process principles, and that the insulated removal process for Administrative Law Judges (ALJs) violates constitutional principles. The FTC argued that these challenges had to first be adjudicated within the agency’s own adjudication process, with subsequent review by a Federal Court of Appeals if necessary by statute.
The FTC is granted adjudicative authority by federal statute, with the backstop of appellate review, in part because it is presumed to have institutional expertise to adjudicate claims such as competition and consumer protection laws. However, because the challenges raised by Axon were constitutional and “extraordinary” in nature—striking at the core of agency authority and operation—adjudication of those claims falls outside of the agency’s area of expertise. Without the requisite expertise to adjudicate core constitutional challenges to their own structure and existence, the Court determined that these are not the type of claims Congress intended to remove from the jurisdiction of the District Courts.
Although the decision could have a large potential impact going forward, the Supreme Court’s decision is limited to resolving the jurisdictional questions raised. The Court only allowed these suits to proceed for adjudication in District Court; it did not reach the merits of Axon’s claims. At least for now, the FTC’s enforcement and adjudicative processes remain intact, but new constitutional challenges to their procedures and structure will not need to be adjudicated first by their own judges.
Although this matter is limited to questioning the constitutionality of the FTC’s proceedings, the Court’s opinion opens the door for future challenges to administrative enforcement and procedure of the FTC, and perhaps also to agencies more broadly.1 As Justice Thomas expressed in his concurring opinion, he is sympathetic to the merits of these claims, noting that “permitting administrative agencies to adjudicate what may be core private rights” raises “serious constitutional issues.” The Court could decide to take up the substantive question in Cochran, a challenge to the lack of a jury in SEC proceedings, as early as next term.
- The Axon opinion also resolved another case in which the Court granted certiorari, SEC v. Cochran. Both Axon and Cochran involved the legal question of whether subjects of administrative adjudication can challenge an agency’s constitutional structure or authority in a Federal District Court. The plaintiff in Cochran argues that the SEC’s action is constitutionally infirm because of tenure protections the agency’s administrative law judges possess. The Supreme Court affirmed and remanded the Fifth Circuit’s decision in Cochran.