Supreme Court to Review Structure of FTC Procedures and Procedures

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Strong points

  • The U.S. Supreme Court recently granted certiorari on a case – Axon Enterprise, Inc. v. Federal Trade Commission – challenge to the FTC’s administrative scheme.
  • If the Supreme Court rules in favor of the petitioner, the structure and design of many government agencies will be exposed to constitutional challenges. In addition, internal administrative procedures will come under greater scrutiny in federal courts.
  • A decision is expected in 2023.

Earlier this year, the United States Supreme Court granted certiorari in a case that has ramifications for Federal Trade Commission (FTC) investigations into private industry. In Axon Enterprise, Inc. v. Federal Trade Commission, petitioner Axon Enterprise, a maker of Tasers and other law enforcement equipment, claimed the FTC was acting as “prosecutor, judge, and jury” in violation of Fifth Amendment guarantees of due process and equal protection before the law. Axon also argued that federal district courts should be able to hear its challenge concurrently rather than after the FTC issues a final agency decision.

This case arose when the FTC attempted to thwart Axon’s acquisition of another company by filing an administrative complaint. In January 2020, Axon filed a lawsuit alleging that the agency’s structure is unconstitutional and that its internal administrative procedures violate Axon’s Fifth Amendment rights.

After the United States District Court for the District of Arizona and the United States Court of Appeals for the Ninth Circuit opposed Axon, Axon asked the Supreme Court whether the federal courts could hear a challenge to the FTC’s constitutionality before the agency issued a final order of some kind.

The judges granted certiorari and limited their review to the first issue presented by Axon in its July 2021 motion:

If Congress has implicitly stripped federal district courts of jurisdiction over constitutional challenges to the structure, procedures, and existence of the Federal Trade Commission by granting appellate courts jurisdiction to “affirm, enforce, amend or rescind” the Commission’s cease and desist orders.

Ramifications of a Supreme Court decision

If the Supreme Court rules in favor of the petitioner, companies would have a remedy to challenge the integrity of the administrative process before the agency’s final decision. Although a ruling may apply only to administrative proceedings within the FTC, a successful challenge to the FTC’s structure would demonstrate a critical philosophical shift in the Supreme Court’s tolerance and approach to powers, decision-making and internal procedures of administrative agencies. Concretely, such a change could allow companies under investigation to prosecute the FTC before it files an administrative complaint. It would also open the door to challenges to the structure of the administrative processes of other government agencies.

Stay tuned as a decision can have a significant impact across multiple industry sectors, including financial services, public companies, product liability and others, as well as cybersecurity, privacy and other related investigations. data by the FTC. In light of the recent humiliation of the FTC by the Supreme Court in the AMG Capital Management, LLC, v Federal Trade Commission decision and the granting of certiorari in Axon, aggressive strategies in the management of government investigations may become commonplace; and litigation can become a useful tool.

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