Can the FTC Use Rulemaking to Change Antitrust Law?

By: Richard J. Pierce Jr. (Truth on the Market)

In 2021, President Joe Biden appointed a prolific young scholar, Lina Khan, to chair the Federal Trade Commission (FTC). Khan strongly dislikes almost every element of antitrust law. She has stated her intention to use notice and comment rulemaking to change antitrust law in many ways. She was unable to begin this process for almost a year because the FTC was evenly divided between Democratic and Republican appointees, and she has not been able to elicit any support for her agenda from the Republican members. She will finally get the majority she needs to act in the next few days, as the U.S. Senate appears set to confirm Alvaro Bedoya to the fifth spot on the commission.   

Chair Khan has argued that the FTC has the power to use notice-and-comment rulemaking to define the term “unfair methods of competition” as that term is used in Section 5 of the Federal Trade Commission Act. Section 5 authorizes the FTC to define and to prohibit both “unfair acts” and “unfair methods of competition.” For more than 50 years after the 1914 enactment of the statute, the FTC, Congress, courts, and scholars interpreted it to empower the FTC to use adjudication to implement Section 5, but not to use rulemaking for that purpose.

In 1973, the U.S. Court of Appeals for the D.C. Circuit held that the FTC has the power to use notice-and-comment rulemaking to implement Section 5. Congress responded by amending the statute in 1975 and 1980 to add many time-consuming and burdensome procedures to the notice-and-comment process. Those added procedures had the effect of making the rulemaking process so long that the FTC gave up on its attempts to use rulemaking to implement Section 5.

Khan claims that the FTC has the power to use notice-and-comment rulemaking to define “unfair methods of competition,” even though it must use the extremely burdensome procedures that Congress added in 1975 and 1980 to define “unfair acts.” Her claim is based on a combination of her belief that the current U.S. Supreme Court would uphold the 1973 D.C. Circuit decision that held that the FTC has the power to use notice-and-comment rulemaking to implement Section 5 and her belief that a peculiarly worded provision of the 1975 amendment to the FTC Act allows the FTC to use notice-and-comment rulemaking to define “unfair methods of competition,” even though it requires the FTC to use the extremely burdensome procedure to issue rules that define “unfair acts.” The FTC has not attempted to use notice-and-comment rulemaking to define “unfair methods of competition” since Congress amended the statute in 1975…

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