FTC Commissioner Questions Legality of In-House Judges

FTC Commissioner Andrew N. Ferguson has publicly questioned the legality of a fundamental component of the agency’s internal judicial system. His criticism bolsters the arguments of several companies, including H&R Block Inc., Meta Platforms Inc., and Kroger Co., that are currently fighting FTC lawsuits by challenging the constitutionality of the agency’s proceedings.

According to a report by Bloomberg, Ferguson, who joined the FTC earlier this year, argued that laws preventing the president from removing FTC administrative law judges (ALJs) interfere with executive authority, potentially violating the Constitution. “If the president does not control subordinate officers, then neither do the people,” Ferguson said in an October 18 statement. Despite raising this concern, Ferguson voted with his fellow commissioners to deny a motion to disqualify an FTC judge from a case involving H&R Block, which is accused of engaging in deceptive practices.

Ferguson’s stance aligns with a broader conservative critique of the powers of federal agencies, a viewpoint that has found an increasingly receptive audience at the Supreme Court in recent years. Per Bloomberg, this internal dissent is unusual, as FTC commissioners rarely question the constitutionality of the agency itself. John B. Kirkwood, a law professor at Seattle University, described Ferguson’s move as “rare” and possibly “unprecedented” for an FTC insider.

FTC Chair Lina Khan responded sharply to Ferguson’s statement, indicating that his argument appeared to be part of a larger effort to reshape administrative law. In a separate statement, Khan emphasized that while disagreements among commissioners are not uncommon, “never in modern history has a Federal Trade Commissioner gone to such lengths to declare that core institutional features of the FTC are unconstitutional.” She also noted that the Supreme Court, despite having multiple opportunities, has not ruled that the statutory protections for ALJs are unconstitutional.

Read more: FTC’s Landmark Rule Banning Fake Reviews Now in Force

Ferguson’s critique plays into ongoing legal challenges by companies that have been targeted by the FTC. H&R Block, in particular, has sought to halt FTC proceedings by challenging the constitutionality of its in-house court, filing both in the FTC’s administrative system and in federal court. However, the Missouri federal court declined to grant H&R Block an injunction, and the case is now before the Eighth Circuit Court of Appeals.

These corporate challenges follow a June Supreme Court decision that curtailed the Securities and Exchange Commission’s ability to handle cases internally, according to Bloomberg. This ruling has provided a legal basis for several companies to argue against the validity of FTC proceedings. Still, the high court has not yet ruled on whether ALJs’ removal protections violate the Constitution, a point Khan stressed in her rebuttal of Ferguson’s position.

Ferguson’s statement reflects a growing skepticism of administrative law within conservative legal circles, particularly regarding agencies like the FTC that operate quasi-independently from presidential control. Alongside his fellow Republican commissioner, Melissa Holyoak, Ferguson has frequently opposed the Democratic majority since their appointments this year, including in votes on major issues like the FTC’s proposed rule banning noncompete agreements.

While Ferguson’s comments lend support to ongoing legal battles against the FTC’s structure, it remains unclear how much influence they will have. As Kirkwood told Bloomberg, Ferguson’s statement is notable but may not make a significant difference in the courts.

Further complicating the situation, the Supreme Court recently declined to hear a case that challenged Humphrey’s Executor, the nearly century-old precedent that requires cause for firing executive-branch agency leaders. This rejection, issued the same day as the FTC’s latest order in its case against H&R Block, leaves unresolved the broader legal questions surrounding the independence of agencies like the FTC.

Meanwhile, a potential resolution to the H&R Block case may be on the horizon. Bloomberg reports that both the FTC and H&R Block have jointly moved to end the in-house proceedings to consider a proposed consent agreement, indicating that the dispute could soon be settled.

Source: Bloomberg