Three Big Pitfalls in the Way of Lina Khan’s Agenda

Gus Hurwitz —  11 August 2022

In a recent op-ed for the Wall Street Journal, Svetlana Gans and Eugene Scalia look at three potential traps the Federal Trade Commission (FTC) could trigger if it pursues the aggressive rulemaking agenda many have long been expecting. From their opening:

FTC Chairman Lina Khan has Rooseveltian ambitions for the agency. … Within weeks the FTC is expected to begin a blizzard of rule-makings that will include restrictions on employment noncompete agreements and the practices of technology companies.

If Ms. Khan succeeds, she will transform the FTC’s regulation of American business. But there’s a strong chance this regulatory blitz will fail. The FTC is a textbook case for how federal agencies could be affected by the re-examination of administrative law under way at the Supreme Court.

The first pitfall into which the FTC might fall, Gans and Scalia argue, is the “major questions” doctrine. Recently illuminated in the Supreme Court’s opinion in West Virginia v. EPA decision, the doctrine holds that federal agencies cannot enact regulations of vast economic and political significance without clear congressional authorization. The sorts of rules the FTC appears to be contemplating “would run headlong into” major questions, Gans and Scalia write, a position shared by several contributors to Truth on the Market‘s recent symposium on the potential for FTC rulemakings on unfair methods of competition (UMC).

The second trap the authors expect might trip up an ambitious FTC is the major questions doctrine’s close cousin: the nondelegation doctrine. The nondelegation doctrine holds that there are limits to how much authority Congress can delegate to a federal agency, even if it does so clearly.

Curiously, as Gans and Scalia note, the last time the Supreme Court invoked the nondelegation doctrine involved regulations to implement “codes of fair competition”—nearly identical, on their face, to the commission’s current interest in rules to prohibit unfair methods of competition. That last case, Schechter Poultry Corp. v. United States, is more than 80 years old. The doctrine has since lain dormant for multiple generations. But in recent years, several justice have signaled their openness to reinvigorating the doctrine. As Gans and Scalia note, “[a]n aggressive FTC competition rule could be a tempting target” for them.

Finally, the authors anticipate an overly aggressive FTC may find itself entangled in yet a thorny web wrapped around the very heart of the administrative state: the constitutionality of so-called independent agencies. Again, the relevant constitutional doctrine giving rise to these agencies results from another 1935 case involving the FTC itself: Humphrey’s Executor v. United States. While the Court in that opinion upheld the notion that Congress can create agencies led by officials who operate independently of direct presidential control, conservative justices have long questioned the doctrine’s legitimacy and the Roberts court, in particularly, has trimmed its outer limits. An overly aggressive FTC might present an opportunity to further check the independence of these agencies.

While it remains unclear the precise rules the FTC seek try to develop using its UMC authority, the clearest signs are that it will focus first on labor issues, such as emerging research around labor monopsony and firms’ use of noncompete clauses. Indeed, Eric Posner, who joined the U.S. Justice Department Antitrust Division earlier this year as counsel on these issues, recently acknowledged that: “There is this very close and complicated relationship between labor law and antitrust law that has to be maintained.”

If the FTC were to upset this relationship, such as by using its UMC authority either to circumvent the National Labor Relations Board in addressing competition concerns or to assist the NLRB in exceeding its own statutory authority, it would be unsurprising for the courts to exercise their constitutional role as a check on a rogue agency.

One response to Three Big Pitfalls in the Way of Lina Khan’s Agenda

  1. 

    I find the authors’ invocation of Schecter Poultry (re. the nondelegation doctrine) to be so wildly misleading as to question their motives.

    They write that the regulations in Schecter Poultry, a case in which the Supreme Court last struck down a statute over excessive delegation concerns, are “nearly identical, on their face, to the commission’s current interest in rules to prohibit unfair methods of competition.” This is nonsense. Schecter involved Congress granting the President authority to approve industry-written codes of practice, competition and price setting cooked up by trade associations for their own benefit. The rulemaking itself was delegated to the private sector, and – crucially – Congress did not establish any articulable guiding principles that the trade associations would have to follow as they drafted their self-serving rules.

    Nothing that Lina Khan, the FTC or anyone with sufficient knowledge to speak on their behalf has proposed in terms of UMC rulemaking, would come close to meeting this extreme example. Even on the rare occasions where some proposed antitrust legislation has envisaged a role for trade associations or industry participation in crafting standards, such as involving Big Tech firms in the creation of platform interoperability standards, this role has been sufficiently cabined that it would still meet the Court’s current “articulable principle” test.

    If Eugene Scalia & co. want to preserve the antitrust status quo and defend the Chicago School, law & economics, consumer welfare standard dogmas which have dominated the past 30 years, they should make their case honestly and defend the current system on its merits rather than misrepresenting proposed reforms by misleadingly comparing them to an extreme and wacky example of excessive delegation from the Great Depression / New Deal era.

    And it might be nice if instead of uncritically republishing their faulty rhetoric, fellow law professors held them to a higher standard, too…