ICLE Director of Law & Economics Programs Gus Hurwitz was a guest on The Cyberlaw Podcast, where he discussed big news for cord-cutting sports fans, Amazon’s ad-data deal with Reach, a novel Federal Trade Commission case brought against Blackbaud, the Federal Communications Commission’s ban on AI-generated voice cloning in robocalls, and South Korea’s pause on implementation of its anti-monopoly platform act. Audio of the full episode is embedded below.

In a little less than a month, the European Union’s Digital Markets Act (DMA) will start to bite, but how will it taste?

By March 7, companies that were designated as “gatekeepers” in September 2023 will be required to meet the obligations of Articles 5, 6, and 7 of the DMA Regulation. With the exception of ByteDance Ltd., the Chinese owners of TikTok, all of the designated companies have, by now, presented compliance proposals. The DMA’s expected beneficiaries (and, arguably, the loudest in favor of its passage) have been disappointed by some of these proposals, and seek more. But should the European Commission grant them what they are asking for?

Read the full piece here.

The government has become increasingly suspicious of major mergers over the past decade, under both political parties. The Justice Department under Donald Trump sued to prevent AT&T from buying Time Warner. The Federal Trade Commission under President Biden is continuing a case the Trump administration initiated against Meta, parent of Facebook, to force the firm to cough up Instagram and WhatsApp, which it swallowed during the Obama years. In January, JetBlue Airways’ plans to merge with Spirit Airlines and Amazon’s plans to acquire iRobot were deterred under regulatory pressure.

Read the full piece here.

The National Institute for Standards and Technology (NIST) published a request for information (RFI) in December 2023 on its “Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights.” It’s quite something, if not in a good way.

Read the full piece here.

ICLE Senior Scholar Daniel J. Gilman took part in a virtual panel convened by the Federalist Society on the Federal Trade Commission (FTC) and U.S. Justice Department’s (DOJ) recent moves to put labor issues at the center of antitrust enforcement and policy making. Video of the full event is embedded below.

Abstract

In administering the antitrust laws, is it relevant what a firm’s market power was when a business practice was first implemented? Relatedly, should the commonness of a practice — in terms of use by other firms in a market or industry — be a consideration when assessing its legality? This article proposes that, under certain, well-specified conditions, the legacy of a business practice and its commonness within a market can be used as a “marginally procompetitive presumption” under the rule of reason framework. Specifically, if a practice was implemented before a firm obtained substantial market power or a practice is commonly used by other firms across the market power spectrum, then the burden placed on defendants to demonstrate the practice is procompetitive should be lessened in proportion to the strength of the legacy and commonality.

Read at SSRN.

tl;dr

Background: Created by Congress in 1914, the Federal Trade Commission (FTC) has employed in-house administrative adjudications for more than a century. The agency’s constitutionality was challenged early in its existence, and upheld by the U.S. Supreme Court in its 1935 Humphrey’s Executor decision. Federal courts have, in the years since, been hesitant to invalidate an agency that has been functioning without issue for decades. 

But… Recent rulings in Seila (2020) and Axon (2023) have raised questions about the extent to which the Supreme Court would still recognize the agency’s legitimacy. In Seila, the Court held that Humphrey’s Executor applies only when an agency “do[es] not wield substantial executive powers.” In Axon, it held that federal courts can entertain constitutional challenges even while an administrative adjudication is pending. 

Such rulings have paved the way for challenges to the FTC’s constitutionality. Most notably, Meta filed a challenge in November 2023 after the FTC sought to use administrative adjudication to modify a 2020 consent decree. Amgen brought a similar challenge in response to merger proceedings, as did Walmart during anti-fraud proceedings. Six primary arguments have been raised against the FTC’s constitutionality.

KEY TAKEAWAYS

FTC COMMISSIONERS ARE INSULATED FROM PRESIDENTIAL REMOVAL

By statute, the president of the United States may remove commissioners of the FTC only “for inefficiency, neglect of duty, or malfeasance in office.” Humphrey’s Executor upheld this process, because the FTC was not deemed to exercise executive power. 

But the FTC has changed dramatically over the past century. In the 1970s, Congress broadened its authority to pursue injunctive relief in federal court and to seek civil penalties, which would typically be considered executive functions. The agency now functions primarily as an enforcer of laws, and much more rarely exercises its quasi-judicial and quasi-legislative powers.

In short, there is a question whether the FTC, in its current form and operations, violates the constitutional separation of powers.

THE FTC IS BOTH PROSECUTOR AND JUDGE

The FTC’s administrative-adjudication process has also raised constitutional questions. FTC staff may, following a preliminary screening, be authorized to investigate a potential violation of the law. That investigation, in turn, can lead commissioners to vote on whether to issue a complaint.

If it is not settled, the complaint is heard by an administrative law judge (ALJ) who, under recently revised agency process, issues a “recommended decision” to the commission. Previously, the ALJ would issue an “initial decision” that would stand unless the FTC or defendant sought review. 

The FTC then decides whether to accept, revise, or wholly replace the recommended decision with one of its own.  Serving as both a prosecutor and judge may violate the Fifth Amendment’s Due Process Clause.

IMPROPER DELEGATION OF LEGISLATIVE POWER

Congress enabled the FTC to decide whether to pursue adjudication in federal courts or within its own administrative process. But under the Constitution’s nondelegation doctrine, when Congress delegates any of its legislative powers, it must provide an “intelligible principle” for an agency to use that power. Some of the recent challenges argue there is no such principle governing which avenue the FTC pursues, rendering the delegation of powers unconstitutional. 

PRIVATE RIGHTS MUST BE ADJUDICATED IN ARTICLE III COURTS 

Among the broad powers conferred to the federal courts under Article III, Section 2 of the Constitution is exclusive jurisdiction to adjudicate private rights. But the FTC has been granted authority to hold administrative adjudications that can result in the deprivation of private rights (e.g., deprivation of property). Such proceedings may be unconstitutional. 

CIVIL PENALTIES WITHOUT A JURY TRIAL

The Seventh Amendment secures the right to jury trial whenever civil penalties exceed $20. This typically applies to deprivation of property rights, as well. But the FTC’s administrative adjudication does not provide for a jury trial. 

DISPARATE MERGER-REVIEW PROCESSES

Under the Hart-Scott-Rodino Act, mergers exceeding certain thresholds must be notified to both the U.S. Justice Department (DOJ) and the FTC. The agencies then follow a so-called “clearance” process to determine which will review the transaction. But the process is largely arbitrary, with some matters allocated based on one agency having more relevant experience, and some on a taking-turns basis.

Unlike the FTC, the DOJ can only challenge transactions before Article III courts, rather than in-house administrative proceedings. These alternative procedures have meaningful procedural and substantive differences. If that leads to disparate treatment, it may violate both the Fifth Amendment’s Equal Protection and Due Process clauses.

For more on this issue, see Daniel Gilman’s Law360 piece “Why Challenges To FTC Authority Are Needed.”

Abstract

This Appendix contains excerpts from the U.S. code of statutes relating to competition outside of the Clayton and Sherman Acts.

Abstract

This Appendix contains descriptions of the antitrust laws of each state, with relevant statutory citations and some brief excerpts of more interesting provisions or provisions with unusual language. States that align the interpretation of their antitrust laws to federal law are marked with an asterisk.