Axon v. FTC: Now the Fun Begins

Advertising Law

In today’s Axon decision, the Supreme Court concluded that a litigant may directly challenge the constitutionality of the structure (and even the existence) of the Federal Trade Commission (FTC or Commission) and the Securities and Exchange Commission (SEC) in federal court without first lumbering through the administrative process. As with the Supreme Court’s last blow to the FTC’s authority in AMG Cap. Mgmt., LLC v. Fed. Trade Comm’n, 141 S. Ct. 1341 (2021), the Court’s decision in Axon was unanimous.

The question the Supreme Court decided in Axon—while of significant procedural importance—is now almost beside the point. Axon questioned whether a party could go straight to court to challenge the administrative structure of the FTC and the SEC. Now that the Supreme Court answered that question in the affirmative, the core legitimacy of the commissions’ enforcement authority is immediately at play.

The opinion, delivered by Justice Elena Kagan, based the Court’s holding on applying the three-pronged test for federal court review established in Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 212 (1994). Justice Clarence Thomas agreed with the Court in full but in concurring expressed significant doubt about the more fundamental question of “the constitutional propriety of Congress vesting administrative agencies with primary authority to adjudicate core private rights with only deferential judicial review on the back end.” Thomas all but asked the defense bar to bring the high court “an appropriate case” to decide this question, with a wink and a nod as to where his vote would lie.

Why It Matters

As to the FTC’s reaction to Axon, here the past is likely precedent. After AMG stripped the FTC of the ability to use Section 13(b) injunctive relief to obtain monetary remedies, the Commission went into hyperdrive, utilizing its rulemaking authority to create a plethora of new regulations and attempting creative statutory workarounds—such as yesterday’s warning letter sent to nearly 700 health care companies—to allow it to go directly to court to seek damages. At the same time as it aggressively flexed its enforcement authority, the FTC implored Congress to provide it with expanded 13(b) authority.

Expect similar behavior from the FTC following Axon. Concerned about the future of its own enforcement authority, the Commission will almost certainly refer ever-more cases to the Department of Justice’s (DOJ) Consumer Protection Branch for prosecution (an uptick we have already been seeing). We can also expect to see an even greater increase in rulemaking, which could one day become the only enforcement avenue for the FTC (or the DOJ, on the FTC’s behalf). Finally, we can expect to see the Commission ask Congress to rewrite or amend the FTC Act to make it more constitutionally sound.

As for defendants, we can expect a flurry of motions in the coming weeks requesting that FTC enforcement actions be put on hold while the question of the FTC’s enforcement legitimacy makes its way through the courts. We can also expect a newly emboldened defense bar to make ever-more creative—but textually accurate—statutory arguments that further erode the FTC’s traditional enforcement powers. There will likely also be similar statutory attacks on the DOJ’s recently expanded use of those FTC powers on the FTC’s behalf.

Although Axon is ultimately a procedural case, its aftermath has the potential to completely overhaul the FTC. AMG challenged the FTC’s statutory compliance. Axon could cause the whole constitutional edifice of the Commission to come tumbling down.



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