The Many Faces of the FTC on Display in Commissioners Review of Administrative Case

MurinoFeatured Expert Column

Andrea Agathoklis Murino, Wilson Sonsini Goodrich & Rosati

[Editor’s Note: Today, Washington Legal Foundation is releasing a Legal Backgrounder in which former Federal Trade Commission (FTC) Policy Director David Balto critiques the Commission’s administrative litigation process, which features the five Commissioners in the role of both prosecutors and appellate judges. We asked our featured expert FTC blogger, also an FTC alumna, her views on the issue. While WLF respects her thoughts on FTC’s administrative litigation process, we respectfully disagree.]

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As an alumna of the FTC, I know first-hand the many roles played by those working inside the agency:  they are investigators, prosecutors, judges, and policy-makers.   On the vast majority of days, those roles mesh seamlessly and without controversy.  But on occasion, as is happening today, there is a clash of roles.  The Commissioners is sitting as an appellate body…charged with reviewing the decision of an FTC Administrative Law Judge (ALJ) that held against the FTC complaint counsel…in a matter that some of the very same Commissioners voted to put into litigation in the first case.

During the hearing, Chairwoman Ramirez and Commissioners Brill, Ohlhausen, and Wright will examine an FTC ALJ decision In the Matter of McWane, Inc..  The case originated in January of 2012 when the Commission, including a then-Commissioner Ramirez and Commissioner Brill, found reason to believe that the defendant, McWane, Inc., a manufacturer of iron waterworks and other plumbing products, had engaged in price-fixing and unlawful information exchange with two competitors, as well as certain exclusionary conduct, and authorized staff to file a Complaint in the FTC’s administrative court.  Following a trial, the ALJ held against the FTC on the first two – and candidly, more serious counts – but found that there was evidence McWane engaged in certain exclusionary conduct and instituted an remedial order on that basis.  Both sides are appealing the portions of the decision held not in their favor.  As they listen, the Commissioners will use the de novo standard of review– which functionally means they can review all of the evidence as they see fit – and therefore ignore the findings of the ALJ. 

This begs the question:  is it appropriate for the Commissioners who authorize complaints as prosecutors, to then sit in judgment as an appellate body?  To my mind, the answer – though counterintuitive – is yes.  David Balto’s thoughtful WLF Legal Backgrounder, “The FTC at a Crossroads:  Can it Be Both Prosecutor and Judge?” lays out the challenges of this prosecutor-come-judge paradigm in detail.

But despite these challenges, Congress designed the FTC to operate in this very way.  It is each Commissioner’s duty to abandon now any preconceived notions of the evidence they may have seen previously and review the entirety of the record anew.  It is their obligation to consider (or reconsider, as the case may be) the body of antitrust law governing the ALJ’s opinion and to then make a determination as to whether there has been a violation of the law or not.  Two further factors influence my thinking:  first, whatever the ultimate decision, the losing party will have a right to appeal the Commission decision to any federal Court of Appeals.  The Commissioners are no doubt mindful of the fact that they are not potentially the last word on this matter.  And second, while Ramirez and Brill are seeing this matter for the second time, Ohlhausen and Wright are new to this case.  Their influence on their colleagues could be significant.  As a practical matter, this shift in the complexion of the Commission will have an effect on the McWane case, but more broadly, there tends to be frequent Commissioner turnover such that it is unlikely the next time the full Commission hears an ALJ appeal that it will be the same exact panel of Commissioners who voted out the complaint initially.

This question is certainly not an easy one.  Stay tuned….

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