Checks and Balances: FTC expands interpretation of its antitrust enforcement authority

By

Caitlin Styrsky

The Checks and Balances Letter delivers news and information from Ballotpedia’s Administrative State Project, including pivotal actions at the federal and state levels related to the separation of powers, due process and the rule of law.

This edition: 

In this month’s edition of Checks and Balances, we review a recent vote from the Federal Trade Commission to broaden its interpretation of the commission’s antitrust enforcement authority; Attorney General Merrick Garland’s restoration of administrative closure authority for immigration judges; and the latest activity from the U.S. Department of Health and Human Services aimed at rolling back state Medicaid work requirements. 

At the state level, we take a look at the Colorado Supreme Court’s new limits on deference practices in the state; a Wisconsin Supreme Court ruling that affirms agency authority to regulate state water resources; and state legislative approval of an indirect initiative in Michigan repealing the governor’s emergency powers.

We also highlight new commentary from the editorial board of The New York Sun that proposes referring to the current Supreme Court as the Hamburger Court after Columbia law professor Philip Hamburger. As always, we wrap up with our Regulatory Tally, which features information about the 182 proposed rules and 288 final rules added to the Federal Register in July and OIRA’s regulatory review activity.

In Washington

FTC expands interpretation of its antitrust enforcement authority

What’s the story? 

The Federal Trade Commission (FTC) on July 1 voted 3-2 to broaden its interpretation of the commission’s Section 5 authority, which authorizes the FTC to investigate and challenge what it deems “unfair methods of competition in or affecting commerce.” The change could allow the agency to expand enforcement proceedings against companies that don’t expressly violate federal antitrust statutes.

The new interpretation departs from the commission’s 2015 precedent, established through internal guidance, that relied on the consumer welfare standard to determine what constitutes antitrust activity. According to the consumer welfare standard, only companies that artificially raise prices qualify as monopolies for the purposes of FTC enforcement. The FTC did not pursue companies via this standard if enforcement through the Sherman Act or the Clayton Act could address the competitive harm.

Under the FTC’s broadened interpretation of its authority, the commission can issue civil penalties to challenge what it deems to be anti-competitive behavior regardless of whether the behavior violates federal antitrust statutes. The change could allow the FTC to bring enforcement proceedings against tech companies that do not qualify as monopolies but that, in the opinion of FTC Chair Lina Khan, have been alleged to have exhibited anti-competitive practices.

“Withdrawing the 2015 Statement is only the start of our efforts to clarify the meaning of Section 5 and apply it to today’s markets,” wrote Khan in a statement. “Section 5 is one of the Commission’s core statutory authorities in competition cases; it is a critical tool that the agency can and must utilize in fulfilling its congressional mandate to condemn unfair methods of competition.”

FTC Commissioner Christine Wilson issued a dissenting statement arguing that the consumer welfare standard “promotes predictability, administrability and credibility in antitrust enforcement. Without it, we can expect that antitrust enforcement will reflect political motivations rather than reasoned and objective assessments of benefits and harms to consumers.”

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Garland restores immigration judges’ authority to delay deportations

What’s the story? 

Attorney General Merrick Garland on July 15 issued a decision in a case before the Board of Immigration Appeals that reversed a Trump administration policy preventing immigration judges (IJs) from exercising administrative closure—a process that allows IJs to delay the deportation of individuals awaiting green cards or visas. 

Former Attorney General Jeff Sessions issued a 2018 decision that barred IJs from pausing deportation proceedings through administrative closure. “​​Although described as a temporary suspension,” claimed Sessions, “administrative closure is effectively permanent in most instances.” Sessions further argued that the U.S. Department of Homeland Security (DHS), rather than IJs, “has the exclusive authority to decide whether and when to initiate proceedings.” 

Three courts of appeals later rejected Sessions’ position and held that the U.S. Department of Justice’s (DOJ) regulations grant IJs the authority to exercise administrative closure. Garland agreed with the judges in his decision, stating that “administrative closure is ‘plainly within an immigration judge’s authority’ under Department of Justice regulations.” DOJ officials initiated rulemaking procedures in December 2020 aimed at codifying IJs’ administrative closure authority, barring a subsequent DOJ regulation or federal court ruling to the contrary.

Immigration Judge Dana Leigh Marks, executive vice president of the National Association of Immigration Judges, told the Associated Press that Garland’s decision to revive administrative closure will allow IJs to “clear our dockets so we’re dealing with cases that are really ready for hearings.” Former Justice Department official Gene Hamilton, on the other hand, argued that the resurgence of administrative closure will allow individuals residing in the country without legal permission to avoid deportation.

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HHS revokes state Medicaid work requirements

What’s the story? 

The U.S Department of Health and Human Services (HHS) on June 24 withdrew its conditional approval for Medicaid work requirements in Indiana and Arizona. HHS stated that the work requirements failed to, in its words, “promote the objectives of the Medicaid program.” 

Nineteen states applied for waivers to establish some form of work requirements for Medicaid recipients during the Trump administration, according to the Kaiser Family Foundation (KFF). HHS granted conditional approval for waivers in eight states, but federal litigation and the coronavirus (COVID-19) pandemic delayed their implementation.

In February 2021, HHS issued letters to all states with conditionally approved Medicaid work requirements directing those states to begin rolling back their program changes. The department later acted in March to expressly revoke planned Medicaid work requirements in Arkansas, Michigan, New Hampshire, and Wisconsin.

HHS on June 24 issued letters to the Indiana Family and Social Services Administration and the Arizona Health Care Cost Containment System withdrawing conditional approval for the states’ Medicaid work requirements, claiming in part that the work requirements would risk significant coverage losses among Medicaid recipients in the states and thus failed to further the intent of the Medicaid program.

Indiana Governor Eric Holcomb (R) expressed disappointment with the HHS decision, but told the Associated Press that the state would “continue to support the health and well-being of Hoosiers, and our participants will receive much needed job training and career support to help them transition from Medicaid to full employment.”

The Biden administration is expected to reject the remaining pending and conditionally approved state waivers for Medicaid work requirements, according to KFF.

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In the states

Colorado Supreme Court narrows state deference practices

What’s the story? In the wake of the Mississippi Supreme Court’s June 10 rejection of state-level Auer deference, the Colorado Supreme Court followed suit in a June 14 en banc decision that narrowed applications of Brand X deference and Chevron deference practices in the state.

In Nieto v. Clark’s Market, the court declined to extend Brand X deference to a regulation issued by the Colorado Department of Labor and Employment (CDLE). Brand X deference requires courts to defer to reasonable agency interpretations of statutes even when the interpretations conflict with prior court precedent. The challenged regulation in Nieto adopted an interpretation of a state labor law that departed from precedent set by the state Court of Appeals, but the Colorado Supreme Court declined to extend Brand X deference to the agency’s interpretation in the case.

“[T]he CDLE is a state agency, and the [U.S. Supreme] Court’s holding in Brand X is not binding as to parallel state administrative procedure statutes,” wrote Justice Melissa Hart in the opinion. “We have not yet similarly interpreted the Colorado Administrative Procedure Act, and we decline Nieto’s invitation to do so here.”

The justices further rejected state-level Chevron deference, which compels a court to defer to an agency’s interpretation of an unclear statute. Justice Hart stated that while the court has applied Chevron-style deference in the past, “we have made clear that, while agency interpretations should be given due consideration, they are ‘not binding on the court.’”

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Wisconsin Supreme Court affirms agency authority to regulate state water resources

What’s the story? The Wisconsin Supreme Court on July 8 issued decisions in two environmental cases that had pitted the state legislature against the state Department of Natural Resources (DNR) in a disagreement over which government entity has the authority to regulate water pollution and irrigation practices. In both cases, the court held 4-2 that the DNR is authorized to restrict permits in order to protect the state’s water resources.

The pair of cases, both initiated by Clean Wisconsin Inc. and Pleasant Lake Management District, centered on Wisconsin Act 21—a 2011 law that limits state agency authority by prohibiting state agencies from taking actions not specifically authorized by the state legislature.

The first case concerned an administrative law judge’s (ALJ) order that the DNR limit the size of a dairy herd causing nearby groundwater contamination. The DNR under then-Governor Scott Walker (R) did not enforce the ALJ’s directive, arguing that Act 21 prohibited the agency from carrying out the order.

A Dane County Circuit Court judge in 2016 affirmed the DNR’s authority to limit the size of the dairy herd to address water pollution. The DNR appealed the decision to the Wisconsin Supreme Court. The current DNR under Governor Tony Evers (D) changed its position and had since claimed regulatory authority in the case.

The Wisconsin Supreme Court upheld the circuit court’s decision. Writing for the majority, Justice Jill Karofsky stated “we conclude that an agency may rely upon a grant of authority that is explicit but broad when undertaking agency action, and such an explicit but broad grant of authority complies with [Act 21].”

In the second case, challengers sued the DNR seeking stricter enforcement of regulations regarding large-scale water withdrawals for irrigation. Challengers claimed that the agency failed to consider the cumulative negative impact on water levels in nearby lakes and streams when it issued permits for nine high-capacity wells. As in the previous case, the DNR argued that Act 21 prevented the agency from considering the cumulative impact of the new wells. 

The Wisconsin Supreme Court again affirmed the circuit court’s decision in the case, holding that the DNR erroneously claimed that it lacked regulatory authority. Writing for the majority, Justice Rebecca Dallet stated, “The DNR’s authority to consider the environmental effects of proposed high capacity wells, while broad, is nevertheless explicitly permitted by statute.”

Chief Justice Annette Ziegler joined Justices Ann Walsh Bradley, Rebecca Dallet and Jill Karofsky in both majority opinions. Justice Brian Hagedorn did not participate in the case.

Justices Rebecca Bradley and Patience Roggensack dissented, arguing in part: “Elevating its environmental policy preferences over the legislature’s prerogative to reclaim its constitutional authority, the majority distorts the plain language of [Act 21] to achieve its own ends.”

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Michigan legislators approve indirect initiative repealing governor’s emergency powers

What’s the story? The Michigan House of Representatives on July 21 voted 60-48 to approve the indirect initiative that repealed the Emergency Powers of Governor Act (EPGA)—a 1945 state law that authorized the governor to issue regulations with associated penalties to bring emergencies under control.

The campaign Unlock Michigan filed the initiative in June 2020, three months after Governor Gretchen Whitmer (D) issued the first coronavirus-related disaster declaration. In October 2020, the Michigan Supreme Court voted 4-3 to strike down the EPGA, holding that the law violated the nondelegation doctrine by unconstitutionally delegating legislative power to the executive branch. While the Supreme Court rendered the EPGA moot, Unlock Michigan continued to advocate for the law’s repeal to prevent the court from changing course in the future.

The House vote followed the state Senate’s 20-15 vote to approve the initiative. The Michigan governor cannot veto the legislature’s approval of an indirect citizen-initiated measure. 

Since March 2020, the following nine states have enacted 12 bills aimed at increasing legislative oversight of gubernatorial emergency authority: Arkansas, Colorado, Indiana, Kansas, Kentucky, New York, Ohio, Pennsylvania, and Utah. 

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The Hamburger Court?

The editorial board of The New York Sun on July 2 questioned, “What in the world are historians going to call this Supreme Court?”

The board rejected the traditional Roberts Court nomenclature in favor of the Hamburger Court after Columbia law professor and founder of the New Civil Liberties Alliance (NCLA) Philip Hamburger. The board argued that Hamburger’s scholarly work, which they described as aimed at reining in the administrative state, coupled with NCLA’s six victories in Supreme Court cases this term in which it filed amicus briefs, demonstrates Hamburger’s growing influence in legal circles.

The board argued that Hamburger’s work has, in their opinion, spurred a movement to return to constitutional principles:

“We understand that a lot of credit can be spread around for the advances in the long slog away from the doctrine of ‘Chevron deference,’ which has held sway in our courts for decades and requires that great deference is owed to our administrative agencies, however unaccountable they might be. Yet that only underlines the size of the problem and the valor of Mr. Hamburger and his colleagues in taking it on.

“‘Most Americans do not realize,’ the New Civil Liberties Alliance notes on its Web site, ‘that Congress today enacts fewer than one hundred statutes per year, handing over the task of legislating to federal administrative agencies.’ It reckons that the Administrative State ‘now creates, enforces and adjudicates hundreds of thousands of regulations governing daily activities in our lives.’ It’s nice to see that the long march back to the Constitution has begun.”

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Regulatory tally

Federal Register

Office of Information and Regulatory Affairs (OIRA)

OIRA’s July regulatory review activity included the following actions:

  • Review of 43 significant regulatory actions. 
  • No rules approved without changes; recommended changes to 38 proposed rules; five rules withdrawn from the review process.
  • As of August 2, 2021, OIRA’s website listed 65 regulatory actions under review.
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