Administrative Litigation At The Ftc: Effective Tool For Developingthe Law Or Rubber Stamp?

This article provides the most comprehensive study to date of the Federal TradeCommission's Part 3 process. A unique and defining tool, Part 3 allows the FTCto challenge alleged section 5 violations in-house through administrativelitigation. Highlighting the agency's expertise, Congress gave the FTC thatauthority in 1914 to develop antitrust and later consumer-protection law.Although the Commission has used its Part 3 authority to good effect, especiallyin some recent competition matters, the process is controversial on due-processgrounds. After it finds “reason to believe” that a violation exists andauthorizes staff to litigate before an independent Administrative Law Judge, theCommission reviews the ALJ's decision de novo. The result, some critics argue,is a foregone conclusion. Rather than advance the law, they contend, Part 3frees the Commission to reach its favored result. Maligned in some quarters as a“kangaroo court” in which the FTC alleges and later summarily confirms section 5violations, the key question is whether administrative litigation effectivelyfulfills the role Congress set out for it. To resolve the debate, we need aclearer picture of how Part 3 operates. Does the FTC rubber stamp its priordeterminations, invariably siding with complaint counsel? Or does it changecourse at the appeal stage and, if so, how often? And, when it does find asection 5 violation on appeal, how often does the FTC nevertheless prune countsand allegations, suggesting that it scrutinizes the factual and legal recordbefore it? Do the answers change with the political constitution of theCommission, such as when a Democratic majority votes out a Part 3 complaint, buta Republican Commission hears the appeal? How often does the Commission'scomposition change between voting out and later deciding a Part 3 matter, andmight the answer resolve the due-process issue? And does the FTC fare better atthe U.S. Courts of Appeal if it affirmed or reversed the ALJ? Until now,relatively little empirical work has scrutinized administrative litigation atthe FTC. This study tracks every Part 3 case that produced a Commission Decisionon or after January 20, 1977. It captures all 145 antitrust andconsumer-protection matters falling within that period, tracking theirdevelopment through initial vote at the “reason to believe” stage, dispositionbefore the ALJ, appeal before the Commission, and petition for review at theU.S. Court of Appeals and beyond. The emerging statistics are illuminative. Inhearing an appeal in the last 10 years, the FTC has never rejected an actionthat it had previously authorized complaint counsel to bring in Part 3. At firstblush, that fact might suggest a preordained appellate process. But thatphenomenon dissipates when one looks at a larger time horizon, suggesting thatuniformity from initial vote to appeal is neither inevitable nor systemic.Indeed, it is possible that recent consistency may be a function of improvedcase selection, aided by effective factual, economic, and legal analysis bystaff and the Commissioners before they authorize a complaint. Evaluating theten matters voted out and affirmed by the Commission in the last decade lendssome support to that proposition. Indeed, Part 3 has been an effective tool indeveloping complex antitrust questions. This article provides a host of newevidence with which to evaluate administrative litigation at the FTC. Thearticle concludes by exploring some initial teaching points from the data.