FTC Chair Lina Khan challenges GOP commissioner's "troubling lack of restraint"

In dueling opinions, Commissioner Andrew Ferguson claims he's just following the Constitution, but Khan says many of his actions are aimed at "undermining the FTC."

On Friday, the Federal Trade Commission issued an order rejecting a request from H&R Block in an ongoing consumer protection matter initiated by the commission earlier this year.

It might have just been “humdrum bureaucratic minutia,“ as Commissioner Andrew Ferguson, a Republican member of the five-member commission, put it, but we live in 2024.

In a statement concurring in the rejection of H&R Block’s request, FTC Chair Lina Khan, joined by Commissioner Alvaro M. Bedoya, a Democratic member, criticized Ferguson for his activity as a commissioner since joining the FTC six months ago.

In addition to discussing the “flaws in Commissioner Ferguson’s partial dissent” on Friday, Khan added that his statement “evinces a troubling lack of restraint increasingly evident across a growing number of his writings.”

It is a stark public statement from the chair of a multi-member commission to a member. But Khan, Biden’s pick to serve as chair, has not been afraid to stake out aggressive positions — a move that has both garnered her passionate champions and strong opponents — and Ferguson appears to be eager for such a confrontation.

Ferguson — a former law clerk to Justice Clarence Thomas who later worked for Sen. Mitch McConnell before serving as Virginia’s solicitor general under Attorney General Jason Miyares — went quite a long ways to proving Khan’s point by responding to her claims with even more extreme language in his statement partially dissenting on Friday.

“I reject the Chair’s insistence on supine deference to her policy preferences and legal theories,” he wrote. “My allegiance is to the Constitution, not to the administrative state.”

And this is where things are in a Democratic administration, where such commissions have a Democratic majority. If nothing else, Ferguson’s behavior is suggestive of what could be come the majority position on the FTC and similar commissions should Donald Trump win in November.

So, what’s going on?

First, the underlying matter is a complaint alleging that H&R Block engaged in “unfair or deceptive acts or practices” in violation of the Federal Trade Commission Act regarding its tax return products and pricing. Here, for example, is one of the allegations:

H&R Block wasn’t — yet — challenging the substance of the complaint. Instead — and this won’t be a surprise to Law Dork readers — H&R Block was first challenging the ability of the FTC’s administrative law judge to consider the matter at all, with the company arguing that all of the commission’s ALJs are unconstitutionally appointed because of protections against their removal.

This is a near-constant challenge from business interests these days, as covered earlier this week at Law Dork. While some of these challenges have stronger arguments than others, the FTC’s ALJs are not at the strong end of the cases.

As Friday’s FTC order denying H&R Block’s motion to disqualify the ALJ stated, “The Commission’s ALJs perform solely adjudicative functions in their FTC Act cases and possess purely recommendatory powers. … They can neither initiate investigations nor begin enforcement cases.“

If these ALJs are unconstitutionally protected, in other words, then it’s hard to imagine what ALJs would be permitted. In fact, this is such an extreme argument, the order noted, that H&R Block’s efforts to get relief from federal court failed repeatedly, first at the district court and at the U.S. Court of Appeals for the Eighth Circuit. H&R Block sought en banc review from the full court, but that, too, was denied earlier this week.

So, seems clear, right?

Not so fast.

Here is how Ferguson began his partially dissenting opinion on Friday:

There are 18 more pages of that, but here is the crux of Ferguson’s opinion:

Dual-layer tenure protections for FTC ALJs insulate subordinate officers from the President’s control. They undermine self-government and empower the administrative state to the people’s detriment. I therefore would hold that those protections violate the Vesting and Take Care Clauses of Article II of the U.S. Constitution. I nevertheless concur in the denial of the disqualification motion because the provision conferring for-cause removal protections to FTC ALJs is severable from the remainder of the statutory scheme.

In other words, he, too, wouldn’t grant H&R Block’s disqualification motion — but he did want to write about how bad he thinks the longstanding protections for the ALJs are.

Khan did not let Ferguson’s opposition go unanswered.

On the substance, she wrote, “Despite having had several opportunities to resolve the question, the Supreme Court has not held that the statutory restrictions on removing ALJs are unconstitutional. Undeterred, Commissioner Ferguson concludes that they are—and that Congress violated the Constitution by placing limits on how easily ALJs can be fired.”

After going through her substantive response, she also gave a step-back critique of his broader approach:

This is hardly the first time Commissioner Ferguson has rushed to steer the law in a new direction. Within a month of joining the FTC, Commissioner Ferguson declared that Section 5 of the FTC Act, the founding authority of our organic statute, is an unconstitutional delegation by Congress—a position no court has taken.

She went on to detail other examples as well, concluding, “Strikingly, these positions all point in the direction of undermining the FTC and its authorities. Some already map on to arguments that parties in litigation against the FTC are advancing—while others provide an invitation and roadmap for advocates to take up.”

To that, Ferguson responded in his partial dissent — with the same sort of over-the-top rhetoric from his introduction.

“The ‘direction’ in which I wish to ‘steer’ the Commission is towards the Constitution, rather than away from it,” he wrote. Regarding the “roadmap” statement, Ferguson responded by suggesting that Khan stated more than she had, writing, “If the Chair believes that my dissents improve the odds of litigants challenging her legal theories in court, she should reconsider her legal theories.”

The ALJ will proceed in the H&R Block matter for now, but Khan let it be known that she views Ferguson’s presence on the commission skeptically just over six months into his time there.

“While disagreement and debate among Commissioners is a longstanding FTC tradition, never in modern history has a Federal Trade Commissioner gone to such lengths to declare that core institutional features of the FTC are unconstitutional,” she wrote.