I submitted a Letter to the Editor of the Wall Street Journal, commenting on an op-ed by Russell G. Ryan wherein Mr. Ryan identified due process concerns respecting the Security and Exchange Commission’s administrative law hearings. My letter notes that the administrative procedures at the Federal Trade Commission, where I once served in a senior role, share similar due process concerns. On August 11 (online) and August 12 (print), the WSJ published a short, edited version of my letter which can be viewed here. I reproduce the unedited version below.

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The due process concerns described by Russell G. Ryan respecting the SEC’s use of administrative law hearings to prosecute alleged wrongdoers can be stated with equal justification about the Federal Trade Commission’s antitrust enforcement.  (“The SEC as Prosecutor and Judge,” by Russell G. Ryan, op. ed. Aug. 5, 2014)  Like the SEC, the FTC holds itself out to be a law enforcement agency.  Also like the SEC, the FTC litigates the merits of its antitrust complaints within an administrative law structure in which the Commission and its employees serve as prosecutor, fact finder, judge, and remedy fashioner.  Indeed, a respondent (antitrust defendant) never gets to appear before an Article III court until it appeals an adverse Commission decision, at which time the appellate court gives deference to the Commission’s findings.

Moreover, in the case of FTC, these practices are totally unnecessary.   We already have an Antitrust Division at the Department of Justice that is fully capable of handling all of federal antitrust enforcement.  Indeed, I would venture to guess that, even among antitrust professionals, few people today can articulate the historical basis of why we have two federal antitrust agencies.  Whatever the historical reason, it no longer exists.  U.S. competition policy would suffer not one bit were all of the FTC’s antitrust functions folded into the Antitrust Division.

The important point here, however, is not the folly of having two, duplicative federal antitrust agencies, but that, in contrast to the FTC, the Justice Department must litigate the merits of its complaints in a neutral, Article III federal district court.  Defendants may even choose to empanel a lay jury.  This process gives antitrust defendants the opportunity to have their arguments and evidence judged by someone other than five presidential appointees that initiated the complaint in the first place.

Due process also suggests that a finding of antitrust liability should not depend on whether an action is brought by the DOJ or by the FTC.  Regrettably, it can.  In the case of merger transactions, both agencies employ the same “Merger Guidelines,” but those are not law and no court is obligated to abide by them.  Thus, the DOJ must not only prove its case before a neutral fact finder, but may also need to refute defenses outside the contours of the Merger Guidelines.  Neither of these circumstances – neutral fact finder and innovative defenses – is present in FTC hearings.   Yet, merger parties have no choice as to which agency will challenge their transaction.  The two agencies make that determination solely between themselves.

Even with respect to business “conduct” cases, the two agencies may take different tacks.  Although there is overwhelming belief within the antitrust community that the well-established principles of the Sherman Act should determine the contours of the FTC Act, FTC commissioners still occasionally – often under Congressional pressure – float “unfair competition” liability theories regarding conduct that would not be unlawful under the Sherman Act.  Such expansion of antitrust law under the guise of the FTC Act makes enforcement appear arbitrary and creates uncertainty about the lawfulness of businesses practices.  All of these due process problems can be easily eliminated by simply making the DOJ the sole federal antitrust enforcer.

Theodore A. Gebhard