Neo-Brandeisian Retrospective: FTC Rulemaking

The FTC’s Neo-Brandeisian “Rule-A-Palooza” undermined the agency’s credibility, diverted resources from enforcement, and exposed consumers to greater risk of fraud.

Under Chair Khan, the agency pursued sweeping rulemakings to reshape the economy.  For example, the FTC interpreted Section 5 of the FTC Act, which prohibits “unfair methods of competition,” to justify a rule that invalidated noncompete agreements. A federal court later set aside the rule determining the agency lacked both the authority to issue a rule and that the rule that was issued could not be justified.

Even where Congress authorized limited rulemaking, the FTC exceeded its statutory authority.  Under the Magnusson-Moss Warranty Act, Congress granted authority to issue rules governing unfair or deceptive acts or practices when the Commission can “define with specificity” what practices are unfair and when those specific acts are “prevalent.”

The FTC regularly ignored those statutory requirements. As a result, the rules were too general, too far-reaching, or both. Moreover, under a new “streamlined” rulemaking process, the agency took shortcuts and steamrolled critics who warned that the rules lacked evidentiary support.  

The agency introduced 18 rules.  The fate of 11 rules remains uncertain, either because the rules have faced legal challenge or because they have been frozen pending review. 

About the author

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

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