Humphrey Gets Executed?: Competition Corner

Issue #37

G’day,

Big news in the world of competition!

President Trump just fired the two remaining Democrat FTC commissioners, Bedoya and Slaughter, setting the stage for a Supreme Court battle that will likely see the seminal 1935 Humphrey’s Executor decision overturned. This would confirm the President’s authority to fire executive officers as he or she sees fit.

In Humphrey’s Executor, the court ruled that the President cannot fire the leaders of ‘independent agencies’ without ‘due cause’. Legal critics have long argued that this limitation interferes with a President’s ability to oversee the execution of the laws as he or she chooses under the Constitution’s Vesting clause (which bestows the President with all executive power), and the Take Care clause, which tasks the President with the laws’ faithful execution.

The 1935 SCOTUS got around this ‘separation of powers’ argument by characterizing the FTC (the subject of the litigation) as a quasi-judicial body because it adjudicated cases and promulgated rules, rather than ‘executing’ the law. They thus reasoned that making FTC commissioners immune to firing by the President without cause does not interfere with the President’s power to enforce the laws as embodiment of the executive.

In the decades since, the FTC has grown into something very different. Antitrust and consumer protection litigation is most of its work. Today’s conservative SCOTUS majority is likely to overturn Humphrey’s Executor. In addition to his FTC firings, this would also uphold President Trump’s firing of NLRB Member Gwynne Wilcox and Merit Systems Protection Board Member Cathy Harris, decisions that have been blocked by two Washington DC federal court judges.

This brings us to an entirely separate question- as a policy matter, is it wise to fire the remaining Democrat commissioners?

This is an unprecedented move that has not been seen under any previous president of either party. It breaks with the longstanding convention that different administrations aim to keep majority control of the FTC, but allow previous administrations’ appointees to serve as a minority on the commission. One of the reasons for that convention might be the decades-long consensus among both Republican and Democrat-appointed FTC commissioners about consumer welfare antitrust principles and the importance of theoretical and empirical economic analysis in any enforcement decision.

The appointment of Lina Khan to the agency under the Biden administration marked a major departure from these principles. Backed by her fellow Democratic commissioners, Khan’s Neo-Brandeisian philosophy underpinned FTC enforcement policy guidance that would never have been brought forth under previous administrations of either partisan stripe. Although the Neo-Brandeisian antitrust movement had relatively few litigation victories, it managed to chill a range of potentially pro-competitive business practices and mergers simply through threats or uncertainty about expensive agency litigation. The casualties of this approach included not just the large firms targeted by the Neo-Brandeisians, but also (in many cases) small businesses and others whose interests the movement purported to uphold.

So, then, firing commissioners Bedoya and Slaughter may be perceived as simply ‘cleaning house,’ allowing the FTC to reflect this President’s vision of a more pragmatic approach to antitrust. After all, the agency can operate and bring cases even with just two commissioners, regardless of whether they’re from the same party. And a new Republican commissioner (nominee Mark Meador) is likely to be added as well.

Conversely, firing the only two remaining Democratic commissioners sets a standard where future administrations are likely to fire and/or replace any commissioners from the other party with their own. This would likely only further the transformation of the agency and antitrust enforcement in general into a polarized and partisan policy exercise.

Democratic commissioners who appeal to consumer welfare-oriented principles may be viewed by future Democratic administrations as too “soft” or similar to their rivals. This would favor the appointment of more Neo-Brandeisians, rather than a return to the pre-Biden antitrust enforcement consensus.

Similarly, there might be greater pressure for future Republican presidents to appoint populist-leaning commissioners who see their role as involving not just protecting consumers and upholding competition, but also furthering conservative political objectives like ‘holding big tech (and other companies perceived as liberal leaning) accountable’.

This would create substantial long-term commercial uncertainty for businesses seeking to focus on economic competition. Firms and markets are instead likely to benefit from the expectation of relative antitrust consistency between administrations.

What do you think? Send us your thoughts.

Alden Abbott @ Forbes

Writing for Forbes, senior scholar Alden Abbott argues that a return to consumer welfare and reducing impediments to innovation and business efficiency can allow antitrust to promote America’s global competitiveness.

He also wrote recently about how the FTC can make the best use of its limited resources by focusing on prosecution of fraud, which offers an opportunity to protect consumers that sometimes goes under the radar when agency resources are allocated elsewhere.

Finally, in the matter of US-UK trade and amidst the looming prospect of further tariffs under the current administration, Abbott touts the virtues of a future US-UK trade agreement that could pave the way for prosperity, innovation, and growth for both nations’ economies.

That’s all for now.

See you next month!

- Satya Marar
Visiting Postgraduate Fellow – Competition, Innovation & Governance
Mercatus Center at George Mason University