The Chevron decision will create some challenges for the FTC’s enforcement and rulemaking | BakerHostetler

It was indeed a memorable final week for the Supreme Court this term. It’s been quite a lot to digest, and the effects and implications are wide-ranging and significant. But for now, let’s look through a narrow lens and focus on how the decision is made Loper Bright Enterprises v. Ramondo will affect the Federal Trade Commission’s (FTC) law enforcement and consumer protection regulatory authority.

If you’ve been lucky enough to be on a desert island in the past few weeks, enter RunningThe Supreme Court struck down four decades old Chevron doctrine, which generally held that when a statute is ambiguous, a court would defer to a reasonable interpretation established by the applicable administrative agency, such as the FTC. This is especially important because Congress rarely legislates with sufficient precision or specificity and there is often ambiguity in statutes. This deference to an administrative agency has been a powerful tool for the FTC in its enforcement actions and recent rulemaking frenzy.

There is some thinking that this decision may not be too important to the FTC’s law enforcement. After all, if you look at litigious FTC cases over the past few decades, Chevron has rarely been mentioned as a significant consideration. But and this is a pretty big but — this is another FTC today and one of the agency’s primary but unspoken strategies since the Supreme Court’s AMG the decision has been to engage in regulation and interpret its authorities broadly to expand the cases where it can seek redress from consumers. However, that strategy has the potential to be quite inconsistent with this reshaped regulatory world. At the end of last week, Running was already cited by a Texas district court that preliminarily held that the FTC had exceeded their authority in publicizing the high-profile non-compete clause.

Probably the best example of how overturning Chevron can limit the FTC’s rulemaking is how the FTC has interpreted the Restore Online Shoppers’ Confidence Act (ROSCA). ROSCA is a statute that sets out three simple requirements that businesses must meet when selling products or services online with a recurring billing feature. The statute requires that essential information be disclosed, that the seller obtains the consumer’s consent, and that there is an easy way to cancel.

For several years, however, the FTC has interpreted and enforced ROSCA in ways that go far beyond the statutory language—particularly in its interpretation of what a simple rescission mechanism entails. The exact statutory language regarding cancellation consists of less than a sentence that simply states that the seller must provide “a simple mechanism for a consumer to stop recurring charges from being placed on a consumer’s credit card, debit card, bank account or other financial account.” That’s all – there is no further information on what constitutes a simple cancellation mechanism However, in 2021, the FTC issued a policy statement regarding negative alternative marketing where the FTC went beyond the clear statutory mandate that there be an easy method of cancellation, stating that cancellation methods should be “at least as easy to use as the method the consumer used to initiate the negative option feature” and emphasizing that “negative option option sellers should not subject consumers to new offers or similar attempts to rescue the negative option arrangement that impose unreasonable delays on consumers’ cancellation efforts.” The FTC has taken similar positions in litigation.

These may or may not be reasonable interpretations of what it means to have a simple cancellation mechanism, and we are in no way recommending that anyone ignore FTC guidance in this space. (And we should add that we remain big fans of agency guidance.) What it does mean, however, is that a court in litigation need not consider the FTC’s interpretation of what this statutory language means. And that’s a very significant change that the agency will have to deal with in court.

Ironically, one way the FTC can address these issues is through more regulation. And indeed, in March 2023, the agency proposed one new negative option rule which provides some of the specificity that is missing in ROSCA. However, the proposed rule goes far beyond what ROSCA requires, and when that rule is final and inevitably challenged, a court will not defer to the FTC on any important questions about its authority to issue the new rule. And as mentioned above, it has already happened in the latest non-compete decision. That rule was based on different statutory language, so the analysis will differ—but the lack of deference to the agency’s interpretation will remain.

And there are other FTC rules that this new decision may highlight. One that jumps to mind is the recently expanded and widened one Health Breach Notification Rule. Indeed, in a dissenting statement earlier this year, Commissioner Melissa Holyoak (joined by Commissioner Andrew N. Ferguson) noted that “no matter how the majority tries to shoehorn its desired policy goal into a “clear reading” of the statute, I cannot support a rule which exceed the limits clearly established by Congress.” This question of whether regulations exceed statutory authority is at the heart of Running.

However, we would like to emphasize that although Chevron is gone, Skidmore the leftovers. And Skidmore stands for the general proposition that agency interpretations constitute a body of experience and informed judgment that may be entitled to deference. It remains to be seen how much that will help the agency.

While the FTC will need to address this new regulatory landscape, we do not want to overstate the potential impact on the agency. For example, to the extent the agency makes law enforcement statements that are misleading under the FTC Act, Running probably won’t be a problem. But where we see the agency becoming more creative, developing new theories of responsibility and perhaps expanding concepts of injustice, Running will likely be played. That doesn’t mean the court disagrees with the FTC’s approach, of course, but it does open a door to advocacy that might have been much harder to open in the past.

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