Republican FTC Commissioner Provokes Spat Over In-House Judges

A Republican on the Federal Trade Commission questioned the legality of a key component of the agency’s in-house court, lending support to an argument now being taken up by several companies fighting FTC lawsuits.

Laws shielding FTC administrative law judges from removal “unconstitutionally interfere” with a president’s power to control the executive branch, Commissioner Andrew N. Ferguson said in an Oct. 18 statement. “If the president does not control subordinate officers, then neither do the people,” he said.

Ferguson, a former chief counsel for Republican Senate Leader Mitch McConnell (Ky.) who joined the FTC in April, made the argument even as he voted with the other commissioners to deny a motion to disqualify an FTC judge from hearing a case relating to alleged deceptive practices from tax services firm H&R Block Inc.

Still, the criticism comes amid a concerted attack on the powers of administrative agencies that has gained a receptive audience in recent years from the conservative-majority Supreme Court.

With that backdrop, companies in the crosshairs of the FTC—including H&R Block, Kroger Co., and Meta Platforms Inc.—have brought cases arguing that the agency’s proceedings are invalid under the Constitution. Ferguson isn’t alone in questioning a part of the agency’s structure but is the most notable internal voice.

“It’s in vogue now, so it’s not as if it comes out of left field,” John B. Kirkwood, a Seattle University law professor who led the FTC’s policy unit for 10 years, said. “But it’s still rare, quite possibly unprecedented” for an FTC commissioner to attack the agency’s constitutionality.

FTC Chair Lina Khan sharply criticized Ferguson’s statement, saying it appeared to be part of an effort “to steer the law in a new direction.”

“While disagreement and debate among commissioners is a longstanding FTC tradition,” she said in a separate statement accompanying the H&R Block decision, “never in modern history has a Federal Trade Commissioner gone to such lengths to declare that core institutional features of the FTC are unconstitutional.”

Ferguson is one of two Republicans on the FTC’s five-person commission, which by law can’t have more than three members from one party. He and his GOP colleague Melissa Holyoak have repeatedly opposed the Democratic majority, including on a rule banning noncompete agreements, since filling vacant seats earlier this year.

An aide for Holyoak declined to comment on Ferguson’s statement. H&R Block and its counsel at Jones Day didn’t immediately return requests for comment.

FTC Versus H&R Block

The fight over in-house judges’ removal protections came in a case where the FTC alleges H&R Block’s online tax offerings were leading consumers to pay for higher-cost products despite many not needing the services.

H&R Block responded to the action, which was filed in the FTC’s administrative court, by challenging the constitutionality of the proceedings. The firm also sued in Missouri federal court to pause the proceedings.

That court ultimately rejected the request for an injunction, and the US Court of Appeals for the Eighth Circuit in September declined to halt the underlying enforcement case during an appeal. The case remains pending at the Eighth Circuit.

That case wound its way through the judiciary as the Supreme Court considered a similar matter dealing with a court inside the Securities and Exchange Commission.

In June, the justices curbed the ability for the SEC to bring cases internally—a fact that several companies have seized on in their lawsuits against the FTC.

The high court, however, didn’t rule on whether administrative law judges have unconstitutional protections from presidential removal, and Khan said the scope of the court’s ruling undermines Ferguson’s position.

“Despite having had several opportunities to resolve the question, the Supreme Court has not held that the statutory restrictions on removing ALJs are unconstitutional,” she said.

Ferguson’s statement lends support to the corporate litigants pressing that question, Kirkwood said, but it’s “unclear how big of difference it’ll make.”

The Supreme Court on Monday also rejected a petition to hear a case challenging Humphrey’s Executor, a nearly 90-year-old precedent that requires presidents to have cause to fire executive-branch agency leaders. The court made no comment on its decision to turn away the appeal, which was brought by lawyers including Jones Day’s Donald McGahn, a former Trump White House counsel.

That same day, an order from the FTC’s in-house court noted that the FTC and H&R Block jointly moved to end the in-house case to consider a proposed consent agreement.

Ferguson Tenure

Ferguson, a former clerk to Supreme Court Justice Clarence Thomas who worked on judicial confirmations under McConnell, joined the FTC following a stint as Virginia’s solicitor general.

McConnell recommended Ferguson to the White House for the role after multiple Republican exits, Bloomberg News reported.

If Donald Trump wins the election in November, he will gain the power to pick a new chair among the full slate of Senate-confirmed commissioners.

It is also common for the FTC chair to resign following a change in party control in the White House, according to a note from the firm Kelley Drye & Warren LLP, which would give Trump the opportunity to nominate a new leader from outside the agency.