The Death of Chevron and the FTC: Sometimes You Get the Deference You Deserve

Competition rules were a big part of the Neo-Brandeisian agenda. The Supreme Court made that more difficult before the FTC even got started.

Welcome back to Competition the Merits, where we are interrupting our regularly scheduled programming (the final installment of our 3-part Robinson-Patman Act series) for a big event in the regulatory landscape.

Chevron is dead. What now? And what implications does the death of Chevron have for the FTC and for competition policy generally? Today’s newsletter aims to tackle those questions. Or at least start the discussion.

Quick-fire reactions ranged from “this means nothing for the FTC because it doesn’t rely on Chevron anyway” to “without Chevron the administrative state is dead, including the FTC,” and much in between. Let’s start with what the Court did, what rules we are left with governing judicial deference to agency interpretations, and then turn to implications for the FTC and the implementation of federal competition policy.

CHEVRON’S DEAD, NOW WHAT?

In Loper Bright Enterprises v. Raimondo, the Supreme Court, in a 6-3 decision, overruled the Chevron deference doctrine. That doctrine provided that federal agencies’ reasonable interpretations of ambiguous statutes they administer shall be entitled to deference by the courts. Chief Justice Roberts, writing for a 6-3 Court, concluded:

Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.

The Court makes a few important moves. I recommend interested readers check out Chris Walker and Dan Deacon in the Yale Journal on Regulation to get started. But the basic moves are relatively straightforward. Chief Justice Roberts, on behalf of the Court, begins with the notion that courts should exercise “independent judgment” in deciding disputes and argues that Chevron was not consistent with the Administrative Procedure Act’s call for courts to “decide all relevant questions of law.” The Court also invokes comparative advantage, pointing out that Chevron’s presumption asks agencies rather than courts to resolve statutory ambiguities when that is a task courts, rather than agencies, are better at.

Some overheated reactions have worried that federal agencies will be hamstrung without Chevron. As someone who served as a Commissioner of an agency that rarely (if ever) invoked Chevron, let me assure you federal agencies can do plenty without it. But what exactly replaces Chevron as the standard for courts reviewing agency statutory interpretations now?

The Court hints, without a full-throated and clear endorsement, at Skidmore deference as the default rule. Well, we can’t say “deference” any more since the majority found that inconsistent with the APA (and two Justices, Thomas and Gorsuch, find it unconstitutional). But the Court cites Skidmore with approval and hints throughout the opinion that agencies’ views may be — but need not be — persuasive in determining the best meaning of a statute.

Skidmore is decidedly expertise and tradition-driven. It speaks of interpretations and opinions based upon “specialized experience,” and a “body of experience and informed judgment to which courts and litigants [could] properly resort for guidance.” When are those factors most persuasive for a court? That depends on “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”

OK, so mandatory deference is out. Agency interpretations can no longer control — even if reasonable. What’s in? Persuasion. An agency’s interpretation may be persuasive if the court is, well, … persuaded that the agency’s interpretation is not merely permissible but the best interpretation available. And one factor Skidmore itself emphasizes, the consistency of today’s interpretation with previous and later pronouncements seems especially relevant for regulatory pronouncements that move back and forth like a political tennis ball (think, e.g. Net Neutrality). More on that later when we get to the FTC — who has sent a few political tennis balls over the net as of late.

To sum up: deference is dead, and that does matter. How much it matters remains to be seen. Agencies flip-flopping on interpretations and doing 180 degree turns on a dime are not likely to persuade reviewing courts. That does not mean they will lose. Courts will have to independently determine whether the proffered interpretation is the best one. Some commentators, like Adrian Vermeule, have suggested Loper Bright could be much ado about nothing because deference inquiries can be substituted with equivalent analysis focused upon Congressional delegations authorizing agencies to exercise discretion so long as they are reasonable. We shall see. And it will take awhile.

But, reader, what about the FTC? And the Non Compete Rule? And so forth? What are the implications for the FTC and competition policy generally? I keep saying “and competition policy generally.” Let us not forget the Biden Administration Executive Order on Promoting Competition in the American Economy. The so-called “Whole Government Approach to Competition.” There is life in competition policy outside the FTC and DOJ. A lot of it. And there are important questions here:

• What does life after Chevron look like for the FTC specifically? Does it change at all?

• How does competition rulemaking under the Biden Executive Order fare After Loper Bright?

I want to cover these in reverse order for reasons I hope will become obvious. There is a lot of denial going around the internet these days — by the Neo-Brandeisians in particular — about what the death of Chevron means for the FTC. Just for example, here is Matt Stoller:

There are plenty of others. Though to be fair, even Stoller is much more measured about this (and nuanced) in his Big Newsletter than he is on X. The general “there is nothing to see here” argument goes something like: The FTC does not cite Chevron in its briefs defending its Non Compete Rule, the FTC (and the rest of the administrative state) existed before Chevron and did stuff, so everything is just fine and the demise of Chevron deference does not matter. OK, some of that is right. But the implications for the FTC and the broader agenda are indeed significant.

Dear Reader — if you are a supporter of the Neo-Brandeisian competition agenda — (well first of all, welcome to Competition on the Merits!) everything is not “just fine.” The rest of this newsletter will explain why that is.

HOW DOES COMPETITION RULEMAKING UNDER THE BIDEN EXECUTIVE ORDER FARE AFTER LOPER BRIGHT?

The Neo-Brandeisians who claim Loper Bright is a tree falling in the forest with nobody around to hear it raise an interesting point. Or at least an interesting question: how can the death of Chevron matter to the FTC if they’ve never done competition rulemaking and thus never relied upon it? Fair enough.

But to understand the answer to that question we need to answer a predicate one: why competition rulemaking in the first place?

The Biden Executive Order on Promoting Competition mentions rulemaking 21 times. Many of those pertain to the FTC:

To address persistent and recurrent practices that inhibit competition, the Chair of the FTC, in the Chair’s discretion, is also encouraged to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority, as appropriate and consistent with applicable law, in areas such as:

(i) unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy;

(ii) unfair anticompetitive restrictions on third-party repair or self-repair of items, such as the restrictions imposed by powerful manufacturers that prevent farmers from repairing their own equipment;

(iii) unfair anticompetitive conduct or agreements in the prescription drug industries, such as agreements to delay the market entry of generic drugs or biosimilars;

(iv) unfair competition in major Internet marketplaces;

(v) unfair occupational licensing restrictions;

(vi) unfair tying practices or exclusionary practices in the brokerage or listing of real estate; and

(vii) any other unfair industry-specific practices that substantially inhibit competition.

The Executive Order calls specifically for the FTC to consider a Non-Compete Rule:

To address agreements that may unduly limit workers’ ability to change jobs, the Chair of the FTC is encouraged to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.

The EO calls for competition rulemaking across the economy and from nearly a dozen federal agencies. Just a few examples:

• The Secretary of Agriculture is to consider a variety of competition rules under authority granted under the Packers and Stockyards Act;

• The Secretary of the Treasury, through the Administrator of the Alcohol and Tobacco Tax and Trade Bureau, “shall consider” initiating or rescinding rules to promote competition in wine, beer, and spirits;

• The FCC is to consider “Net Neutrality” and other competition rules;

• The Secretary of Transportation “shall, to better protect consumers and improve competition, and as appropriate and consistent with applicable law, promote enhanced transparency and consumer safeguards, as appropriate and consistent with applicable law, including through potential rulemaking, enforcement actions, or guidance documents”;

• The Surface Transportation Board is to “consider commencing or continuing a rulemaking to strengthen regulations pertaining to reciprocal switching agreements pursuant to 49 U.S.C. 11102(c), if the Chair determines such rulemaking to be in the public interest or necessary to provide competitive rail service”;

• The Secretary of Health and Human Services is to consider a variety of rules;

• The Director of the Consumer Financial Protection Bureau, “is encouraged to consider commencing or continuing a rulemaking under section 1033 of the Dodd-Frank Act to facilitate the portability of consumer financial transaction data so consumers can more easily switch financial institutions and use new, innovative financial products”;

While competition rulemaking at the FTC is new, the shift toward competition rulemaking is not an FTC-specific phenomenon. The Biden “whole of government” approach to competition policy puts rulemaking front and center. There’s nothing inherently wrong with that. Where rulemaking authority is clearly delegated to a federal agency there might well be benefits to rulemaking rather than case by case adjudication. But it is difficult to read the Executive Order without taking away the clear message that competition rulemaking was intended to play a greater part of the regulatory landscape than it ever had before.

WHY DID THE FTC WANT COMPETITION RULEMAKING IN THE FIRST PLACE?

Let’s get back to the “why.” Why the push for competition rulemaking at the FTC, in particular? All these years the FTC was enforcing competition law without rulemaking it was doing other things — namely, it was adjudicating individual cases through enforcement actions.

The Neo-Brandeisians were especially displeased with the state of affairs in case-by-case adjudication. Some blamed the law. Some blamed the courts themselves. Some blamed Congress for not changing the law. There was more than enough blame to go around. For some, it was a Chicago School conspiracy. Chair Khan and Assistant Attorney General Jonathan Kanter have each described the last 50 years of antitrust enforcement as a failure. Khan’s House Report lays the alleged failure at the feet of existing antitrust, which simply makes it too hard for plaintiffs to win as she tells it. Which antitrust law? I mean, all of them: predatory pricing law, Section 7 of the Clayton Act, all of monopolization doctrine, Section 1 of the Sherman Act. You name it.

Well, what is an antitrust revolutionary to do if they can’t go out and win cases. One does not win a revolution without winning cases. Our revolutionary friends have two routes available: (1) get Congress to change the law (see above House Report); or (2) rulemaking. These are not mutually exclusive strategies. Khan and Kanter and their Neo-Brandeisian allies at think tanks, in Congress, and in the press, have pushed as they can for changes in the law. The House Report recommends overturning every Supreme Court antitrust precedent since 1977 as well as at least one law review article.¹ Not to mention pushing new antitrust legislation like AICOA that would reduce plaintiffs’ burdens of proof in antitrust cases or outright declare conduct illegal. How is that pushing for new legislation going? Well, it appears the window for bipartisan antitrust reform, a window much written about for the past 4-5 years, has closed. So much for achieving the Neo-Brandeisians’ goals through Congress.

But these folks can walk and chew gum at the same time. If not Congress, then perhaps rulemaking? Remember, the fundamental problem facing the Neo-Brandeisians is that the burden of proof in individual antitrust cases is too high. They cannot win often enough under the consumer welfare standard because it requires evidence that the allegedly unlawful conduct actually harmed competition and consumers. If you cannot get the burden of proof lowered by an Act of Congress, rulemaking is the strategic alternative.

Do not take my word for it. The intellectual architect for this move at the FTC is not Lina Khan. It is none other than former FTC Commissioner and now Director of the CFPB, Rohit Chopra. Competition rulemaking was on FTC Commissioner Chopra’s radar from day one at the FTC.

He wrote about it, including in a co-authored piece with his then advisor Lina Khan.

They dedicated an entire Appendix of a short essay to the thesis that Unfair Methods of Competition rulemaking would be entitled to Chevron deference.

Indeed, among Chair Khan’s first acts at the Commission was to throw out the bipartisan 2015 UMC Policy Statement. As the driving force behind that bipartisan policy statement — I have some biases here. But, to be frank, I missed the ball a bit when Khan’s FTC abandoned the 2015 Statement. I did not have competition rulemaking on my radar — mostly because I believe the FTC simply does not have the authority under a plain reading of the FTC Act. The main benefit of trashing the 2015 Statement — its primary goal was the modest objective of tethering UMC to the consumer welfare standard — was not to avoid the consumer welfare standard, but rather to evade the 2015 Statement’s commitment to case-by-case adjudication.

The move to rulemaking was a prescient one by Chopra, and now executed by Chair Khan. Chopra anticipated that a legislative solution to the Neo-Brandeisian problem was unlikely. And he’s been proven correct. He laid the groundwork for a UMC rulemaking agenda at the FTC before Chair Khan stepped foot in the building. But the Chopra-Khan plan is an ambitious one.

The Non Compete Rule was to be the first of many. Does any one remember the Open Markets Institute petition for a UMC rulemaking on exclusionary contracts? I do. And I would not be surprised if the FTC has already done substantial work on the project. It was an expansive petition proposal, at least as ambitious (if not as politically popular) as the Non Compete Rule, essentially declaring broad swaths of contracts unlawful under the UMC authority that would have likely been lawful under existing antitrust law.

The Biden Executive set the high-level plan for competition rulemaking, the Chopra-Khan framework laid the table for UMC rulemaking at the FTC with an eye toward Chevron deference, and discarding the 2015 Policy Statement opened the door for the rulemaking agenda. There is no doubt the Khan FTC has plans for other UMC rules.

All of this is to say, to understand the implications of Loper Bright at the FTC one must understand why the significant investment in competition rulemaking has been taking place inside the agency for years. The answer goes to the very heart of the Neo-Brandeisian strategic agenda:

Evade judicial review under existing law because significant and consistent wins under consumer welfare standard are not enough.

Without a helping hand from the legislature to make life easier by reducing burdens of proof or outright declaring conduct per se unlawful, rulemaking is the strategic solution to case-by-case adjudication. And the death of Chevron deference makes that considerably more difficult as Khan and Chopra recognized.

Now, to state the obvious, if one takes my own view that the FTC Act simply does not confer UMC rulemaking authority than the outcome is the same with or without Loper-Bright. But not all share my view on that score. Nonetheless, the turn to rulemaking was not a side quest for the FTC. It was the part of the main objective — and a key dimension of the Neo-Brandeisian program moving forward as the Executive Order makes clear.

IMMEDIATE IMPLICATIONS AT THE FTC

The above discussion makes some of the immediate implications at the FTC clear. A lot of that discussion immediately turns to the Non Compete Rule. But, as dissenting Commissioners Holyoak and Ferguson make clear in their own statement, it appears (to me, anyway) likely the FTC loses there with or without any deference.

For the rest of this discussion let’s presume the FTC either has some UMC rulemaking authority or (more likely) that Congress grants some UMC rulemaking authority in the future to solve a specific issue.

What does Loper Bright have to say about that? I’d like to return to where we started off. If mandatory deference is out and Loper Bright calls for something that walks and talks like Skidmore deference — that is, an agency’s interpretation may be persuasive if the court is persuaded that the agency has identified the best available interpretation. As Dan Deacon points out, this seems to bode well for agencies that are consistent over time and to bode less well for agencies that appear to be playing political tennis with major issues.

On that score, the future does not look bright for an FTC looking for any sort of (don’t call it deference!) favorable reading from an Article III court. This FTC:

• Discarded the bipartisan 2015 Policy Statement and replaced it with one that declares broad swaths of conduct unlawful;

• Altered the mission statement of the agency to prioritize fairness over competition;

• Discarded various Guidelines and replaced them with documents that appear much more political and much less grounded in economics or antitrust law;

• Has made no secret of an attempt to revolutionize the FTC to achieve goals well outside the remedies provided by existing law.

Don’t get me wrong. These are all features and not bugs if you are in favor of the revolution. Hopefully we did not lose our Neo-Brandeisian reader yet! But from the perspective of what used to be Skidmore deference — well, whatever it is now, the FTC does not appear to score well on this dimension.

So what is left?

The odds of a lifeline from Congress are all but gone. The Republicans — even the so-called “Khan-servatives” have seen too much to vote for revolutionary legislation that would alter the fundamentals of antitrust law. They wanted a pound of flesh from Big Tech and the agencies have already delivered or have cases pending. The politics of supporting a blank check for the FTC and DOJ are not attractive for conservatives in this economy when the FTC and DOJ have made clear they intend the same end of not just Big Tech, but manufacturers, retailers, private equity, oil & gas, and … well … everyone.

So back to court we go for case-by-case adjudication under existing law. The FTC will win some and it will lose some. As it is doing now. And as it has always been. When the numbers are in for the Biden FTC I predict that the scoreboard will look disappointing relative to expectation and certainly relative to what was promised:

• A mediocre win-loss record in litigated merger cases – though plenty of activity

• Zero rulemakings or significant legislative wins resulting from advocacy

• Quite a bit of flux in agency guidance and policy statements, but none that will last through the next Republican administration

• Plenty of in terrorem deterrence of all sorts of business activity

But the scoreboard newsletter will involve a deeper dive that will have to wait for another day.

What’s the bottom line for Loper Bright and competition policy?

First, judicial review remains at the heart of American competition policy and end runs around that cannot succeed without a clear delegation from Congress. That is a good thing. Legislation on these issues remains unlikely for many reasons. But the main reason is that so many of the “big ideas” around antitrust legislation are harmful to the economy and will make Americans poorer at a time when the political appetite for that is especially low.

Second, between Loper Bright, Jarkesy (more on that soon), the still-looming and unanswered challenges for administrative litigation at the FTC, and the specter of Humphrey’s Executor coming to an end, it is getting more and more reasonable to start thinking about what antitrust enforcement might look like with a single executive agency. Doug Ginsburg and I have a paper on that thought experiment here.

Third, one useful way of thinking about the death of Chevron is reducing the relative price of lasting deregulation. Obviously, the Chevron door swings both ways in the sense that the end of Chevron would apply equally to the next Administration’s agencies and their new rules. But if Republican administrations, and the Trump administration in particular, continues to prioritize a deregulatory mission, it is very likely the constraints it imposes on regulatory agencies will be much more likely to bind in Democratic administrations.

Back to our normally scheduled programming later this week to close out our Robinson-Patman series.

1. I kid you not. Check out footnote 2056.