The Executive Branch is the Captain Now
The White House has recast its relationship with independent agencies. OIRA now reviews regulation & the DOJ has the final say on interpreting law. What changes at the FTC? Plenty.
Welcome back Competition on the Merits readers! Many of you are antitrust lawyers or economists and we are going to get out of your comfort zone a bit today and talk about administrative law and Presidential control of federal agencies.
Regulatory reform has been an overarching goal of the Trump Administration. And they have been busy. Within the last month alone, the Trump Administration has made at least a half-dozen significant changes to the regulatory landscape. Most of these changes revolve around a February 18, 2025 executive order that recasts the relationship between the White House’s Office of Information and Regulatory Affairs (OIRA) and individual agencies. The same executive order reaffirms the supremacy of the President and Attorney general when it comes to providing authoritative interpretations of law.
But that is not all. Yet another landmark change involves the coming battle over Humphrey’s Executor, the Supreme Court precedent that has sustained removal protections for heads of multi-member agencies, like the Federal Trade Commission. We’ve previously discussed Humphrey’s Executor in our column discussing what events might transpire if Lina Khan stayed at the Federal Trade Commission and refused to step down, preventing the Trump Administration from securing a majority at the agency. That “What if” did not come to pass. But Humphrey’s Executor’s time as the law of the land may be coming to an end. The Trump Administration has announced in a letter that it does not believe the protections of Humphrey’s Executor should extend to modern day multi-member Commissions like the FTC, that it will not defend that precedent in court—where it faces many challenges—and that it will seek to overturn it. All of this is quite important for the Federal Trade Commission. Chairman Ferguson has already announced his full agreement with the Trump Administration’s letter: "I agree with every word of the Acting Solicitor General's letter. Humphrey's Executor was wrongly decided, is deeply anti-democratic, and ought to be overruled.” The day is coming when FTC Commissioners can be fired with or without cause. That’s a big enough deal that we will carve it out for a separate column.
Today’s Competition on the Merits focuses on the changing relationship between the Federal Trade Commission and the White House—both in terms of OIRA supervision as well as the clear announcement that the DOJ’s interpretation of existing law reigns supreme.
What is OIRA and What Does it Do?
OIRA was created by the Paperwork Reduction Act, signed into law by President Carter in 1980. It is located within the Office of Management and Budget (OMB). President Reagan issued Executive Order 12291 in 1981, which gave OIRA the authority to review agencies’ significant regulations before publication in the Federal Register. Fundamentally, OIRA is responsible for coordinating and reviewing economically and politically significant rules and regulations across the executive branch.
OIRA is armed with a staff of career experts across a variety of subject matters. OIRA review includes evaluating the justifications for the proposed regulation and assessing its legal rationale, as well as its costs and benefits. OIRA can (1) approve the rules with or without modifications, (2) remand the rules to the originating agency for reconsideration, or (3) request that the agency withdraw the rule. OIRA also shares the proposed regulation and its analyses with other parts of the White House, e.g. the National Economic Council, the Domestic Policy Council and others who might be impacted. OIRA coordinates with the White House, takes input from various perspectives that might be offered throughout the White House, and attempts to resolve disputes. Here, we will mostly focus upon OIRA’s application of cost-benefit analysis to proposed regulations.
President Clinton revoked Reagan’s OIRA Executive Orders in favor of his own Executive Order 12866. Executive Order 12866 lays out OIRA’s regulation review responsibilities and functions. OIRA reviews significant draft rules from agencies. Here is how former OIRA Administrator Neomi Rao has described Executive Order 12866:
Others are less wed to the idea of keeping Executive Order 12866 in place as a foundational blueprint for regulatory review. But we will save that discussion for later. One important limitation on Executive Order 12866 was its exclusion of the so-called “independent agencies,” like the Federal Trade Commission. One of the Trump Administrations’ big ideas in the regulatory space has been to extend OIRA review to independent agencies. That is a very big deal. It has long been understood to be a constitutional move to bring independent agencies under OIRA supervision. But previous administrations have not made that leap. Until now.
OIRA review requirements apply to “significant” regulations. What constitutes “significant regulation” encompasses several elements, including a quantitative threshold concerning the impact of the regulation on the economy. That threshold has changed over time. President Biden issued Executive Order 14094, which increased the threshold for rules requiring a full regulatory impact analysis from $100 million to $200 million in annual benefits or costs. President Trump revoked Executive Order14094, returning the threshold for significant regulations subject to OIRA review to $100 million.
The thrust of President Clinton’s Executive Order 12866 was to shift control of regulation away from the White House and back to the originating federal agencies. It embraced cost-benefit analysis. But it also distorted the cost-benefit analysis to be applied by insisting that agencies consider “distributive impacts” and “equity.”
There is plenty more to read to understand OIRA and White House review of federal regulation. These are a good place to start: :
A discussion by former OIRA Administrator Susan Dudley on the Trump Administration’s changes to OIRA and cost-benefit analysis;
An excellent primer on regulatory analysis at OIRA from James Broughel;
An article by Cass Sunstein on the Myths and Realities of OIRA;
A piece by Douglas Ginsburg and Chris DeMuth on White House Review of Agency Rulemaking; and
An article by Neomi Rao, The Hedgehog and the Fox in Administrative Law.
But I want to focus here on changes the Trump Administration has made—or proposed to make—to the role of the White House in reviewing agency regulation. Then I’ll turn to potential implications in the world of competition policy. In case I’m about to lose some of you antitrust lawyers who skipped administrative law during law school and do not think OIRA is relevant in your world—please keep reading. Because you’re wrong. And your clients will thank you later.
The Trump Administration Makes Big Changes to White House Review of Agency Regulations
Let’s start with what I think is the biggest one.
Executive Order 12866 and cost-benefit analysis review now extends to the so-called independent agencies, including the Federal Trade Commission. A February 18th Executive Order titled “Ensuring Accountability for All Agencies,” the Trump White House announced that independent agencies (other than the Federal Reserve) would now need to comply with Executive Order12866.
This is a policy change that has been brewing for a while. Trump I OIRA Administrator, and now D.C. Circuit judge, Neomi Rao, advocated for this position as a scholar and during the first Trump Administration. The Obama Administration issued an executive order that encouraged independent agencies to comply with Executive Order12866 but did not require it.
For what it is worth, this is one of the issues where I have changed my mind over time after my experience within the agencies. During my confirmation hearing to become an FTC Commissioner back in 2012, I was asked my view on proposed legislation that would require OIRA review for the Federal Trade Commission. At the time I was asked, this was not a problem that I had studied. As an antitrust academic, I was not very familiar with rulemaking and so I looked to senior FTC scholars that I admired for answers to the question. Folks like former Chairman Tim Muris and Bill Kovacic had answered that OIRA review was unnecessary because the Federal Trade Commission had significant economic expertise in house in the form a large team of talented Ph.D. economists, that it took economic analysis seriously, and could be trusted to engage in high quality review of its own work product without outside supervision. Sounded good to me. So that was my default position and the answer that I gave when asked in 2012. So, why have I changed my mind?
I became a Commissioner and saw agency rulemaking first hand. I saw significant regulations and agency reports where economic analysis was ignored. I repeatedly wrote dissents pointing out these flaws. Sure, it was true that the FTC has economic expertise within the walls of the building. But there was nothing to require that input to be taken seriously in the process of promulgating rules and regulations or other decision-making. Economic analysis was taken seriously sometimes. Not so much at other times. And that was back in 2013 to 2015. The problem has gotten far worse as one can see from reading more recent FTC 6(b) reports completely devoid of data or serious analysis or looking at skewed attempts at serious cost-benefit analysis in recent FTC output.
More on FTC-specific implications below, but OIRA review of the Federal Trade Commission’s significant regulations is a big deal. It is not the only big change in the regulatory landscape.
In Executive Order 14148, President Trump rescinded the Biden order that had increased the threshold of “significant regulatory action” from $100 million to $200 million.
In Executive Order 14192, President Trump rescinded the 2017 Executive Order 13771 which imposed a “2 for 1” regulatory budget in favor of directing agencies to “‘identify at least 10 existing regulations to be repealed’ for every new regulation issued,” along with a requirement that for Fiscal Year 2025 the total incremental cost of all new regulations, “including repealed regulations … shall be significantly less than zero.” Executive Order 14192 also prohibits agencies from issuing regulations that were not included in the most recent version or update of the published Unified Regulatory Agenda or otherwise approved by OMB.
We still are not done with major changes. Of course, we should mention that President Trump nominated Jeff Clark as Administrator of OIRA. Notably, in addition to other obvious qualifications as the former AAG for the Energy and Natural Resources Division of the Department of Justice, you may not know that Clark has an undergraduate degree in economics from Harvard College and was an Olin Fellow in Law and Economics at Georgetown Law.
And how about one change that did not happen. Left intact, at least so far, is President Clinton’s Executive Order 12866. That Executive Order embraces cost-benefit analysis and has proven quite durable since its issuance in 1993. But given the Trump Administration’s revealed preference for cleansing “equity” considerations from federal institutions, I would not be surprised to see Executive Order 12866 revised to eliminate equity and other qualitative considerations from the OIRA cost-benefit analysis.
As you can see, the Trump Administration has been busy hitting deregulatory notes – and recasting the relationship between the White House and federal agencies. We have talked quite a bit about the Trump Administration strategy to “split the uprights” with rigorous enforcement of the antitrust laws on the one hand while aggressively deregulating on the other. Observers of the Federal Trade Commission and Department of Justice may have a tough time identifying the deregulatory output from the agencies thus far. This is especially true given the Trump Administration’s Federal Trade Commission endorsement of the Biden-Kanter-Khan 2023 Merger Guidelines and the decision to keep the revised HSR rules–also known as the “Khan Merger Tax” because it imposes significant regulatory costs on all merging parties (including those mergers that raise no competition concerns) through the Premerger Notification process. But these executive orders make clear that deregulation is a very high priority for the Trump Administration—and one expects that the Trump Federal Trade Commission and Department of Justice will be looking for opportunities to support the President’s deregulatory agenda sooner rather than later.
Let’s turn to thinking about what all of this means for the Federal Trade Commission generally, and competition policy at the Federal Trade Commission specifically.
What Does It Mean for the Federal Trade Commission Generally?
The primary thrust of Trump’s “Accountability for All Agencies” Executive Order is to extend the reach of Executive Order 12866 to the so-called independent agencies, including the Federal Trade Commission. What does that mean? It means that “significant regulatory actions” must go through OIRA regulatory review. ‘‘Regulatory action’’ includes “any substantive action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking.” As discussed, “significant” regulatory actions are once again those with an impact on the economy of $100 million or greater (as well as those that conflict with other agencies or otherwise create novel or political issues for the Administration).
This has immediate implications for the FTC’s consumer protection agenda. After all, that is where nearly all of the FTC’s lawful rulemaking activity occurs: COPPA, Telemarketing Sales Rule, Junk Fees, the Contact Lens Rule, Made in the USA, and so forth. The Federal Trade Commission does a great deal of rulemaking on the consumer protection side of the house. OIRA review is going to change things. First, it will necessarily slow things down. Second, it will require greater emphasis on the economic evidence substantiating the proposed rules or amendments. To be clear, the Federal Trade Commission has the resources to engage in serious economic analysis of proposed rules. And it often does. And the Federal Trade Commission often relies upon it. But not always. The integration between consumer protection and economic analysis will have to be tighter than ever to pass OIRA scrutiny, should OIRA become especially interested in FTC rules. The fact that new Bureau of Consumer Protection Director Chris Mufarrige has a graduate degree in economics and experience with rulemaking and OIRA should be a boon to the agency. But make no mistake, OIRA supervision will be a major change in the Federal Trade Commission’s production function on the consumer protection side of the house where rulemaking plays a significant role.
What about on the competition side of the house? The FTC does not do much lawful competition rulemaking because it lacks the legal authority to do so. So the fact that, say, the Noncompete Rule would have also failed OIRA’s cost-benefit test on economic grounds is not especially important because it failed for more fundamental reasons. Nor do I believe the new proposed HSR Form —aka the Khan Merger Tax—would have survived meaningful OIRA review. But that ship has sailed.
So what is left for the implications of the new alignment between the executive branch and the institutions formerly known as independent agencies? Quite a bit. And while OIRA itself may play a role in future HSR revisions, the Congressional Review Act’s reviews of FTC actions (including policy statements), or some future (unlikely in this Administration) misguided attempt at competition rulemaking, it is not the only tool of executive branch control of the Federal Trade Commission.
The February 18, 2025 “Ensuring Accountability for All Agencies” Executive Order also declares supreme the interpretations of law offered by the Attorney General and the Department of Justice.
That will matter especially when the Federal Trade Commission and Department of Justice have potentially conflicting views. If there are any antitrust lawyers still reading after all of that administrative law talk, this should sound familiar.
Some potentially important examples:
How about the Department of Justice offering an interpretation of Section 5 of the FTC Act’s Unfair Methods of Competition provision? One quick way to achieve at least some of the goals of the One Agency Act is to take away the special, unlawful sauce the Federal Trade Commission can bring to competition cases.
The Department of Justice and Federal Trade Commission have sometimes historically disagreed on questions involving the intersection of intellectual property and antitrust laws. For example, whether breach of a FRAND commitment by an SEP holder constitutes a violation of Section 2 of the Sherman Act or Section 5 of the FTC Act? It would seem under the new Executive Order that a DOJ statement would prevail and resolve any inconsistency.
The Executive Order would have prevented situations like FTC v. Qualcomm, where the Trump Administration had expressed its position that the suit be dismissed, but the Federal Trade Commission was either unable or unwilling to take the steps to do so when deadlocked at a 2-2 vote.
What about international competition advocacy? The Department of Justice could issue an authoritative proclamation reaffirming the Supreme Court’s statement that the antitrust laws are a “consumer welfare prescription.” That would seem to prevent, under the executive order, any Federal Trade Commissioner or member or employee from advancing as the position of the United States any position to the contrary.
The list goes on. Conflicts between the Federal Trade Commission and Department of Justice have been relatively rare, but are not unheard of. And the executive order seems a useful tool to restrain minority commissioners who do not tow the majority line, a position with which I have some familiarity.
Now how possibly can the executive enforce this order? What does it do if a minority Commissioner invited to speak on behalf of the Federal Trade Commission in Europe or China or elsewhere decides to go rogue? Clearly, the threat of termination is a big deal here to incentivize compliance with the executive’s position. So we circle back to Humphrey’s Executor once again. A President who can fire FTC Commissioners for taking positions on behalf of the United States that are contrary to the Attorney General’s view is likely to get compliance. And if there is no compliance, we see Commissioners terminated and replaced.
The punchline is that the executive branch is the captain now. And that goes for all so-called independent agencies, including the Federal Trade Commission. How the executive exercises that authority over the Federal Trade Commission will likely differ on both sides of the house, with greater OIRA involvement in the day-to-day operations of the agency on the consumer protection side, and a greater role for the Department of Justice including the Attorney General—on the competition side. Antitrust and consumer protection advocacy and policy making each look a little bit different today than they did just a month ago. The executive branch’s grasp is tighter and the strategies navigating the issues are a bit more complicated with new players on the board. We will circle back to talk about Humphrey’s Executor in another COTM. For now, I am wary of overrunning my readers’ appetite for administrative law!
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