After Chevron: What To Expect In Consumer Protection At FTC

Since the Supreme Court issued its landmark Loper Bright Enterprises v. Raimondo ruling rejecting Chevron deference, many have opined on what this means for the “administrative state.”  

Some businesses eagerly anticipate federal courts will now rein in allegedly overreaching agencies, including the Federal Trade Commission (FTC) under Chair Lina Khan. 

For the past 40 years the FTC has primarily been a law enforcement agency, not a “regulator,” with most FTC law enforcement actions brought pursuant to Section 5(a) of the FTC Act, prohibiting “unfair or deceptive acts or practices in or affecting commerce.”  

Whether a claim is deceptive under Section 5 is considered a factual finding entitled to deference unless not supported by substantial evidence, under the FTC Act, 15 U.S.C. § 21(c). Accordingly, for most typical FTC cases, Chevron was never an issue. 

The FTC’s press officer Doug Farrar said: 

“We don't expect the court’s ruling on Chevron is going to have a significant impact on agency efforts to protect consumers on issues like privacy and safeguard fair and competitive markets including for innovative new products like AI.”  



What about cases where the FTC’s industry guides are relevant?  

The FTC’s industry guides are administrative interpretations of law and do not have the force or effect of law.  

The Supreme Court had previously ruled that no Chevron deference was due to agency actions that did not have the “force of law.”  While guides may be cited, FTC complaints do not allege violations of its guides, but rather Section 5. Court decisions addressing guide issues are rare, but in the FTC’s case against baseball legend Steve Garvey, the 9th Circuit, when deciding whether Garvey was an endorser, cited Skidmore v. Swift & Co., where an agency’s interpretations, if persuasive, may be entitled to respect but not deference.  

Similarly, FTC staff guidance, such as the Health Products Compliance Guide, would not have received Chevron deference. In Neora, a Texas district court referred to the FTC’s 2013 staff guidance on what constitutes a pyramid scheme and found the analysis instructive but did not cite Chevron.  



What about cases brought to enforce rules the FTC has issued?  

For these, it gets a bit murky, and courts have been inconsistent. 

For Section 18 rules, it has depended on whether the rule is an “interpretive rule” or a “trade regulation rule.” Interpretive rules, such as the FTC’s rules issued regarding the Magnuson-Moss Warranty Act, lack the force of law and, for the most part, have not been given Chevron deference.  

The 7th Circuit in Miller v. Herman ruled that the FTC’s warranty rules, which interpret Mag-Moss, were only advisory and thus did not merit Chevron deference.  In contrast, the 11th Circuit in Davis v. Southern Energy Homes, analyzing the same warranty rules, applied Chevron (but nonetheless found the FTC’s interpretations unreasonable).   

As for FTC cases enforcing statutory rules, some courts have applied Chevron. For example, in a case involving a National Auto Dealers Association challenge to an FTC interpretation of the word “use” in the Fair and Accurate Credit Transactions Act (FACTA), the DC district court ruled that the FTC interpretation, set out in the preamble to the amended rule implementing FACTA, had the force of law and analyzed it under Chevron.   

Now, under Loper Bright, the FTC’s interpretations will likely be viewed under Skidmore, where the courts will consider them if they are well-reasoned and consistent with statutory text, Congressional policy, and prior interpretation, but courts will not set aside their own reasoned judgment.  

Since the Supreme Court’s 2021 decision in the AMG  case overturning decades of FTC practice of obtaining consumer redress under section 13(b) of the FTC Act, the FTC has increasingly turned to other authority to obtain monetary remedies – consumer redress or civil penalties.  

The controversial “notice of penalty offenses” authority under Section 5(m)(1)(b) of the FTC Act authorizes the FTC to seek civil penalties for knowingly engaging in conduct the FTC has determined in a litigated administrative case to be unfair or deceptive. The FTC attempts to prove notice by serving a synopsis of the litigated decision. Where the conduct is narrow and well-defined, such as advertising rayon products made from bamboo as bamboo instead of the statutorily required proper generic name of rayon, the practice should not be controversial. However, where deception involves more of a judgment call, it could invite a challenge.  

For example, the notice regarding unsubstantiated advertising representations states: “It is an unfair or deceptive act or practice for an advertiser to make an objective product claim without having a reasonable basis, at the time the claim is made, consisting of competent and reliable evidence.”  

While this is an unremarkable and well-accepted principle of FTC advertising law, determining whether an advertiser has a reasonable basis is often not straightforward. It involves careful consideration of the so-called Pfizer factors, including the type of product and claim and benefits of a truthful claim. And yet, failing to have a reasonable basis will now subject advertisers that have been served with the Notice of Penalty Offense to civil penalties. It is arguable whether Section 5(m)(1)(b) authorizes this for broad principles. Certainly, companies may argue that Congress did not intend it to cover gray areas.  



What about Loper Bright’s impact on the FTC’s rulemaking activities?

The Commission under Chair Khan has gone back to the future of the 1960s and 1970s and engaged in extensive rulemaking. Here Loper Bright, together with the Court’s 2022 decision in West Virginia v. EPA , are likely to more substantially crimp the FTC’s success in its rulemaking activities.

Some of the FTC’s amped up rulemaking efforts are pursuant to statutory grants of authority, for example, the Combating Automotive Retail Scams (CARS) Act (authorized by the Dodd-Frank Act). Others are pursuant to its Section 18 rulemaking authority, for example, new proposed rules such as the Commercial Surveillance Rule, Junk Fees Rule, the Fake Review Rule, and the Impersonation Scams Rule, as well as updates to existing Section 18 rules such as the Negative Option Rule and the Eyeglass Rule.

Congress has clearly authorized the Commission to engage in consumer protection rulemaking under Section 18. (This means that the type of challenge being made to the FTC’s Non-Compete Ban Rule, issued under FTC Act Section 6(g), is not at play.)

Any challenges to the Commission’s proposed rules issued pursuant to clear statutory delegation, therefore, would likely not involve Chevron but the Administrative Procedure Act (as in the pending National Auto Dealer Association challenge to the CARS Act). For Section 18 rulemakings, a more likely source of challenge to some of these rulemakings would be the Supreme Court’s decision in West Virginia v. EPA, which articulated the “major questions” doctrine, under which agencies may not make rules regarding matters of major economic or policy significance unless Congress has clearly authorized the agency to do so.

Certainly, any rule in the Commission’s “commercial surveillance” rulemaking will invite a major questions challenge, given Congress’s own inability to take action on comprehensive privacy legislation and the lack of specific authorization to the Commission to issue a general privacy rule. The same might be said for the Junk Fees Rule. That proposed rule affects vast swaths of the economy, and numerous bills have been introduced in Congress to require “all-in” pricing but none has become law.

Regardless, despite these Supreme Court decisions, it seems unlikely that the Commission under the current administration will change its tactics. Chair Khan has made it clear she believes the Commission previously had been too timid in using its authorities and that it can and should be more aggressive in taking action to enforce the various laws under its jurisdiction. 

The Commission’s August 15 announcement of its case against Coulter Motor Company over allegedly deceptive and unfair car advertising and sales practices illustrates this point. In that case, the FTC’s complaint alleged that the defendants’ lending practices had a discriminatory impact on Latino purchasers, and that this practice violated not just the Equal Credit Opportunity Act, but also FTC Act section 5 as an unfair practice.

The FTC’s two Republican Commissioners, Melissa Holyoak and Andrew Ferguson, dissented from that count of the complaint, writing that treating section 5 as a general antidiscrimination statute was not supported by the statutory language, legislative history, or decades of practice. Commissioner Holyoak opined that the majority’s position, if litigated, would likely not be upheld by the courts under Loper Bright. 

The upcoming Presidential election of course creates uncertainty as to future Commission actions. Even if Vice President Harris wins the White House, it is possible that Lina Khan will not remain Chair. Her term expires at the end of September, though she can hold over until replaced. Some in the tech industry are urging Vice President Harris to replace Khan. A President Harris could name one of the other two Democratic Commissioners, Rebecca Slaughter or Alvaro Bedoya, as Chair, even before the Senate confirms a new nominee. And of course, if former President Trump wins, once a new nominee is confirmed, the Commission would have a 3-2 Republican majority, which would almost certainly chart a different course.

Whether under Harris or Trump, a future Commission may be more willing to consider litigation risk and the opportunity costs of making aggressive policy choices that lead to litigation. At the same time, companies may be more willing to litigate now that courts need not defer to the FTC’s interpretations. Thus, although the FTC’s bread-and-butter consumer protection law enforcement actions under Section 5(a) of the FTC Act are unlikely to be affected by the Loper Bright decision because Chevron deference rarely was a factor in such cases, Loper Bright may now curb the FTC’s bolder interpretations of the statutes it enforces.

Originally published in Law360.