Douglas Ross writes that for most of its history, the Federal Trade Commission did not rely on the Chevron doctrine to enforce its mandate to prohibit “unfair methods of competition” and “unfair or deceptive acts or practices.” Thus, Loper Bright will not significantly alter the FTC’s historical role in regulating competition. However, the Chevron doctrine could have been a useful ally to the current FTC, which under Chair Lina Khan has pursued more ambitious rulemaking, such as to ban noncompete clauses. Without the Chevron doctrine, the FTC will face a more arduous path to defending its new rules as they are challenged in the courts.
Editor’s Note: This article is part of a series that explores how Loper Bright and the end to the Chevron deference doctrine will impact the ability of the federal agencies to regulate the economy. You can read the previously published articles in the series here.
The Chevron doctrine abruptly ended its 40-year run as governing law earlier this year when the Supreme Court, in Loper Bright v. Raimondo, repealed Chevron and, in Justice Neil Gorsuch’s words, “place[d] a tombstone . . . no one can miss” on its remains. During the Chevron era, the Federal Trade Commission rarely relied on the Chevron doctrine. So the answer to the question “how does the end of Chevron affect the FTC?” could be: “not much.” But this answer overlooks how useful Chevron could have been to today’s FTC as the agency seeks—for the first time since before Chevron was decided—to expand both the agency’s rulemaking power and the current understanding of what is “unlawful” under the Federal Trade Commission Act.
The Chevron Doctrine and Loper Bright
Federalagencies are creatures of the organic acts that create them. Agencies interpret these statutes repeatedly, both when promulgating rules and when conducting adjudicative proceedings. When a statute an agency administers is clear, the agency must do the statute’s bidding. The Chevron doctrine kicked in when the statute was silent or ambiguous. Chevron required federal courts to defer to an agency’s interpretation of a statutory ambiguity, so long as that interpretation was reasonable; courts were not free to substitute what they might consider a “better” interpretation of the ambiguity. Loper Bright ended that deference. Now it’s the job of a court reviewing agency interpretations of statutory ambiguities to find, and give effect to, the “best” interpretation of the statute—and to reject other interpretations, no matter how “reasonable” they might be, in favor of the “best” one.
Chevron deference mattered while it existed: a 2017 study of Chevron’s effects showed that when appellate courts found no ambiguity or gap in a statute, and so construed the statute themselves rather than deferring to an agency, agencies won less than 40 percent of the time. But when appellate courts determined a statute was ambiguous, and deferred to agencies, agencies won almost 95 percent of the time.
The Effect of Loper Bright on FTC Enforcement Actions
During the Chevron era, the FTC rarely relied on the Chevron doctrine. The reasons are found in the history of the agency and the structure of its organic act. Section 5(a) of the Federal Trade Commission Act makes unlawful “[u]nfair methods of competition . . . and unfair or deceptive acts or practices” in or affecting commerce. Section 5(b) authorizes the Commission to initiate adjudicative proceedings to enforce violations of the Act. This statutory language is clear.
The Commission can enforce the prohibition on “unfair methods of competition” (UMC) and “unfair or deceptive acts or practices” (UDAP) either through adjudication before the agency’s own administrative law judges or in federal court or it can issue new rules prohibiting the concerned conduct. While the Commission has some rulemaking authority granted in the ambiguous language of Section 6(g) of the Act (discussed more below), traditionally the agency has enforced its mandate to prohibit UMC and UDAP principally through adjudication. In UMC adjudicative proceedings the agency typically uses Section 5 to enforce the Sherman and Clayton Acts. The agency has not relied on Chevron deference to interpret ambiguous provisions in those antitrust statutes—and could not, as they are not statutes the FTC administers. But the Supreme Court repeatedly has recognized that Section 5 of the FTC Act reaches beyond the Sherman and Clayton Acts, to standalone “practices the Commission determines are against public policy for other reasons.”
The exact nature of these “standalone” Section 5 violations is unclear. When the FTC tried to expand the “standalone” envelope in the early 1980s, the courts were antagonistic and its efforts were unsuccessful. The agency largely abandoned these efforts after a loss in 1984—coincidentally, the same year Chevron was birthed. During the next four decades—in other words, during Chevron’s lifetime—the FTC rarely pled a standalone Section 5 violation (other than “invitations to collude,” which do not violate Section 1 of the Sherman Act). Because the Commission was not pushing the boundaries of Section 5, it had little reason to rely on Chevron in Section 5 cases.
But in November 2022, FTC Chair Lina Khan and the Democratic majority of commissioners issued a Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5, making clear the Commission’s intent to explore aggressively the outer reaches of Section 5 and condemn, as “unfair methods of competition,” conduct that previously was benign. Soon after, the Commission filed various adjudicative actions targeting conduct not previously understood to violate Section 5, such as noncompete clauses.
While the Commission didn’t rely on Chevron to bolster its standalone authority in the year between the issuance of the Section 5 Policy Statement late in 2022, and Chevron’s demise in mid-2024, had Chevron not been under threat at the time the Commission might have done so. More importantly, had Chevron not been overruled in 2024, the Commission almost certainly would have found the doctrine an important ally in future court battles over the reach of Section 5.
If Chevron were still good law we could have expected the Commission to argue (in future battles) that its interpretation of Section 5’s standalone authority was a “reasonable” one, even if not the only permissible reading of the statute. That would have been enough under Chevron, so long as a reviewing court agreed the construction was at least “reasonable,” to validate the agency’s approach. But it won’t be enough under Loper Bright. The Commission now faces a much more daunting task: to the extent it interprets ambiguous language in Section 5, it must argue its interpretation, which may reach a great deal of conduct never before found to violate the 110-year old FTC Act, is the ”best” reading of the statute.
The Effect of Loper Bright on FTC Rulemaking
The Commission has some rulemaking authority. But the scope of this authority is hotly debated. Section 6 of the FTC Act gives the Commission the power to conduct investigations, publish reports, and, in Subsection 6(g), to “classify corporations.” The latter provision also states the agency may “make rules and regulations for the purpose of carrying out the provisions of this subchapter.”
For decades, the consensus was that Section 6(g) gave the Commission authority to issue interpretive and procedural rules, but not to promulgate substantive rules exerting its UMC and UDAP authority. In fact, for almost five decades after the FTC Act took effect in 1914, the Commission never relied on Section 6(g) for authority to issue either UDAP or UMC rules. During this period, the Commission stated it had no such rulemaking authority. But, for 15 years starting in 1963, the Commission invoked Section 6(g) to promulgate two dozen or so rules under its UDAP authority and, sometimes, under both its UDAP and UMC authority. This was controversial: in the words of former Commissioner Christine Wilson, “[t]his rulemaking crusade nearly led to the demise of the agency.”
Funding for the FTC was threatened on several occasions. In 1975, Congress passed the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, explicitly authorizing UDAP rulemaking and imposing much more onerous provisions than typically are required for notice-and-comment rulemaking under the Administrative Procedure Act.
Chevron, which had not been decided yet, obviously played no role in the FTC’s efforts in the 1960s and 1970s to promulgate rules under Section 6(g). By 1984, when Chevron was decided, the FTC had clear authority to issue UDAP rules under Magnuson-Moss, but rarely did so because of the same statute’s added procedural burdens. The loss of Chevron deference can hardly dampen UDAP rulemaking that isn’t attempted in the first place.
But what about UMC rulemaking? Will the loss of Chevron have a greater effect here? Before this year, the FTC had issued just one rule (in 1968) seeking to prohibit a practice as a UMC (and not as a UDAP as well). So the quick answer here, as with UDAP rulemaking, might be that the loss of Chevron deference can hardly dampen UMC rulemaking that isn’t attempted in the first place. But this answer overlooks Chair Khan’s ambitions, when she took control of the agency, to make competition rulemaking a central part of the FTC’s function. Before she took office she wrote a law review article advocating more competition rulemaking at the FTC. Soon after she became chair she sent a memo to the agency’s staff asserting that the “rulemaking . . . in addition to adjudication—will be critical” to the accomplishment of her vision for the FTC.
But whether the Commission has the ability to issue substantive UMC rules is under assault right now, for reasons having nothing to do with Chevron.
In April, the Commission issued an ambitious rule banning most agreements in which employees agree not to compete with their employers for a period of time after they leave their job under the agency’s UMC authority. This re-ignited a debate whether the agency has authority to issue such rules in the first place. On the same day the Non-Compete Rule was issued, the Rule was challenged in a district court in Texas. That court, in August, found the Rule unlawful and set it aside under the Administrative Procedure Act. The court specifically held that “the FTC lacks substantive rulemaking authority with respect to unfair methods of competition, under Section 6(g).” Two other courts, one in Pennsylvania and another in Florida, have suggested the FTC does have substantive rulemaking authority under Section 6(g) (although the Florida court found the Rule likely is unlawful anyway, under the “major questions doctrine”). While these cases percolate up through different courts of appeals, the FTC will be unable to rely on Chevron to defend its rule—but the far greater danger to the agency is that the Supreme Court may ultimately conclude that the agency lacks authority to issue substantive competition rules altogether. In that case, the loss of Chevron will be irrelevant.
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During the 40 years when Chevron was the law of the land, the FTC didn’t try to expand the reach of Section 5 beyond commonly accepted limits or to engage in competition rulemaking. As a result, the agency didn’t have much occasion to call on Chevron. But now, new Commission leadership seeks aggressively to expand the reach of Section 5 and add rulemaking to its armamentarium. Chevron could have been a useful aegis in these efforts. But the Chevron era is over and the agency must fight these battles without it.
Author Disclosure: the author reports no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
