By Brent Skorup, Anastasia P. Boden, and Christopher Barnewolt
Every day, Americans find themselves and their businesses shunted into administrative proceedings at agencies like the Federal Trade Commission. In these proceedings, individuals and regulated parties litigate, often for years, within an agency that simultaneously writes the applicable regulations, enforces those rules before its hearing officers or courts, adjudicates initial complaints, and hears appeals.
For many Americans, it is jarring to find themselves subject to severe financial, reputational, and professional penalties in adjudications very different from a courtroom. The Federal Rules of Evidence do not apply, juries are nonexistent, and the hearing officers are overseen and at risk of removal by the head (or heads) of the agency. Quietly and routinely, people lose their businesses and their livelihoods. Many accept an early settlement offer or lighter penalties rather than attempt the risky and expensive process to vindicate their rights in federal court. Some parties, however, are challenging these pernicious agency practices that have accumulated over decades.
Intuit Inc. markets and sells TurboTax, the popular tax‐preparation software used by millions of Americans annually. A few years ago, the FTC investigated Intuit, believing certain TurboTax ads were deceptive and harmed consumers, and issued a complaint before its own agency judges. But when the FTC simultaneously sought a preliminary injunction against Intuit in federal court, the judge rejected the FTC’s theory. Having failed to persuade the court, the FTC simply chose to reissue its complaint internally—acting as judge, jury, and executioner.
Unsurprisingly, the FTC then ruled in favor of its own allegations and imposed new disclosure requirements on Intuit. Over the last forty‐six years, the FTC has lost just five of the over 150 cases adjudicated internally on the merits. Intuit sued, arguing the FTC’s processes and new requirements had several deficiencies, including violating the company’s due process protections.
The Cato Institute submitted an amicus brief to the Fifth Circuit in Intuit v. FTC, urging the court to make it clear that the FTC’s exercise of legislative, executive, and judicial power is unconstitutional. Our brief discusses how the Founders opposed the combination of all three powers of government in one body as dangerous to liberty and reviews how the Framers intended the Constitution to establish the separation of powers. As James Madison said in Federalist 47,
The accumulation of all powers legislative, executive and judiciary in the same hands, whether of one, a few or many, and whether hereditary, self appointed, or elective, may justly be pronounced the very definition of tyranny.
We also discuss how allowing the FTC to act as both prosecutor and judge in agency proceedings violates parties’ due process rights. Finally, we argue Congress has unconstitutionally delegated the FTC unconstrained authority to choose between federal court and in‐house agency adjudication and that this violates the nondelegation doctrine. Congress needed to provide more limits on the FTC’s broad power to decide which venue—agency or court—and legal processes apply to parties like Intuit.
Our brief urges the Fifth Circuit to recognize the unconstitutionality of the FTC’s combination of legislative, executive, and judicial powers and to vacate the FTC’s order.
