While we anxiously await the Supreme Court’s decision on whether the FTC can obtain equitable monetary relief pursuant to Section 13(b) of the FTC Act in the AMG case, a defendant’s challenge to the FTC administrative litigation process appears to be struggling. As administrative litigation may be used more frequently by the FTC if it loses the AMG case, the case is worth following.
Axon Enterprises makes body cameras for police use and in May 2018 purchased one of its competitors. The FTC investigated the consummated merger and had concerns that the merger reduced competition. In January 2020, Axon filed a lawsuit in the District of Arizona, and on the same day the FTC filed a complaint against Axon. In its complaint, Axon argued that the FTC’s in-house litigation procedure violates due process and equal protection rights because the FTC controls all aspects of the proceeding, effectively making the FTC judge, attorney, and jury in these cases. Additionally, the complaint disparaged the FTC for the clearance process by which the FTC and Department of Justice decide which agency should handle a merger, claiming that the process lacks transparency. In support of its claim that these proceedings violate constitutional rights, Axon alleged that the FTC has not lost a single case in its in-house proceedings in 25 years. The FTC did not contest this statistic.
In the District Court’s decision, Judge Dominic W. Lanza acknowledged the significance of Axon’s claims but ultimately decided that Axon will need to raise these issues through the administrative litigation process. For more information on this case, look at our earlier blog on the case here.
Things started to look up for Axon when the Ninth Circuit stayed the administrative trial pending the appeal. That victory, however, was short-lived. On January 28, 2021, a split Ninth Circuit affirmed the District Court decision and ruled that Axon would have to go through the FTC’s in-house proceedings before presenting its challenge to the FTC’s procedures to the District Court. Although the Court did note some “serious concerns about how the FTC operates,” it ultimately decided that Axon must go through the FTC’s administrative proceedings before it could challenge the administrative litigation process in federal court. Ultimately, the Ninth Circuit decided, “The FTC Act reflects a fairly discernible intent to preclude district court jurisdiction, and Axon can ultimately obtain meaningful judicial review of its claims before this court once the FTC administrative proceeding concludes.”
The panel joined every other circuit that considered a similar issue and held that Congress implicitly stripped the district court of jurisdiction. “The Court found that while the FTC Act does not expressly state that a party cannot pursue a case in federal court, Congress “impliedly precluded district court jurisdiction.” Undeterred in its challenge to the FTC, Axon’s Vice President of Litigation revealed that Axon may pursue an appeal with the full Ninth Circuit or the Supreme Court.”
For now, the FTC’s administrative litigation process appears safe from collateral attack. The FTC may need that process if the Supreme Court strikes down the FTC’s use of Section 13(b) as its preferred method of litigation.