National Petroleum Refiners Is (Still) Correctly Decided, by Kacyn H. Fujii
On July 9, 2021, President Biden signed an executive order that encouraged the Federal Trade Commission (FTC) to exercise its competition rulemaking authority in several areas including labor markets. But whether the FTC actually possesses competition rulemaking authority is a subject of vigorous debate. Despite recent critiques, the best reading of the FTC Act is that the FTC has that authority.
In 1973, the D.C. Circuit in National Petroleum Refiners Association v. FTC held that the FTC Act permitted the FTC to promulgate rules under its unfair methods of competition authority. Specifically, it interpreted Section 6(g), which gives the FTC the authority “to make rules and regulations for the purpose of carrying out the provisions in this subchapter,” to allow rulemaking to carry out the FTC’s Section 5 authority. Professor Richard Pierce, in his remarks at the 2020 FTC workshop on noncompetes, argued that no court today would follow National Petroleum’s reasoning, even going so far as to call its logic “preposterous.” Professor Aaron Nielson agreed that some of National Petroleum’s reasoning was outdated but conceded that its judgment might have been correct. Meanwhile, FTC Chair Lina Khan and former FTC commissioner Rohit Chopra have spoken in favor of the FTC’s competition rulemaking authority, both from a legal and policy perspective. This post responds to recent critiques of National Petroleum and contends that it was correctly decided and the FTC has competition rulemaking authority.
National Petroleum’s focus on text is consistent with the approaches that courts today take. The court first addressed appellees’ argument that the FTC may carry out Section 5 only through adjudication because adjudication was the only form of implementation explicitly mentioned in Section 5. The D.C. Circuit noted that, although Section 5(b) granted the FTC adjudicative authority, nothing in the text limited the FTC only to adjudication as a means of implementing Section 5’s substantive protections. It dismissed the appellee’s argument that expressio unius meant that adjudication was the only mechanism the agency had available to implement Section 5. The D.C. Circuit also rejected the district court’s interpretation of the legislative history because it was too ambiguous to find Congress’s “specific intent.” Similar to the approach courts take today, National Petroleum gave the text primacy over legislative history, putting significant weight on the fact that the language of Sections 5 and 6(g) is broad.
It is true that, as Nielson notes, courts today would not so readily dismiss employing canons like expressio unius. But courts today would not necessarily employ expressio unius either. The language of Section 6(g) authorizing FTC use of rulemaking is clear and broad, expressly including Section 5 among the sections the FTC may implement through rulemaking, so Congress may have not thought it necessary to explicitly mention rulemaking in Section 5. Given how clear the language is, it also does not seem so farfetched that a court today would decide to not apply the expressio unius canon to imply an exception to the language. As the Court has commented in rejecting the expressio unius canon’s implications, “the force of any negative implication [from this canon] depends on context,” and can be negated by indications that an enactment was “not meant to signal any exclusion.”
Others argue that National Petroleum’s interpretation of Sections 5 and 6(g) would not hold up in light of newer interpretive moves deployed by courts. For example, former FTC Commissioner Maureen Ohlhausen and former Assistant Attorney General James Rill contend that the FTC should not have broad competition rulemaking authority because of the “elephants-in-mouseholes” doctrine articulated in Whitman v. American Trucking. They invoke AMG Capital Management v. FTC as evidence that the Court is wary about “allow[ing] a small statutory tail to wag a very large dog.” The Court in AMG considered whether Section 13(b) of the FTC Act, which expressly authorized the FTC to seek injunctive relief from the federal courts, also permitted the agency to seek monetary damages. The Court concluded that the FTC could not seek monetary damages from courts. Permitting this would allow the FTC to bypass its administrative process altogether, thus contravening Congress’s goals by failing to “produce a coherent enforcement scheme.” However, Sections 5 and 6(g) are distinguishable from the statutory provision at issue in AMG. Unlike Section 13(b), which did not explicitly grant the FTC the authority to seek monetary damages, Section 6(g) does explicitly give the FTC rulemaking authority to carry out the other provisions of the Act with no limitations on this broad language. Meanwhile, there is no “coherent enforcement scheme” that would be served by limiting Section 6 only to methods to carry out Section 5’s adjudicative authority. Rulemaking authority does not detract from the FTC’s ability to adjudicate.
One could also argue that, according to the “specific over the general” canon, adjudication should be the FTC’s primary implementation method: Section 5(b), which is very specific in its description of the FTC’s adjudicative authority, should govern over Section 6(g), which discusses rulemaking only in general language. But there is no inherent conflict between the general and specific provisions here. Even if adjudication was intended as the primary implementation method, Section 5 does not explicitly preclude rulemaking as an option in its text. There may be valid functional reasons that Congress would want an agency that acts primarily through adjudication to also have substantive rulemaking authority. National Petroleum itself observed that “the evolution of bright-line rules [through adjudication] is often a slow process” and that “legislative-type” rulemaking procedures allow the agency to consider “broad range of data and argument from all those potentially affected.” In addition, as Professor Emily Bremer observes, Congress consistently sets more specific guidelines for adjudication to meet individual agency and program needs, resulting in “extraordinary procedural diversity” across adjudication regimes. The greater level of specificity with respect to adjudication in Section 5(b) of the FTC Act may simply reflect Congress’s perceived need to delineate adjudication regimes in further detail than it does for rulemaking.
In addition, some doubtful about the FTC’s rulemaking authority have cited legislative context. Specifically, Ohlhausen and Rill argue that the Magnuson-Moss Warranty Act demonstrates Congress’s concern with the FTC having expansive rulemaking power. Thus, broad competition rulemaking authority would be inconsistent with the approach Congress took in Magnuson-Moss. However, the passage of Magnuson-Moss also implies that Congress thought the FTC had existing rulemaking power that Congress could limit—thus validating National Petroleum’s overall holding that the FTC did have rulemaking authority. In addition, Congress could have also extended Magnuson-Moss’s limits on rulemakings to competition rulemaking authority but decided to apply it only to the FTC’s consumer protection authority. This interpretation is supported by the text as well. The Magnuson-Moss provision expressly states that its changes “shall not affect any authority of the Commission to prescribe rules (including interpretive rules), and general statements of policy, with respect to unfair methods of competition in or affecting commerce.” Congress specifically exempted competition rulemaking from Magnuson-Moss’s additional procedural requirements. If anything, this demonstrates that Congress did not want to interfere with the FTC’s competition authority.
The history of the FTC Act also supports that Congress would not have wanted to create an expert agency limited only to adjudicative authority. The FTC Act was passed during a time of unprecedented business growth in spite of the passage of the Sherman Act in 1890. More specifically, Congress enacted the FTC Act in response to Standard Oil. Standard Oil established rule of reason analysis that some decried as a judicial “power grab.” Even though members of Congress disagreed about the proper scope of the FTC’s authority, all of the proposed plans for the FTC reflected Congress’s deep objections to the existing common law approach to antitrust enforcement. Congress was concerned that the existing approach was “yielding a body of law that was inconsistent, unpredictable, and unmoored from congressional intent.” Its solution was to create the FTC. The legislative context supports interpreting the statute to give the FTC all of the tools—including rulemaking—to effectively respond to nascent antitrust threats.
Finally, the FTC’s historical reliance on adjudication does not mean that it lacks the authority to promulgate rules. Assuming the relevance of historical practice—an assumption AMG cast doubt upon when it spurned the FTC’s longstanding interpretation of the FTC Act—there are reasons that an agency may choose adjudication over rulemaking that have nothing to do with its views of its statutory authority. The FTC’s preference for adjudication may simply have reflected the policy-focused views of its leadership. For example, James Miller, FTC Chair from 1981 to 1985, had “fundamental objections to marketplace regulation through rulemaking” because he thought Congress would exert too much pressure on rulemaking efforts. He attempted to thwart ongoing rulemaking efforts and instead vowed to take an “aggressive” approach to enforcement through adjudication. But this does not mean he thought the FTC lacked the authority to promulgate rules at all. Over the past several decades, courts and the federal antitrust enforcers have taken a non-interventionist or laissez-faire approach to enforcement. The FTC’s history of not relying on rulemaking may simply be indicators of the agency’s policy preferences and not its views of its authority.
In short, National Petroleum’s interpretive moves are sound and its conclusion that the FTC possesses unfair methods of competition rulemaking authority should stand the test of time. While some may disagree with FTC rulemaking as a policy matter, Chair Khan’s plans for FTC rulemaking should not be questioned for lack of authority to issue rules.
Kacyn H. Fujii is a J.D. Candidate at University of Michigan Law School.