ADventures in Law

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It was certainly a memorable final week for the Supreme Court this term. There has been quite a lot to digest, and the impact and implications are broad and significant. But for now, let’s look through a narrow lens&nbsp;and focus on how the decision in Loper Bright Enterprises v. Ramondo will impact the Federal Trade Commission’s (FTC) consumer protection law enforcement and rulemaking authority.

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In case you have been fortunate enough to be on a deserted island for the past few weeks, in Loper, the Supreme Court struck down the four-decade-old Chevron doctrine, which stood generally for the proposition that when a statute is ambiguous, a court would defer to a reasonable interpretation set forth by the applicable administrative agency, such as the FTC. This is particularly significant because Congress rarely legislates with sufficient precision or specificity and there is often ambiguity in statutes. This deference to an administrative agency has been a powerful tool for the FTC in its enforcement actions and recent rulemaking frenzy.

There is one school of thought that this decision might not be too significant for FTC law enforcement. After all, if you look at litigated FTC matters for the past few decades, Chevron has rarely been cited as a significant consideration. But <a>–</a> and this is quite a large&nbsp;but – this is a different FTC today and one of the agency’s primary but unspoken strategies since the Supreme Court’s AMG decision has been to engage in rulemaking and broadly interpret its authorities in order to expand the cases where it may seek consumer redress. That strategy, however, does have the potential to be quite inconsistent with this reshaped regulatory world.&nbsp;Indeed, late last week, Loper was already cited by a district court in Texas that preliminarily ruled that the FTC had <a href="https://www.nytimes.com/2024/07/03/business/ftc-noncompete-ban-injunction.html">exceeded its authority</a> in promulgating the high-profile noncompete rule.

Probably the best example of how the overturning of Chevron may curtail the FTC’s rulemaking is how the FTC has interpreted the Restore Online Shoppers’ Confidence Act (ROSCA). ROSCA is a statute that sets forth three simple requirements that companies must meet when selling products or services online with a recurring billing feature. The statute requires that material information be disclosed, that the seller obtain the consumer’s affirmative consent and that there be a simple method of cancellation.

For several years now, however, the FTC has interpreted and enforced ROSCA in ways that far exceed the statutory language – particularly in its interpretation of what a simple mechanism of cancellation means. The exact statutory language regarding cancellation consists of less than a sentence that simply states that the seller must provide “a simple mechanism for a consumer to stop recurring charges from being placed on a consumer’s credit card, debit card, bank account or other financial account.” That’s it – there is no further information about what constitutes a simple mechanism of cancellation. In <a href="https://urldefense.com/v3/__https:/www.ftc.gov/system/files/documents/public_statements/1598063/negative_option_policy_statement-10-22-2021-tobureau.pdf__;!!FRfqb9lMRA!2Zc1172Cfmr3Z0U_XAFhE21VrzK9OXrB-Z_oAVQ1AFf4gFDFkOBEiW9H7W7wUKcxMFCX7KFwvJODWpzlcZFdxA$" target="_blank" rel="noreferrer noopener">2021 , however, the FTC issued an Enforcement Policy Statement Regarding Negative Option Marketing</a> in which the FTC went beyond the clear statutory mandate that there be a simple method of cancellation, stating that cancellation methods should be “at least as easy to use as the method the consumer used to initiate the negative option feature” and emphasizing that “negative option sellers should not subject consumers to new offers or similar attempts to save the negative option arrangement that impose unreasonable delays on consumers’ cancellation efforts.”&nbsp;The FTC has taken similar positions in litigation.

These may or may not be reasonable interpretations of what it means to have a simple mechanism of cancellation, and we are in no way recommending that anyone disregard FTC guidance in this space. (And we should add that we remain big fans of agency guidance.)&nbsp;What it does mean, however, is that in litigation, a court need not defer to the FTC’s interpretation of what this statutory language means. And that is a very significant change that the agency will have to deal with in court.&nbsp;

Ironically, one way that the FTC may address these issues is through more rulemaking. And indeed, in March 2023 the agency proposed a <a href="https://urldefense.com/v3/__https:/www.ftc.gov/news-events/news/press-releases/2023/03/federal-trade-commission-proposes-rule-provision-making-it-easier-consumers-click-cancel-recurring__;!!FRfqb9lMRA!2Zc1172Cfmr3Z0U_XAFhE21VrzK9OXrB-Z_oAVQ1AFf4gFDFkOBEiW9H7W7wUKcxMFCX7KFwvJODWpx-GHFkKw$" target="_blank" rel="noreferrer noopener">new negative option rule</a> that provides some of the specificity that is lacking in ROSCA. However, the proposed rule goes well beyond what ROSCA requires, and once that rule is finalized and inevitably challenged, a court will not be deferring to the FTC on some key issues of its authority to promulgate that new rule.&nbsp;And as mentioned above, that has already happened in the recent decision about the noncompete rule. That rule was premised on different statutory language, so the analysis will differ – but the lack of deference to the agency’s interpretation will remain.

And there are other FTC rules for which this new decision may rear its head. One that jumps to mind is the newly expanded and broadened <a href="https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-finalizes-changes-health-breach-notification-rule">Health Breach Notification Rule</a>. Indeed, Commissioner Melissa Holyoak (joined by Commissioner Andrew N. Ferguson)&nbsp;in a dissenting statement earlier this year noted that “no matter how the majority attempts to shoehorn its desired policy goal into a ‘plain reading’ of the statute, I cannot support a rule that exceeds the bounds Congress clearly established.” This issue of whether rules exceed statutory authority is at the heart of Loper.

We do want to emphasize, however, that although Chevron is gone, Skidmore remains. And Skidmore stands for the general proposition that agency interpretations constitute a body of experience and informed judgment that may be entitled to respect. It remains to be seen how much that will help the agency.

Although the FTC will have to tackle this new regulatory landscape, we don’t want to overstate the potential impact on the agency. For example, to the extent that the agency is bringing law enforcement challenging statements as deceptive under the FTC Act, Loper will not likely be an issue. But where we see the agency getting more creative, developing new theories of liability and perhaps expanding concepts of unfairness, Loper will likely be in play. That of course does not mean that the court will disagree with the FTC’s approach, but it does open a door for advocacy that may have been a lot harder to open previously. &nbsp;

The Chevron Decision Will Create Some Challenges for FTC Law Enforcement and Rulemaking