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FTC v. Walmart

After an investigation into third-party abuses of Walmart’s money order services, the Federal Trade Commission (FTC) supposed that Walmart had violated several statutes and that a lawsuit against the company was necessary to obtain monetary penalties and an injunction against future violations. But when the Department of Justice declined FTC’s recommendation to initiate suit, FTC decided to act on its own. This it cannot do. FTC Commissioners are not removable at-will by the President, so they may not exercise executive power. Initiating “litigation seeking monetary or injunctive relief” employs quintessential executive power. FTC initiated the lawsuit pursuant to powers purportedly granted by statutes enacted in the 1970s. NCLA argued that FTC’s structure precludes augmenting its authority. Therefore, its actions are unconstitutional, and the 1970s-era statutory additions to FTC’s capabilities must be set aside.

In Humphrey’s Executor, the Supreme Court upheld, against a constitutional challenge, the provisions of the Federal Trade Commission Act, which made Commissioners removable only “for cause.” When Humphrey’s Executor upheld the constitutionality of FTC’s independence, it reasoned the agency, as it existed in 1935, did not exercise any executive power. As a matter of constitutional history, practice, and understanding, Humphrey’s was mistaken. The Supreme Court in recent cases has acknowledged, though not yet corrected, its error.

The district court has no choice but to follow Humphrey’s, because it is bound by Supreme Court precedent. But faithfully following the Humphrey’s precedent, which only approved of the FTC after concluding that it has solely “quasi legislative” and “quasi judicial” powers, requires the court to conclude that FTC may not exercise “executive power,” which includes bringing suit in an Article III court.

These dual layers of analysis—under the Constitution and under a wayward precedent—clarify the district court’s path forward. FTC’s attempt to bring suit against Walmart is unlawful on two grounds: (1) it is unlawful when one focuses on the Constitution and recognizes that Humphrey’s was factually and legally mistaken about the power FTC may exercise; and (2) it is unlawful when one simply follows Humphrey’s, because that precedent bars the FTC from exercising executive power in suits brought in the courts.

Mark Chenoweth
President and Chief Legal Officer
John J. Vecchione
Senior Litigation Counsel
Greg Dolin
Senior Litigation Counsel
NCLA FILINGS

Motion for Leave to File Brief of the New Civil Liberties Alliance as Amicus Curiae in Support of Defendant Walmart’s Motion to Dismiss the Complaint

September 13, 2022 | Read More

Memorandum of Law in Support of Walmart Inc.’s Motion to Dismiss

August 29, 2022 | Read More

PRESS RELEASES

NCLA Brief Supports Walmart Effort to Prevent Independent FTC from Exercising Executive Power

September 14, 2022

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