William Kovacic and Jon Nuechterlein on Agency Independence and Humphrey's Executor

Tom Lenard

Hello and welcome back to the Technology Policy Institute's Podcast Two Think Minimum. It's Wednesday, April 23, 2025. I'm Tom Lenard, President Emeritus and Senior Fellow at TPI. I'm joined by my colleague, Scott Wallsten, TPI's President and Senior Fellow, and Sarah Oh Lam, who is Vice President of Strategic Initiatives and also a Senior Fellow. Today we're delighted to have as our guests Bill Kovacik and Jon Nuechterlein to talk about antitrust in the Trump Administration. Bill is a Global Competition Professor of Law and Policy and Director of the Competition Law Center at GW Law School. He's held a series of positions at the FTC including General Counsel, Commissioner, and Chair of the Agency. Jon has recently joined TPI as a Nonresident Senior Fellow, after retiring as co-leader of Sidley Austin's Telecommunication and Internet Competition Practice. He's also an Adjunct Professor at Georgetown Law Center, a former FTC General Counsel, and a former FCC Deputy General Counsel, and he recently joined Bill as a Distinguished Scholar at the GW Competition Law Center. Welcome, Bill and Jon. It's great to have you here, and there's certainly lots of stuff to talk about in the antitrust world.

Bill Kovacic

Wonderful to be here. Thanks, Tom.

Jon Nuechterlein

Likewise.

Tom Lenard

I guess my 1st question is, are you at all surprised by the continuity and antitrust enforcement between the Biden and Trump administrations. Or another way of putting it, that is, are we all Neo-Brandeisians now?

Bill Kovacic

Maybe a little bit more than we used to be. But some things, I guess, don't surprise me both from an institutional point of view, but also a philosophical point of view. I mean, to pick one where I suppose we might have anticipated some continuity, and that's the continuation of the Big Tech cases, especially the cases involving the information services platforms. I think we got a number of hints over the past couple of years, and especially last year, that the agencies would carry on -- that Andrew Ferguson in particular meant to carry on these cases. That Gail Slater, first the nominee, now the head of the Antitrust Division, would carry these cases on. And that they’d do it perhaps with a somewhat different focus. And that's the focus on speech, on the capacity of big information services platforms to act as gatekeepers for speech, especially the speech of conservatives, which the President and the Chair of the FTC and the head of the Antitrust Division regard as having been a serious concern and a major reason to go on with the two cases, for example, that are featured prominently in the US District Court for this District of Columbia. That’s the Google search case and the FTC's Meta case. So I guess we had a foreshadowing that that would go ahead.

I guess the one area where maybe we would have expected a notably different approach is merger control, and I think we still will see a relaxation of controls, especially in the willingness of the agencies to accept settlements more readily than their predecessors did. But it doesn't surprise me, and I guess this is an institutional feature, that Andrew Ferguson and Gail Slater have dug in on mergers early. There was a lot of coverage, and maybe academics are responsible for this, and journalists as well, that said, “here come the Republicans, it's ”olly olly in-free.” And if you're the head of the agency, you don't want people thinking that the fences have fallen down, and they can simply march in and get anything you want. So I think part of what we're seeing from both agencies is to say we do have a set of controls, and they're going to apply, and your two-to-one or three-to-two merger is not going to get through. So I think in part, that's an effort to say, don't expect that we're simply going to turn the other way as you bring your dodgy deals to us. But I do think that the willingness to accept more settlements will produce over time a greater degree of flexibility in dealmaking where problems have been identified. A flexibility that in many ways Jonathan Cantor, the previous head of the Antitrust Division, and Lina Khan, the previous Chair of the FTC, tended to wring out of the system. So we'll see more settlements that lead to more dealmaking. Those are two areas where I see continuity but also a possibility of some change.

Tom Lenard

So, Jon, Bill mentioned speech, content as being a motivating factor. Now, how easily does that fit under the antitrust rubric?

Jon Nuechterlein

Well, as we know, the Commission has put out a request for information, an “RFI,” on the extent to which major tech platforms have engaged in censorship of content or illicit forms of content moderation. And there's an implication in the RFI that the FTC may rely on its UDAP authority—its authority to go after unfair or deceptive acts or practices—in addition to its antitrust authority, to crack down on what it perceives as inappropriate forms of content moderation. That was entirely expected.

In the same vein, we've heard the FTC Chair, Andrew Ferguson, talk about looking into whether there were illicit boycotts by advertisers with respect to disfavored speech on these platforms. It's also looking into whether there's been collusion among major companies regarding DEI initiatives. Those are sort of the right-leaning populist initiatives of this FTC. And they really should come as no surprise because this administration is not a Reagan Republican administration. In many respects it now bears the hallmarks of a movement called National Conservatism.

So we have NatCon initiatives that focus on conservative social values, such as faith, family, and country, and increasingly on labor, which is an interesting development in this administration. I think Chairman Ferguson tweeted that “the GOP is a workers’ party.” That is not something you would have expected to see from prior Republican administrations. But it also just reflects an ideological shift in the flavor of conservatism that we see in the Republican party these days.

Scott Wallsten

So let me ask. Not being a lawyer, I will ask questions that may not make any legal sense, but I don't understand how things like DEI can be thought of under an antitrust rubric. How do they explain that? What's the rationale? Does that actually make any sense?

Jon Nuechterlein

The hook is whether companies have colluded in their DEI initiatives. And so there may be investigations on that issue. I don't believe that much will come of this at the FTC, as opposed to the FCC. But there has been rhetoric from the FTC as well about looking into whether major American businesses have engaged in inappropriate coordination of their DEI initiatives.

Scott Wallsten

So are they under antitrust laws? Are they? Can they not coordinate on anything at all, period?

Jon Nuechterlein

 I mean, it would be subject to the rule of reason. If you're looking at it from a labor market perspective, the question is whether they are colluding to disfavor certain types of job applicants or employees.

Bill Kovacic

As Jon was saying, I think it would be an agreement that has the effect, and maybe the purpose, of denying access to the market, to the labor marketplace of certain classes of job seekers. The general notion is that you can do anything you want if you act alone, but it would be the collective decision to restrict access in that way. But I think, as Jon was saying, I can't immediately imagine a DEI group boycott or collective action case being brought immediately. That would be hard to do, and I don't really expect that we'll see one of those.

Jon Nuechterlein

I don't either. It's hard to imagine this ever being a winner in court, and I think the FTC leadership is fully aware of that. At the same time, there's tremendous pressure on agency leaders to check some boxes ideologically, to show fidelity to the current White House. And this is a means for the FTC to do that.

Bill Kovacic

I think the more likely collective action case that Andrew Ferguson has now said several times that his agency will look at is the collective decision about information services platforms not to accept certain types of speech, to adopt monitoring and filtering programs that use various criteria to exclude types of speech that have the effect of screening out specific philosophical perspectives. That's the more likely case that they might think of bringing.

Tom Lenard

And do you think that would be a winner?

Bill Kovacic

This is in the high risk and, I think, problematic part of the enforcement spectrum.

Jon Nuechterlein

I mean, there are probably some judges in the Fifth circuit who might be sympathetic to an FTC case along these lines, but it's hard to imagine it holding up unless the facts are very extreme. And obviously we don't have access to the facts.

Bill Kovacic

And I think there’s an issue that comes up in the background for those of us who lived through an era in which the FTC sought to adopt a very expansive interpretation of its authority under the statutory provisions that Jon mentioned. And that is, how far do you want to walk into the arena of policing speech that in some ways has strong political overtones? Do you want to be a moderator? Do you want to be a referee to police behavior in that area? I think that a long succession of FTC officials, at least since some of these early experiences, have said, “that's quicksand.” And you go in, and you'll never be seen again, if you decide to do that, whether you do it as a competition matter or, as Jon was suggesting, you use the deceptive and unfairness authority that the FTC has. I can remember occasions at the FTC—when I was a young person there, you know, 40 years ago—when you'd have elected officials say, “my opponent's lying about me, and what are you going to do about it—that is, don't you have the ability to prohibit speech that is not truthful?” And that was never, even in its most expansive view of what it might do, that was never a type of business that the FTC wanted to have much to do with; that would eat you alive.

Jon Nuechterlein

The wild card in all these things is White House influence on the FTC. And obviously Chairman Ferguson views himself as part of a unitary Executive—as essentially an arm of the President. And the President is very mercurial and has lots of very context-specific likes and dislikes that are unpredictable. And so I think, unfortunately, what we may see over the next couple of years is an inability of many agencies, including perhaps the FTC, to adopt an intellectually coherent set of policies. You know this is very likely to come up in the context of mergers. We saw in the last Trump Administration, tweets by the President, as President, saying things like, “it is shameful that my FCC has blocked the Sinclair/Tribune merger on competition grounds, because it would have brought a much-needed conservative voice for American consumers.” That sort of influence would be very likely to affect enforcement decisions by the agencies in Trump 47, as opposed to 45. Under this regime, it appears that the President believes that everyone in the Executive branch, even in law enforcement matters, should just adopt his position in particular matters, whether or not doing so would be consistent with any broader set of policy objectives.

Scott Wallsten

In every administration, every agency, including the ones that were supposedly independent (which is another thing we'll come to later) will still try to want to do things that were consistent with that administration's beliefs. But in this case you're saying that it's intended to show fidelity, even if it's not necessarily something that that agency would traditionally do. To what end?

Jon Nuechterlein

Jawboning is one obvious answer to that. Even if agencies lack authority to do a certain thing, in support of their political objectives, they can make life very difficult for the targeted party if the targeted party doesn't fall in line. I think we've seen probably less of that at the antitrust enforcement agencies so far than we have at the FCC. But I wouldn't be surprised to see more of that at all agencies.

Tom Lenard

On the same general subject about White House involvement: So the White House has fired the two Democratic FTC Commissioners. Maybe you guys can bring us all up to speed on where that stands in terms of you know when you think Humphrey's Executor will get back to the Supreme Court and how this is all going to play out.

Jon Nuechterlein

I'm happy to give a little overview of the legal background. I suspect that many of your listeners aren't that familiar with the relevant case law. And so I can quickly bring us up to speed on that.

So the Humphrey’s Executor case that you mentioned, in 1935, involved the FTC. And it was a case in which the Supreme Court unanimously ruled that the President must have a good reason for firing an FTC commissioner once that commissioner has been appointed and confirmed. As you know, the FTC is composed of five commissioners. They are appointed for staggered terms. Importantly, no more than three of those five may be from a single political party. And that requirement has created a degree of bipartisanship at the FTC that has caused that agency to be more stable in its ideological outlook over time than agencies that are subject to direct presidential control.

Section One of the FTC Act imposes the restriction that was at issue in Humphrey's Executor, and the restriction is, quote, “any commissioner may be removed by the President for inefficiency, neglect of duty, or malfeasance in office.” And the Supreme Court, in Humphrey's Executor, ruled two things. One is that that phrase means that the President may not remove a Commissioner at will. The reason for removal has to fall into one of those three categories. And second, the Supreme Court held that that restriction on the President's removal authority was constitutional.

This restriction on removal authority is called “for-cause tenure protection.” It's what is at issue in these modern cases that we see involving independent agencies. In recent cases, and two of them jump out, the Supreme Court has strongly questioned whether Humphrey's Executor was rightly decided. The first of these was a case called Free Enterprise Fund in 2010. Chief Justice Roberts wrote, first of all, that the Constitution only acknowledges three branches of government—the executive, the legislative, and the judicial—and that there cannot be a fourth branch, consisting of agencies that are wholly outside of the executive branch but exercise executive authority. In that case, the Court was careful to limit the scope of its holding to cases where there are two levels of tenure protection. But it invalidated, as unconstitutional, a regime in which the Public Company Accounting Oversight Board’s members were subject to tenure protections in their relations with the SEC, which oversaw the PCAOB, and the SEC itself in turn was subject to tenure protections in its dealings with the President. The Court ruled somewhat narrowly that that scheme of two-layer tenure protection was unconstitutional.

The next case of greater significance today is the case in which the Supreme Court invalidated the tenure protections for the Director of the CFPB, the Consumer Financial Protection Bureau. That was Seila Law v. CFPB in 2020. The Court began by noting that “the constitutional strategy is straightforward. The Framers sought to divide power everywhere except the presidency, and render the President directly accountable to people through regular elections.” This is in academic circles known as the “unitary Executive” theory, and the theory is that there are these three branches of government, the President is head of the executive branch, and no one in the executive branch should be insulated from the Presidential will, because to do so would create electorally unaccountable bureaucratic power, which is undemocratic. That's the core of the unitary Executive theory. The court in Seila Law also cast doubt on the factual premise of Humphrey's Executor; it basically held that the FTC, in fact, did wield executive power. But it acknowledged that Humphrey's Executor was precedent and wasn't being challenged in that case directly, and the court decided Seila Law solely on the ground that the CFPB Director was a single person rather than a collection of five commissioners, and so it didn't overrule Humphrey's Executor, but it cast some doubt on it.

—Okay, so this brings us to the present. On March 18^th, President Trump fired Commissioners Rebecca Slaughter and Alvaro Bedoya, both Democrats, without citing any cause. That ended what had been the FTC's 2-to-2 partisan split. It left the agency just with two Republicans. A third now has been confirmed, Mark Meador, and so now the Republicans have a 3-to-0 advantage. The President said nothing about appointing new commissioners who are not Republicans, and three is the limit on the number of Republican commissioners there could be. Rebecca Slaughter and Alvaro Bedoya both sued in federal district court nine days later, and they've now moved for summary judgment, and the case is pending in district court.

Meanwhile there's another set of Humphrey’s Executor cases that's moving on a faster track for two reasons, first, because they arose earlier in the administration, and also because the plaintiffs in those cases, unlike the fired FTC commissioners, have sought preliminary injunctive relief. And those cases involve a fired member of the Merit Systems Protection Board, Cathy Harris, and a fired Labor Board commissioner, Gwynne Wilcox. Those cases bounced back and forth between the district court and the D.C. Circuit for some time. The district court ultimately entered an injunction basically instructing members of the executive branch to treat the two fired officials as though they had not been fired. The D.C. Circuit sat en banc to review that decision, and the majority, mostly Democrats, upheld the preliminary injunction. The Republicans dissented. The Supreme Court then stayed the injunction, and so that case has technically already been to the Supreme Court.

I think we're now waiting to see what will happen on the merits. The cases are now back in the lower courts. There are two issues. One is the continued validity of Humphrey's Executor—whether it should be overruled or not. The other issue is: suppose that the plaintiffs, the fired commissioners, prevail on that issue—what then is the permissible scope of relief? Can they be reinstated to their jobs, or not? The Republicans on the D.C. Circuit would hold that federal courts lack the remedial authority to essentially defy a presidential order to fire these employees, and the only remedies that they could achieve would be back pay. So in a nutshell, that's what's been going on in in the courts, and that's where we are today with respect to these fired FTC Commissioners.

Tom Lenard

Does it mean that the FTC case came after these other cases, and that those will get to the Supreme Court earlier, and whatever happens with Humphrey's Executor will be considered in the context of those two agencies?

Jon Nuechterlein

Not necessarily. I think it really just depends on the timing of future events in the lower courts, although there's a very good chance that could happen. And you know, lurking in the background of all this is the independence of the Federal Reserve. And there's a sense in which no one really cares all that much—I mean, the markets don't care all that much—about whether there are minority commissioners at these commissions. I mean, obviously we do, but the markets don't care that much about them. The markets care enormously about whether the President can tell the Fed chair what to do with respect to monetary policy. We saw that on Monday, with a little mini crash following a suggestion by the President, since rescinded, that Jay Powell ought to be fired. And it is very difficult—perhaps not impossible, but very difficult—to issue a court decision overruling Humphrey's Executor as to the FTC, but not as to the Fed.

Tom Lenard

Is there a way to divide that? I mean this might be an uninformed question, but is there a way to divide the Fed's functions as between their regulatory functions and their monetary policy functions in this context?

Jon Nuechterlein

Yeah, that is what the what Trump's executive order purported to do back when he issued his executive order about the nonexistence of independent agencies. He said, this order will not apply to the monetary functions of the Open Market Committee, but will apply to the regulatory aspects of the Fed's activities. The problem with that is that it would be very difficult to enforce that distinction, because if the President wanted to fire a Fed chair because he didn't like his monetary policy, he could just come up with some pretext for firing him because he didn't like his bank regulatory policies.

Bill Kovacic

I think Jon's done a great job of pointing out the complication of knocking out Humphrey's Executor with respect to these other institutions. It's hard to see the principled basis for excluding the Fed unless you accept the argument that monetary policy is so important that it transcends what any of these other institutions do, and therefore it requires a greater degree of insulation from political interference. But nailing that down in the text of the Constitution seems to me to be pretty hard to do.

Jon Nuechterlein

Not only that, but I think in one of these recent Supreme Court opinions, the Court said, the mere fact that these agencies exercise important functions, which Congress thought needed to be insulated from direct Presidential control, makes it all the more critical that the agency heads be subject to democratic pressure by elected representatives. So importance actually could cut either way.

Bill Kovacic

I really wonder on that, Jon, too: is the Court going to focus on the extent of controls that already exist? That is, there's a tone in some of the debate that that the Executive, if it doesn't have the removal power absolute, is simply powerless. And I can think of all the respects in which the White House currently enjoys a measure of political control. The President, since 1950, has had the power to designate the chair from among sitting FTC commissioners. He can say, Chair Lenard, you're not doing the job. Wallsten's the chair now; he's the Sun God chair, and you are just a mere humble mortal Commissioner. And that just takes the signing of a letter as long as both of you are currently on the Board. That's a genuine point of political pressure.

It is, of course, the White House that submits the budget on behalf of the United States. The FTC does not submit its budget directly to the Congress; it goes through OMB. Now, the FTC has ways to go to the Congress and lobby them within the murky bounds of the prohibition on lobbying by public agencies. But OMB invariably gives those requests a haircut and has the ability to come back and say, “What's this? We don't like that.” That's an important filtering process.

And the discussion has come up about the role in foreign policy. Well, the White House has the capacity to deny the Federal Trade Commission the ability to travel overseas. I think I have one of my passports in the office, and you turn to the page after the picture page, and it says, “This is the property of the United States.” You don't own it. We let you use it. And you have to turn it in at the request of any authorized individual. If you're a public official, if Jon or I, in the old days wanted to go to say Paris for the OECD meetings, we’d have to obtain what's called “country clearance,” which means the US Embassy in Paris has to send us an email, a communication that says, “Jon and Bill, you can come on behalf of the U.S. and appear at those meetings”. They also have the ability to say, “Stay home, permission denied.” So the executive branch has absolute power to deny the FTC the capacity to go overseas.

There's the Paperwork Reduction Act, which limits the number of requests that an agency can send out for information to the number of recipients of that request, and that runs through the White House if you go above the magic number of 9.

This is a collection of measures that has been expanded over time in response to, often, the Blue Ribbon commissions, like the Hoover Commission in the in the late forties, to give the President more control. So the choice is not between an executive that is absolutely helpless and an executive that has absolute power. I suppose the real question, and I would hope the Court would think about it in these terms, is how much control is necessary? Need it be absolute in this respect if the President is to be able to exercise proper implementation functions.

Scott Wallsten

We're talking about this the unitary executive theory as a question of how much independence the agency has. But it's also an attack on Congress, right?

Bill Kovacic

Sure.

Scott Wallsten

Because Congress has oversight in theory. And this is just taking more authority away from Congress and giving it to the Executive.

Bill Kovacic

Scott I would love to have even one penny, before they all go away, for every time I've heard it in this debate suggested that the issue here is applying controls to unaccountable federal regulators— unaccountable from both ends of Pennsylvania Avenue. There's a lot of political intervention possible, and it takes place. Congress has myriad tools, and they use them. And the FTC has a painful history of seeing how those have been used to bring the agency to bear. So the fiction that there's no accountability in the existing system is painful to listen to. The deeper issue, again, is accountability to which institution; that is crucial here. And especially in those in those early debates over the FTC, you see exactly this issue being discussed. And the Congress to a large extent did say, the accountability ultimately is going to run to us; that's where we're setting this place up. There's a famous exchange in the Senate where Albert Cummins, who's probably the FTC proposal’s best friend in the Senate, is asked in a floor debate, “You're thinking of giving these guys a lot of authority here, this ‘unfair methods of competition’ mandate, wow! Pretty broad. Where's that going?” And Cummins says, “yeah, I know. But believe me, we're going to be watching and if they do something we don't like”—and these were Cummins’ words—”we created the Commission, and we can destroy it.” That's a nice christening ceremony for the FTC:  “Mind you, we'll destroy you if we don't like what you're doing.” So there was thought to be a powerful political feedback loop there. But over time we see the expansion of measures available to the Executive.

The strawman debate is whether we have no accountability at all, or the Executive has no accountability. The real debate is, where should the accountability reside? And does the President have enough? And should that accountability in some sense be shared with the Legislature to carry out these larger policy goals? I'd love to see that debate played out in the cases, and I think for the parties; it'd be nice to bring that into full view for the Court to think about.

Jon Nuechterlein

Well, I think it won't come as a surprise to you folks to hear that the Supreme Court can be rather formalist when it comes to these separation-of-powers questions. The arguments Bill raises are nuanced and absolutely correct as a matter of political theory. But when you raise those arguments to the Supreme Court, what you often get are quotations from the Framers about how important the President's removal authority is in his ability to control these agencies. And so far we have not seen indications that the Court will address this set of issues as a pragmatic one of political structure as opposed to a formalistic one of, you know, the original tripartite plan for the Constitution.

Bill Kovacic

Jon, you have a better instinct than I do on this, but you know the Court is watching everything that takes place daily, everything we see. And is it going to occur to the Court: “Is this a good moment to reinforce executive power?” Is this the right time to issue a broad statement that says “that originalist perspective, that textual perspective—that's controlling, and we're not so much concerned about who exactly is driving the car, but we're really concerned about how well the car can maneuver, that's all. So we want to make sure the President has the best damn car we can give him, with a lot of speed, a lot of power, a lot of maneuverability.” Or does the Court step back for a second and say, “Is this (again) the right moment to issue a triumphant statement about the President's prerogatives about removal?” Maybe the answer is that it doesn't phase them at all; that's not the issue; they can't take it into account. Does it enable them to sidestep the issues coming before them in any way. Perhaps not. But I just wonder how the current environment and atmosphere will affect the way they think about the question of how much power the Executive has to have.

Jon Nuechterlein

I think it has to. But I think that the way that will manifest itself is the Court really doesn't want to have to resolve these issues right now. It does not want to have to resolve them with Trump as President. It does not want to have to resolve them with the open questions about the Fed, and whether they will spook markets and bring the economy crashing down if they issue a ruling that seems to draw into question the independence of the Fed. So those concerns in the short term may just lead to a delay in the Supreme Court finally resolving these issues. But it really can't avoid them, because this is a President who has made it clear that he really just wants to call everybody’s bluff and, you know, bring all of his positions to the fore as quickly as possible.

I will say one thing about this, and Dick Pierce pointed this out in an article he wrote a while back: It's entirely unclear to me whether it really matters whether the President has only for-cause removal authority as opposed to at-will removal authority. Because, when you think about it, this President would be perfectly capable of coming up with some pretext for firing anybody that he wanted to within this administration. I mean, just think about the terms that are used in the FTC Act: any commissioner may be removed for “inefficiency, neglect of duty, or malfeasance in office.” You could call anything “inefficiency” or “neglect of duty.” And no court's going to want to get under the hood of those terms and figure out whether the President has properly exercised his discretion. So if the President loses this case, my whole expectation is he would just come right back around and come up with some for-cause pretext to fire people he doesn't like.

Bill Kovacic

No kidding. You don't need to surrender, and the original Humphreys case really brought this into full view. You know Franklin Roosevelt is unhappy with William Humphreys. Some of his advisors said, You can knock him out on these other stated grounds: that is, you can say that he is maliciously uncollegial. He was a master of invective in having at his colleagues and at elected officials as well. You could walk through a litany of objections to ways in which he behaved as a member of the Commission, and apparently Roosevelt didn't have the patience for that.

Jon Nuechterlein

Or he was too much of a gentleman. It would have required a nastier letter than the one he wrote: “You will understand I need to have my own men running the Commission.”

Bill Kovacic

“We don't agree, and I need my own person to come in here.” But I agree with you that you'll have future battles on these fronts if Humphrey’s lives.

Sarah Oh Lam

How resilient do you think our Constitution is? I mean, at the time of the Framers, you know, they had a George Washington, but did they foresee a--

Bill Kovacic

After whom a great university is named, just to let you know.

Sarah Oh Lam

They were thinking ahead to the different cases of, different types of presidents that want to be king. But here we're seeing that those boundaries are tested. Is it more personnel than policy? Or, how does the Supreme Court think about it?

Jon Nuechterlein

Well, the Framers didn't think of the President as being much of a threat as Congress. The Supreme Court has said that in recent decisions; it’s quoted passages from the Federalist Papers and other original sources, to the effect that Congress was the main menace to individual liberties, and it needed to be balanced by a stronger Executive than you would have if the Executive Branch were split up into warring constituencies.  And remember, back in the 18th century there was no bureaucracy. Universities didn't depend on the federal government for grants; the President had many fewer opportunities to impose pain on dissidents. And so we just live in an entirely different world now. The problem is that when the Supreme Court interprets the Constitution, it views itself as bound by decisions the Framers made in an entirely different political context.

Bill Kovacic

I think Sarah's question really points to a fascinating aspect of our litigation process. You know there's a great deal of interest, of course, in going back to these original materials and trying to extract a good answer, circa late 18th century, to your question, Sarah. And to come up with a good answer to that, and then think about how, in light of these changes in institutional arrangements and the functions of government, how that original insight applies to the interpretation of power today. We think about what a challenge it is for courts to absorb economic learning and to bring that in. I think it's the same with history. That is, how do you take a history that is filled with twists and turns? Every historian I ever had, as a teacher, as a mentor, tried to bring this to bear—many of them would insist on paying attention to nuance in particular. How do you bring that into the resolution of a specific matter, and avoid what one historian has said, the search for a so-called “usable past”—to treat history in the way that lawyers treat precedents, where the managing partner says, “Find me a case that says, as opposed to tell me what the law is, find me a case that says, X.” You have this in the application of history: I think you have advocates saying, “Find me a history, a story that says this, and that's what I'm going to put in front of the court.” How do you get a fuller and arguably more informative picture before them on these issues?

Tom Lenard

So maybe return back a little bit to Humphrey's Executor? Is it your guys’ opinion that the Court is going to try to in some way punt?

Jon Nuechterlein

I think it's very hard to predict what the Court will do. We know there are some votes for overruling it outright. We know there are some votes for preserving it. But we've also seen extreme hesitation, even from the most conservative justices, about a ruling that would draw the Fed's independence into question. So it's hard to say exactly what the Court will ultimately do when presented with these issues. I know Andrew Ferguson is very confident that the Supreme Court's going to overrule Humphrey's Executor, and I think that's probably the consensus.

Bill Kovacic

Yeah, when we did our fireside chat with Andrew and Melissa Holyoak, one of the FTC Commissioners, in Aspen in August, Andrew said exactly that. I believe his words were “Humphrey's Executor is dead, and it's just a matter of having a proper burial.” But I'm very much where Jon is on the net assessment of where they go. They can try to carve out the Fed; they have the last vote, they get to do it. But can they do it in a way that's not risible, and I don't see a really good way to do that. And again, at this moment, do they want to validate a broader expression of executive power, just watching one step after another that can be breathtaking? I don't know. But I can imagine at least a little bit of thought will be given to how do we dodge this? How do you sidestep this?

Tom Lenard

I would think so.

Bill Kovacic

And I don't think they'll care about it, but you know a question that that we talked about in Aspen, too, was, you know, what does this do to some of these agencies? I think it is a domino that starts to fall and topples other elements of the FTC's mandate. I'm not sure how you run an adjudication process—and I think this is part of what the Supreme Court was concerned about in in Humphreys—how do you have a court function where the executive can say, “Hey, Lenard, I don't like that decision. You're out. You shouldn't have issued that complaint. You're certainly not going to sit on the resolution of that case, you're out.” How can a court function effectively where the prospect of removal is omnipresent?

Jon Nuechterlein

This does raise pretty obvious questions about the FTC's continued existence, at least as an antitrust enforcer.

Bill Kovacic

Yep.

Jon Nuechterlein

You know right now it is a fully Republican agency under the direct control of the President, in the same way that the Assistant Attorney General for Antitrust is under the direct control of the President. There are very serious constitutional challenges to the Commission’s administrative adjudication process: there are due process challenges, and there are Seventh Amendment challenges. As Bill points out, unitary Executive theory kind of blows up any sense of the neutrality of the FTC as adjudicator. So in the antitrust sphere the FTC has become essentially the mirror image of the Antitrust Division. Now Congress originally created the FTC not just because it wanted to have a panel of bipartisan experts, but also because it wanted them to enforce this new broader, more amorphous ban on “unfair methods of competition.” But it's no longer in vogue, particularly among Republicans, to say that there's any significant daylight between that standard and the antitrust laws. So all the reasons why, historically, Congress wanted there to be a separate agency to enforce this prohibition on unfair methods of competition, those have all sort of evaporated in recent years.

Bill Kovacic

Yeah. I'm thinking, too, of how there are some international interconnections that deal with the independence issue. I believe there are treaties or subtreaty-like agreements that the U.S. has on issues like data sharing that's acceptable under privacy law, which depend on the FTC being recognized as an independent authority—that is, the relevant authority has to be considered independent in the sense that a variety of other countries would designate such authority. And in this area and others there are international agreements that depend upon the FTC, in the first instance, being regarded as being independent in the sense of protected from not-for-cause removal. And even the Department of Justice, in a variety of settings overseas, has said, “in the antitrust area, we exercise independent judgment; and oh, yes, the President in theory can instruct us to do certain things, but it doesn't happen that way.” Well, we've peeled away that illusion now, and it would happen as well to the FTC. It's just to say that there's an intricate circuitry of agreements, understandings, and relationships that depend upon this classification.

Now, the Court might say you never should have built them that way. Or you've got to rewire these diagrams. But by pulling that wire out of the wiring box there's a faint chance that you could burn down the garage. There is an interesting circuitry of decision making and authority that depends on some of these characterizations, and I assume that there will be an effort to put this in front of the Court to think about, too—that this is what can happen.

Jon Nuechterlein

Yeah. And meanwhile, I think Max Schrems is working on new papers for the European Commission.

Bill Kovacic

Right, right, right.

Scott Wallsten

Well, I'm sure the President has considered all of these angles with a very sophisticated analysis.

Bill Kovacic

Every single one, Scott. So things he already knows.

Tom Lenard

Okay. Well, there are more things to discuss. but I think we've run out of time for this session. I want to thank you all for a very good discussion, very interesting discussion. Appreciate it very much.

Jon Nuechterlein

Our pleasure.

Bill Kovacic

Thank you. Thanks so much.