For many Americans, it is jarring to find themselves subject to severe financial, reputational, and professional penalties in adjudications very different from a courtroom. The Federal Rules of Evidence do not apply, juries are nonexistent, and the hearing officers are overseen, and at risk of removal, by the head (or heads) of the agency. Quietly and routinely, people lose their businesses and their livelihoods. Many accept an early settlement offer or lighter penalties rather than attempt the risky and expensive process to vindicate their rights in federal court. Some parties, however, are challenging these pernicious agency practices that have accumulated over decades.
Intuit Inc. markets and sells TurboTax, the popular tax‐preparation software used by millions of Americans annually. A few years ago, the FTC investigated Intuit, believing certain TurboTax ads were deceptive and harmed consumers, and issued a complaint before its own agency judges. But when the FTC simultaneously sought a preliminary injunction against Intuit in federal court, the judge rejected the FTC’s theory. Having failed to persuade the court, the FTC simply chose to re‐issue its complaint internally—acting as judge, jury, and executioner.
Unsurprisingly, the FTC then ruled in favor of their own allegations; over the last 46 years, the FTC has lost just five of the over 150 cases adjudicated internally on the merits. The agency issued an order imposing new disclosure requirements on Intuit. Intuit sued, arguing the FTC’s processes and new requirements had several deficiencies, including violating the company’s due process protections.
The Cato Institute submitted an amicus brief to the Fifth Circuit in Intuit Inc. v. FTC, urging the court to make it clear that the FTC’s exercise of legislative, executive, and judicial power is unconstitutional. Our brief discusses how the Founders opposed the combination of all three powers of government by one body as tyrannical and dangerous to liberty, and reviews how the Framers intended the Constitution to establish the separation of powers. We also discuss how allowing the FTC to act as both prosecutor and judge in agency proceedings violates parties’ due process rights. Finally, we argue Congress has unconstitutionally delegated the FTC unconstrained authority to choose between federal court and in‐house agency adjudication, and this violates the nondelegation doctrine. Congress needed to provide more limits on the FTC’s broad power to decide which venue—agency or court—and legal processes apply to parties like Intuit.
Our brief urges the Fifth Circuit to recognize the unconstitutionality of FTC’s combination of legislative, executive, and judicial powers and to vacate the FTC’s order.
