Journal of Competition Law & Economics, 1–37

doi:10.1093/joclec/nhw028

ADMINISTRATIVE LITIGATION AT THE FTC:
 

EFFECTIVE TOOL FOR DEVELOPING THE
 

LAW OR RUBBER STAMP?
 

Maureen K. Ohlhausen*

ABSTRACT

This article provides the most comprehensive study to date of the Federal

Trade Commission’s Part 3 process. A unique and defining tool, Part 3 allows

the FTC to challenge alleged section 5 violations in-house through administrative litigation. Highlighting the agency’s expertise, Congress gave the FTC that

authority in 1914 to develop antitrust and later consumer-protection law.

Although the Commission has used its Part 3 authority to good effect, especially

in some recent competition matters, the process is controversial on due-process

grounds. After it finds “reason to believe” that a violation exists and authorizes

staff to litigate before an independent Administrative Law Judge, the

Commission reviews the ALJ’s decision de novo. The result, some critics argue,

is a foregone conclusion. Rather than advance the law, they contend, Part 3

frees the Commission to reach its favored result. Maligned in some quarters as

a “kangaroo court” in which the FTC alleges and later summarily confirms section 5 violations, the key question is whether administrative litigation effectively

fulfills the role Congress set out for it. To resolve the debate, we need a clearer

picture of how Part 3 operates. Does the FTC rubber stamp its prior determinations, invariably siding with complaint counsel? Or does it change course at

the appeal stage and, if so, how often? And, when it does find a section 5 violation on appeal, how often does the FTC nevertheless prune counts and allegations, suggesting that it scrutinizes the factual and legal record before it? Do the

answers change with the political constitution of the Commission, such as when

a Democratic majority votes out a Part 3 complaint, but a Republican

Commission hears the appeal? How often does the Commission’s composition

change between voting out and later deciding a Part 3 matter, and might the

answer resolve the due-process issue? And does the FTC fare better at the U.S.

Courts of Appeal if it affirmed or reversed the ALJ? Until now, relatively little

empirical work has scrutinized administrative litigation at the FTC. This study

tracks every Part 3 case that produced a Commission Decision on or after

*	 Commissioner, Federal Trade Commission. Email: mohlhausen@ftc.gov. The views expressed

in this article are solely those of the author and do not necessarily reflect the views of the

Federal Trade Commission or any other Commissioner. I am deeply grateful to Gregory Luib,

Elizabeth Parisi, Alan Devlin, and David Meyer for their invaluable contributions to this article. I also greatly appreciate the efforts of Neil Chilson, Haidee Schwartz, and Svetlana Gans,

as well as the insights offered by former FTC Chairmen Timothy J. Muris and William E.

Kovacic.

© The Author 2016. Published by Oxford University Press.

This is an Open Access article distributed under the terms of the Creative Commons

Attribution-NonCommercial-NoDerivs licence (http://creativecommons.org/licenses/by-nc-nd/4.0/),

which permits non-commercial reproduction and distribution of the work, in any medium, provided the

original work is not altered or transformed in any way, and that the work is properly cited. For commercial

re-use, please contact journals.permissions@oup.com

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2 Journal of Competition Law & Economics

January 20, 1977. It captures all 145 antitrust and consumer-protection matters

falling within that period, tracking their development through initial vote at the

“reason to believe” stage, disposition before the ALJ, appeal before the

Commission, and petition for review at the U.S. Court of Appeals and beyond.

The emerging statistics are illuminative. In hearing an appeal in the last

10 years, the FTC has never rejected an action that it had previously authorized

complaint counsel to bring in Part 3. At first blush, that fact might suggest a

preordained appellate process. But that phenomenon dissipates when one looks

at a larger time horizon, suggesting that uniformity from initial vote to appeal is

neither inevitable nor systemic. Indeed, it is possible that recent consistency

may be a function of improved case selection, aided by effective factual, economic, and legal analysis by staff and the Commissioners before they authorize

a complaint. Evaluating the ten matters voted out and affirmed by the

Commission in the last decade lends some support to that proposition. Indeed,

Part 3 has been an effective tool in developing complex antitrust questions.

This article provides a host of new evidence with which to evaluate administrative litigation at the FTC. The article concludes by exploring some initial teaching points from the data.

JEL: L11; L13; L41

I. INTRODUCTION

The Federal Trade Commission is one of the world’s leading antitrust and

consumer-protection enforcers. Among its powers is “Part 3,” an administrative litigation procedure through which the FTC can challenge anticompetitive conduct and unfair or deceptive acts or practices.1 Congress’s rationale

for granting the FTC this power is that, as an expert agency, the

Commission is well placed to resolve difficult questions of competition and

consumer-protection law. The FTC has made great strides in doing so. In

litigating seven cases before the Supreme Court in the last thirty years, for

example, it has won six times.2 Five of those seven matters arose from Part 3.3

And, in the last decade alone, the FTC has used administrative litigation to

advance the law on healthcare-merger enforcement, dominant-firm

1 16 C.F.R. pt. 3. 2	 See N. Carolina State Bd. of Dental Examiners v. Fed. Trade Comm’n, 135 S. Ct. 1101

(2015); Fed. Trade Comm’n v. Actavis, Inc., 133 S. Ct. 2223 (2013); Fed. Trade Comm’n v.

Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003 (2013); Fed. Trade Comm’n v. Ticor Title

Ins. Co., 504 U.S. 621 (1992); Fed. Trade Comm’n v. Superior Court Trial Lawyers Ass’n,

493 U.S. 411 (1990); Fed. Trade Comm’n v. Indiana Federation of Dentists, 476 U.S. 447

(1986). But see Cal. Dental Ass’n v. Fed. Trade Comm’n, 526 U.S. 756 (1999). 3	 N. Carolina, 135 S. Ct. at 1101; Cal. Dental, 526 U.S. at 756; Ticor Title, 504 U.S. at 621;

Superior Court, 493 U.S. at 411; Ind. Federation, 476 U.S. at 447. Even Actavis indirectly

resulted from Part 3 litigation. The FTC sued Schering-Plough in 2001 through its administrative process, finding a section 5 violation. Although the Eleventh Circuit granted ScheringPlough’s petition for review, the Supreme Court ultimately vindicated the FTC. Compare

Schering-Plough Corp. v. Fed. Trade Comm’n, 402 F.3d 1056 (11th Cir. 2005), cert. denied,

548 U.S. 919 (2006), with Actavis, 133 S. Ct. at 2223.

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Administrative Litigation at the FTC 3

misconduct, pay-for-delay agreements in the pharmaceutical industry, stateaction immunity, deceptive acts or practices, and beyond.4

Nevertheless, the FTC’s administrative litigation process, examined in

Part III.A, stands accused of being a rigged system. In a Part 3 proceeding,

the FTC serves prosecutorial and adjudicative roles. After a staff investigation and recommendation, and following party meetings, the Commissioners

may vote out a Part 3 complaint if they find “reason to believe” that a section 5 violation occurred and that the action would serve the public interest.5

An independent administrative law judge (ALJ) subsequently reaches an initial decision, based on a full trial. The Commissioners, however, then decide

the merits of the case without deferring to the ALJ’s factual or legal findings

pursuant to their regulatory authority.6 Due-process objections result. The

worry is that, once the FTC authorizes a Part 3 complaint, liability is inevitable no matter how the ALJ rules or what new facts or legal issues emerge.

To evidence those claims, some commentators have argued that the

Commission almost always rules in complaint counsel’s favor.7

Is such criticism accurate?8 The answer lies in facts that have previously

been elusive. To assess the value of Part 3, it is also crucial to gauge the

effectiveness of administrative litigation at the FTC in serving its function to

develop the law. This article provides the most exhaustive empirical study to

date of the FTC’s Part 3 process. It captures 145 Part 3 cases in which the

FTC rendered a decision between January 20, 1977 and July 31, 2016. For

each case, it tracks the composition of the Commission in voting out and

later deciding a Part 3 matter, the result before the ALJ, the Commission,

and on petition for review to the appellate courts. It explores trends across

4	 N. Carolina, 135 S. Ct. 1101; Fanning v. Fed. Trade Comm’n, 821 F.3d 164 (1st Cir. 2016);

McWane, Inc. v. Fed. Trade Comm’n, 783 F.3d 814 (11th Cir. 2015), cert. denied, 136 S. Ct.

1452 (2016); POM Wonderful, LLC v. Fed. Trade Comm’n, 777 F.3d 478 (D.C. Cir. 2015),

cert. denied, 136 S. Ct. 1839 (2016); ProMedica Health Sys., Inc. v. Fed. Trade Comm’n,

749 F.3d 559 (6th Cir. 2014); Polypore Int’l, Inc. v. Fed. Trade Comm’n, 686 F.3d 1208

(11th Cir. 2012); Realcomp II, Ltd. v. Fed. Trade Comm’n, 635 F.3d 815 (6th Cir. 2011). 5 15 U.S.C. § 45(b). 6	 16 C.F.R. § 3.54(a) (“Upon appeal from or review of an initial decision, the Commission will

consider such parts of the record as are cited or as may be necessary to resolve the issues presented and, in addition, will, to the extent necessary or desirable, exercise all the powers which

it could have exercised if it had made the initial decision.”). 7	 See, e.g., A. Douglas Melamed, Comments to the Fed. Trade Comm’n, Workshop

Concerning Section 5 of the FTC Act 14 (Oct. 14, 2008) (referencing an unpublished study of

all Part 3 “Sherman Act cases” between 1983 and 2007 that found that FTC “staff won 16

cases and lost none”); Joshua Wright, Supreme Court Should Tell FTC to Listen to Economists,

Not Competitors on Antitrust, FORBES (Mar. 14, 2016) (“[T]he FTC has ruled for itself in 100

percent of its cases over the past three decades.”). Part 3.B of this article summarizes dueprocess claims regarding Part 3. 8	 The courts have not been sympathetic to due-process arguments against the FTC’s Part 3 process. See, e.g., Gibson v. Fed. Trade Comm’n, 682 F.2d 554, 559–60 (5th Cir. 1982) (rejecting

“the Gibsons’ . . . weakest argument,” namely that “the FTC system of prosecutionadjudication deprives them of their right to a fair trial and due process”).

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4 Journal of Competition Law & Economics

time and political affiliation. It identifies whether a dismissal was on the merits, reflected a change in the law or facts or lack of jurisdiction, or flowed

from a determination that continuing the litigation was no longer in the public interest. As explained in the Appendix, to focus on the most illuminative

matters, the study excludes Part 3 cases resolved by consent before a

Commission decision, dismissed after the courts denied the FTC’s motion to

preliminarily enjoin an unconsummated merger, and other matters. The

article marshals the data and presents it along dimensions most relevant to

the debate on Part 3’s due-process implications and mission efficacy.

Interesting conclusions emerge from the data, which Part II presents in full.

For the purposes of this brief introduction, however, consider five findings.

First, a recurring claim is that the FTC always imposes liability. That

claim is true, but only for recent cases, which are relatively few. Although the

Commission found liability in 92 percent of its 12 Part 3 decisions in the last

decade, it dismissed 29 percent of the 143 Part 3 matters in which it made a

liability-dismissal decision since January 1977.9 The Commission dismissed

16 percent of Part 3 matters on the merits. Those dismissals do not include

the 21 matters in which the Commission found liability, but also trimmed

counts or respondents, suggesting careful review. Notably, the Commission

dismissed 40 percent of Part 3 antitrust complaints overall. And, of the antitrust matters adjudicated on the merits, 29 percent were dismissed.

Second, although the Commission dismissed more administrative cases historically—36 percent from 1987 to 1996, for example—its recent trend of finding liability coincides with a higher rate of success before the appellate courts.

Although the judiciary affirmed Commission liability findings in 50 percent of

cases from 1987 to 1996, since 2007 it has affirmed 100 percent of appealed

Part 3 case to date in which the Commission found liability. Those findings

are consistent with the seismic change in antitrust law, which shifted toward

sophisticated economic analysis starting in the late 1970s and early 1980s.10

9	 The liability rate for the last decade rises to 100 percent if you exclude Cabell, which the

Commission dismissed in 2016 due to a change in the law. See note 12 infra. The 145 Part 3

matters in this study also include Reynolds and Unocal, in which the Commission never reached a

liability decision. In Unocal, the Commission reversed the ALJ’s initial decision to dismiss antitrust claims based on the Noerr-Pennington doctrine. In re Union Oil Co. of Cali., FTC Dkt. No.

9305, Opinion of the Comm’n, July 7, 2004. The parties ultimately resolved the litigation

through a consent in 2005. Similarly, in Reynolds, the Commission reversed the ALJ’s initial

decision to grant the respondent’s motion to dismiss. In re R.J. Reynolds Tobacco Co., FTC

Dkt. No. 9206, Opinion of the Comm’n, Mar. 4, 1988. 10 See, e.g., BUREAU DIRECTORS OF THE FEDERAL TRADE COMMISSION, FEDERAL TRADE

COMMISSION LAW ENFORCEMENT IN THE 1980S: A PROGRESS REPORT ON THE FIRST THREE

YEARS OF THE REAGAN ADMINISTRATION LEADERSHIP, OCTOBER 1981 TO OCTOBER 1984, at

41 (1984) (noting that, “[w]hen the administration began, antitrust law was changing. As the

Washington Post later observed in an editorial, many of the old rules simply were ‘undermined

by observations of how the world works’” and observing that, “[r]eflecting this new learning,

federal courts were overturning most of the Commission’s antitrust cases brought before them”

and “were extremely critical of the Commission’s analyses in many of these cases.”).

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Administrative Litigation at the FTC 5

Though perhaps slow to adapt to this trend, the FTC’s eventual embrace of

modern industrial-organization economics likely led the Commission to select

more meritorious cases over time, which would produce a higher rate of liability findings by the Commission and success in the appellate courts.

Third, what of the criticism that the Commission is biased in deciding the

merits simply because it previously instituted the proceedings?11 In fact, in 72

percent of Part 3 cases, the commissioners who authorized the administrative

litigation had either left or no longer formed a majority at the liability-dismissal

stage. The argument for a systemic bias wobbles in light of the data because

the same commissioners rarely voted out and later decided a Part 3 matter.

For example, of the 51 cases in our study authorized between 1967 and 1976,

a different commission majority made the liability-dismissal decision in 92 percent of them. Interestingly, however, only in the last decade—during which

the Part 3 process been more expeditious—has the same commission majority

generally authorized and resolved a Part 3 matter (90 percent), a period with

both a high percentage of liability and a high success rate on appeal.

Fourth, a fascinating question is whether the Commission finds liability

more often when the same majority authorized the Part 3 complaint. If claims

of bias have merit, the FTC should be more likely to dismiss when different

commissioners authorized the case. The results are the opposite. When the

same Commission majority endured—that is, when “bias” would presumably

exist—it dismissed 33 percent of cases. When a different majority decided

the case than voted out the complaint, however, it was less likely to dismiss—

doing so in 27 percent of matters. Put differently, respondents fared worse

(losing 73 percent versus 67 percent of the time) when the commissioners

who authorized the action no longer constituted a majority.12 Certainly, there

are complications and subtleties behind these aggregate numbers, but that

simply means that one must interpret statistics cautiously.

These findings are the tip of the iceberg. Part II lays out the empirical findings in detail, allowing readers to discern points of interest for themselves. It

also addresses the factors that make it difficult to draw broad conclusions from

the data. Part III explores the existing commentary and literature on Part 3,

contextualizing this study’s statistics. Part IV moves from the observational to

11 See, e.g., Richard A. Posner, The Federal Trade Commission, 37 U. CHI. L. REV. 47, 53 (1969)

(“It is too much to expect men of ordinary character and competence to be able to judge

impartially in cases that they are responsible for having instituted in the first place.”). 12 As discussed below, a partial—though incomplete—explanation for this phenomenon is that

dismissals are more likely to involve the same majority commissioners who authorized the

Part 3 complaint if the dismissals follow promptly after the vote to authorize the case. Such

dismissals can involve changes in the law, such as in Cabell. In re Cabell Huntington Hosp.,

Inc., FTC File No. 141-0218, Order Returning Matter to Adjudication and Dismissing

Complaint [hereinafter Cabell]; In re Cabell, FTC Dkt. No. 9366, Statement of the Federal

Trade Commission, July 6, 2016; Press Release, Fed. Trade Comm’n, FTC Dismisses

Complaint Challenging Merger of Cabell Huntington Hospital and St. Mary’s Medical

Center (July 6, 2016).

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the analytic and normative. It peers behind percentages to scrutinize a representative sample of the underlying cases, testing various propositions about the

value and purported deficiencies of administrative litigation at the FTC. It

mounts a firm, though qualified, defense of Part 3. An appendix explains the

technical details underlying this empirical study.

II. CORE FINDINGS: THE FTC’S PART 3 PROCESS OVER THE LAST

FORTY YEARS

This Part presents the article’s core findings. Given the volume of results, it

intersperses discussion with graphical and tabular presentations of the data.

As explained in the attached appendix, the dataset comprises 145 matters on

which the Commission rendered a Part 3 opinion between January 20, 1977

and July 31, 2016.

A. Contextualizing the Data

The population of administrative cases in the dataset is not equally distributed over time. To the contrary, the volume of Part 3 matters is heavily

weighted toward the 1970s and 1980s. For the 145 matters captured in this

study, the following chart shows the number of cases filed by decade, separately for consumer protection (BCP) and competition (BC).(Figure 1)

The asymmetric distribution of cases has important implications for this

study and, indeed, for any empirical work on Part 3 that hopes to suggest

meaningful conclusions.

First, recent cases are few in number, which limits inferences than one can

reliably draw from them. Among other examples, critics have made much of

the FTC’s practice of finding liability in most cases in the last two decades.

Without a richer body of cases to study, however, it is hard to know what to

make of that phenomenon.

Second, one can find a larger volume of Part 3 cases by looking back to

the 1970s and 1980s, but do those matters represent modern practice? That

was an era when the Chicago School’s contribution to economic analysis in

antitrust cases was only beginning to seep into the case law and agency practice. Indeed, the FTC was strongly criticized in the 1970s and 1980s.13

Hence, it is easy to question whether the FTC’s earlier “reason to believe”

13	 See, e.g., William E. Kovacic, The Modern Evolution of U.S. Competition Policy Enforcement

Norms, 71 ANTITRUST L.J. 377, 398, 451, 457–58 (2003) (observing “the doubts that courts

in the 1970s and 1980s had expressed about the institutional capability of the FTC,” noting

that, “[a]s late as 1979, top officials at the FTC were recommending the application of ‘no

fault’ theories of liability to restructure dominant firms that enjoyed a substantial period of

monopoly power unattributable to superior efficiency,” and stating that, “[i]n the late 1960s

and throughout the 1970s, . . . the agencies accepted a norm that measured their worth by the

number and power of cases involving concentrated industries” despite the fact that “the model on which the agencies relied was in the process of crumbling.”).

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= BCP

= BC

0

10

20

30

40

50

60

1971-1976* 1977-1986 1987-1996 1997-2006 2007-2016

Administrative Litigation at the FTC 7

29 

38 

9 10 

5 

22 

17 

8 2 

5 

Figure 1. The universe of Part 3 cases = 145

Notes: All Part 3 cases in which the commission reached a decision after January 20, 1977. Does

not include consents or federal court cases that did not go to Commission decision. * – partial

decade.

decisions and merits determinations capture the rigor of today’s Part 3 complaints and opinions. Although there are lessons to learn from the 106 cases

in the dataset filed between 1971 and 1986, we must be attuned to the dangers of overlooking the impact of sweeping changes in antitrust analysis. That

point applies to the outcome of Commission Part 3 decisions themselves as

well as their subsequent fates on appeal.

The following chart provides a more detailed picture of how the 145 cases

played out over time. Each horizontal line represents a Part 3 matter in the

database. The red portion reflects the time between when the Commissioners

authorized the complaint and the ALJ issued an initial decision. The green

bars represent the duration between the initial decision and the

Commission’s opinion. Finally, the purple segment captures the time

between the FTC’s opinion and the ruling on a petition for review from the

appellate courts. Two features are striking. First, the duration of cases has

shortened over time. Second, and consistent with the last graph, the FTC

issued many more Part 3 decisions in the past than it has recently.(Figure 2)

B. Notable Trends

Several dynamic trends emerge from the data. In particular, the FTC has

brought many fewer Part 3 cases but become more likely to find liability in

Part 3 over time. Counterbalancing that phenomenon, however, is the fact

that the FTC’s appellate record has also greatly improved.

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8 Journal of Competition Law & Economics

Figure 2. Part 3 cases
 

Note: Cases ordered by date of complaint.
 

1. Commission Decisions to Impose Liability

The core question is whether the Commission performs an objective and

rigorous appellate review of the ALJ’s initial decisions. This article’s dataset

sheds new light on the answer. Far from rubber stamping complaint counsel,

the Commission dismissed 41 (29 percent) of the cases that it had authorized

under Part 3. The FTC has been more willing to depart from complaint allegations in competition cases. There, the Commission dismissed 40 percent

of (36 of the 90) competition matters on appeal from an ALJ decision. By

contrast, the Commission dismissed only 9 percent of consumer-protection

cases.(Figure 3)

The results depart sharply from the conventional narrative. In its more

cynical version, the claim is that the Part 3 process—and a respondent’s

appeal to the Commission in particular—is essentially rigged. But reviewing

four decades’ worth of Part 3 matters tells a different story. It is unlikely that

the FTC has demonstrated a systemic bias if it dismisses 40 percent of antitrust cases and almost a third of all its cases.

Of course, one must peer behind the number to discern the relevant

dynamics. The Commission did not dismiss all of the 41 cases on the merits.

Only 23 matters—or approximately 16 percent of its 143 Part 3 liability

determinations—fell on the merits.14 What accounted for the other

14 Hence, 56 percent of all Part 3 dismissals were on the merits (23 of 41 matters).

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40%

60%

9%

91%

0%

25%

50%

75%

100%

Dismiss Liability

BC

BCP

Administrative Litigation at the FTC 9

Figure 3. Commission decision by mission
 

Note: Based on 143 cases where the Commission reached a decision on liability, January 20,
 

1977 to July 31, 2016.
 

dismissals? The FTC dismissed actions for a variety of reasons, including

because they were no longer in the public interest, a lack of jurisdiction, a

change in the law, and changed facts.15

Moreover, upholding or dismissing matters in full are not the only options

for the Commission. It can also prune liability counts, allegations, and remedies that, in its view, the facts and law do not support, even though it finds

liability on at least one count. In fact, of the 102 final orders where the

Commission imposed liability, it struck allegations, counts, or a respondent

in 21 of them, which in consistent with a careful review of the complaint

allegations.16

Combining those observations contradicts recurring claims that the

FTC always rules for complaint counsel. The Commission dismissed 29

percent of antitrust cases decided on the merits and cut allegations,

respondents, or counts in 13 percent of matters where it found liability.

There is ample room for debate about the proper implications of those

findings, but the statistics undermine the claim that the FTC is simply a

15 See, e.g., In re Exxon Corp., 98 F.T.C. 453 (1981) (no longer in the public interest); In re

College Football Ass’n, 117 F.T.C. 971 (1990) (lack of jurisdiction); Cabell, supra note 12

(change in law); In re Robert G. Koski, D.O., 112 F.T.C. 500, 1989 WL 1126779, at

*7 (Oct. 10, 1989) (change in facts). 16 There were also three administrative cases in which the Commission trimmed some allegations, counts, or respondents, but also expanded some others.

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10 Journal of Competition Law & Economics

kangaroo court. So, what is the basis for claims that the Commission

always finds in its own favor?

There are two answers to the last question. The first involves time.

Some empirical work on Part 3 looks only at the last two decades, when

the Commission issued only 28 decisions in administrative litigation as

tracked in this study. This article looks back further, doubling the effective

timeframe and capturing 117 additional cases. That broader picture tells a

different story. For a period, the agency regularly dismissed cases that it

had previously voted out. Dismissals have become rarer over time.

Looking at the relatively small set of Part 3 matters from the last two decades, one could infer that the deck is stacked in complaint counsel’s favor.

(Figure 4)

Therein lies the claim that “the FTC has ruled for itself in 100 percent of

its cases over the past three decades.”17 Technically, the Commission dismissed 22 percent of its Part 3 matters (11 cases) during that period.18 Not

all of those dismissals, however, reflect a substantive merits determination.

Earlier this year in Cabell, for instance, the FTC dismissed a Part 3 complaint challenging a healthcare-system acquisition because a change in the

law created issues of state-action immunity.19 In R.J. Reynolds, the FTC

dismissed its consumer-protection action after the tobacco firm accepted a

binding settlement with the attorney generals of 46 states.20 And in Robert

Koski the Commission dismissed its complaint against a doctor accused of

conspiring to boycott a hospital. It did so with the support of complaint

counsel after post-complaint evidence emerged that the physician had not

conspired.21 Such dismissals may not shed much light on whether the

Commission is predisposed to impose liability after authorizing a Part 3

complaint.

But of the eleven Commission dismissals in the last three decades, five

were on the merits. For example, in R.R. Donnelley, the FTC challenged a

commercial-printing merger in Part 3, after the district court denied its

17 Wright, supra note 7.
 18 In re R.J. Reynolds Tobacco Co., FTC Dkt. No. 9285, Order Dismissing Compl., Jan. 26,
 

1999; In re Summit Tech., Inc. & VISX, Inc., FTC Dkt. No. 951-0029, Order Reopening the

Record and Dismissing the Compl., Feb. 7, 2001; Press Release, Fed. Trade Comm’n, FTC

Dismisses Complaint Against Dillards Over Investigation of Consumer-Disputed Charges on

Credit Card Bills, Mar. 12, 1996; In re R.R. Donnelley, 120 F.T.C. 36 (July 21, 1995); In re

College Football Ass’n, FTC Dkt. No. 9242, Opinion of the Comm’n, June 16, 1994; In re

Adventist Health Sys./W., 117 F.T.C. 224 (Apr. 1, 1994); In re Owens-Illinois, Inc., 115 F.T.

C. 179 (Feb. 26, 1992); Robert Koski, 112 F.T.C. 500, 1989 WL 1126779; In re Motor

Transport Ass’n of Conn., Inc., 112 F.T.C. 309, 1989 WL 1126778 (Aug. 25, 1989); In re

Midcon Corp., 112 F.T.C. 156 (erroneously recorded as “93”) (July 18, 1989). 19 Cabell, supra note 12.
 20 R.J. Reynolds, FTC Dkt. No. 9285.
 21 Robert Koski, 1989 WL 1126779, at *7.
 

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Administrative Litigation at the FTC 11

Figure 4. The FTC imposes liability more often over time, but in fewer cases

motion for a preliminary injunction.22 In its final order in 1995, the

Commission rejected complaint counsel’s proposed relevant market for

“high volume gravure printing” and concluded that “neither coordinated nor

unilateral anticompetitive effects are a likely result of the acquisition in the

assumed market.”23 It reversed the ALJ and dismissed the complaint.

Similarly, in 1994 in Adventist, the FTC dismissed a Part 3 complaint against

a healthcare-system acquisition. Affirming the ALJ, the Commission held

that “complaint counsel failed to carry the burden of proof” on its proposed

relevant geographic market.24

In 1992, in Owens-Illinois, the FTC dismissed an administrative action

challenging a merger in the glass-container industry. Overruling the ALJ and

disagreeing with complaint counsel, the Commission found that “in each of

the relevant product markets the evidence suggests that anticompetitive

effects are unlikely.”25 In 1989 in Motor Transport, the Commission affirmed

an ALJ determination that the state-action doctrine immunized the collective

22 R.R. Donnelley, 120 F.T.C. 36. It bears noting the Commission today is highly unlikely to

challenge an unconsummated merger in Part 3 after the federal courts, through appeal, deny a

preliminary injunction. Nevertheless, R.R. Donnelley is an example of a case where the FTC

ruled on the merits against complaint counsel. 23 Id. at 137–38. 24 In re Adventist Health Sys./W., 117 F.T.C. 224, 285 (Apr. 1, 1994). 25 Id. at 331.

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12 Journal of Competition Law & Economics

rate-making challenged by the FTC in Part 3 as price-fixing.26 And earlier

that year in Midcon, the FTC sided with the ALJ in dismissing a Part 3 complaint against a consummated acquisition in the natural-gas industry.27 The

agency found that “complaint counsel [had] failed to show that there was a

substantial likelihood of anticompetitive effects in a section of the country.”28

In sum, over the past thirty years the Commission has held in favor of

respondents and against complaint counsel in a variety of matters.29 The

data does not support the claim that the FTC has demonstrated systemic

bias in favor of complaint counsel regardless of the facts, economics, or the

larger merits.30

It is true, however, that in the last decade the FTC has found liability in

almost every Part 3 case that it had authorized. In LabMD, ECM BioFilms,

Jerk, McWane, POM Wonderful, ProMedica, North Carolina Dental, Polypore,

Daniel Chapter One, Realcomp II, and Evanston, the Commission found a section 5 violation.31 Only in Cabell-St. Mary’s—a healthcare-acquisition that

the FTC alleged to be anticompetitive—did the FTC dismiss the Part 3 complaint.32 After the FTC voted to authorize the Part 3 case in that matter,

West Virginia passed a law that purported to shield certain healthcare

26 In re Motor Transport Ass’n of Conn., Inc., 112 F.T.C. 309, 1989 WL 1126778, at *17

(Aug. 25, 1989). 27 In re Midcon Corp., 112 F.T.C. 156, 1989 WL 1126782 (July 18, 1989). 28 Id., at *48. 29 There have also been circumstances in which the ALJ rules against complaint counsel, who

then choose not to appeal to the Commission. See, e.g., Gemtronics, Inc., FTC Dkt. No.

9330, Notice, Dec. 8, 2009 (“Neither Complaint Counsel nor Respondents filed a Notice of

Appeal from the Initial Decision in this matter, and the Initial Decision became the Decision

of the Commission on November 9, 2009.”). 30	 There are examples beyond the cases discussed above. See, e.g., In re Gen. Motors Corp.,

103 F.T.C. 641, *52–53 (1984) (dismissing the complaint, despite the ALJ’s initial decision

finding liability under the Robinson-Patman Act, on the grounds that “the underlying predicate of the Robinson-Patman Act was not consumer welfare” and that “the Commission will

eschew efforts to broaden application of the Robinson-Patman Act beyond that established by

law.”); In re Beatrice Foods Co., 101 F.T.C. 733, *51 (1983) (“We disagree with the ALJ’s

conclusion that the acquisition violates the antitrust laws and order that the complaint be

dismissed.”). 31	 In re LabMD, Inc., FTC Dkt. No. 9357, Opinion of the Comm’n, July 29, 2016; In re ECM

BioFilms, Inc., FTC Dkt. No. 9358, Opinion of the Comm’n, Oct. 19, 2015; In re Jerk,

LLC, FTC Dkt. No. 9361, Opinion of the Comm’n, Mar. 25, 2015; In re McWane, Inc.,

Dkt. No. 9351, Opinion of the Comm’n, Feb. 6, 2014; In re POM Wonderful LLC & Roll

Global LLC, FTC Dkt. No. 9344, Opinion of the Comm’n, Jan. 16, 2013; In re ProMedica

Health Sys., Inc., FTC Dkt. No. 9346, Opinion of the Comm’n, Mar. 28, 2012; In re

N. Carolina State Bd. of Dental Examiners, FTC Dkt. No. 9343, Opinion of the Comm’n,

Dec. 7, 2011; In re Polypore Int’l, Inc., FTC Dkt. No. 9327, Opinion of the Comm’n, Dec.

13, 2010; In re Daniel Chapter One & James Feijo, FTC Dkt. No. 9329, Opinion of the

Comm’n, Dec. 24, 2009; In re Realcomp II Ltd., FTC Dkt. No. 9320, Opinion of the

Comm’n, Nov. 2, 2009; In re Evanston Nw. Healthcare Corp. & EHN Med. Grp., FTC Dkt.

No. 9315, Opinion of the Comm’n, Apr. 28, 2008. 32 Cabell, supra note 12.

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cooperative agreements from antitrust scrutiny, raising potential questions of

state-action immunity.33 Thus, the most recent experience is indeed one in

which the FTC consistently finds liability.

Does the Commission’s near-100 percent record in 12 matters over the

last decade reflect careful case selection or a newly developed predisposition

to rule in staff’s favor? Part IV addresses that question. Evaluating each of

those cases on its merits, it suggests that the more likely explanation for the

Commission’s imposition of liability in all recent cases is the selection of fewer and better cases. This explanation also finds support in the next subpart,

which shows that the FTC’s success on appeal has also increased over time.

More generally, the fact that the Commission has dismissed cases it previously authorized is important, even if the incidence varies over time. It suggests that the agency’s recent track record in siding with complaint counsel is

not necessarily evidence of systemic bias or an institutional flaw. Perhaps the

FTC’s case selection in the last decade, in which the Commission has

affirmed liability in 11 of 12 Part 3 decisions, has been more rigorous and

thus better. An examination of the merits of those decisions reveals that

proposition to be plausible.

2. The FTC’s Appellate Record

Of the 102 administrative matters where the Commission found liability in

the last four decades, the parties appealed 75—or 74 percent—of them to the

federal courts. Of those petitions for review, 62 challenged a liability determination by the FTC (as opposed to a procedural finding or remedial order).

Antitrust matters represented a slight majority of the appeals: 44 of the 75

petitions for review.

The federal courts affirmed liability in 61 percent of petitions for review,

reversed 33 percent of cases, remanded 3 percent, and had mixed rulings in

the remaining 3 percent. That is not a dramatically impressive appellate

record, particularly given that petitioners face an uphill battle because the

courts defer to the FTC’s factual findings and affirm if substantial evidence

supports the agency’s final decision.34 On the other hand, firms can generally

appeal to any circuit, which often allows them to choose a venue with more

favorable precedent.35

33 Id. 34 See, e.g., Toys “R” Us, Inc. v. Fed. Trade Comm’n, 221 F.3d 928, 930 (7th Cir. 2000)

(“[The petitioner] attacks both the sufficiency of the evidence supporting the Commission’s

conclusions and the scope of the Commission’s remedial order. It is hard to prevail on either

type of challenge: the former is fact-intensive and faces the hurdle of the substantial evidence

standard of review, while the latter calls into question the Commission’s exercise of its discretion to remedy an established violation of the law.”). The Commission may not enjoy deference on its interpretation of antitrust law, however. See, e.g., Daniel A. Crane, Technocracy

and Antitrust, 86 TEX. L. REV. 1159, 1199–1200, 1206–07 (2008). 35 15 U.S.C. § 45(c).

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Yet, a potentially crucial trend is apparent from the data. The

Commission’s record on appeal has improved in the last two decades, at

the same time it brings fewer cases in Part 3 and dismisses complaints less

often. From both 1977 to 1986 and 1987 to 1996, the FTC won 50 percent

of appeals. Things got better for Commission Part 3 decisions issued from

1997 to 2006, when the appellate courts affirmed in 67 percent of the cases.

For cases decided by the Commission within the last decade, the FTC

reached its zenith before the judiciary, winning 100 percent of appeals.36

That fact may help to explain why complaint counsel enjoyed a near-100

percent record before the Commission over the last decade.37 Recently, as

examined in Part IV, the agency seems to be bringing strong cases in Part 3.

(Figure 5)

It may also be helpful to break down appeals by competition and

consumer-protection matters. Of the 40 antitrust matters appealed on liability across the full period of this study, the courts affirmed 20 of them,

reversed 16 of them, and reached a mixed conclusion or remanded without a

liability determination in the remainder. The Commission fared better in

consumer-protection matters, winning 17 of the 22 cases appealed on liability

grounds. There are distinct trends over time, however, which these high-level

statistics obscure.

On the antitrust side, the FTC prevailed in appeals from liability decisions

overtime as follows: 36 percent (1977 to 1986), 33 percent (1987 to 1996),

71 percent (1997 to 2006), and 100 percent (2007 to 2016). That trend

shows significant improvement. That phenomenon may be especially notable

on the antitrust side because the previously high rate of reversals is in some

tension with the FTC’s role as an expert adjudicator. The record on

the consumer-protection side differs notably. There, the Commission won

73 percent, 100 percent, 50 percent, and 100 percent of petitions for review

in each of the four preceding decades. Those percentages mask a small number of cases, however, because the database contains only seven consumerprotection matters in which the appellate courts reached a liability decision

36 See N. Carolina State Bd. of Dental Examiners v. Fed. Trade Comm’n, 135 S. Ct. 1101

(2015); Realcomp II, Ltd. v. Fed. Trade Comm’n, 635 F.3d 815 (6th Cir. 2011); Fanning v.

Fed. Trade Comm’n, 821 F.3d 164 (1st Cir. 2016); McWane, Inc. v. Fed. Trade Comm’n,

783 F.3d 814 (11th Cir. 2015), cert. denied, 136 S. Ct. 1452 (2016); POM Wonderful, LLC v.

Fed. Trade Comm’n, 777 F.3d 478 (D.C. Cir. 2015), cert. denied, 136 S. Ct. 1839 (2016);

ProMedica Health Sys., Inc. v. Fed. Trade Comm’n, 749 F.3d 559 (6th Cir. 2014); Polypore

Int’l, Inc. v. Fed. Trade Comm’n, 686 F.3d 1208 (11th Cir. 2012); Daniel Chapter One v.

Fed. Trade Comm’n, 405 F. App’x 505 (D.C. Cir. 2010). Note that, although the D.C.

Circuit granted a petition for review in Rambus in 2008, the FTC rendered its liability decision in that matter in 2006. Hence, the case falls within the 1997 to 2006 period as organized

by this article. See Rambus Inc. v. Fed. Trade Comm’n, 522 F.3d 456 (D.C. Cir. 2008); In re

Rambus, FTC Dkt. No. 9302, Opinion of the Comm’n, Aug. 2, 2006. 37 The sole Part 3 matter that the Commission dismissed for substantive reasons in the last decade was Cabell, due to a change in the law. See Cabell, supra note 12.

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Administrative Litigation at the FTC 15

Figure 5. Commission record with appeals court

in the last 30 years.38 In the 1997 to 2006 period in which the FTC’s appellate success rate dropped to 50 percent in consumer-protection cases, for

instance, there were only two relevant matters.39

A final—but potentially revealing—statistic involves the role, if any, that

affirming or reversing the ALJ plays in the FTC’s success rate on appeal. In

the 47 matters where the FTC affirmed the ALJ and an appeal on liability followed, the Commission won 64 percent of cases. By contrast, when the

Commission overruled the ALJ, imposed liability, and the respondent

appealed (14 cases), the courts affirmed 43 percent of the time. Based on

that observation, there appears to be a benefit to a firm in prevailing before

the ALJ, even if the Commission subsequently imposes liability. Bear in

mind, however, that these comparative figures—64 percent to 43 percent—

derive from limited case numbers.

3. As the FTC Has Become More Likely to Find Liability, Its Appellate Success

Rate Has Improved

Another clear trend emerges regarding the FTC’s liability findings and the

agency’s success on appeal. As the chart below demonstrates, the federal

38	 Fanning, 821 F.3d 164; POM Wonderful, 777 F.3d 478, cert. denied, 136 S. Ct. 1839; Daniel

Chapter One, 405 F. App’x 505; Novartis Corp. v. Fed. Trade Comm’n, 223 F.3d 783 (D.C.

Cir. 2000); Trans Union Corp. v. Fed. Trade Comm’n, 81 F.3d 228 (D.C. Cir. 1996); Kraft,

Inc. v. Fed. Trade Comm’n, 970 F.2d 311 (7th Cir. 1992); Removatron Int’l Corp. v. Fed.

Trade Comm’n, 884 F.2d 1489 (1st Cir. 1989). 39	 See Novartis, 223 F.3d 783 (affirming liability); Trans Union, 81 F.3d 228 (reversing liability).

Note that Trans Union falls within this study’s 1997 to 2006 period because the final

Commission decision in that case occurred in 2000.

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appellate courts have affirmed a higher proportion of the FTC’s liability findings over time. By the same token, the FTC has dismissed fewer cases over

time. The resulting dynamic is, at the very least, consistent with the proposition that the Commission is identifying superior cases in authorizing Part 3

complaints than it used to do in the past.(Figure 6)

4. Until Recently, the Same FTC Majority Rarely Authorized and Decided Part 3

Cases

The basic due-process criticism leveled at the FTC’s institutional design is

that the same people cannot impartially adjudicate a case that they were previously responsible for instituting.40 Combined with claims that the FTC

always finds liability in Part 3 matters, it might be tempting to conclude that

the Commission has its thumb on the scale in hearing appeals from the ALJ

because it made up its mind when it authorized the complaint.

It is significant, then, that different Commissioners voted out and decided

most of the administrative cases in this study. In 72 percent of the matters,

the commissioners who had voted to authorize the Part 3 complaint no

longer were present or formed a majority on the Commission by the

liability-dismissal decision. That dynamic is a function of the duration of

administrative litigation. In times past, the process was protracted and so,

for example, different majority commissions decided 92 percent of the

cases in this study filed between 1967 and 1976. Today, administrative

litigation is more expeditious, which may explain why in the last decade

the same majority Commission authorized and decided 90 percent of

cases.41(Figure 7)

In a counter-intuitive finding, the FTC was actually more likely to dismiss

a Part 3 complaint when the same majority commission initiated and

resolved the case. When the voting majority of commissioners remained, 33

percent of the cases were dismissed. By contrast, when a different majority

arose after approving the complaint, the FTC dismissed 27 percent of the

cases. The explanation, in part, is that liability-dismissal decisions are more

likely to involve the same majority commission when they come soon after

the complaint vote. Hence, changes in the law42 or facts may produce more

dismissals when the same commissioners responsible for authorizing a Part 3

complaint are still present.

40 See, e.g., Posner, supra note 11. 41 See, e.g., Press Release, Fed. Trade Comm’n, FTC Issues Final Rules Amending Parts 3 and

4 of the Agency’s Rules of Practice, Apr. 27, 2009 (announcing rules to “expedite the prehearing, hearing, and appeal phases.”). 42 See, e.g., Cabell, supra note 12 (newly adopted West Virginia law raised state-action hurdles

for the FTC’s challenge to a proposed merger).

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Figure 6. As FTC dismisses fewer cases, it wins more on appeal

0% 

25% 

50% 

75% 

100% 

N Y 

1967-1976 1977-1986 1987-1996 1997-2006 2007-2016 

Note: Based on 145 Commission cases between 1/20/1977 to 7/31/2016 

Figure 7. Cases where the same majority Commission voted out and decided a Part 3 matter

C. High-Level Observations from the Aggregate Data

We now move beyond large trends in the data to consider several findings

that weigh on the due-process issue and on the question whether the FTC’s

Part 3 process is fulfilling its congressional purpose.

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First, the FTC draws particular criticism when it overturns an ALJ’s initial

decision to dismiss a Part 3 matter. Critics often point to that outcome as evidence of bias by the Commission in finding liability despite an independent

fact-finder’s determination to the contrary. Of the 35 matters in the dataset

that the ALJ dismissed, however, the Commission overturned 19 of them (or

in 54 percent of such cases). Hence, reversing the ALJ to find for complaint

counsel does not occur as frequently as some commentators might suggest.

And of the 95 administrative cases in which the ALJ found liability, the

Commission dismissed 11 of them.

Second, when the parties litigate a Part 3 matter before the ALJ, complaint counsel win—meaning that they secure a liability verdict, on at least

one count, in—73 percent of cases. Put differently, firms accused of violating section 5 win outright approximately a quarter of the time before the

ALJ. Breaking down the data by antitrust and consumer-protection matters,

a disparity emerges. Complaint counsel in antitrust matters won 52 of 80

cases or 65 percent of the time. When challenging unfair or deceptive acts

or practices in Part 3, they prevailed in 43 of 50 matters or 86 percent of

those cases.

The parties’ chances of success before the ALJ, however, vary over time.

All four initial decisions on antitrust cases in the last decade found for complaint counsel on at least one count.43 FTC staff performed less well in the

1997 to 2006 period, losing 5 of the 10 competition matters litigated before

the ALJ in that time. Complaint counsel fared worse still in the decade from

1987 to 1996, losing 5 of the 8 antitrust cases (63 percent) they tried before

the ALJ. A mixed record on the competition side extends back into the 1977

to 1986 time frame, when FTC staff lost completely in 12 of 30 (or 40 percent of) competition matters in Part 3 before the ALJ.

Complaint counsel have fared better before the ALJ in consumerprotection cases. FTC staff have prevailed—at least in part—in all but one of

twelve such matters filed between 1987 and 2016. Of the Part 3 matters in

this study, complaint counsel only lost 6 of 38 consumer-protection cases

(16 percent) filed between 1967 and 1986. It seems that ALJs are more

receptive to the FTC’s unfair and deceptive acts or practices cases. Maybe

the Commission tends to authorize more compelling Part 3 cases on the

consumer-protection side, such that the facts and law are clearer than in antitrust matters. Further, and relative to consumer protection, antitrust law saw

sweeping changes during this time. Or perhaps competition matters are simply harder to prove, given the economic complexity and factual disputes that

inevitably arise on market definition and anticompetitive effects. In either

43	 See In re McWane, Inc., FTC Dkt. No. 9351, Initial Decision, May 8, 2013; In re ProMedica

Health Sys., Inc., FTC Dkt. No. 9346, Initial Decision, Dec. 12, 2011; In re N. Carolina Bd.

of Dental Examiners, FTC Dkt. No. 9343, Initial Decision, July 14, 2011; In re Polypore

Int’l, Inc., FTC Dkt. No. 9327, Initial Decision, Mar. 1, 2010.

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case, FTC staff’s asymmetric success rate in competition and consumerprotection cases before the ALJ is striking.

Even in the cases where the ALJ finds liability—73 percent of cases—we

can look more deeply at the nature of those holdings. Not all of those matters

involved pure wins for complaint counsel. Of the Part 3 matters in which

they imposed some form of liability, the ALJ rejected an allegation in 18 percent of those cases, rejected at least one count in 13 percent of those cases,

and struck a respondent in 4 percent of those matters. In 61 of the 95 cases

(64 percent) where the ALJ found liability, he did so finding in favor of FTC

staff on all counts. In short, these statistics reveal that complaint counsel are

consistently more likely to win a Part 3 matter before the ALJ, at least in

part, but that ALJ findings against FTC staff are by no means rare, at least in

competition cases. And, even where complaint counsel ultimately prevail in

securing some liability finding, the ALJs are not shy about rejecting counts or

allegations that they consider to be inconsistent with the evidence.

Third, the FTC brings almost twice (1.7 times) as many antitrust cases in

Part 3 (91) than it does consumer-protection matters (54). If Part 3’s principal advantage over suing in federal court is to develop the law, the disparity

in favor of competition enforcement may make sense. Often, though not

invariably, competition cases pose more complex issues.

Fourth, when the Commission elects to litigate a matter administratively,

it does so unanimously in 78 percent of cases. The level of unanimity in voting out complaints has generally increased over time, rising from 75 percent

of the database cases filed between 1967 to 1976 to 100 percent in the last

decade, with a dip to a low of 71 percent in 1987 to 1996. Interestingly,

unanimity does not seem to depend on whether the Commission majority is

Democratic (80 percent) or Republican (80 percent), though disagreement

in voting out a Part 3 case rises to 31 percent when the Commission’s political constitution is split 50/50. Finally, it bears noting that Commission

unanimity extended to the decision stage, as well. There, 86 percent of decisions were unanimous, with 78 percent of decisions being unanimous in dismissing and 89 percent being unanimous in finding liability.

III. EVALUATING ADMINISTRATIVE ADJUDICATION AT THE FTC

The FTC’s Part 3 authority is a powerful tool for developing or clarifying the

law. For firms accused of violating section 5, however, the administrative

process is rarely their preferred litigation forum. The perception is that the

FTC decides the case when it authorizes staff to file a Part 3 complaint and

hence is not impartial in later reviewing the ALJ’s decision. Should the FTC

reach a final decision in complaint counsel’s favor, the respondent can petition for judicial review. The accused firm enjoys one significant advantage in

that it may file its petition with any U.S. Court of Appeals in whose jurisdiction it conducts business. Nevertheless, the appellate court defers to the

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FTC’s factual determinations, upholding final FTC decisions on a “substantial evidence” basis, even if the court does not defer to the Commission’s

legal analysis.44

Some companies subject to Part 3 adjudication claim due-process deficiencies. This has spurred a robust debate about the merits of Part 3. This

part first examines ways to evaluate Part 3’s efficacy and due-process protections. The findings disclosed in the last part inform the answer. Second, to

contextualize the larger debate, this part touches on a sampling of the literature that has questioned or criticized administrative litigation at the FTC. It

focuses in particular on claims regarding the inevitability of liability findings

when the Commission acts both to vote out a complaint and to review, de

novo, the ALJ’s legal and factual findings.

A. Normative Considerations

How should one evaluate Part 3 and its due-process protections? The answer

turns on three questions. The challenge is that none of them is susceptible of

direct empirical measurement. The issues are as follows: (1) How accurate

are the FTC’s complaints? (2) Does the FTC neutrally review the ALJ’s initial decisions? and (3) Does judicial appellate review ensure accurate

decision-making by the FTC? Each factor matters. First, the accuracy of the

Commission’s “reason to believe” decision controls much of the analysis that

follows. In a world of perfect institutional competence, knowledge, and

design, the FTC would base its decision to issue a Part 3 complaint on a

solid foundation of legal and economic analysis. A trial on the merits before

an independent ALJ would merely confirm the facts that the investigation

had revealed. Regardless of the ALJ’s ruling, the Commission would rule on

appeal consistently with its initial vote. The FTC’s decision would stand free

of error. There may still be an issue of appearances, but the substantive critique would ultimately be hollow.

Of course, we do not occupy such a world. Hence, it is important that the

Commission stand ready to revisit its prior determinations should a full

record—bolstered not least by cross-examination of key witnesses and

experts—reveal facts, economic insights, or legal principles that the initial

investigation and complaint recommendation and deliberation did not

adequately uncover. But how do we assess whether the Commission’s “reason to believe” findings are well founded and accurate? There is no perfect

answer, but the FTC’s record before the appellate courts may provide the

best available insight.

Second, the FTC’s review of the ALJ decision frames the due-process

issue. Perhaps it is preferable as a matter of institutional design to split the

44	 See, e.g., Toys “R” Us, Inc. v. Fed. Trade Comm’n, 221 F.3d 928, 930 (7th Cir. 2000);

Crane, supra note 34.

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prosecutorial and adjudicative functions. Even then, however, an independent and careful review by the Commissioners—unmoved by an earlier vote to

authorize the complaint—would largely or entirely solve the problem. Hence,

the key question: does the FTC assess the merits blind to the Commission’s

earlier view or does it tip the scales in complaint counsel’s favor, unconsciously or otherwise?

Unfortunately, teasing out an answer is not easy. When the Commission

reverses the ALJ and imposes liability, for instance, does it (1) simply rubber

stamp its prior decision, (2) fully scrutinize the record with an open mind to

revisiting and rejecting its earlier, initial determinations,45 or (3) adopt a

half-way position, approaching the appeal with a priori expectations consistent with its “reason to believe” decision, but willing to consider evidence or

legal theories pointing the other way? The fact that a particular FTC decision

favors complaint counsel sheds little light on the answer.

Nevertheless, if we assess a sufficiently large pool of Part 3 decisions,

unwavering uniformity may look suspicious. Initial, “reason to believe” votes

are of course susceptible to error. Trials, which include live testimony and

cross-examination, expose truth more accurately. Even if the Commission

makes well-informed decisions in voting out a complaint, we would expect to

see some deviation at the Commission liability-dismissal stage over enough

cases if a scrutinizing review takes place. Further, even if the FTC does not

dismiss or otherwise reject a set of complaint counsel’s cases in their entirety,

one would expect some trimming of counts, respondents, or remedies to

occur if review on appeal is in fact de novo, rigorous, and independent of the

prior vote to authorize the complaint.

To answer this second question, however, one must first resolve the first:

does the Commission identify meritorious cases in the first instance and

screen out poor ones? Unless we know the answer, outcomes on appeal from

the ALJ to the FTC tell us little. For instance, if the FTC did a poor job at

Part 3 case selection, an unwavering adherence to complaint counsel would

signal a problem. In that situation, one could reasonably infer that the

Commission made its mind up when it voted out the complaint. By contrast,

if the FTC overwhelmingly picked meritorious cases, the fact that it rarely

dismissed a Part 3 case on appeal from the ALJ would be consistent with full,

independent scrutiny on appeal. As noted, however, it is hard to gauge the

quality of the Commission’s initial votes. Thus, perhaps the best proxy is to

consider how the FTC fares at the federal courts of appeals and at the

Supreme Court, using those higher institutional bodies’ rulings as a qualitative metric.

Third, whether judicial review holds the FTC to its proof is an empirical

question with no obvious answer. We gain important in sight, however, by

45	 Note that, in reviewing an appeal from an initial decision, the Commission does not defer to

the ALJ’s legal or factual findings, pursuant to its statutory authority. See 16 C.F.R. § 3.54(a).

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looking at the depth of the appellate courts’ scrutiny, how often accused

firms’ petitions for review succeed, and whether the FTC’s success record

has improved over time.

The statistics emerging from Part II above inform these factors and ought

to be useful to the substantive debate. We now move to review some of the

literature criticizing the FTC’s Part 3 process.

B. Due-Process Criticism of Part 3

Commentators have long worried about the combined functions performed

by the Commission in Part 3. In 1981, for instance, the ABA observed, “No

thoughtful observer is entirely comfortable with the FTC’s (or other agencies’) combining of prosecutory and adjudicatory functions. Whenever the

same people who issued a complaint later decide whether it should be dis46 missed, concern about at least the appearance of fairness is inevitable.” A

decade earlier, former FTC Commissioner Philip Elman noted that the

“Commission plays many roles. It is investigator, prosecutor, judge, and

jury.”47 He warned of “the subtle institutional influences which no law, regulations or codes of ethics can remove”—motivations that might include “fear

that dismissal of its own complaint will be construed as an admission of

costly error.”48

Turning to contemporary writings, in 2008, A. Douglas Melamed opined

that FTC “Commissioners inherently and unavoidably lack the independence that we expect from adjudicative fact-finders.”49 Observing 60 FTC

cases litigated in Part 3 between 1983 and 2007, he found that “the

Commission won nearly 80 percent of the cases” and argued, “That result

itself suggests a process that is tilted in favor of the Commission and against

respondents.”50 He concluded that Part 3 “adjudication appears not to be

sufficiently reliable to be counted upon to send the kind of sound, clear signals to the business community that competition policy requires.”51

In 2013, David Balto argued that the FTC’s “administrative litigation role

is particularly unsettling” because the agency “acts as both prosecutor and

judge.”52 Noting the Commission’s high-profile dismissal of the R.R.

Donnelley merger litigation in 1995, he observed that since then “the FTC

has always found a violation. In over 20 cases it has never found for the

46 Report of the American Bar Association Section of Antitrust Law Special Committee to Study the

Role of the Federal Trade Commission, 58 ANTITRUST L.J. 43, 119 (1989–1990). 47 Philip Elman, Note, Administrative Reform of the Federal Trade Commission, 59 GEO. L.J. 777,

785 (1971). 48 Id. at 810. 49 Melamed, supra note 7, at 17. 50 Id. at 18 (noting an unpublished study by Andrew Ewalt). 51 Id. at 21. 52 David A. Balto, The FTC at a Crossroads: Can It Be Both Prosecutor and Judge?, 28 LEGAL

BACKGROUNDER 1, 1 (2013).

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respondent and has reversed ALJ decisions that dismissed complaints. This

FTC ‘winning streak’ is simply unprecedented.”53 It was not always that

way. He noted, for instance, that “in the 1980s the Commission dismissed

over 40 percent of its complaints on the merits.”54 Regardless of the root

cause, he argues that the Commission’s “almost two decade history of always

ruling in its own favor creates a strong impression of unfairness.”55

What factors explain the FTC’s consistently imposing liability in final

decisions under Part 3? Perhaps the Commission brings stronger cases inhouse than it used to do. Mr. Balto is dubious, however, because “some of

its most important cases have been rejected by the appellate courts” and its

Part 3 rulings “often do not stand up on appeal.”56 Other explanations

include the FTC’s “trying to establish new legal principles or explore new

legal avenues” or that the ALJ’s rulings are inadequate.57 Either way, Mr.

Balto finds the Commission’s consistent decisions favoring complaint counsel to be problematic.

Mr. Balto’s voice is not the only one that questions the fairness of the

FTC’s Part 3 process. Former Commissioner Joshua Wright recently criticized Part 3 in connection with his larger view that the FTC eschews the

“economic approach to antitrust enforcement.”58 He questions whether the

Commission brings “unbiased rigor and expertise” through its administrative

litigation.59 The culprit, he suggests, is that Part 3 gives the FTC “the option

of playing prosecutor and judge. As prosecutor, the FTC Commissioners can

vote to authorize its staff to initiate an administrative hearing before an

administrative law judge. As judge, if the FTC loses in front of its own

administrative law judge, the Commissioners themselves review the case.”60

He concludes that this ability “has been problematic and raises significant

concerns that the deck is stacked against firms and in the agency’s favor.”61

C. Empirical Studies on Administrative Litigation at the FTC

Due-process claims about the FTC’s Part 3 process are mostly anecdotal or

theoretical. That is, aside from the charge that appearances alone are

53 Id. at 3. But see Part II.B.1 supra.
 54 Id. at 2.
 55 Id. at 3 (emphasis in original).
 56 Id.
 57 Id.
 58 Wright, supra note 7.
 59 Id.
 60 Id.
 61 Id. Other commentators have also expressed due-process concerns with the FTC’s Part 3 process. See, e.g., Mark Leddy, Christopher Cook, James Abell & Georgina Eclair-Heath,

Transatlantic Merger Control: The Courts and the Agencies, 43 CORNELL INT’L L.J. 25, 53

(2010) (contending that “the FTC’s recent proposals . . . raise concerns about prosecutorial

bias and lack of effective judicial oversight.”).

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problematic, the question whether the FTC neutrally reviews ALJ initial

decisions is, at least in part, empirical. Hence, this part closes by addressing

the limited empirical scholarship on Part 3. Does the evidence support

charges of FTC bias in favor of complaint counsel? Given the relatively thin

factual record to date, there is no clear answer to that question. This article,

of course, hopes to contribute to a more complete discussion.

The most in-depth study to date appears to be Nicole Durkin’s 2013

piece, Rates of Dismissal in FTC Competition Cases from 1950–2011 and

Implications for Fairness.

62 It pursued three substantive questions.

First, how often did the FTC dismiss Part 3 antitrust cases on appeal from

the ALJ?63 Studying competition matters resolved on the merits between

1950 and 2011, Ms. Durkin found that the Commission dismissed 20 percent of its Part 3 antitrust cases in the 1950s, 15 percent in 1960s, 13 percent

in the 1970s, 40 percent in the 1980s, 24 percent in the 1990s, and 0 percent

in the 2000s.64 Viewing the 1980s as an outlier, she cautioned against

extrapolating general principles from that decade. In her view, the dismissal

rates “cannot be relied upon in concluding that FTC adjudication is free

from bias resulting from the Commission’s dual functions.”65 She acknowledged, however, that superior case selection may explain the FTC’s tendency

not to dismiss on the merits.66

Second, although the FTC is an independent agency, Ms. Durkin looked

for political bias in Part 3 final orders.67 She scrutinized “straddle cases”

where a majority Commission associated with one administration authorized

an action and a majority Commission associated with the other party heard

the appeal from the ALJ.68 Three presidential administrations fell within her

review, specifically those of Eisenhower, JFK/LBJ, and Reagan.69 She found

that, on average, the FTC was 1.6 times more likely to dismiss straddle cases

than non-straddle matters.70 That phenomenon dissipated, however,

between the Eisenhower and Reagan administrations.71 As with the first

question she studied, she found the data ambiguous. Her takeaway point was

similar: “this data does not offer support for the conclusion that the

62 Nicole Durkin, Comment, Rates of Dismissal in FTC Competition Cases from 1950–2011 and

Implications for Fairness, 81 GEO. WASH. L. REV. 1684 (2013); see also Melamed, supra note 7. 63 Durkin, supra note 62, at 1697–1700. 64 Id. at 1699. This article cites the results that Ms. Durkin reported after adjusting for sweeps

cases, where the FTC sues multiple firms in the same industry as part of a single enforcement

action. 65 Id. 66 Id. at 1699–1700. 67 Id. at 1700–03. 68 Id. 69 Id. at 1701. 70 Id. at 1702. 71 Id.

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Commission enjoys the political independence that would make any bias

resulting from its dual functions tolerable.”72

Finally, Ms. Durkin asked when the appellate courts were more likely to

affirm FTC decisions than the final orders of other federal agencies.73 She

observed that the courts reversed 29 percent of the FTC’s antitrust final

orders in 1970s, 64 percent of those cases in the 1980s, 20 percent in the

1990s, and 22 percent in the 2000s.74 Those percentages compared unfavorably to the judiciary’s 13.06-percent reversal rate of all agency decisions

between 1997 and 2011.75 She cautioned, however, that the FTC decisions

are too few to employ statistically reliable cross-agency comparisons.76

Although a valuable contribution to the literature, Ms. Durkin’s work is a

starting point. She did not study consumer-protection matters, which provide

a larger window into the Commission’s Part 3 final decision-making.77 Nor

did she track individual counts or ask whether the FTC’s track record on

appeal varied depending on whether the Commission affirmed or reversed

the ALJ. This article explores all of those points and more, including the political constitution of the Commission at the time of authorizing a Part 3 complaint and reaching a final decision across the full temporal range of the

study.

A study by Andrew Ewalt, and referenced by A. Douglas Melamed in

2008, examined a 25-year universe of Part 3 decisions between 1983 and

2007.78 It found that, of the 16 matters, “respondents did not win a single

such case.”79 The unpublished study reportedly covered only “Sherman Act

cases litigated and decided on the basis of disputed facts,”80 and we do not

know which cases fall within and outside of that criterion.81 Given the study’s

limited coverage and unclear case selection, it is difficult to evaluate its results.

Certainly, the study is not a substitute for this article’s in-depth examination of

145 Part 3 antitrust and consumer-protection matters over a 40-year period.

In conclusion, there is a real need for more a more nuanced analysis of the

FTC’s Part 3 process. This article marks a step forward in empirical understanding of administrative litigation at the FTC. The next part takes advantage of the limited pool of recent cases to delve behind the numbers to

evaluate the individual underlying matters. Doing so suggests that

72 Id. at 1703.
 73 Id. at 1703–05.
 74 Id. at 1704.
 75 Id. at 1705.
 76 Id.
 77 Id. at 1694.
 78 Melamed, supra note 7, at 14.
 79 Id. (emphasis omitted).
 80 Id.
 81 Because the FTC does not enforce the Sherman Act, I understand the “Sherman Act cases”

reference to mean “unfair methods of competition” claims under section 5 of the FTC Act

that rest on a Sherman Act theory, as distinct from standalone section 5 claims.

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contemporary Part 3 practice reflects improved case selection, which casts a

better light on the FTC’s recent liability determinations, especially given the

relatively small number of recent administrative cases.

IV. DELVING FURTHER INTO PART 3: PAST, PRESENT, AND FUTURE

Claims that the FTC invariably imposes liability in Part 3 are understandable.82 They reflect the reality of recent administrative litigation. In the last

decade, the Commission has found liability on at least one count in every

appeal from an ALJ’s initial decision. For firms accused of wrongdoing, it is

easy to infer that liability is a foregone conclusion. Yet, I do not think that

that inference is justified, for at least two reasons.

First, the last decade of Commission decisions provides only a small number of cases—twelve—making it an unreliable sample from which to draw

broad inferences about the FTC’s institutional design. In fact, looking at the

merits of the underlying cases provides insight that data alone may overlook.

Accordingly, the first subpart here analyzes the Commission’s last ten years

of Part 3 decisions to gauge their quality.

Second, if the design of Part 3 led the Commission always to impose

liability after an initial “reason to believe” determination because of a systemic bias, then the numbers over time should bear out that phenomenon.

But they do not. As Part II explained, the FTC dismissed 40 percent of its

competition matters in Part 3 and did so for 24 percent of such cases on the

merits. Coupled with the Commission’s strengthening record on appeal

before the courts over time, the more likely explanation is that the FTC is

doing an increasingly good job at picking meritorious cases. The FTC’s staff

pursues exhaustive, data-rich investigations, coupled with empirical and theoretical analysis by the Bureau of Economics, which provides a separate

recommendation. The Commission thoroughly scrutinizes all the recommendations, hears the parties’ arguments in detail, and often engages in robust

deliberations among Commissioners. And an evaluation of the FTC’s propensity to impose liability in Part 3 is incomplete without also considering

the fact that the Commission frequently closes investigations rather than pursue litigation, whether administratively or in court.

We now turn to the last decade’s worth of Part 3 decisions to discern

whether criticism of the Commission’s de facto 100 percent record in that

period has accurately identified a systemic-bias problem.

A. Is the FTC a Kangaroo Court? Evaluating the Substantive Cases

The cost of a small dataset is that the ensuing statistics only allow a modest

range of reasonable inferences. For instance, the fact that the Commission

82 See, e.g., Wright, supra note 7.

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essentially found liability in all cases in the last decade does not necessarily

imply deficient due process or suggest that the FTC has its thumb on the

scales. Twelve cases simply are not enough to warrant such a conclusion.

But a limited data pool also has benefits. It allows us to look beyond the

numbers to evaluate the underlying cases on a substantive basis.

If the FTC’s recent practice of siding with complaint counsel is problematic, it must be because the Commission failed to dismiss an unmeritorious

action. We can test that proposition by looking at the relevant cases. Of the

twelve study cases that were the subject of an FTC dismissal/liability decision

in the last decade, seven were antitrust matters (Cabell, North Carolina State

Board, McWane, Evanston, ProMedica, Polypore, and Realcomp II) and five

were consumer-protection cases (LabMD, ECM BioFilms, Jerk, POM

Wonderful, and Daniel Chapter One).83

Some of those enforcement actions stand among the FTC’s most influential and pro-consumer victories to date. In North Carolina Dental, the FTC

challenged a state regulatory board controlled by active market participants

in the field of dentistry for prohibiting non-dentists from offering teethwhitening services.84 The Commission secured an influential victory at the

Supreme Court, which limited the scope of state-action immunity.85

McWane was a rare example of a monopolization suit that was both meritorious and successful. In 2015, the Eleventh Circuit affirmed the FTC’s liability

finding based on the dominant firm’s use of exclusive-dealing contracts to

exclude its competitors.86

Evanston marked a turning point in antitrust scrutiny of healthcare mergers.87 After the FTC and DOJ lost seven hospital-merger challenges in a

row, the FTC conducted a section 6(b) study to understand the competitive

effects of such deals, finding effects to be more localized and geographic markets to be narrower than previously thought.88 One of four consummated

transactions examined in that study was Evanston, which the FTC subsequently challenged through a ground-breaking Part 3 action. The FTC prevailed in every healthcare-merger challenge after Evanston until May 2016,

when two district courts denied the agency’s motions for preliminary

83 See supra note 31.
 84 N. Carolina State Bd. of Dental Examiners v. Fed. Trade Comm’n, 135 S. Ct. 1101, 1104
 

(2015). 85 Id. The North Carolina Dental marked the culmination of a long attempt to clarify the stateaction doctrine. For my further thoughts on the topic, see Maureen K. Ohlhausen,

Reflections on the Supreme Court’s North Carolina Dental Decision and the FTC’s

Campaign to Rein in State Action Immunity (Mar. 31, 2015). 86 McWane, Inc. v. Fed. Trade Comm’n, 783 F.3d 814 (11th Cir. 2015). 87 In re Evanston Nw. Healthcare Corp. & EHN Med. Grp., FTC Dkt. No. 9315, Opinion of

the Comm’n, Apr. 28, 2008. 88 See, e.g., Timothy J. Muris, Chairman, Fed. Trade Comm’n, Prepared Remarks Before the

7th Annual Competition in Health Care Forum: Everything Old Is New Again: Health Care

and Competition in the 21st Century (Nov. 7, 2002).

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injunction.89 The FTC obtained stays in both cases and has appealed to the

relevant circuits. Regardless of its success in those appeals, the antitrust community widely regard Evanston as a ground-breaking case.90

The other three Part 3 antitrust matters from the last decade are also noteworthy. In ProMedica, the FTC challenged the hospital’s consummated

acquisition of St. Luke’s in Part 3.91 The agency won an important appeal at

the Sixth Circuit in 2014.92 In Polypore the FTC challenged a consummated

deal in the battery-component market,93 and the appellate court affirmed.94

And in Realcomp II, the FTC challenged an entity comprised of real-estate

agents and brokers that published a database of listings, for refusing to publish information regarding discount real-estate brokers.95 The Sixth Circuit

affirmed.96

This consistently positive record in the appellate courts weakens the argument that the Commission finds liability in unmeritorious cases due to systemic bias. The same is true on the consumer-protection side. Although I

disagreed with some aspects of two of those Commission decisions,97 the

Commission appropriately found liability for the core behavior challenged in

each case.

In Jerk, the Commission filed a Part 3 complaint against “Jerk LLC” and

its founder, John Fanning, based on misrepresentations contained on “Jerk.

com” about the source of its content and the benefits of subscribing as a

member. FTC staff moved for summary decision, which a unanimous

Commission granted.98 In May 2016, the First Circuit affirmed liability.99 In

POM Wonderful, the D.C. Circuit upheld an FTC decision that a firm’s

disease-prevention claims pertaining to its pomegranate juice misled consumers.100 The court also rejected the petitioner’s constitutional arguments,

89 Fed. Trade Comm’n v. Advocate Health Care Network, No. 15 C 11473, 2016 WL 3387163

(N.D. Ill. June 20, 2016); Fed. Trade Comm’n v. Penn State Hershey Med. Ctr., No. 1:15­

cv-2362, 2016 WL 2622372 (M.D. Pa. May 9, 2016), argued, No. 16-2365 (3d Cir. July 26,

2016). But cf. Fed. Trade Comm’n v. Staples, Inc., No. 15-2115 (EGS), 2016 WL 2899222

(D.D.C. May 17, 2016). 90 See, e.g., Lisa Jose Fales & Paul Feinstein, How to Turn a Losing Streak into Wins: The FTC

and Hospital Merger Enforcement, 29 ANTITRUST 31 (2014). 91 In re ProMedica Health Sys., Inc., FTC Dkt. No. 9346, Opinion of the Comm’n, Mar. 28,

2012. 92 Promedica Health System, Inc. v. Fed. Trade Comm’n, 749 F.3d 559 (6th Cir. 2014). 93 In re Polypore Int’l, Inc., FTC Dkt. No. 9327, Opinion of the Comm’n, Dec. 13, 2010. 94 Polypore Int’l, Inc. v. Fed. Trade Comm’n, 686 F.3d 1208 (11th Cir. 2012). 95 In re Realcomp II Ltd., FTC Dkt. No. 9320, Opinion of the Comm’n, Nov. 2, 2009. 96 Realcomp II, Ltd. v. Fed. Trade Comm’n, 635 F.3d 815 (6th Cir. 2011). 97 See In re ECM BioFilms, Inc., FTC Dkt. No. 9358, Partial Dissent of Commissioner

Maureen K. Ohlhausen, Oct. 19, 2015; see also In re POM Wonderful, FTC Dkt. No. 9344,

Concurring Statement of Commissioner Maureen K. Ohlhausen, Jan. 10, 2013. 98 In re Jerk, LLC, FTC Dkt. No. 9361, Opinion of the Comm’n, Mar. 25, 2015. 99 Fanning v. Fed. Trade Comm’n, 821 F.3d 164 (1st Cir. 2016). 100 POM Wonderful, 777 F.3d at 478.

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except insofar as the FTC’s remedial order “imposed an across-the-board,

two-RCT [randomized clinical trial] substantiation requirement for any

future disease-related claims by petitioners.”101 The Supreme Court denied

certiorari in May 2016.102 And in Daniel Chapter One, the D.C. Circuit

affirmed an FTC decision that the company and its sole “overseer” and

member deceived customers into thinking that its herb products variously

inhibited tumor growth and treats cancers.103

The merits and the appellate success of these cases do not support a

narrative that the Commission blindly supports ill-conceived cases because of

systemic bias. To the contrary, they show a recent history of solid, wellsupported enforcement actions in Part 3, even if one does not agree with

every choice the Commission has made in each matter. The courts have

affirmed all 8 of the Commission liability decisions that have been

appealed.104 Trying to use the last decade as evidence of the FTC’s blindly

siding with complaint counsel simply does not square with an evaluation of

the underlying matters.

Indeed, to find Part 3 antitrust liability decisions that succumbed on

appeal, one must reach back to Rambus and Schering-Plough.

105 Those cases

warrant mention, if only because critics of the FTC’s Part 3 record have

focused on them in the past. For example, in 2013, one observer wrote,

“recently the appellate courts have been critical of the FTC’s decisionmaking where it has substituted its fact finding for the ALJ” and illustrated

his point with the Schering-Plough and Rambus cases.106 In criticizing the

FTC’s Part 3 process, others have made a similar point.107 In my view, however, Schering-Plough and Rambus are poor support for these critiques.

The weakness of these claims is most evident in Schering-Plough. There,

the Eleventh Circuit adopted a scope-of-the-patent test for antitrust liability

governing pay-for-delay agreements in the pharmaceutical sector.108 Finding

that the branded-drug manufacturer’s patent lawsuit could have excluded the

allegedly infringing generic, the court found that Schering-Plough’s

101 Id. at 499. I supported (and wrote) the Commission’s opinion finding liability in POM

Wonderful, but also explained my disagreement “with the majority’s view that two RCTs are

warranted in the order as fencing in Relief.” In re POM Wonderful LLC, FTC Dkt. No.

9344, Jan. 10, 2013, at 51 n.36. I would have required “only one RCT and would regard

that study in view of other available scientific evidence.” Id. The D.C. Circuit opinion agreed

with my view. POM Wonderful, 777 F.3d at 489, 499, passim. 102 POM Wonderful, 136 S. Ct. 1839. 103 Daniel Chapter One v. Fed. Trade Comm’n, 405 F. App’x 505 (D.C. Cir. 2010). 104 As of September 2016, ECM BioFilms was on appeal to the Sixth Circuit, from which an

opinion was forthcoming. 105 Rambus Inc. v. Fed. Trade Comm’n, 522 F.3d 456 (D.C. Cir. 2008); Schering-Plough

Corp. v. Fed. Trade Comm’n, 402 F.3d 1056 (11th Cir. 2005), cert. denied, 548 U.S. 919

(2006). 106 Balto, supra note 52. 107 See, e.g., Melamed, supra note 7, at 15. 108 Schering-Plough, 402 F.3d at 1065–68.

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agreement to settle the lawsuit by paying the generic to abandon its validity

challenge fell within the patent’s scope and was therefore lawful.109 That ruling marked a serious setback for the FTC’s antitrust-enforcement agenda in

the life sciences, but it was not the end of the story. In 2013, the Supreme

Court rejected the scope-of-the-patent test and upheld the FTC’s position

that such agreements may violate the antitrust laws. Far from being evidence

of a poor case selection and a deficient administrative process, ScheringPlough is a positive example of the FTC’s pursuing the development of antitrust law through Part 3.

Rambus raises more interesting questions.110 The matter challenged alleged

holdup by Rambus of JEDEC, a microelectronics standard-setting organization, by concealing and later enforcing its standard-essential patents (SEPs)

against firms implementing JEDEC standards. The antitrust questions that

emerge from the use of SEPs in industries subject to voluntary standards are

among the most difficult in the field today. For the last several years, leading

experts have debated the theoretical and empirical support for holdup and

holdout by owners and users of proprietary technology.111 In its 2006 decision in Rambus, a unanimous Commission imposed liability in Part 3, finding

that—due to the firm’s deception—JEDEC lost the opportunity either to

design a standard without Rambus’s technology or to secure a commitment

from Rambus to license its technology on reasonable and nondiscriminatory

(RAND) terms.112

The D.C. Circuit granted the petition for review.113 It assumed, without

deciding, that tricking an SSO into adopting one’s technology over a substitute

technology would harm competition.114 There was insufficient evidence, however, that JEDEC would have chosen a different technology had Rambus disclosed its patents. Hence, liability for monopolization could exist only if evading

a RAND-licensing promise was anticompetitive. The D.C. Circuit held that it

was not because the deception did not impair a rival or otherwise harm the

competitive process.115 It merely resulted in a higher price, which under the

court’s reading of NYNEX was not actionable anticompetitive conduct.116

109 Id. 110 Rambus Inc. v. Fed. Trade Comm’n, 522 F.3d 456, 456 (D.C. Cir. 2008).
 111 See, e.g., Thomas F. Cotter, Patent Holdup, Patent Remedies, and Antitrust Responses, 34 J. 
 

CORP. L. 1151, 1151–53 (2009) (summarizing positions). Disagreement has continued

between FTC Commissioners on these questions. Compare, e.g., Written Submission on the

Public Interest of Federal Trade Commission Chairwoman Edith Ramirez, In re Certain 3 G

Mobile Handsets & Components Thereof, July 10, 2015, with Reply Submission on the

Public Interest of Federal Trade Commissioners Maureen K. Ohlhausen and Joshua

D. Wright, In re Certain 3 G Mobile Handsets & Components Thereof, July 20, 2015. 112 In re Rambus, Dkt. No. 9302, Opinion of the Comm’n, Aug. 2, 2006 113 Rambus, 522 F.3d at 456. 114 Id. at 463. 115 Id. at 463–67. 116 Id. at 464–65 (relying on NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998)).

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It is clear that Rambus raises difficult issues at the cutting edge of antitrust

law. But it is in complex cases where Part 3 has its greatest value. This brings

me to a nuanced point. Regardless of whether one agrees with the FTC’s decision in Rambus, it is scant evidence of a predisposition by the Commission

stubbornly to stick to its prior position in voting out a complaint. And even if

the Commission erred in holding as it did—a question that the antitrust bar

still debates—Rambus is not a liability decision that plausibly indicates bias or

prejudgment.

B. Finding the Value in Administrative Litigation: Time to Develop

the Law

As my account of recent Part 3 cases reveals, the Commission has recently

employed its administrative process rather well. It halted and reversed a losing streak in healthcare-merger enforcement with its Part 3 action in

Evanston.

117 The FTC magnified that success in ProMedica.118 It brought a 119 rare modern example of a successful monopolization action in McWane. It

fought an early battle in an ultimately victorious campaign against pay-fordelay agreements in Schering-Plough.

120 And it persuaded the Supreme Court

to narrow the state-action immunity doctrine in North Carolina Dental.

121

Part 3 underlay each of those enforcement actions.

As a former FTC Commissioner observed 45 years ago, the agency “was

conceived not as a prosecutorial or enforcement body, but as an expert

administrative tribunal vested with the responsibility for developing an

enlightened antitrust policy and given the tools to carry out that task.”122 It

should not be controversial to suggest that the FTC as an institution123 has

greater substantive expertise in antitrust law and economics than many—

though certainly not all—federal district judges.124 In modern practice, the

FTC has effectively deployed its administrative-litigation process to develop

the law for consummated deals. In clear-cut conduct matters, district court is

117 In re Evanston Nw. Healthcare Corp. & EHN Med. Grp., FTC Dkt. No. 9315, Opinion of

the Comm’n, Apr. 28, 2008. 118 ProMedica Health Sys. Inc. v. Fed. Trade Comm’n, 749 F.3d 559 (6th Cir. 2014). 119 McWane, Inc. v. Fed. Trade Comm’n, 783 F.3d 814 (11th Cir. 2015). 120 Schering-Plough Corp. v. Fed. Trade Comm’n, 402 F.3d 1056 (11th Cir. 2005). 121 N. Carolina State Bd. of Dental Examiners v. Fed. Trade Comm’n, 135 S. Ct. 1101 (2015). 122 Elman, supra note 47, at 781. 123 This is not to suggest that all FTC Commissioners are themselves experts in competition,

consumer protection, or economics. See, e.g., William E. Kovacic, The Quality of

Appointments and the Capability of the Federal Trade Commission, 49 ADMIN. L. REV. 915

(1997). Rather the point is that the institutional framework of the FTC with Bureaus of

Competition, Consumer Protection, and Economics—combined with the agency’s research

policy and enforcement experience—provides the Commission a solid foundation in these

areas. 124	 Accord, e.g., Mark Leddy et al., Transatlantic Merger Control: The Courts and the Agencies, 43

CORNELL INT’L L.J. 25, 53 (2010).

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usually the preferable forum. But with new questions continuing to arise,

especially—but by no means only—in patent-related cases, Part 3 is a unique

asset for contemporary antitrust policy. For that reason, I have generally

favored bringing difficult conduct matters in Part 3, rather than in federal

court. Thus, for example, I dissented from a recent Commission vote to litigate a pay-for-delay case in federal court, instead of through administrative

adjudication.125

In short, frontier antitrust cases are what Congress designed Part 3 to

tackle. Not everyone agrees, however, that the FTC is endowed with unique

substantive expertise vis-à-vis the courts. Wright and Diveley question, for

example, whether the FTC outperforms district courts in antitrust cases.126

And indeed former-Commissioner Wright has previously found evidence

that judges do struggle with antitrust matters.127 Thus, the authors’ findings

about the FTC’s relative performance warrant attention.

Wright and Diveley found that “cases decided by the Commission are 14

per cent more likely to be appealed than are cases decided by Article II[I]

judges.”128 They regard the decision to appeal as the principal indicator of

the quality of the underlying decision.129 The theory is that, by appealing, a

party credibly signals a lack of faith in the integrity of the underlying order.

Wright and Diveley also determined that “Commission decisions are

reversed 20 per cent of the time and decisions by Article III judges are

reversed only 5 per cent of the time.”130 Subsequently running a regression,

they “consistently observe higher appeal and reversal rates for the Commission

that are robust to controls for type of case, time trends, and a variety of

robustness checks designed to control for unobservable differences in cases

brought through administrative litigation rather than in federal district

court.”131

Although welcoming the study as the start of much-needed empirical work

in this field, I take the authors’ findings with a grain of salt. Two considerations, in particular, warrant caution in inferring that federal district courts

125	 See, e.g., In re Endo Pharma. Inc., Dissenting Statement of Commissioner Maureen K.

Ohlhausen (Mar. 31, 2016), (“I do not believe . . . that it serves the public interest to seek

disgorgement in this case. The better course would be to pursue this matter administratively.

The Part III process grants the Commission a unique tool to advance the law. Employing it

here would allow the Commission to render a thoughtful decision applying the Actavis standard, providing much-needed guidance to courts and firms around the country.”). 126 Joshua D. Wright & Angela Diveley, Do Expert Agencies Outperform Generalist Judges? Some

Preliminary Evidence from the Federal Trade Commission, 1 J. ANTITRUST ENFORCEMENT 1

(2013). 127 Michael D. Baye & Joshua D. Wright, Is Antitrust Too Complicated for Generalist Judges? The

Impact of Economic Complexity and Judicial Training on Appeals, 54 J.L. & ECON. 1 (2011). 128 Wright & Diveley, supra note 126, at 13. 129 Id. at 10. 130 Id. at 15. 131 Id. at 20.

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typically reach superior antitrust decisions. First, it is unclear whether the

quality of FTC determinations in the 1970s and 1980s—during a time of

seismic change in antitrust law, when the Commission brought and lost many

more Part 3 actions than it does today—is representative of the sophistication

of the agency’s decision-making today. As explained above, the FTC has

fared extremely well on appeal in the last two decades and a close look at the

cases taken in the last ten years reveal consistent merit. By contrast, the FTC

won antitrust appeals in just 37 percent of cases from 1977 to 1986 and

34 percent the following decade. Summing the data on antitrust Part 3 matters from 1976 to 2010, as the authors did, may not accurately convey the

reality of the modern Commission. It is possible and indeed likely, for

instance, that the FTC’s performance was historically less strong than it is

today. Certainly, there is a view that today’s agency is a more sophisticated

entity than it was before the Chicago revolution took hold.

Second, it is unclear whether a party’s decision to appeal is a reliable proxy

of the quality of underlying decision, and especially when using those choices

to compare two dissimilar contexts. Based on criticism already discussed,

there is likely a perception—warranted or not—that the FTC will find liability

in a Part 3 proceeding. Companies that litigate through the ALJ trial and

appeal to the Commission, may surmise that the petition for review to a U.S.

Court of Appeals is where they should fight the battle. Put differently, it

would not be surprising if respondents are more likely to appeal from an

FTC final decision than the average disappointed party is in a federaldistrict-court proceeding. Finally, it is not at all obvious that the Commission

and district courts hear comparable antitrust matters.

In conclusion, there is a need for more nuanced analysis of the institutional expertise of the antitrust agencies vis-à-vis district court. Indeed, the

reality of the FTC’s modern appellate record in Part 3—winning 100 percent

of all antitrust appeals from Part 3 in the last decade and 71 perceent the decade before—, the impact of Part 3 decisions on recent developments in antitrust law, and the mixed record of recent district-court opinions in difficult

competition matters raise substantial challenges to other narratives.132

V. CONCLUSION

Although criticized in some quarters, administrative adjudication is a useful

tool for advancing competition policy. Despite a checkered history, the FTC

132	 Part 3 is a valuable tool for developing the law, and the evidence does not show that the

Commission prejudges appeals from the ALJ’s initial decision. Nevertheless, that is a far cry

from suggesting that administrative litigation in its current guise at the FTC is optimal. For

example, I have suggested that the Commission show more deference to ALJ findings on witness credibility. See In re ECM BioFilms, Inc., Dkt. No. 9358, Partial Dissent of

Commissioner Maureen K. Ohlhausen, Oct. 19, 2015, at 3. (“I find it problematic that the

majority shows no deference to the ALJ’s findings about expert witness credibility.”).

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34 Journal of Competition Law & Economics

recently has used its Part 3 authority well, transforming the law on healthcare mergers, pay-for-delay agreements, and state-action immunity in the

last 15 years. The ability to bring to bear institutional expertise in antitrust

law and economics on the day’s most difficult competition questions has

clear value. That is why I have favored bringing more complex antitrust

cases into Part 3.133

But any system of law enforcement only works if it incorporates safeguards

that ensure accurate decision-making, both by giving accused entities a fair

hearing and through a review process that holds the agency to its proof. It

is here that Part 3 stands accused of deficient due-process protections.

Certainly, firms enjoy a number of rights when defending a Part 3 action.

They present their views of the law, facts, and economics to the Commission

before it determines whether there is “reason to believe” that a violation

occurred and that an action would be in the public interest. Afterward, they

litigate a trial before an ALJ, who is independent of the Commission, and

can cross-examine witnesses and experts. Meanwhile, the Commissioners

remain cordoned off from the case until the parties argue on appeal from the

ALJ. The Commission holds oral argument before issuing a final decision

that, if it imposes liability, respondents can usually appeal to any U.S. Court

of Appeals in the country. That choice of forum is an unusual advantage.

Nevertheless, skeptics are dissatisfied. They claim that, by voting out a

complaint in the first instance and then later hearing an appeal from the ALJ,

the Commission inevitably compromises its independence. In its most hostile

expression, the charge accuses the FTC of being a kangaroo court.

There are two dimensions to that criticism. The first one concerns appearances, such that an agency acting as both prosecutor and adjudicator invites

questions about partiality. The second issue, however, is more substantive

and ultimately more important. Does the FTC in fact make up its mind at

the case’s inception and put its thumb on complaint counsel’s side of the

scales on appeal? Or does it take its independent, appellate function seriously

and scrutinize the record de novo with an open mind to dismissing should the

merits warrant it?

Some commentators have offered, as evidence of a faulty system, the fact

that the Commission often sides with staff on appeal from the ALJ in Part 3

matters. Skeptics infer that a high success rate for complaint counsel in final

FTC decisions reflects a foregone conclusion, at worst, or an unconscious

bias in favor of liability, at best. This article has sought to address and to supplement the empirical literature on which critics base those claims. Its findings are notable. Despite recurring claims that the FTC “always” sides with

complaint counsel, or rules for itself in 100 percent of cases, the record over

the last four decades tells a different story.

133 See supra note 125.

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Statistics can be misleading when one disregards the actual phenomena

being studied. It is true that the FTC has found liability in almost every Part

3 case in the last decade. But the appellate record suggests that those matters

had merit, meaning that the law and facts likely warranted liability. Indeed,

the federal courts have affirmed 100 percent of the FTC administrative final

orders issued in the last decade and challenged on appeal. The FTC’s track

record in the last 10 years is impressive. Influential wins at the Supreme

Court during that period only enhance the point.134 To get a clearer picture

of whether the Commission dogmatically imposes liability, regardless of the

merits or the ALJ’s initial decision, one must go back further in time.

This article goes back four decades. 145 administrative cases in that time

show that the Commission does not always rule for complaint counsel.

Indeed, the agency dismissed 29 percent of the Part 3 matters it previously

authorized. It is difficult to reconcile that fact with the claim that the FTC’s

institutional design renders it systemically predisposed to impose liability.

Indeed, in competition matters, the Commission rejected liability even more

often, doing so in 40 percent of Part 3 cases. And although one can legitimately debate the implications from this statistic, the FTC dismissed 16 percent of all appeals (both antitrust and consumer protection) from the ALJ’s

initial decision on the merits.

What is also striking from the data is that, as time went on, the FTC

brings fewer Part 3 cases, is less likely to dismiss, and is also more likely to

prevail on appeal. Although commentators will discuss the implications of

the data, to my mind the emerging picture is largely one of improved case

selection, likely in response to changes in antitrust law that demanded more

economic rigor.

VI. APPENDIX: METHODOLOGY

This study tracks 145 Part 3 cases with Commission decisions on or after

January 20, 1977, the beginning of the Carter presidency, to Commission

decisions before August 1, 2016. A relevant question is why the past four

decades. The study could have gone back farther, but 1977 provides a good

approximate starting point of modern antitrust analysis taking hold with a

growing focus at the Commission and within the antitrust bar on applying

rigorous economic analysis to antitrust cases, as well as a more disciplined

focus on cases likely to pose antitrust harm affecting consumer welfare.135

134 North Carolina, 135 S. Ct. at 1101; Actavis, 133 S. Ct. at 2223; see also FTC v. Phoebe

Putney Health Sys., Inc., 133 S. Ct. 1003 (2013). 135 See Timothy J. Muris, Chairman, Fed. Trade Comm’n, Remarks at the Milton Handler

Annual Antitrust Review: Looking Forward: The Federal Trade Commission and Future

Development of U.S. Competition Policy (Dec. 10, 2002); Robert Pitofsky, Past, Present,

and Future of Antitrust Enforcement at the Federal Trade Commission, 72 U. CHI. L. REV. 209,

211–13 (2005).

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Additionally, until the 1960s, the Commission’s adjudicative procedures

were significantly different, with discovery largely consolidated with the hearing, which occurred in different locations and over an extended time, and

diverging in other ways from federal procedure.136 Alternatively, if the study

only included the last decade of Commission decisions, it would have examined only 12 Commission decisions, a very limited group of cases that would

reveal little about trends or the intrinsic characteristics of the Commission’s

adjudicative process and outcomes.

The next step involved determining which cases would provide the most

accurate view of the Commission’s record. This question presented complex

issues. As a default, I included all matters in which the Commission issued a

complaint and subsequently issued a Commission decision. In most of the

matters with Commission decisions included in the study the ALJ also issued

a decision, but not in all (130 out of 145).

From the baseline of including all matters before the Commission in Part

3, I excluded matters: (1) in which cases settled after the filing of a complaint

and before the ALJ decision, which involved more than 40 cases, or (2)

settled after the ALJ decision but before a Commission decision, a significantly smaller number. I also excluded cases that (3) involved an ALJ decision that was not timely appealed and thus issued as a final order of the

Commission, (4) the Commission accepted or rejected proposed consent

orders, (5) the Commission dismissed a complaint following denial of a preliminary injunction in federal court, and (6) the Commission dismissed a

complaint after the parties abandoned a transaction. In many of these circumstances, the records show some form of a Commission decision but the

decision is not particularly meaningful.

From a more technical perspective, I also excluded (7) decisions regarding

requests to reopen or modify existing orders; (8) dismissals of related matters

when the primary matter already was included in the dataset of matters; and

(9) interim decisions that subsequent, final Commission decisions in the

same matter superseded (and which the dataset included).

The study characterizes outcomes at the ALJ and Commission decision

stages as liability or dismissal. At the Commission decision stage, it also

records whether the Commission trimmed or expanded charges or allegations, or respondent, and whether its decision affirmed or reversed the ALJ.

If dismissed by the Commission, it records whether the dismissal was on the

merits or for a different reason such as a change of law, change of fact, or no

longer in the public interest. The database includes any appeal of a

Commission decision, the federal appellate court’s decision, and any subsequent Supreme Court record. For each appellate ruling, the database

136 The rules of practice were further changed in the late 1970s and mid-1980s, and have continued to be revised with changes in 2009 (first published in 2008) to expedite the

Commission’s adjudicatory proceedings.

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contains the date and court of appeals; whether the appeals court affirmed,

reversed or had a mixed decision; and whether it was a liability, remedy, or

procedural ruling.

Beyond outcome, the study tracks many variables to provide relevant and

more granular insights, such as how frequently the same majority of

Commissioners that voted a complaint was still present and voted on the

Commission decision, and whether the Commission was more or less likely

to find liability in this situation. At the time of the complaint, the study tracks

the date/decade; whether it was a competition (merger, non-merger, or both)

or consumer protection matter; the charges/counts; the Commissioners voting, the vote count, and whether it was unanimous; and the party of the

majority of Commissioners voting. At the time of the Commission decision,

beyond outcome variables, the database contains information on the date/

decade of the vote; Commission composition and vote count (notation of

dissents); whether the Commission trimmed counts, allegations, or respondents relative to the ALJ decision; the number of Commissioners that left the

Commission between complaint and decision votes; whether a complaint

majority still existed among Commissioners at time of decision; whether the

vote was unanimous; and the party of the majority voting, as well as the party

of those in the decision majority. The database also tracks the times between

complaint, ALJ decision, and Commission decision.

For sources for more recent Commission matters, generally those of the

past two decades, I relied on publicly available records on the FTC web site,

records available through Lexis and Westlaw, and Commission records. For

older records, particularly the identity and vote of Commissioners voting on

complaints and decisions, I relied upon information contained in the

Commission’s “Minutes” records.

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