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Reassessing the Mythology of Magnuson-Moss:

A Call to Revive Section 18 Rulemaking

at the FTC

Kurt Walters*

America faces twin crises of metastasizing corporate power and foundering govern-

ment capacity to respond. Calls for fundamental reforms to the economic system have

grown louder as corporate consolidation reaches record levels and “informational capital-

ism” systematically shifts power from individuals to large, data-rich firms. Americans are

left vulnerable to “dark patterns” that extract customers’ wealth, to gig work companies

that siphon tips away from workers, and to algorithmic decision-making that exhibits

racial and gender bias. But many rightfully doubt that America’s elected branches of gov-

ernment remain functional enough to handle these emerging challenges, and the Supreme

Court continues to impede efforts that Congress and the President do undertake.

The Federal Trade Commission is well-positioned to step into this breach. Section 18

of the FTC Act grants the agency the authority to issue new consumer protection rules to

police against unfair or deceptive business tactics, backed by tough penalties and consumer

redress. Yet, this power sat virtually dormant for the past thirty-eight years after a “Rea-

gan Revolution” at the agency decisively ended its rulemaking activity. For the first time

in decades, a majority of FTC Commissioners supports using this tool, but long-unchal-

lenged received wisdom stands in the way. This common narrative holds that Congress

saddled the FTC with almost impossibly onerous “Magnuson-Moss” procedural require-

ments for rulemaking in reaction to overbroad and politically unpopular regulations. This

article argues that the conventional story is mistaken. A review of the history, statutory

text, and judicial constructions of section 18 show that this pessimistic view confuses a

historical decline in rulemaking—which was driven by non-statutory factors including an

ascendant corporate lobby, changing congressional pressures, and a deregulatory ideological

moment—with supposed flaws in section 18.

Puncturing the mythology that has grown up around the Magnuson-Moss Act pro-

vides a more clear-eyed view of the FTC’s authorities. Doing so makes apparent that the

Commission can—and should—pick back up its powerful tool of consumer protection

rulemaking. Future rules can rein in marketplace misconduct such as unfair privacy abuses,

deceptive online “drip pricing,” and much more. Reinvigorating the FTC’s regulatory pro-

gram can restore the agency as a champion of American consumers and a cornerstone of an

administrative state able to counterbalance dominant corporations and establish a more

just economy.

* Law clerk to the Honorable Kimba M. Wood, United States District Court for the

Southern District of New York. Thank you to Samuel Levine, Yochai Benkler, Matthew Ste-

phenson, and Austin King for invaluable comments and feedback. I am also grateful to the

editors of the Harvard Law & Policy Review for their careful attention and diligent work in

bringing this piece to print. An early version of this paper was prepared while serving as a law

clerk to Commissioner Rebecca Kelly Slaughter of the Federal Trade Commission. Its use as a

published article has been authorized pursuant to the Federal Trade Commission Rules of

Practice. The views expressed in this article are mine alone and do not represent the views of

the Federal Trade Commission, any of its Commissioners or staff, or any other employer, past

or present.

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520 Harvard Law & Policy Review [Vol. 16

NTRODUCTION

................................................. 520

I. T

OLE OF

ULES AT THE

FTC ........................ 523

II. A B

RIEF

ISTORY OF

FTC R

ULEMAKING

.................. 528

A. Controversial Claim of Rulemaking Authority: 1962–74 ..... 528

B. Use of Sweeping Powers Draws Backlash: 1975–80 ......... 530

C. The Enduring “Reagan Revolution”: 1981–Present .......... 533

D. A New Era? ........................................... 536

III. A F

RESH

OOK AT

ECTION

18............................ 539

A. Comparing Section 18 with APA Rulemaking .............. 539

1. Pre-Proposal ....................................... 542

2. Proposal & Written Input ........................... 543

3. Informal Hearings .................................. 544

4. Agency Analysis & Promulgation...................... 547

B. Lessons from Case Law .................................. 549

C. Responses to Section 18 Skepticism ........................ 554

IV. A

DMINISTRATIVE

EFORMS FOR

FFICIENT

ULEMAKING

... 559

A. Recent Amendments to Agency Rules ...................... 560

1. Reforming the Role of Presiding Officer ................ 560

2. Harmonizing Agency Procedures with Statutory

Requirements ....................................... 562

B. Recommendations for Further Reforms ..................... 564

1. Restoring the Cross-Examination Compromise .......... 564

2. Additional Steps .................................... 568

V. O

PPORTUNITIES FOR

EGULATION

......................... 569

A. Data Privacy........................................... 571

B. Drip Pricing ........................................... 576

ONCLUSION

................................................... 578

NTRODUCTION

America faces twin crises of metastasizing corporate power and found-

ering government capacity to respond. Corporate consolidation has spiked in

recent decades, and wealth inequality has surged alongside it.

This concen-

tration of market power has led to harms to consumers, workers, and entre-

preneurs alike.

A breathtaking fifty-four percent of Americans report having

experienced corporate abuse over the past decade.

Unsurprisingly, then, sev-

enty percent of the country believes “the economic system unfairly favors

Jan De Loecker, Jan Eeckhout & Gabriel Unger, The Rise of Market Power and the

Macroeconomic Implications, 135 Q.J. E

CON

. 561, 562–63 (2020).

Austan Goolsbee, Big Companies Are Starting to Swallow the World, N.Y. T

IMES

(Sept.

30, 2020), https://www.nytimes.com/2020/09/30/business/big-companies-are-starting-to-

swallow-the-world.html [https://perma.cc/96DT-4Q9N].

Katie Porter & Jill Habig, Corporations Are Abusing People. Here’s How to Better Protect

Workers and Consumers., USA T

ODAY

(Aug. 23, 2019, 7:00 AM), https://www.usatoday.com/

story/opinion/2019/08/23/protect-workers-consumers-from-corporate-abuse-we-can-do-

more-column/2060655001/ [https://perma.cc/K9JY-SCAM].

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2022] Reassessing the Mythology of Magnuson-Moss 521

powerful interests.”

These stunning statistics came before the COVID-19

pandemic saw the most powerful companies collect unprecedented profits as

millions of Americans lost their jobs and many more struggled under the

strain of quickly rising prices.

Calls for fundamental reforms to the economic system are gaining

strength in the face of these growing imbalances of power. The rise of “in-

formational capitalism” has systemically shifted control from individuals to

large, data-rich companies.

Americans are left vulnerable to “dark patterns”

that exploit psychological vulnerabilities to extract wealth from customers, to

gig work companies that deceptively siphon tips away from workers, and to

algorithms that cloak racial or gender biases in seeming mathematical neu-

trality. The now-routine occurrence of data breaches exposing highly sensi-

tive personal information can have devastating effects. Through it all,

consumers are less able than ever to defend themselves against these types of

technologically sophisticated harms.

Yet, many Americans do not believe that their elected branches of gov-

ernment remain functional enough to handle these challenges. A sense of

democratic degradation is pervasive, from scholars to ordinary voters.

Even

if the national legislature did not exhibit historic levels of chronic gridlock,

besides a few exceptional emergency packages, Americans believe four-to-

one that their government works more for wealthy donors than for people

like them.

The Federal Trade Commission (“FTC”) is far better positioned to step

into this breach and beat back abuses in the marketplace than many observ-

ers realize. Section 18 of the Federal Trade Commission Act grants the

agency the authority to issue binding consumer protection rules to police

against unfair or deceptive business tactics across nearly the entire economy,

backed by tough penalties and consumer redress. This is a potent tool. As

former FTC Chair William Kovacic remarked, “no regulatory agency in the

United States matches the breadth and economic reach of the Commission’s

mandates.”

But this rulemaking power has sat nearly unused in the past

Ruth Igielnik, 70% of Americans Say U.S. Economic System Unfairly Favors the Powerful,

SCH

. C

. (Jan. 9, 2020), https://www.pewresearch.org/fact-tank/2020/01/09/70-of-

americans-say-u-s-economic-system-unfairly-favors-the-powerful/ [https://perma.cc/2M95-

VH25].

See Amy Kapczynski, The Law of Informational Capitalism, 129 Y

ALE

L.J. 1460,

1462–63 (2020).

See, e.g., Sarah Binder, The Dysfunctional Congress, 18 A

. R

. P

. S

. 86, 95–96

(2015).

Michael W. Traugott, Americans: Major Donors Sway Congress More Than Constituents,

ALLUP

(July 6, 2016), https://news.gallup.com/poll/193484/americans-major-donors-sway-

congress-constituents.aspx [https://perma.cc/C6HN-5JKA].

Letter from Rep. Lee Terry, Chairman, Subcomm. on Com., Mfg. & Trade of the H.

Comm. on Energy & Com., to Daniel A. Crane, Senior Professor of Law, Univ. of Mich. 2

(Oct. 2, 2014), https://docs.house.gov/meetings/IF/IF17/20140228/101812/HHRG-113-

IF17-Wstate-CraneD-20140228-SD001.pdf [https://perma.cc/KN2X-8WWQ].

The agency has both a competition mandate, to protect against “unfair methods of competi-

tion,” and a consumer protection mandate, to bar “unfair or deceptive acts or practices.” See 15

U.S.C. § 45(a)(1). Both stretch across nearly the entire U.S. economy, save for a few excep-

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522 Harvard Law & Policy Review [Vol. 16

thirty-eight years, ever since the agency encountered a backlash to a flurry of

regulation in the late 1970s.

Reinvigorating the agency’s rulemaking program can restore the FTC

to its one-time role as a champion of American consumers. An energetic

FTC can also serve as a cornerstone of an administrative state able to coun-

terbalance the power of dominant market actors. Section 18 rulemaking of-

fers benefits to consumers, with tough penalties deterring corporate

misconduct; to the agency, with rules allowing for more efficient enforce-

ment; and to companies, which gain greater clarity and notice regarding

their legal responsibilities. Now, for the first time in four decades, a majority

of FTC Commissioners supports picking up this tool once again.

President

Biden has also urged the agency to use its consumer protection rulemaking

powers, calling for restrictions on surveillance-style data collection.

The agency’s renewed openness to section 18 rulemaking has run up

against a conventional wisdom, solidified and nearly unexamined for de-

cades, that such rulemaking is next to impossible. This narrative holds the

Congress saddled the FTC with cumbersome and onerous procedural re-

quirements, the so-called “Magnuson-Moss procedures,” in response to po-

litically controversial rulemakings. At best, this prevailing story continues,

using this authority to craft new rules would be a poor use of agency time

and resources; at worst, it is something that Congress has “virtually

prohibit[ed].”

This Article presents evidence that this conventional wisdom is mis-

taken. The prominence of this story is largely the result of observers conflat-

ing section 18’s statutory requirements with the agency’s historical

experience. The FTC’s regulatory activity in the 1970s crashed against an

ascendant corporate lobby, changing political pressures from Congress, a

fading consumer movement, and agency leadership that was ideologically

committed to putting a permanent end to the agency’s assertive rulemaking.

Puncturing the mythology that has grown up around the Magnuson-

Moss Act provides a more clear-eyed view of the agency’s authorities: The

burden of section 18’s statutorily mandated procedures has been dramatically

overstated, while the potential benefits of using the rulemaking power to

intervene against consumer abuses are under-recognized. It becomes appar-

tions such as prudentially regulated financial institutions and common carriers. See id.

§ 45(a)(2).

See infra, Part II.D.

See Exec. Order No. 14,036 § 5(h)(i), 86 Fed. Reg. 36,987, 36,992 (July 9, 2021) (urg-

ing the Commission to promulgate rules to restrict “unfair data collection and surveillance

practices that may damage competition, consumer autonomy, and consumer privacy”). Sub-

stantial rules on these topics would likely need to be promulgated under section 18. See Re-

becca Kelly Slaughter, Algorithms and Economic Justice: A Taxonomy of Harms and a Path

Forward for the Federal Trade Commission 54–55 (August 2021) (White Paper for the Y

ALE

NFO

. S

’

ROJECT

& Y

ALE

J.L. & T

ECH

.), https://law.yale.edu/sites/default/files/area/

center/isp/documents/algorithms_and_economic_ justice_master_final.pdf [https://perma.cc/

EP6F-B6ZN]; see also Note, infra note 239.

Ask the Commissioner: Federal Trade Commissioner Christine Varney, 14 ACCA D

OCKET

36, 36 (1996).

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2022] Reassessing the Mythology of Magnuson-Moss 523

ent that the FTC can and should move beyond pleading with a sclerotic

Congress to provide the agency with different rulemaking procedures. The

Commission should begin taking dearly needed action using the broad

rulemaking authority that is already on the books.

This piece makes several novel contributions to the existing scholarship.

First, because scholarly study of section 18 faded as the authority fell into

disuse, this is among the first articles to have the historical distance to situate

the FTC’s retreat from rulemaking within the broader deregulatory fervor

that swept American government in the 1980s. Second, it is the first piece of

public scholarship in decades to analyze deeply the statutory bases of section

18 rulemaking and disentangle the effects of statutory requirements from

those of inefficient, self-imposed agency rules and an ideological aversion to

regulation. In so doing, this article rebuts the core arguments and pieces of

scholarship underlying the conventional understanding that section 18 pro-

cedures are unworkable. Moreover, this discussion makes clear the impor-

tance of the Commission’s recent removal of several agency-imposed sources

of delay in its rulemaking proceedings. Third, this article provides a robust

roadmap for approaching the issue of cross-examination in informal hear-

ings—the feature of section 18 that many observers credit with undermining

FTC proceedings in the past. It explains how the agency can embrace the

statute’s text and legislative history, which show that Congress left open nu-

merous avenues for the Commission to prevent cross-examination from be-

coming a source of delay.

The remainder of the Article is organized as follows. Part I describes

the value of substantive rule-writing at the FTC, combining arguments

about the general virtues of rulemaking with those unique to the FTC due to

its weak remedial powers when proceeding by adjudication alone. Part II

follows with an abbreviated history of the Commission’s rulemaking activity

from the agency’s founding in 1914 to the present day, charting shifts due to

changes in legal powers, external pressures, and internal prioritization. Part

III conducts a granular comparison of section 18’s procedures with those

required in Administrative Procedure Act (“APA”) notice-and-comment

proceedings, identifying the ways in which recent legislative, presidential,

and judicial dictates have minimized the significance of their differences.

Part IV analyzes how the Commission’s recent administrative reforms to its

rulemaking procedures eliminate agency-imposed sources of delay and pro-

vides new recommendations for how the agency can prevent cross-examina-

tion from undermining efficient rulemaking. Finally, Part V considers two

promising candidates for section 18 rulemaking: data privacy and online

“drip pricing.”

I. T

OLE OF

ULES AT THE

FTC

Longstanding FTC rules are centerpieces of American consumer pro-

tection law. A return to discretionary rulemaking could deliver a range of

benefits to consumers, the agency, and businesses alike. Rulemaking and

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524 Harvard Law & Policy Review [Vol. 16

case-by-case adjudication play complementary roles in the toolbox of any

administrative agency. As explained by generations of judges and adminis-

trative law scholars, adjudication offers flexibility and tailoring to a specific

fact pattern, whereas rulemaking can better deter unlawful abuses, provide

greater clarity for regulated parties, streamline enforcement proceedings, and

incorporate public input.

The choice between these tools thus “lies prima-

rily in the informed discretion of the administrative agency.”

The Supreme Court accentuated the urgency of the FTC moving to

rulemaking when it eliminated one of the agency’s primary tools for safe-

guarding consumers, in AMG Capital Management, LLC v. FTC.

The

Court invalidated the Commission’s four-decade-long use of section 13(b)

of the FTC Act, a provision defining the agency’s injunctive remedial pow-

ers, to secure restitution for consumers and disgorgement of wrongdoers’ ill-

gotten gains.

The Commission’s Acting Chair responded by saying that the

Court had “deprived the FTC of the strongest tool we had to help consum-

ers.”

Two examples illustrate the chill that AMG Capital casts on agency

enforcement. As a result of the ruling, the Commission dropped its efforts to

secure nearly $500 million in relief for consumers harmed by a pharmaceuti-

cal giant blocking access to lower-cost drugs; it also saw the Eleventh Circuit

vacate an asset freeze the agency had secured on $85 million held by opera-

tors of fake government-benefit websites.

The decision can be expected to

severely undermine the agency’s ability to secure monetary relief for viola-

tions of the FTC Act’s prohibition on “unfair or deceptive acts or practices”

(“UDAP”), at least if the conduct is not also covered by a trade regulation

rule or prior cease-and-desist order.

See, e.g., Katie R. Eyer, Administrative Adjudication and the Rule of Law, 60 A

DMIN

. L.

. 647, 649–51 (2008); David L. Shapiro, The Choice of Rulemaking or Adjudication in the

Development of Administrative Policy, 78 H

ARV

. L. R

. 921, 928–42 (1965).

SEC v. Chenery Corp., 332 U.S. 194, 203 (1947).

141 S. Ct. 1341 (2021).

Id. at 1347.

Press Release, Fed. Trade Comm’n, Statement by FTC Acting Chairwoman Rebecca

Kelly Slaughter on the U.S. Supreme Court Ruling in AMG Capital Management LLC v.

FTC (Apr. 22, 2021), https://www.ftc.gov/news-events/press-releases/2021/04/statement-ftc-

acting-chairwoman-rebecca-kelly-slaughter-us [https://perma.cc/GK8K-5EU3].

Press Release, Fed. Trade Comm’n, Federal Trade Commission Withdraws Remaining

Case against AbbVie after Supreme Court Decision Strips Consumers of Relief (July 30,

2021), https://www.ftc.gov/news-events/press-releases/2021/07/ftc-withdraws-remaining-

case-against-abbvie-after-supreme-court-decision [https://perma.cc/GD9E-AVUP]; Morgan

Conley, 11th Circ. Undoes $85M Asset Freeze in Fake Gov’t Site Suit, L

360 (Nov. 4, 2021,

8:59 PM), https://www.law360.com/articles/1437881/11th-circ-undoes-85m-asset-freeze-in-

fake-gov-t-site-suit [https://perma.cc/CSU8-Q6PS].

Section 19(b) allows the FTC to pursue equitable relief for first-time section 5 viola-

tions only if the violation has already been litigated to final judgment in the agency’s adminis-

trative tribunals— including appeals by right to the full Commission and a U.S. court of

appeals—and the agency can later establish scienter in federal court. See David C. Vladeck, The

Erosion of Equity and the Attack on the FTC’s Redress Authority, 82 M

ONT

. L. R

. 159,

178–79 & n.151 (2021).

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2022] Reassessing the Mythology of Magnuson-Moss 525

Yet before AMG Capital, the FTC’s UDAP enforcement already

earned frequent criticism for resolving in “no-money, no-fault” settlements,

which critics say create a “first time free” dynamic for initial violations.

Even if one were to believe that Congress will restore the FTC’s equitable

remedial powers to their pre-AMG Capital state—and unusually swiftly for

the contemporary, gridlocked Congress—the status quo ante was far from

ideal. The Commission often described the difficulty of quantifying the scale

of consumer harm as a barrier to securing equitable relief in case-by-case

enforcement.

Furthermore, without civil penalties, the deterrent effect of

restitution or disgorgement is discounted by the proportion of offenses that

go undetected.

Section 18 of the FTC Act offers a means to begin responding to these

deficiencies.

This authority empowers the agency to promulgate “rules

which define with specificity acts or practices which are unfair or deceptive

acts or practices in or affecting commerce” and to impose “requirements pre-

scribed for the purpose of preventing such acts or practices.”

The reach of

section 18 rules spans the FTC’s nearly economy-wide jurisdiction, and the

Commission may pursue civil penalties

and equitable remedies

for rule

violations.

Such rulemaking offers a range of benefits, even beyond patching up

the damage done to FTC enforcement by the Supreme Court. First, it will

create a much stronger deterrent effect than the agency’s past approach of

relying on case-by-case adjudication and informal guidance. Equitable reme-

dies for violations of trade regulation rules have solid textual grounding in

section 19 of the Act, leaving them unaffected by AMG Capital. Moreover,

the civil penalties for rule violations are quite substantial.

These remedial

powers can make section 18 rules a far stronger deterrent to first-time

offenses.

Second, trade regulation rules provide valuable clarity. Firms benefit

because “clear rules mean that it is less costly for regulated parties to inform

themselves of the law’s requirements.”

Well-defined rules also strengthen

See, e.g., Statement of Comm’r Rohit Chopra Joined by Comm’r Rebecca Kelly Slaugh-

ter Regarding Final Approval of the Sunday Riley Settlement 6 (Nov. 6, 2020), https://

www.ftc.gov/system/files/documents/cases/fi-

nal_rchopra_sunday_riley_statement_dated_11.6.pdf [https://perma.cc/XEM6-GRJH].

See id. at 5.

See id.

15 U.S.C. § 57a.

Id. § 57a(a)(1)(B).

Id. § 45(m)(1)(A).

Id. § 57b(a)–(b).

The civil penalty for each violation of a trade regulation rule is $46,517. See Press Re-

lease, Fed. Trade Comm’n, FTC Publishes Inflation-Adjusted Civil Penalty Amounts for

2022 (Jan. 6, 2022), https://www.ftc.gov/news-events/press-releases/2022/01/ftc-publishes-in-

flation-adjusted-civil-penalty-amounts-2022 [https://perma.cc/28PN-75GF]. Each day of a

continuing violation is considered to be a separate violation. See 15 U.S.C. § 45(m)(1)(C).

John F. Manning, Constitutional Structure and Judicial Deference to Agency Interpretations

of Agency Rules, 96 C

OLUM

. L. R

. 612, 655 (1996).

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526 Harvard Law & Policy Review [Vol. 16

agency enforcement efforts by removing the “first, and probably best, line of

argument to defend against an FTC construction of Section 5 . . . that it

violates constitutional notice and Due Process requirements.”

Third, rules permit more efficient enforcement proceedings. When

bringing an enforcement action based on a trade regulation rule, the agency

can establish liability simply by showing that a given rule was violated. In

contrast, even before AMG Capital undercut the FTC’s remedial powers,

liability for a UDAP violation under a bare section 5 theory required proving

that a specific party’s particular act or practice met the test either for unfair-

ness or deception.

Having to meet the evidentiary burden to prove anew

that an act or practice is likely to harm consumers or to mislead them as to

material facts is an inefficient use of agency resources at best. At worst, it

creates avenues for wrongdoers to avoid accountability. Trade regulation

rules allow for more straightforward and less resource-intensive enforcement.

Fourth, and finally, proceeding by rulemaking strengthens the demo-

cratic legitimacy of agency action by providing greater opportunities for in-

put by regulated parties and regulatory beneficiaries.

Public engagement is

especially important given Congress’s intent for the agency to update its con-

ceptions of unfairness and deception regularly to keep pace with evolving

abuses in the marketplace.

Alternative approaches have some merit but fail to recreate the full set

of benefits offered by rulemaking. The agency’s current, adjudication-centric

program has created a sort of “common law” built from consent orders and

complaints. While this approach offers flexibility—and informal guidance

about agency enforcement priorities can provide notice to regulated

firms

—it is hamstrung by the FTC’s remedial shortcomings. It is also un-

stable. An adjudication-first enforcement strategy can be altered abruptly by

new Commission leadership, and the dearth of binding precedent in the

FTC’s UDAP “common law” leaves it vulnerable to unfriendly courts if liti-

gants choose to resist agency enforcement.

The recent call by then-Commissioner Rohit Chopra and his attorney-

advisor Samuel Levine to reinvigorate the FTC’s use of its Penalty Offense

Authority provides a complement to rulemaking, rather than a replace-

Justin (Gus) Hurwitz, Chevron and the Limits of Administrative Antitrust, 76 U. P

ITT

L. R

. 209, 267 (2014) (discussing notice in the antitrust context).

See 15 U.S.C. § 45(n) (test for unfairness); Letter from James C. Miller III, Chairman,

Fed. Trade Comm’n, to Rep. John D. Dingell, Chairman, H. Comm. on Energy & Com.

(Oct. 14, 1983), https://www.ftc.gov/system/files/documents/public_statements/410531/

831014deceptionstmt.pdf [https://perma.cc/MZ49-J6YV] (test for deception).

Cf. K. Sabeel Rahman, Reconstructing the Administrative State in an Era of Economic and

Democratic Crisis, 131 H

ARV

. L. R

. 1671, 1675–76 (2018).

See FTC v. Wyndham Worldwide Corp., 799 F.3d 236, 243 (3d Cir. 2015) (“Congress

designed the term [unfairness] as a ‘flexible concept with evolving content’ . . . and ‘intention-

ally left [its] development . . . to the Commission.’” (quoting FTC v. Bunte Bros., 312 U.S.

349, 353 (1941) and Atl. Ref. Co. v. FTC, 381 U.S. 357, 367 (1965))).

See, e.g., 16 C.F.R. pt. 255 (2022).

See, e.g., LabMD, Inc. v. FTC, 894 F.3d 1221, 1237 (11th Cir. 2018).

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2022] Reassessing the Mythology of Magnuson-Moss 527

ment.

This authority was created by the same Magnuson-Moss Act that

defined the FTC’s discretionary consumer protection rulemaking power

and involves the distribution of past cease-and-desist orders against one firm

to other companies in the same industry. Firms put on notice in this way can

face civil penalties if they commit similar UDAP violations.

These civil

penalties serve as a valuable deterrent and a stopgap after AMG Capital evis-

cerated the agency’s ability to secure equitable monetary relief in most cases.

With Samuel Levine now as its Director, the Bureau of Consumer Protec-

tion has begun to distribute Notices of Penalty Offenses to put firms in

particular industries on notice.

However, it may be difficult to put every

potential malefactor on notice, particularly for newly founded firms and the

types of misconduct prevalent among them.

Moreover, Penalty Offense

Authority does not support equitable relief, while section 18 trade regulation

rules unlock both civil penalties and the full suite of equitable remedies.

The value of new trade regulation rules is not a matter of speculation.

The track record of existing rules issued under the FTC’s discretionary

rulemaking power demonstrates their potential for preventing significant

harm to consumers. The “earth-moving” Credit Practices Rule, for example,

was promulgated under section 18 and prohibits a wide range of damaging

contractual terms for consumer credit, including “confessions of judgment,

exemption waivers, irrevocable wage assignments, non-purchase security in-

terests in household goods, pyramiding late charges, and deceptive cosigner

practices.”

One need only look to an adjacent area that is unprotected by

this rule, small business loans, to see the devastation that could result if prac-

tices such as confessions of judgment remained permissible in consumer

loans.

The FTC still holds the power to make such transformative changes

to the imbalanced relationship between corporation and consumer. But to do

See Rohit Chopra & Samuel A.A. Levine, The Case for Resurrecting the FTC Act’s Pen-

alty Offense Authority, 170 U. P

. L. R

. 71, 98–104 (2021).

See id. at 94.

15 U.S.C. § 45(m)(1)(B).

See, e.g., Press Release, Fed. Trade Comm’n, FTC Puts Hundreds of Businesses on

Notice About Fake Reviews and Other Misleading Endorsements (Oct. 13, 2021), https://

www.ftc.gov/news-events/press-releases/2021/10/ftc-puts-hundreds-businesses-notice-about-

fake-reviews-other [https://perma.cc/9B5R-GBMA] (announcing the mailing of a Notice of

Penalty Offenses to more than 700 companies).

Cf. Statement of Comm’r Rohit Chopra Joined by Comm’r Rebecca Kelly Slaughter

Regarding Final Approval of the Sunday Riley Settlement 6 (Nov. 6, 2020), https://

www.ftc.gov/system/files/documents/cases/fi-

nal_rchopra_sunday_riley_statement_dated_11.6.pdf [https://perma.cc/XEM6-GRJH].

See Chopra & Levine, supra note 34, at 84–85 tbl.1.

ARGOT

AUNDERS

, N

’

ONSUMER

., T

IME TO

PDATE THE

REDIT

RACTICES

ULE

: CFPB S

HOULD

ODERNIZE

FTC R

ULE

DDRESSING

BUSIVE

REDI-

TOR

OLLECTION

RACTICES

2 (2010), https://www.nclc.org/images/pdf/debt_collection/

credit-practices-rule-update.pdf [https://perma.cc/LWL3-V9QD].

Zachary R. Mider, Zeke Faux, David Ingold & Demetrios Pogkas, “I Hereby Confess

Judgment,” B

LOOMBERG

(Nov. 20, 2018), https://www.bloomberg.com/graphics/2018-confes-

sions-of-judgment/ [https://perma.cc/B3T6-87NL].

\\jciprod01\productn\H\HLP\16-2\HLP207.txt unknown Seq: 10 17-AUG-22 9:35

528 Harvard Law & Policy Review [Vol. 16

so, it must shake off the now-longstanding cultural aversion to assertive reg-

ulation that swept over the agency in the wake of past controversy.

II. A B

RIEF

ISTORY OF

FTC R

ULEMAKING

The effort dedicated to FTC rulemaking has waxed and waned in re-

sponse to popular pressure, legislative reforms, and internal culture change at

the agency. It has ranged from a flurry of rulemakings across the agency’s

expansive purview to more recent disuse. Discretionary rulemaking at the

FTC can be broken into three broad eras: entrepreneurial invocation of sec-

tion 6(g) of the FTC Act from 1962 to 1974, active section 18 rulemaking

beginning in 1975 with the passage of the Magnuson-Moss Act, and a re-

treat from regulation cemented by the advent of the Reagan Administration

in 1981. Perhaps, we see a new era emerging today.

A. Controversial Claim of Rulemaking Authority: 1962–74

The FTC’s experience with rulemaking started slowly. Over its first five

decades, the FTC had promulgated rules only when authorized by specific

acts of Congress, starting with the Wool Products Labeling Act of 1939.

Instead, the agency in that period shaped industry practice primarily with

voluntary Trade Practice Rules, now known as “guides.”

Rulemaking re-

lated to the agency’s competition mandate was rarer still. The Robinson-

Patman Act of 1936 gave the agency the authority to set “quantity limit”

rules on the sales of commodity products to help the Commission to police

price discrimination, which was seen as promoting monopoly. The agency

did not use that authority until 1949 when it set limits on the quantities of

rubber tires sold, and only then at the persistent prodding of a U.S. House of

Representatives committee.

The Commission began its move into discretionary rulemaking during

the early 1960s, as the administrative state entered an “age of rulemaking.”

Legal scholars began to advocate for increased use of rulemaking starting in

the late 1950s and early 1960s.

These thinkers emphasized that, relative to

case-by-case adjudication, rules offered clarity, more predictable and consis-

Act of Oct. 14, 1940, ch. 871, §?2, 54 Stat. 1128 (codified at 15 U.S.C. §§ 68–68j).

The Act supported the agency’s 1941 promulgation of the Wool Products Labeling Rules. See

16 C.F.R. pt. 300 (2022); 6 Fed. Reg. 3426 (July 15, 1941).

See Trade Rules and Trade Conferences: The FTC and Business Attack Deceptive Practices,

Unfair Competition, and Antitrust Violations, 62 Y

ALE

L.J. 912, 925 (1953); S

TEPHANIE

ANWIT

, F

EDERAL

RADE

OMMISSION

§ 5:6 (rev. ed. 2018).

See 17 Fed. Reg. 113 (Jan. 4, 1952); Alan Buxton Hobbs, Clayton Act Quantity Limit

Proceedings, 7 W

ASH

. & L

L. R

. 131, 138 (1950).

J. Skelly Wright, The Courts and the Rulemaking Process: The Limits of Judicial Review,

59 C

ORNELL

L. R

. 375, 375 (1974).

See Reuel E. Schiller, Rulemaking’s Promise: Administrative Law and Legal Culture in the

1960s and 1970s, 53 A

DMIN

. L. R

. 1139, 1146–51 (2001).

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2022] Reassessing the Mythology of Magnuson-Moss 529

tent application, and efficient enforcement proceedings that reduced agency

caseloads.

The Commission embraced these arguments in 1962 when it claimed

broad rulemaking authority under the loosely worded section 6(g) of the

FTC Act.

It established a Division of Trade Regulations and Rules and

issued an internal rule stating that it would promulgate binding trade regula-

tion rules under APA notice-and-comment rulemaking procedures.

Cover-

ing subjects ranging from retail food advertising to door-to-door sales

tactics, the agency then engaged in thirty-five rulemaking proceedings over

its first twelve years of discretionary rulemaking,

finalizing dozens by

1974.

Many of these rules were framed as applying to both the FTC’s con-

sumer protection and competition mandates, restricting both “unfair or de-

ceptive acts or practices” and “unfair methods of competition.”

The

Commission’s rulemaking was spurred forward from the outside. A pair of

hard-hitting reports issued in 1969 by affiliates of Ralph Nader and by the

American Bar Association assailed the agency’s assertedly meek approach,

and powerful members of the FTC’s oversight committees in Congress con-

tinuously pressed for greater regulatory action.

This assertion of rulemaking power proved controversial. Commenta-

tors vigorously debated whether the legislative history of the FTC Act and

section 6(g)’s text and placement within a section devoted largely to internal

agency organization could support this type of substantive rulemaking.

That legal uncertainty was effectively resolved by the U.S. Court of Appeals

See id. at 1150.

15 U.S.C. § 46(g) (empowering the agency to “[f]rom time to time classify corporations

and . . . make rules and regulations for the purpose of carrying out the provisions of this

subchapter,” subject to certain exceptions). The agency also asserted inherent authority to issue

substantive rules due to its adjudicative powers, although this received less attention. See Glen

O. Robinson, The Making of Administrative Policy: Another Look at Rulemaking and Adjudica-

tion and Administrative Procedure Reform, 118 U. P

. L. R

. 485, 493 n.33 (1970).

See Developments in the Law—Deceptive Advertising: VI. The Federal Trade Commission:

Modes of Administration, 80 H

ARV

. L. R

. 1063, 1091 (1967); Schiller, supra note 46 at 1147.

DMIN

. C

ONF

OF THE

U.S., R

ECOMMENDATION

79-1: H

YBRID

ULEMAKING

RO-

CEDURES OF THE

EDERAL

RADE

OMMISSION

2 (1979), https://www.acus.gov/sites/de-

fault/files/documents/79-1-with-table.pdf [https://perma.cc/7KXW-STXU] [hereinafter

ACUS 1979 R

ECOMMENDATION

See M

ILES

W. K

IRKPATRICK

, J

OAN

Z B

ERNSTEIN

, R

OBERT

ITOFSKY

, M

ICHAEL

ROCKMEYER

, J

AMES

F. R

ILL

, N

ANCY

L. B

, E

DWIN

S. R

OCKEFELLER

, C

ALVIN

J. C

OL-

LIER

, J. T

HOMAS

OSCH

, K

ENNETH

G. E

LZINGA

, A

LAN

H. S

ILBERMAN

, E

RNEST

EL-

HORN

, C

ASS

R. S

UNSTEIN

, C

ASWELL

O. H

OBBS

III, W

ILLIAM

L. W

EBSTER

, B

ASIL

EZINES

, A

LAN

B. M

ORRISON

, T

IMOTHY

J. M

URIS

& S

TEPHEN

ALKINS

, R

EPORT OF THE

MERICAN

SSOCIATION

ECTION OF

NTITRUST

PECIAL

OMMITTEE TO

TUDY THE

OLE OF THE

EDERAL

RADE

OMMISSION

64 (1989) [hereinafter 1989 ABA

EPORT

See, e.g., Care Labeling of Textile Wearing Apparel, 36 Fed. Reg. 23,883, 23,884 (Dec.

16, 1971) (codified as amended at 16 C.F.R. pt. 423).

See Barry R. Weingast & Mark J. Moran, The Myth of Runaway Bureaucracy: The Case

of the FTC, R

EGULATION

, May/June 1982, at 33, 34–36; Robert E. Freer, Jr., The Federal

Trade Commission—A Study in Survival, 26 B

. L

1505, 1505–06 (1971).

See Richard A. Wegman, Cigarettes and Health: A Legal Analysis, 51 C

ORNELL

L. R

678, 740 n.280 (gathering arguments for and against).

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530 Harvard Law & Policy Review [Vol. 16

for the D.C. Circuit, which in 1973 upheld the FTC’s power to regulate, in

a paean to the virtues of rulemaking.

Nonetheless, a broader debate contin-

ued in Congress over whether to codify the agency’s rulemaking power and

whether to impose greater procedural requirements and oversight over the

process.

B. Use of Sweeping Powers Draws Backlash: 1975–80

The FTC’s rulemaking powers saw a seismic shift with the enactment

of the Magnuson-Moss Warranty—Federal Trade Commission Improve-

ment Act (“Magnuson-Moss Act”) in January 1975.

In the face of present-

day mythology, it is critical to recall that the Act was both intended to be

and received as a means to empower the agency’s regulatory program. The

Magnuson-Moss Act created a new section 18 of the FTC Act, which made

explicit the agency’s authority to issue rules prohibiting unfair or deceptive

acts or practices and laid out procedural requirements for such rulemaking

proceedings.

These procedures included informal oral hearings with a lim-

ited right of cross-examination, reflecting best practices recommendations by

the Administrative Conference of the United States (“ACUS”) during that

era.

The Act also provided for civil penalties and consumer redress in cases

of rule violations,

made those remedies apply to extant rules issued under

section 6(g) as well as to future rules promulgated under section 18,

and

expanded the agency’s UDAP jurisdiction to be coterminous with Congress’s

Commerce Clause power.

The “chief architect” of that legislation was Michael Pertschuk, top

counsel to the Senate Commerce Committee chaired by a lead sponsor of

the legislation, Senator Warren Magnuson.

Newsweek reported that “[i]t

was mainly as a result of Pertschuk’s prodding that Congress passed the

Magnuson-Moss Act of 1974” and that “his most conspicuous accomplish-

ment [was] his use of legislative clout to transform the FTC from a somno-

lent backwater . . . into an activist agency.”

The victory was a triumph of

Pertschuk’s legislative maneuvering—he was able to secure his desired FTC

Nat’l Petroleum Refiners Ass’n v. FTC, 482 F.2d 672, 698 (D.C. Cir. 1973).

Magnuson Moss Warranty-Federal Trade Commission Improvements Act of 1975,

Pub. L. No. 93-637, 88 Stat. 2183 (1975) (codified as amended in scattered sections of 26

U.S.C.).

However, the Act explicitly left unchanged the Commission’s authority to promulgate

rules restricting unfair methods of competition. Rohit Chopra & Lina M. Khan, The Case for

“Unfair Methods of Competition” Rulemaking, 87 U. C

. L. R

. 357, 378 (2020).

See 38 Fed. Reg. 19,782, 19,792 (July 23, 1973).

See 15 U.S.C. §§ 45(m)(1)(A), 57b(b).

Id. § 45(m)(1)(A).

Magnuson Moss Warranty-Federal Trade Commission Improvements Act of 1975,

Pub. L. No. 93-637, § 201(a), 88 Stat. 2183, 2193 (1975) (codified at 15 U.S.C. § 45).

Morgan Norval, Kept Critics, R

EASON

(July 1981), https://reason.com/1981/07/01/

kept-critics/ [https://perma.cc/2MBV-DGUH].

Allan J. Mayer & James Bishop, Jr., Regulation: A Tough Man for the FTC, N

EWS-

WEEK

, Mar. 7, 1977, at 61.

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2022] Reassessing the Mythology of Magnuson-Moss 531

reform package by tying it to measures that responded to public uproar re-

garding deceptive warranties.

Pertschuk then was appointed Chairman of

the FTC in early 1977 and bolstered his reputation as a “hero of the con-

sumer movement” and a strong proponent of regulatory action.

During the decade after its passage, the Magnuson-Moss Act was

viewed as substantially increasing the agency’s rulemaking powers. In 1979, a

New York Times contributor stated that the bill was responsible for “sending

new waves of energy through the commission, dramatically increasing its

power.”

The authors of a leading treatise on the FTC shared this view,

writing that the Magnuson-Moss Act “has transformed the FTC into one of

the most powerful of government agencies by confirming its authority to

prescribe . . . rules.”

This common understanding of Magnuson-Moss con-

tinued through at least 1984, when the Washington Post described the bill as

having “liberalized the commission’s rulemaking authority.”

The FTC also viewed section 18 as empowering and responded with a

flurry of activity. It began a stunning sixteen rulemaking proceedings within

sixteen months of the passage of the Magnuson-Moss Act, adding four more

by 1978

—perhaps the most expansive suite of rulemakings ever pursued at

once by a single agency. The Eyeglass Rule was the first rule to be finalized

of those proposed after the passage of the Magnuson-Moss Act.

The pace of action and breadth of affected industries prompted attacks

by an ascendant business lobby as the energy of the consumer movement

faded. Newly aggressive entities such as the U.S. Chamber of Commerce

joined with networks of anti-regulation scholars to take aim at the agency for

allegedly trying to become “the second most powerful legislative body in the

United States.”

In so doing, they employed the approach advocated in the

famous memorandum to the Chamber from later Supreme Court Justice

Lewis Powell.

The most vitriolic opposition came in response to a

rulemaking that proposed blocking television advertisements aimed at young

children and advertisements for sugary foods on programs reaching a wider

range of children, nicknamed the “Kidvid” rule. Despite initially strong pub-

lic support for restricting advertising to young children, business-led resis-

tance and a “Stop the FTC” campaign funded to the then-unprecedented

See id.; M

ICHAEL

ERTSCHUK

, W

HEN THE

ENATE

ORKED FOR

: T

NVISI-

BLE

OLE OF

TAFFERS IN

OUNTERING

ORPORATE

OBBIES

150–51 (2017).

Peter Passel, Opinion, Is Consumerism Dead?, N.Y. T

IMES

, Nov. 22, 1982, at A18.

A.O. Sulzberger Jr., Should the F.T.C. Be Reined?, N.Y. T

IMES

, Nov. 5, 1979, at D1.

TEPHANIE

W. K

ANWIT

, F

EDERAL

RADE

OMMISSION

§ 6:3 (rev. ed. 2018) (inter-

nal citation omitted).

Mark Potts & Michael Isikoff, Pertschuk Exits FTC With Guns Blazing, W

ASH

. P

OST

(Sept. 26, 1984), https://www.washingtonpost.com/archive/business/1984/09/26/pertschuk-

exits-ftc-with-guns-blazing/5e9c7df9-e639-41af-8c8c-202fcdb55eca/ [https://perma.cc/

A835-MGVB].

See ACUS 1979 R

ECOMMENDATION

, supra note 50, at 6–8.

See 43 Fed. Reg. 23,992, 23,992 (June 2, 1978) (codified at 16 C.F.R. pt. 456).

J. Howard Beales III & Timothy J. Muris, FTC Consumer Protection at 100: 1970s

Redux or Protecting Markets to Protect Consumers?, 83 G

. W

ASH

. L. R

. 2157, 2228 (2015)

(quoting Jean Carper, The Backlash at the FTC, W

ASH

. P

OST

, Feb. 6, 1977, at C1).

See Luke Herrine, The Folklore of Unfairness, 96 N.Y.U. L. R

. 431, 491–92 (2021).

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532 Harvard Law & Policy Review [Vol. 16

tune of $30 million saw enormous success in the media and in Congress.

The blowback culminated with a Washington Post editorial that famously

decried the rulemaking as a “preposterous intervention that would turn the

agency into a great national nanny.”

As politically influential groups mobilized against the FTC, Congress

took several temporary steps to slow the agency’s rate of regulation. These

moves escalated to the point that a late 1979 funding rider imposed a thirty-

day prohibition on finalizing trade regulation rules or engaging in “any new

activities.”

In May 1980, Congress briefly let funding for the agency lapse

entirely.

In a scarring experience for agency staff, the Commission was

forced to initiate procedures to shutter the agency.

These measures, and

tough oversight committee hearings, served as “shock therapy for

bureaucrats.”

Despite the tumult, the Federal Trade Commission Improvements Act

of 1980

(“1980 Act”) that followed this controversy was “compromise legis-

lation” between FTC boosters and detractors that held few lasting statutory

restrictions.

The Act’s most notable check on the agency was a two-year

experiment with a legislative veto power over FTC rules—cut short when

the D.C. Circuit struck the provision down as unconstitutional and the Su-

preme Court foreclosed legislative vetoes in I.N.S. v. Chadha.

The legisla-

tion also impeded the agency’s ability to continue three specific rulemakings,

including the children’s advertising rule, although it did not foreclose future

action in all of those areas.

The 1980 Act also required the agency to issue

Advance Notices of Proposed Rulemaking for section 18 rulemakings and

added a bevy of minor revisions to section 18 that were either temporary or

of marginal significance.

A former FTC Chair remarked with surprise,

Editorial, The FTC as National Nanny, W

ASH

. P

OST

, Mar. 1, 1978, at A22.

See William J. Baer, Where to from Here: Reflection on the Recent Saga of the Federal Trade

Commission, 39 O

KLA

. L. R

. 51, 54 (1986).

See id.

Weingast & Moran, supra note 53, at 34.

Federal Trade Commission Improvements Act of 1980, Pub. L. No. 96-252, 94 Stat.

374 (1980).

See Earl W. Kintner, Christopher Smith & David B. Goldston, The Effect of the Federal

Trade Commission Improvements Act of 1980 on the FTC’s Rulemaking and Enforcement Author-

ity, 58 W

ASH

. U. L.Q. 847, 847 (1980).

462 U.S. 919 (1983). See Consumers Union of U.S., Inc. v. FTC, 691 F.2d 575, 577

(D.C. Cir. 1982), aff’d sub nom. Process Gas Consumers Grp. v. Consumer Energy Council of

Am., 463 U.S. 1216 (1983).

See Kintner et al., supra note 79, at 848.

In addition to the ANPRM requirement, see supra note 79, the amendments included

mandatory submission of NPRMs to Congress thirty days before publication in the Federal

94 Stat. at 377, further restrictions to ex parte communications, id. § 12, 94 Stat. at 379,

limitations on subpoena power in rulemakings, id. § 13, 94 Stat. at 380, and an obligation to

produce regulatory analyses, id. § 15, 94 Stat. at 388. The Act also restricted section 18

rulemaking governing standard-setting by private bodies and compelled substantive changes to

the Funeral Rule through conditions on funding. Id. § 7, 19, 94 Stat. at 376, 391–93. As

discussed in Part III.A, these revisions around the edges of FTC’s authority ought not be

considered fatal to effective rulemaking.

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2022] Reassessing the Mythology of Magnuson-Moss 533

“[p]retty clearly . . . no fundamental changes have been imposed by the 1980

amendments.”

The lasting threat to FTC rulemaking came not from statu-

tory restrictions but from the personnel who would soon assume control of

the agency.

C. The Enduring “Reagan Revolution”: 1981–Present

The advent of the Reagan Administration proved the most influential

step toward ending the FTC’s focus on rulemaking—far outstripping any

legislative changes. The transition memo produced during President Rea-

gan’s 1980–81 transition effort is a revealing guide to the ensuing transfor-

mation in FTC self-image, personnel, and culture.

The document attacked

the agency’s actions during the 1970s as “misguided,” “counterproductive,”

and “overly aggressive,” and argued that “President Reagan can and should

point this agency in a new direction.”

Crucially, the memorandum’s authors

recognized that “[t]he bulk of our specific recommendations could be carried

out under existing legislative authority,” and did not require intervention by

Congress.

Three focuses stand out as most relevant to orienting the agency

away from rulemaking: establishing a strong presumption in favor of volun-

tary guidance rather than binding regulation, due to perceived costs to indus-

try; installing personnel committed to the Reagan Administration’s

deregulatory vision; and elevating the role of economists in agency action.

The transition memo called for a radical reduction in rulemaking. It

urged a shift from agency regulation to the “enlightened use” of industry

self-regulation, aiming to minimize “the emotive content of the adversarial

relationship with business that is indigenous to much of the FTC’s work.”

Accordingly, rulemaking staff was cut precipitously. Staff hours dedicated to

rulemaking dropped from 89 “workyears” in 1976 to 25 in 1982 and only 12

in 1988.

Meanwhile, the number of FTC presiding officers dwindled from

nine immediately after the passage of the Magnuson-Moss Act to just one

by the late 1980s.

The memo also highlights the importance of a visionary Chairman to

change the FTC’s culture. This focus matches the credo of ideological con-

servatives within the Reagan Administration that “personnel is policy.”

The

Debate: The Federal Trade Commission Under Attack: Should the Commission’s Role Be

Changed?, 49 A

NTITRUST

L.J. 1481, 1482 (1980).

See generally Conclusions and Recommendations from Federal Trade Comm’n Transition

Team Report Submitted to Reagan Adm’n [sic], reprinted in A

NTITRUST

& T

RADE

. R

(BNA) N

. 999, at G-1 [hereinafter FTC Transition Memo].

Id. at G-1, G-3.

Id. at G-1.

Id.

1989 ABA R

EPORT

, supra note 51, at 154 fig.17.

William D. Dixon, Rulemaking and the Myth of Cross-Examination, 34 A

DMIN

. L. R

389, 400 n.41 (1982); 1989 ABA R

EPORT

, supra note 51, at 89 n.96.

Stewart Lawrence, Opinion, “Personnel Is Policy”: To Get Back on Track, Trump Must

Recall Reagan’s Example, D

AILY

ALLER

(Feb. 17, 2017), https://dailycaller.com/2017/02/17/

personnel-is-policy-to-get-back-on-track-trump-must-recall-reagans-example/.

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534 Harvard Law & Policy Review [Vol. 16

transition team urged the President to choose a “Chairman from outside the

agency . . . who is committed to filling key staff positions with qualified

persons who share a new vision for the agency.”

They perceived, correctly,

that the adoption of their proposals “depend[ed] critically on strong leader-

ship from the Commission and, especially, its Chairman.”

President Rea-

gan delivered by selecting the author of the transition report, James Miller,

as his first FTC Chairman in 1981. Within three years, the agency had

executed twenty-five of the twenty-nine recommendations in the transition

memo, with “substantial progress” toward another two.

Economists hostile to regulation were put in charge at the FTC, both

literally and figuratively. In Miller, the agency had its first Chairman with a

background as an economist rather than as an attorney.

The transition

memo aimed to raise the influence of economists throughout the agency. It

urged the agency to reallocate prized space in its small, central headquarters

building to Bureau of Economics staff and to increase the power of econo-

mists to shape which matters were considered by the Commission.

Despite

its air of neutrality, this push to elevate economic thinking had a marked

anti-regulation slant. The transition team sought to require that agency

economists focus greatly on any costs imposed by government action or reg-

ulation, with less emphasis given to the corresponding benefits.

This ap-

proach dovetailed with efforts rooted in the Chicago School of economics to

limit rulemaking by mandating quantified “cost-benefit analysis.”

Industry

helped to fund the cultivation of this intellectual development precisely be-

cause costs to regulated parties, such as industrial pollution controls, are sys-

temically easier to quantify than benefits to regulatory beneficiaries, such as

improved health outcomes for children.

While seeking to raise the influ-

ence of economists, the transition team sought to reduce the power of the

rest of the agency—it requested that Congress cut the FTC’s budget by

twenty-five percent, provide a “sorely needed” reduction in the agency’s legal

authority, and eliminate many of its regional offices.

The push to halt rulemaking was a dramatic success. After the rapid

pace of the previous decade, the agency promulgated only two rules during

the 1980s.

100

Upon his departure from the agency he had once chaired, then-

FTC Transition Memo, supra note 84, at G-2.

Id. at G-1.

ETE

EPP

, FTC: A T

HREE

-L

ETTER

AY TO

PELL

“N

ANNY

”?, N

’

AXPAYERS

NION

4 (2015), https://www.ntu.org/library/doclib/NTU-PP-135-FTC.pdf [https://

perma.cc/4UJV-R8JC].

Eleanor M. Fox, Chairman Miller, the Federal Trade Commission, Economics, and

Rashomon, 50 L. & C

ONTEMP

. P

ROBS

. 33, 33 (1987).

FTC Transition Memo, supra note 84, at G-2.

See id. at G-2.

See Herrine, supra note 72, at 498–99.

See Elizabeth Popp Berman, Let’s Politicize Cost-Benefit Analysis, L. & P

. E

CON

(Oct. 5, 2021), https://lpeproject.org/blog/lets-politicize-cost-benefit-analysis/ [https://

perma.cc/YCD5-FCBL].

FTC Transition Memo, supra note 84, at G-1, G-3.

100

1989 ABA R

EPORT

, supra note 51, at 89 n.96 (In fairness, the few rules that emerged

from the new internal order found more success in court, although it is difficult to distinguish

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2022] Reassessing the Mythology of Magnuson-Moss 535

Commissioner Michael Pertschuk stated of the Reagan appointees, “Part

wittingly, part unwittingly, they have crippled the FTC.”

101

Reporters also

noted this “turnabout in the commission’s approach to industry regulation,

from what many characterized as an adversarial position to one of

accommodation.”

102

The fundamental reorientation of the FTC’s approach during the Rea-

gan years had remarkable durability over ensuing decades. Tim Muris, who

led the Bureau of Consumer Protection during the Reagan years and was

Chairman from 2001 to 2004, recalled the staff purge at the root of the

agency’s metamorphosis: “Many FTC staff, with a different vision of the

FTC, were asked to leave or left on their own accord. There really was a

Reagan Revolution in antitrust and consumer protection. As I like to say, my

side won.”

103

He credits the staying power of this philosophical shift to key

Reagan-era staff continuing to lead the Bureau of Consumer Protection into

the 2000s.

104

Later Chairmen continued to extend Chairman Miller’s legacy

decades later: “The FTC Chairmen from 1995–2004, Robert Pitofsky and

Timothy Muris, both had worked at the agency in the 1970s [and 1980s];

[and] both shared the market-oriented vision of the FTC.”

105

This longevity was by design. At a conference “to celebrate the 30th

anniversary of the Reagan Revolution at the FTC,”

106

former Chairman

Miller recounted his efforts to create a lasting transformation in agency

culture:

[W]e also recognized that reforms could be undone after we left.

Accordingly, we went about trying to prevent recidivism in a num-

ber of ways. We endeavored to teach the highly motivated career

staff that the approach that we advocated to competition and con-

sumer protection matters was the one most efficient and serving

the true interest of consumers.

107

how much of this change is due to learning from earlier legal setbacks from how much was due

to the greater length of proceedings during the Reagan years); see generally Harry & Bryant Co.

v. FTC, 726 F.2d 993 (4th Cir. 1984); Am. Fin. Servs. Ass’n v. FTC, 767 F.2d 957 (D.C. Cir.

1985); Consumers Union of U.S., Inc. v. FTC, 801 F.2d 417 (D.C. Cir. 1986).

101

Potts & Isikoff, supra note 68.

102

Irvin Molotsky, It Sometimes Seems Like the Federal Tirade Commission, N.Y. T

IMES

June 5, 1984, at E5.

103

Kirstin Downey & Kirk Victor, FTC at 100: Reagan Revolution Transforms FTC in the

1980s, FTCW

ATCH

(Feb. 13, 2015), https://www.mlexwatch.com/articles/1788/ftc-at-100-

reagan-revolution-transforms-ftc-in-the-1980s [https://perma.cc/B6W6-ZFNC]; Looking

Back on the Muris Years in Consumer Protection: An Interview with Timothy J. Muris, 18 A

NTI-

TRUST

, Summer 2004, at 9, 10; F

. T

RADE

OMM

’

, Timothy J. Muris: Former Chairman,

https://www.ftc.gov/about-ftc/biographies/timothy-j-muris [https://perma.cc/L6R6-UGBX].

104

See J. Howard Beales III & Timothy J. Muris, FTC Consumer Protection at 100: 1970s

Redux or Protecting Markets to Protect Consumers?, 83 G

. W

ASH

. L. R

. 2157, 2228

(2015).

105

See id.

106

Transcript of Lessons Since the Reagan Revolution at the FTC: A 30-Year Perspective

on Competition and Consumer Policies 1 (Sept. 30, 2011), https://masonlec.org/site/

rte_uploads/files/LEC_AM.pdf [https://perma.cc/9L9C-4EQR].

107

Id. at 4.

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536 Harvard Law & Policy Review [Vol. 16

New administrations brought little change to the agency’s approach to

discretionary rulemaking. At the end of the George H.W. Bush presidency,

the FTC adopted a plan to review each of its rules every ten years, training

the agency’s efforts on repeal of old rules considered outdated rather than

promulgation of new rules to respond to consumer harm.

108

In keeping with

President Clinton’s deregulatory mantra that the “era of big government is

over,”

109

this move only accelerated in the mid-1990s. The agency’s regula-

tory activity centered on cutting back existing trade regulation rules, includ-

ing six section 18 rules that were repealed in just seven months.

110

Rulemaking did continue under some specific acts of Congress,

111

although

other grants of APA notice-and-comment rulemaking authority sat unused

for decades.

112

The Federal Trade Commission Act Amendments of 1994 made some

minor tweaks to section 18, eliminating a long-defunded program to com-

pensate rulemaking participants and adding a non-justiciable requirement

that the agency have reason to believe that industry misconduct is “prevalent”

before beginning a rulemaking.

113

But the much more significant pressure

against rulemaking during that era was the continuation of a twenty-year

shift in agency self-conception, from regulatory agency to law-enforcement

agency,

114

which continued through the George W. Bush, Obama, and

Trump Administrations. Yet, because the agency’s turn away from rulemak-

ing was caused by changes in culture rather than statute, “the basic authori-

zation for substantive rulemaking remain[s] in place to be reawakened in a

more receptive political climate.”

115

D. A New Era?

There is a palpable sense that the FTC is on the precipice of a new,

more assertive era after President Biden designated pioneering antitrust

scholar Lina Khan to be FTC Chair.

116

In recent years, a growing set of

scholars have urged the FTC to resuscitate long-underutilized authorities

across both its competition and consumer protection mandates, including

108

See Lydia B. Parnes & Carol J. Jennings, Through the Looking Glass: A Perspective on

Regulatory Reform at the Federal Trade Commission, 49 A

DMIN

. L. R

. 989, 997 (1997).

109

William J. Clinton, Address Before a Joint Session of the Congress on the State of the

Union, 1 P

. P

APERS

79, 79 (Jan. 23, 1996).

110

See Parnes & Jennings, supra note 108, at 997.

111

See, e.g., 16 C.F.R. pts. 309, 315 (2021).

112

See 15 U.S.C. § 45a (Made in the USA labeling); 42 U.S.C. § 16471(a)–(d) (consumer

energy); 21 U.S.C. § 355 note (generic drug applicant agreements); 12 U.S.C. § 5519(d) (mo-

tor vehicle dealer practices).

113

See Pub. L. No. 103-312, §§ 3, 5; 108 Stat. 1691, 1691–92 (1994).

114

Parnes & Jennings, supra note 108, at 999 (“Over the past twenty years, the Commis-

sion has gradually shifted its focus from regulation to law enforcement.”).

115

RIDGEN

& R

ICHARD

M. A

LDERMAN

, C

ONSUMER

ROTECTION AND THE

§ 12:13 (rev. ed. 2018).

116

See David McCabe & Cecilia Kang, Biden Names Lina Khan, a Big-Tech Critic, as

F.T.C. Chair, N.Y. T

IMES

(June 15, 2021), https://www.nytimes.com/2021/06/15/technol-

ogy/lina-khan-ftc.html [https://perma.cc/PD6U-323S].

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2022] Reassessing the Mythology of Magnuson-Moss 537

Khan’s own calls to reinvigorate competition rulemaking.

117

The impression

of an imminent return to FTC rulemaking grew even stronger when, in its

first meeting under Chair Khan, the Commission issued a suite of adminis-

trative reforms to streamline section 18 proceedings.

118

Interest in a renewed embrace of section 18 rulemaking has grown to a

greater level today than at any time in the past forty years. In 2019, Com-

missioner Rebecca Slaughter broke a decades-long taboo by beginning to

discuss seriously the possibility of brand-new section 18 rulemakings—call-

ing for a data protection rule

119

and a regulation to prevent consumer harm

from AI-powered algorithms that exhibit racial or gender bias.

120

The fol-

lowing year, then-Commissioner Rohit Chopra started to advocate the use

of section 18 to create “restatements” of existing precedents to unlock civil

penalties for first-time offenders, listing imposter fraud and tip-theft by gig

work companies as prime areas for rulemaking.

121

Then, in 2021, Commis-

sioner Christine Wilson—who, unlike Slaughter and Chopra, occupies a

Republican seat on the Commission—voiced her tentative support for a sec-

tion 18 rulemaking to address data privacy.

122

Regardless of bipartisan sup-

port, the recent confirmation of privacy expert Alvaro Bedoya to the

Commission, filling the seat vacated by Chopra, gives the Commission a

majority that observers expect will pursue a privacy rulemaking.

123

The

agency signaled its seriousness with the creation of a new rulemaking group

in the Office of General Counsel.

124

Just days before the start of 2022, the

117

See Chopra & Khan, supra note 57, at 378.

118

See Revisions to Rules of Practice, 86 Fed. Reg. 38,542 (July 22, 2021).

119

Rebecca Kelly Slaughter, Comm’r, Fed. Trade Comm’n, Remarks at Silicon Flatirons:

The Near Future of U.S. Privacy Law 8–9 (Sept. 6, 2019), https://www.ftc.gov/system/files/

documents/public_statements/1543396/slaughter_silicon_flatirons_remarks_9-6-19.pdf

[https://perma.cc/37VJ-NVCA].

120

Rebecca Kelly Slaughter, Comm’r, Fed. Trade Comm’n, Remarks at UCLA School of

Law: Algorithms and Economic Justice 15–16 (Jan. 24, 2020), https://www.ftc.gov/system/

files/documents/public_statements/1564883/re-

marks_of_commissioner_rebecca_kelly_slaughter_on_algorithmic_and_economic_justice_01-

24-2020.pdf [https://perma.cc/49L9-UM65].

121

Statement of Comm’r Rohit Chopra Regarding the Report to Congress on Protecting

Older Consumers 2 (Oct. 19, 2020), https://www.ftc.gov/system/files/documents/pub-

lic_statements/1581862/p144400choprastatementolderamericansrpt.pdf [https://perma.cc/

6SAP-HAQQ]; Statement of Comm’r Rohit Chopra Regarding the Deception of Delivery

Drivers by Amazon.com 2 n.12 (Feb. 2, 2021), https://www.ftc.gov/system/files/documents/

public_statements/1587003/20200102_final_rchopra_statement_v2.pdf [https://perma.cc/

Z8HP-R8Q2].

122

FTC Commissioner Wilson Signals Openness to Data Privacy Rulemaking, E

LEC

. P

RI-

VACY

NFO

. C

. (Feb. 12, 2021), https://epic.org/ftc-commissioner-wilson-signals-open-

ness-to-data-privacy-rulemaking/.

123

See Andrea Vittorio, New Data Privacy Rules Loom for Businesses as Bedoya Joins FTC,

LOOMBERG

L. (May 12, 2022, 4:50 AM), https://news.bloomberglaw.com/privacy-and-

data-security/new-data-privacy-rules-loom-for-businesses-as-bedoya-joins-ftc [https://

perma.cc/33Z9-E3XL].

124

Press Release, Fed. Trade Comm’n, FTC Acting Chairwoman Slaughter Announces

New Rulemaking Group (Mar. 25, 2021), https://www.ftc.gov/news-events/news/press-re-

leases/2021/03/ftc-acting-chairwoman-slaughter-announces-new-rulemaking-group [https://

perma.cc/L3AP-24HL].

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538 Harvard Law & Policy Review [Vol. 16

full Commission took its first formal step toward a new rulemaking by re-

questing public input on a rule to restrict government and business imper-

sonation fraud;

125

a similar step for false future-earnings claims followed a

few months later.

126

The agency has also begun to see outside pressure to re-engage with its

rulemaking authority. President Biden has called for an FTC rule to restrict

surveillance-style data collection,

127

which would likely be issued under sec-

tion 18.

128

So, too, a sizeable contingent of U.S. Senators has written the

agency to urge it to begin a section 18 rulemaking on digital privacy,

129

appeal echoed by a coalition of more than forty civil society groups.

130

The

Build Back Better Act that the U.S. House of Representatives passed in

November 2021 included $500 million over eight years to fund a new privacy

bureau at the FTC.

131

Even if the fate of that legislation remains unclear as

this article goes to print, it is apparent that many in Congress seek to press

the agency into action.

The Commission’s renewed interest in rulemaking has run headlong

into a longstanding, if weakly supported, conventional wisdom that section

18’s “Magnuson-Moss procedures” are almost impossibly onerous. This my-

thology arose as part of the “hangover” that followed harsh congressional

criticism of the agency’s substantive priorities in the 1970s.

132

It has received

scant scrutiny since that point. In fairness, before Commissioner Slaughter

began to signal interest in section 18 rulemaking in 2019,

133

there was little

practical reason for deep scholarship on the topic. The FTC had not initi-

ated an entirely new section 18 rulemaking in the thirty-eight years since it

finalized the Credit Practices Rule.

134

The scholarly conversation is accord-

ingly thin and, unfortunately, flawed, as discussed in Part III.C. Indeed,

Professor Chris Hoofnagle has noted that the FTC is the subject of many

“zombie ideas” with curiously strong staying power, “bad arguments that re-

surface in the face of disconfirming evidence,” which he credits to the con-

125

See Trade Regulation Rule on Impersonation of Government and Businesses, 86 Fed.

Reg. 72,901, 72,901 (Dec. 23, 2021).

126

Deceptive or Unfair Earnings Claims, 87 Fed. Reg. 13,951, 13,951 (Mar. 11, 2022).

127

See Exec. Order No. 14,036 § 5(h)(i), 86 Fed. Reg. 36,987, 36,992 (July 9, 2021).

128

See Slaughter, supra note 10, at 54–55.

129

Letter from Richard Blumenthal, Brian Schatz, Ron Wyden, Elizabeth Warren,

Christopher A. Coons, Ben Ray Luj´an, Amy Klobuchar, Cory A. Booker & Edward J. Mar-

key, Senators, U.S. Senate to Lina Khan, Chair, Fed. Trade Comm’n (Sept. 20, 2021), https://

www.blumenthal.senate.gov/imo/media/doc/2021.09.20%20-%20FTC%20-%20Pri-

vacy%20Rulemaking.pdf [https://perma.cc/VB9A-4PZX].

130

Press Release, Free Press, 45 Civil-Rights, Media-Democracy and Consumer-Advo-

cacy Groups Urge FTC to Act Against Data Abuses and Discrimination (Oct. 27, 2021),

https://www.freepress.net/news/press-releases/45-civil-rights-media-democracy-and-con-

sumer-advocacy-groups-urge-ftc-act [https://perma.cc/QS5H-UUJE].

131

H.R. 5376, 117th Cong. § 31501 (as passed by the House of Representatives, Nov. 19,

2021).

132

See Terrell McSweeny, Psychographics, Predictive Analytics, Artificial Intelligence, & Bots:

Is the FTC Keeping Pace, 2 G

. L. T

ECH

. R

. 514, 526 (2018).

133

Slaughter, supra note 120, at 8–9.

134

However, the Business Opportunity Rule was spun off from the Franchise Rule in

2011. 76 Fed. Reg. 76,816, 76,816 (Dec. 8, 2011).

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2022] Reassessing the Mythology of Magnuson-Moss 539

fluence of business influence and the work of then-budding conservative

scholars before and during the Reagan era.

135

The need for a clear-eyed as-

sessment of section 18 could not be more apparent.

136

The moment is ripe for debunking the unsupported mythology sur-

rounding Magnuson-Moss. No observer appears to have attempted to dis-

tinguish the effects of the statutory requirements of the Magnuson-Moss

Act from those wrought by shifts in partisan and ideological control of the

Commission or by inefficient, self-imposed agency rules of practice. This

omission is peculiar when one considers the twenty-one-month Residential

Thermal Insulation Rule proceeding, conducted solely under the chairman-

ship of consumer champion Michael Pertschuk, in comparison to the nine-

year proceeding leading to the finalization of the complex Credit Practices

Rule under deregulation-minded Chairman Miller.

137

A deep statutory anal-

ysis of section 18 reveals that skeptics greatly over-emphasize the differences

between the FTC’s rulemaking authority and contemporary APA notice-

and-comment rulemaking. The FTC’s discretionary consumer protection

rulemaking authority thus presents an important, untapped opportunity to

prevent consumer abuses and promote a fairer economic system.

III. A F

RESH

OOK AT

ECTION

A. Comparing Section 18 with APA Rulemaking

While section 18 of the FTC Act establishes a rulemaking process spe-

cific to the FTC, one should not exaggerate the extent of its departure from

informal rulemaking under the Administrative Procedure Act (“APA”). The

APA was enacted in 1946 as the “armistice of a fierce political battle over

administrative reform” following the New Deal, a fight that ended favorably

for New Deal supporters.

138

The Act is a “quasi-constitution” of the admin-

istrative state that sets the default rules for agency action throughout the

government.

139

It broadly classifies all administrative actions either as case-

by-case adjudications or generally applicable rules. Then, the Act further

135

HRIS

OOFNAGLE

, F

EDERAL

RADE

OMMISSION

: P

RIVACY

AW AND

OL-

ICY

351 (2016).

136

See Rebecca Kelly Slaughter, Comm’r, Fed. Trade Comm’n, Remarks at the Cyber-

security and Data Privacy Conference: FTC Data Privacy Enforcement: A Time of Change 6

& n.11 (Oct. 16, 2020), https://www.ftc.gov/system/files/documents/public_statements/

1581786/slaughter_-_remarks_on_ftc_data_privacy_enforcement_-_a_time_of_change.pdf

[https://perma.cc/5C63-Y6NY].

137

See 49 Fed. Reg. 7740, 7740 (Mar. 1, 1984); 44 Fed. Reg. 50,218, 50,218 (Aug. 27,

1979) (note, though, that only three of the nine years of the Credit Practices Rule proceeding

occurred under Chairman Miller).

138

George B. Shepherd, Fierce Compromise: The Administrative Procedure Act Emerges from

New Deal Politics, 90 N

. U. L. R

. 1557, 1561, 1680 (1996).

139

Christopher J. Walker, The Lost World of the Administrative Procedure Act: A Literature

Review, 28 G

. M

ASON

L. R

. 733, 733 (2021).

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540 Harvard Law & Policy Review [Vol. 16

divides each category into informal and formal modes, with the formal mode

carrying elevated procedural requirements.

Section 18 builds upon the foundation of informal APA rulemaking.

140

It thus does not trigger the more demanding requirements of many adjudica-

tive processes or formal APA rulemaking.

141

While now uncommon, formal

rulemaking has led to notoriously lengthy proceedings, such as the rulemak-

ing for the Food and Drug Administration’s infamous “peanut butter rule,”

which took nine years to complete.

142

Informal rulemaking, also commonly labeled “notice-and-comment”

rulemaking, is defined by 5 U.S.C. § 553. It requires (1) a notice of pro-

posed rulemaking (“NPRM”),

143

(2) a written comment period,

144

and (3)

publication of the rule and a “concise general statement of [its] basis and

purpose” thirty days before the rule becomes effective.

145

Rules issued using

these procedures are subject to judicial review under the APA, most notably

the “arbitrary or capricious” standard.

146

In addition to these explicit statutory

requirements, there are further steps effectively mandated by judicial re-

view,

147

presidential proclamation,

148

or various statutes.

149

Agencies also fre-

quently engage in a range of discretionary measures such as issuing advance

notices of proposed rulemaking (“ANPRMs”) and holding informal public

workshops.

Thus, it is not uncommon for a section 553 rulemaking at another

agency to involve a staff investigation of a relevant industry or practice,

placement of the potential rule on a regulatory agenda, ANPRM with com-

140

See 15 U.S.C. § 57a(b)(1) (referencing 5 U.S.C. § 553).

141

See id. § 57a(b)(1), (e)(5)(C); see also FTC v. Brigadier Indus., 613 F.2d 1110, 1116

(D.C. Cir. 1979) (“The drafters of the Magnuson-Moss Act, however, were quite explicit that

the inclusion of these new procedural safeguards had not turned rulemaking proceedings into

adjudicatory proceedings.” (internal quotation marks omitted)); Ass’n of Nat’l Advertisers, Inc.

v. FTC (Nat’l Advertisers II), 617 F.2d 611, 633 (D.C. Cir. 1979) (Wright, J., concurring)

(“Any attempt to characterize [FTC rulemaking] as an ‘adjudication’ or ‘adversarial process’

completely disregards the congressional mandate in Section 18 requiring informal

rulemaking.”).

142

See New Paper by the Coalition for Sensible Safeguards Exposes the Dangers of the Regula-

tory Accountability Act, P

. C

ITIZEN

(Nov. 17, 2011), https://www.citizen.org/news/new-pa-

per-by-the-coalition-for-sensible-safeguards-exposes-the-dangers-of-the-regulatory-

accountability-act-congress-public-safeguard/ [https://perma.cc/7483-85MP]. Trial-like pro-

cedures may also have contributed less to the length of the FDA’s proceeding than did unre-

lated dysfunction in the agency. One commentator writes, “out of eleven years total time, the

trial-type hearing was responsible for a little over one quarter of one year.” Dixon, supra note

89, at 420.

143

5 U.S.C. § 553(b).

144

Id. § 553(c).

145

Id. § 553(b)–(d).

146

Id. § 706(2); See generally Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29 (1983).

147

See, e.g., Bus. Roundtable v. SEC, 647 F.3d 1144, 1155–56 (D.C. Cir. 2011); United

States v. Nova Scotia Food Prods. Corp., 568 F.2d 240, 252 (2d Cir. 1977).

148

See Exec. Order No. 13,563, 76 Fed. Reg. 3821 (2011).

149

Rulemaking must comply with cross-agency rules such as the Regulatory Flexibility

Act, Small Business Regulatory Enforcement Fairness Act, and Paperwork Reduction Act. See

5 U.S.C. §§ 601–612; 44 U.S.C. §§ 3501–3521.

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2022] Reassessing the Mythology of Magnuson-Moss 541

ment period, informal workshop, NPRM with detailed proposed rule along

with alternatives, written comment period, “reply comment” period, agency

staff analysis of comments and submitted data, robust cost-benefit analysis,

review by the Office of Information and Regulatory Affairs (“OIRA”), rule

revision, publication of a Final Rule in the Federal Register, and judicial

review. Significant rulemakings take an average of between two and four

years.

150

Indeed, a number of scholars have criticized the procedural require-

ments courts have imposed on APA rulemaking—which they characterize as

creating a phenomenon of “ossification,” undermining agency action with a

“rigid and burdensome” regulatory process.

151

Section 18 rulemaking must be considered in context. Whether com-

pared to judicially mandated “hybrid rulemaking” and FTC practice prior to

passage of the Magnuson-Moss Act or to present-day mandates, section 18’s

variations on APA notice-and-comment rulemaking are far more modest

than generally presumed. The D.C. Circuit, administrative law’s most im-

portant circuit court of appeals, had imposed elevated “hybrid rulemaking”

requirements on many administrative proceedings beginning in the mid-

1960s. By 1974, the D.C. Circuit had reversed a section 553 rulemaking for

lack of adjudicative procedures and asserted its power to require oral

presentations and cross-examination in rulemaking—essentially the same

procedures found in section 18.

152

Perhaps for this reason, the FTC had

already chosen to institute essentially all of the procedures of section 18

before the Magnuson-Moss Act was passed, with the exception of cross-

examination.

153

The Supreme Court beat back the D.C. Circuit’s hybrid re-

quirements only in 1978, several years after Magnuson-Moss.

154

Today, too, courts impose relatively tough standards for section 553

rulemaking. These proceedings involve so-called “paper hearings” with de-

mands to explicitly consider and respond to public comments,

155

engage in

quantified cost-benefit analysis,

156

consider reasonable alternative rules,

157

150

’

CCOUNTABILITY

FFICE

, GAO-09-205, F

EDERAL

ULEMAKING

: I

M-

PROVEMENTS

EEDED TO

ONITORING AND

VALUATION OF

ULES

EVELOPMENT AS

ELL AS TO THE

RANSPARENCY OF

OMB R

EGULATORY

EVIEWS

19 (2009) (finding an

average length of four years for major rules analyzed between 2006 and 2008); M

ICHAEL

ANGLIS

, P

. C

ITIZEN

, U

NSAFE

ELAYS

7 (2016), https://www.citizen.org/wp-content/

uploads/unsafe-delays-report.pdf [https://perma.cc/U2QN-R9C6] (finding economically sig-

nificant rules issued during a twenty-year period to have an average length of 2.4 years).

151

Thomas O. McGarity, Some Thoughts on “Deossifying” the Rulemaking Process, 41 D

UKE

L.J. 1385, 1385–86 (1992); see Nicholas Bagley, The Procedure Fetish, 118 M

ICH

. L. R

. 345,

357 (2019) (collecting examples of criticism).

152

See Antonin Scalia, Vermont Yankee: The APA, the D.C. Circuit, and the Supreme

Court, 1978 S

. C

. R

. 345, 348–52 (1978).

153

Dixon, supra note 89, at 393.

154

See Vt. Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, 435 U.S. 519, 524

(1978).

155

See United States v. Nova Scotia Food Prods. Corp., 568 F.2d 240, 252 (2d Cir. 1977).

156

See Bus. Roundtable v. SEC, 647 F.3d 1144, 1155–56 (D.C. Cir. 2011).

157

See Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463

U.S. 29, 46–49 (1983).

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542 Harvard Law & Policy Review [Vol. 16

and meet the standards of “hard look” judicial review

158

—each of which is

reminiscent of one of section 18’s provisions. Presidential orders have also

demanded that executive agencies’ rules provide robust cost-benefit analyses

and survive a pre-promulgation review by OIRA.

159

The following pages

provide the first concerted comparison of contemporary APA rulemaking

practice with the FTC Act’s section 18 procedures.

1. Pre-Proposal

The first step that section 18 requires the FTC to take before com-

mencing a rulemaking is to publish an ANPRM in the Federal Register and

share it with a committee in each chamber of Congress.

160

The ANPRM

must contain a “brief description of the area of inquiry under consideration,”

the “objectives which the Commission seeks to achieve,” any “possible regu-

latory alternatives under consideration by the Commission,” and an invita-

tion for public comment on the rulemaking.

161

The APA does not mandate this step,

162

but agencies often release

ANPRMs, particularly for complex or significant rules.

163

Critics of the prac-

tice emphasize that rulemakings that begin with an ANPRM take an aver-

age of 1.3 to 2.2 years longer to complete than those that do not.

164

These

commentators offer no causal story for why the fact of issuing an ANPRM

would create delays of this length, though, rather than the intuitive explana-

tion that agencies take this step during more complex rulemakings.

There is little reason to think that section 18’s pre-proposal require-

ments of an ANPRM and notice to Congress need add dramatically to the

time required to promulgate a rule. There is no mandatory length of time for

acceptance of public comment

165

and the ANPRM may be shared with Con-

gress simultaneously with or even after publication in the Federal Register.

166

158

See id.

159

See Exec. Order No. 12,291, 46 Fed. Reg. 13193 (Feb. 17, 1981); Exec. Order No.

12,866, 58 Fed. Reg. 51735 (Sept. 30, 1993); Exec. Order No. 13,563, 76 Fed. Reg. 3821

(Jan. 18, 2011).

160

See 15 U.S.C. § 57a(b)(2)(A); 16 C.F.R. § 1.10(b)–(c) (2021).

161

Id. § 57a(b)(2)(A).

162

See 5 U.S.C. § 553.

163

See, e.g., 77 Fed. Reg. 30,923 (May 24, 2012) (Consumer Financial Protection Bureau

Electronic Fund Transfers Rule).

164

ICHAEL

ANGLIS

, P

. C

ITIZEN

, U

NSAFE

ELAYS

17 (2016), https://

www.citizen.org/wp-content/uploads/unsafe-delays-report.pdf [https://perma.cc/945F-

8ENH].

165

In recent rulemaking proceedings to amend trade regulation rules under section 18, the

Commission has frequently announced ANPRM comment periods of sixty days. See, e.g., 82

Fed. Reg. 29,256, 29,256 (June 28, 2017); 81 Fed. Reg. 19,936, 19,936 (Apr. 6, 2016). It

likely would be reasonable to establish shorter comment periods in light of the many opportu-

nities for public input.

166

See 15 U.S.C. § 57a(b)(2)(A); 16 C.F.R. § 1.10(c) (2021).

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2022] Reassessing the Mythology of Magnuson-Moss 543

2. Proposal & Written Input

The phase of officially initiating a rulemaking and collecting written

comments is also nearly indistinguishable between APA notice-and-com-

ment rulemaking and section 18. Both types of rulemaking formally com-

mence with the publication of an NPRM.

167

The content of those

documents is also quite similar. An NPRM for a notice-and-comment

rulemaking must include details of the proposed rule, the legal authority

under which it is proposed, and a description of the rulemaking proceed-

ings.

168

A section 18 NPRM must also “stat[e] with particularity the text of

the rule, including any alternatives,” and include “the reason for the proposed

rule.”

169

While this is superficially more demanding than the corresponding

text in section 553,

170

judicial doctrines such as the “logical outgrowth” test

disincentivize any agency from issuing an NPRM without concretely articu-

lating the proposed rule, alternatives, and the agency’s reasoning.

171

Presi-

dential and statutory directives also require agencies to consider reasonable

alternatives when engaged in notice-and-comment rulemaking.

172

NPRMs

released under either authority invite the public to submit written comments,

typically for periods of sixty days.

173

Section 18 also has two ersatz requirements that lack judicial enforce-

ability. Observers sometimes portray the requirement that the FTC issue an

NPRM “only where it has reason to believe” that the conduct to be restricted

by the rule is “prevalent” as a foreboding barrier to rulemaking.

174

While no

court has construed this provision, its text and legislative history do not sup-

port this interpretation. The Senate Report that accompanied the 1994 leg-

islation creating this requirement made clear that the “reason to believe”

167

See 5 U.S.C. § 553(b); 15 U.S.C. § 57a(b)(1)(A). The FTC Act also requires the

agency to place its rules on a “regulatory agenda” before releasing an NPRM, which is common

practice across agencies due to the Regulatory Flexibility Act. See Fall 2020 Unified Agenda of

Regulatory and Deregulatory Actions, O

. I

NFO

. & R

. A

., https://www.reginfo.gov/pub-

lic/do/eAgendaMain [https://perma.cc/G99R-5T5F].

168

5 U.S.C. § 553(b)(1)–(3).

169

15 U.S.C. § 57a(b)(1)(A).

170

Section 553 provides that the notice shall include “either the terms or substance of the

proposed rule or a description of the subjects and issues involved.” 5 U.S.C. § 553(b)(3) (emphasis

added).

171

See, e.g., Chocolate Mfrs. Ass’n of U.S. v. Block, 755 F.2d 1098, 1105 (4th Cir. 1985).

172

Exec. Order. No. 13,563 § 1(b), 76 Fed. Reg. 3821, 3821 (Jan. 18, 2011) (directing

that “each agency must . . . choos[e] among alternative regulatory approaches” and “identify

and assess available alternatives to direct regulation”). All executive agencies must comply with

cross-agency requirements such as the Regulatory Flexibility Act, which requires consideration

of alternatives to economically significant rules. See 5 U.S.C. § 603(c).

173

See, e.g., 84 Fed. Reg. 13,150, 13,150 (Apr. 4, 2019) (opening sixty-day comment

period). The FTC extends its comment periods frequently. The most recent new section 18

rulemaking featured four extensions of comment periods. See 74 Fed. Reg. 29,149, 21,149

(June 16, 2009); 73 Fed. Reg. 34,895, 34,895 (June 19, 2008); 71 Fed. Reg. 46,878, 46,878

(Aug. 15, 2006); 71 Fed. Reg. 31,124, 31,124 (June 1, 2006).

174

15 U.S.C. § 57a(b)(3); see S

TEPHANIE

W. K

ANWIT

, F

EDERAL

RADE

OMMISSION

§ 6:3 (rev. ed. 2020) (describing the requirement as having “bite”); Parnes & Jennings, supra

note 108, at 996 (crediting the “prevalence” requirement as a principal reason why the agency

rarely uses its section 18 rulemaking power).

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544 Harvard Law & Policy Review [Vol. 16

language was intentionally selected to preclude judicial review of a prevalence

determination,

175

a fact that has not previously been cited in the literature.

So, too, the content of the Preliminary Regulatory Analysis is expressly ex-

empted from judicial review unless “the Commission has failed entirely to

prepare a regulatory analysis.”

176

The one truly distinct statutory requirement during this phase of sec-

tion 18 rulemaking is a mandate that the Commission share a copy of its

NPRM with two congressional committees thirty days before it is published

in the Federal Register.

177

This relic of the days in which Congress actively

meddled in the agency’s substantive priorities adds only slightly to the length

of the rulemaking process.

3. Informal Hearings

Sections 18’s most meaningful addition to APA notice-and-comment

rulemaking is a period for informal oral hearings following the NPRM com-

ment period. In fact, the Chief Presiding Officer during the 1970s consid-

ered the addition of limited cross-examination rights to be the only

difference from the procedures that the agency followed before 1975.

178

The

other procedures required by the Magnuson-Moss Act, including informal

oral hearings without cross-examination, had already been imposed by

agency discretion before 1975.

179

But while informal oral hearings with

cross-examination are unfamiliar to many practitioners of administrative law,

they are far from prohibitive. With reforms such as the new method for

selecting presiding officers, informal oral hearings can be a relatively brief

portion of a section 18 proceeding.

Interested persons have the right to make an oral presentation at an

informal hearing conducted by the agency.

180

Because the statute requires

only that the opportunity for an informal oral hearing be provided,

181

recent

practice has seen the agency frequently conduct section 18 rulemakings for

rule amendments or repeals without a hearing when no participant requests

one.

182

Still, any meaningful new rule will be sure to garner enough opposi-

tion from the affected industry to trigger a hearing.

175

See S. R

. N

. 103-30, at 10 (1993), as reprinted in 1994 U.S.C.C.A.N. 1776 (“The

‘reason to believe’ standard is intended to bar any judicial review.”).

176

15 U.S.C. § 57b-3(c)(1).

177

Id. § 57a(b)(2)(C).

178

See Dixon, supra note 89, at 393; see also Report of the Section Concerning FTC Trade

Regulation Rulemaking Procedures Pursuant to the Magnuson-Moss Act, 49 A

NTITRUST

L.J. 347,

370–72 (1980) [hereinafter 1980 ABA Report].

179

This fact is relevant to the “before and after” comparisons of rulemaking length pro-

vided by Professor Lubbers. See infra Part III.C.

180

See 15 U.S.C. § 57a(c)(2)(A).

181

See id. § 57a(b)(1)(C).

182

See, e.g., 83 Fed. Reg. 2934, 2947 (Jan. 22, 2018) (listing procedures for a trade regula-

tion rule amendment proceeding, including “holding an informal hearing such as a workshop,

if requested by interested parties”).

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2022] Reassessing the Mythology of Magnuson-Moss 545

The first steps at this stage of the process are the selection of a presid-

ing officer and issuance of a notice of informal hearing. This hearing notice

is not mentioned in the statute, but the FTC Rules of Practice describe an

“initial notice of informal hearing” that specifies the time and location of the

hearing, the Commission’s designation of any issues that are subject to cross-

examination or rebuttal, and an invitation for requests to cross-examine or

rebut another presenter.

183

A “final notice of informal hearing” then identi-

fies any interested persons who will be allowed to cross-examine other par-

ticipants or to make rebuttal submissions.

184

After historically deferring to

the presiding officer on designation of issues subject to cross-examination or

rebuttal and on requests to exercise those rights, the Commission has re-

centered itself in these determinations with recent administrative reforms to

its rulemaking procedures.

185

However, it is likely inevitable that the presid-

ing officer will receive numerous requests to exercise cross-examination or

rebuttal rights after publication of the final notice of informal hearing. That

circumstance is particularly likely if the agency publishes the final notice of

informal hearing before participants must disclose the contents of their oral

presentations. A court may blanch at a timeline that requires a participant to

decide whether to ask to cross-examine or rebut a particular presenter prior

to knowing what she will assert in her presentation.

Next is the informal oral hearing itself. The Commission and its presid-

ing officer are empowered by statute to make rules or issue rulings for these

informal hearings “as may tend to avoid unnecessary costs or delay.”

186

This

power expressly includes “reasonable time limits” on presentations, and a

federal court of appeals affirmed the power of the presiding officer to limit

the number of witnesses making presentations.

187

These are critical tools to

foreclose attempts at delay by flooding a hearing with an unmanageable

number of witnesses.

Finally, there is the aspect of the proceeding that initially raises the

hackles of many administrative lawyers: cross-examination. Section 18 pro-

vides a qualified right for participants to present rebuttals to others’

presentations or to cross-examine those who gave oral presentations. How-

ever, this right arises only if a number of precedent conditions are satisfied.

It is also subject to extensive discretionary limits and rules set by the presid-

ing officer. Section 18 cross-examination should not be considered nearly as

intimidating as one might imagine if envisioning a courtroom during a crim-

inal trial.

First, the cross-examination right applies only “if the Commission de-

termines that there are disputed issues of material fact it is necessary to re-

solve.”

188

As detailed in Part IV, this frequently ought not to be the case,

183

16 C.F.R. § 1.12(a) (2021).

184

Id. § 1.12(c) (2021).

185

See infra Part IV.A.

186

15 U.S.C. § 57a(c)(3).

187

See Harry & Bryant Co. v. FTC, 726 F.2d 993, 997 (4th Cir. 1984).

188

15 U.S.C. § 57a(c)(2)(B) (emphasis added).

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546 Harvard Law & Policy Review [Vol. 16

particularly if the agency releases guidelines outlining the rare circumstances

in which such a designation is appropriate. The history of this provision

makes clear that Congress intended the Commission only to designate “is-

sues of specific fact in contrast to legislative fact.”

189

While serving as Chair-

man of ACUS, future Supreme Court Justice Antonin Scalia explained to a

lead sponsor of the Magnuson-Moss Act that these issues of “specific fact”

should only “arise occasionally” in rulemakings of general applicability such

as those conducted by the FTC.

190

The Commission has at times employed a

“no designated issues” format. In this type of rulemaking, the Commission

can pose questions for public comment in the NPRM with a disclaimer such

as “[t]he list of questions is not intended to be a list of ‘disputed issues of

material fact that are necessary to resolve.’”

191

Such questions create no right

to cross-examination.

Second, anyone wishing to qualify for rebuttal or cross-examination

must persuade the Commission or presiding officer that the particular rebut-

tal or cross-examination is “required for the resolution of a designated is-

sue.”

192

Moreover, full cross-examination is only permitted if the interested

person can demonstrate that a “full and true disclosure with respect to the

issue can only be achieved through cross-examination” rather than written

rebuttals or additional oral presentations.

193

These are exacting standards.

Third, the presiding officer can organize participants granted cross-ex-

amination rights into groups with the “same or similar interests,” with each

group entitled to a single representative who can conduct cross-examina-

tion.

194

The group members may either select this representative or have one

selected for them by the presiding officer.

195

The presiding officer may also

elect to conduct cross-examination on behalf of those who were granted

cross-examination rights, working off of questions submitted by those indi-

viduals. The statute explicitly lists this last approach as an example of a

power that may be invoked “to avoid unnecessary costs or delay.”

196

Fears about judicial review of the informal hearings stage of section 18

rulemaking are likely overblown. A unique judicial review provision allows a

reviewing court to vacate a rule based upon decisions regarding cross-exami-

nation or rebuttal, but several factors make the bite of this provision less than

it first appears. Courts have soundly rejected attempts at interlocutory chal-

189

Ass’n of Nat’l Advertisers, Inc. v. FTC (Nat’l Advertisers III), 627 F.2d 1151, 1163

(D.C. Cir. 1979) (quoting H.R. R

. N

. 93-1606, at 33 (1974) (Conf. Report)).

190

Id. at 1164.

191

50 Fed. Reg. 43,224, 43,226 (Oct. 24, 1985).

192

16 C.F.R. § 1.12(b)(3) (2021) (emphasis added).

193

Id.

194

15 U.S.C. § 57a(c)(4)(A).

195

See id.; 16 C.F.R. §§ 1.12(d), 1.13(a)(3) (2021). An individual who dissents from the

choice of group representative may conduct cross-examination individually only if he can

“satisf[y] the Commission that he has made a reasonable and good faith effort to reach agree-

ment” with the other group members and the “the Commission determines that there are

substantial and relevant issues which are not adequately presented by the group representative.”

15 U.S.C. § 57a(c)(4)(B).

196

Id. § 57a(c)(3)(B).

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2022] Reassessing the Mythology of Magnuson-Moss 547

lenges to these sorts of decisions.

197

Even for timely challenges, the standard

of review is favorable to the agency. Only “preclud[ing] disclosure of dis-

puted material facts which was necessary for fair determination by the Com-

mission of the rulemaking proceeding taken as a whole” will jeopardize a

rule.

198

The presiding officer was historically empowered to set limits on the

length of presentations or even the number of witnesses when many “seek to

present essentially repetitious comments, views, or arguments.”

199

The

Fourth Circuit upheld numerous assertive exercises of discretion by the pre-

siding officer in the Funeral Rule proceeding against challenge in Harry &

Bryant.

200

Section 18 also immunizes these decisions against standard APA

challenges that assert a rule is arbitrary, capricious, or made without obser-

vance of procedure required by law.

201

On the whole, there is little reason to believe that the informal hearings

stage of a section 18 rulemaking must add substantially to the length of that

rulemaking. Recently instituted rules now limit informal hearings to no

more than five hearing days, to take place within a thirty-day period.

202

Moreover, technological developments since the 1980s have lessened the sig-

nificance of adding oral presentations to the record. A historical complaint

about informal hearings was that they produced a lengthy record to ana-

lyze.

203

Yet, digital submissions have allowed comment dockets for APA no-

tice-and-comment rulemaking to swell into the millions of public

comments,

204

a surge in scale that would not transfer to in-person proceed-

ings. In fact, a digitized record with searchable text would make analysis of

the rulemaking record more straightforward than it was in the 1970s and

1980s.

4. Agency Analysis & Promulgation

In APA notice-and-comment rulemaking, an agency must consider

material comments submitted by the public and weigh whether to finalize

the proposed rule as-is, revise it, or end the proceeding. Courts police the

thoroughness of the agency’s consideration by reviewing the “concise general

197

See Ass’n of Nat’l Advertisers, Inc. v. FTC (Nat’l Advertisers I), 565 F.2d 237, 239 (2d

Cir. 1977) (finding presiding officer determinations to be procedural and not final agency

actions); Ass’n of Nat’l Advertisers, Inc. v. FTC (Nat’l Advertisers II), 617 F.2d 611, 620–21

(D.C. Cir. 1979) (dismissing attacks on procedural adequacy of trade regulation rulemaking

based on lack of ripeness).

198

15 U.S.C. § 57a(e)(3)(B) (emphasis added).

199

. T

RADE

OMM

’

, FTC O

PERATING

ANUAL

§ 7.3.19.3.3.1 (1991).

200

Harry & Bryant Co. v. FTC, 726 F.2d 993, 997–99 (4th Cir. 1984).

201

See 15 U.S.C. § 57a(e)(5)(C).

202

See 16 C.F.R. § 1.13(a)(2)(ii) (2021). The FTC Operating Manual from when trade

regulation rulemaking was common suggested holding no more than three informal oral hear-

ings over a maximum of five weeks. F

. T

RADE

OMM

’

, supra note 199. Even this may be

more than the literal text of the statute requires: “an informal hearing,” singular. 15 U.S.C.

§ 57a(b)(1)(C).

203

See 1980 ABA Report, supra note 178, at 376.

204

See Michael A. Livermore, Vladimir Eidelman & Brian Grom, Computationally As-

sisted Regulatory Participation, 93 N

OTRE

AME

L. R

. 977, 988 (2018).

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548 Harvard Law & Policy Review [Vol. 16

statement” of basis and purpose that accompanies a Final Rule—these are

misleadingly named, as they frequently run in the hundreds of pages.

205

Fail-

ure to consider and respond to material public comments can lead to a rule

being set aside as arbitrary or capricious.

206

Meaningful revisions to the rule

can also require an additional written comment period in order to abide by

the logical outgrowth doctrine.

207

Section 18 adds only a few steps after the close of public input. The

statute requires the public release of a written transcript of any oral hearings

and a “recommended decision” of the presiding officer regarding the “rele-

vant and material evidence” illuminated by the rulemaking proceeding.

208

Then, the Commission may issue a Final Rule “based on the matter in the

rulemaking record” along with a statement of basis and purpose

209

and Final

Regulatory Analysis.

210

That statement of basis and purpose must include

statements as to the prevalence of the acts or practices restricted by the rule,

how that conduct is unfair or deceptive, and the economic effects of the

rule.

211

Similar to the prevalence requirement and Preliminary Regulatory

Analysis at the NPRM stage, the contents of the statement of basis and

purpose and Final Regulatory Analysis are exempt from judicial review.

212

Furthermore, even if those requirements did not exist at all, the agency

would still need to demonstrate that the acts or practices regulated by a rule

are unfair or deceptive to show them to be within the agency’s regulatory

authority. Rigorous empirical analysis might also be required by the general

demands of many reviewing courts

213

and government-wide mandates such

as the Regulatory Flexibility Act and Small Business Regulatory Enforce-

ment Fairness Act.

214

Until recently, internally set agency rules added substantially to what

the statute requires. Those rules had provided for the public release of a

formal staff report summarizing the rulemaking record before the presiding

officer’s recommend decision was released,

215

required at least sixty days of a

205

See, e.g., 77 Fed. Reg. 30,923 (May 24, 2012) (454 pages).

206

See 5 U.S.C. § 706(2)(A); United States v. Nova Scotia Food Prods. Corp., 568 F.2d

240, 252 (2d Cir. 1977).

207

See, e.g., Chocolate Mfrs. Ass’n of U.S. v. Block, 755 F.2d 1098, 1105 (4th Cir. 1985).

208

See 15 U.S.C. § 57a(c)(1)(B), (5).

209

See id. § 57a(b)(1)(D).

210

See id. § 57b-3(b)(2).

211

See id. § 57a(d)(1).

212

See id. §§ 57a(e)(5)(C), 57b-3(c)(1); S. R

. N

. 93-1408 (1974) (Conf. Rep.), as

reprinted in 1974 U.S.C.C.A.N. 7755, 7764 (stating that, while a statement of basis and pur-

pose must exist, “its contents are not to be subject to court review on any basis at any time”).

But see Pa. Funeral Dirs. Ass’n v. FTC, 41 F.3d 81, 86–89 (3d Cir. 1994); Am. Optometric

Ass’n v. FTC, 626 F.2d 896, 906 (D.C. Cir. 1980) (finding the exemption of the statement of

basis and purpose to contradict other judicial review provisions in section 18 and resolving to

“consult[ ] the statement of basis and purpose where the statement is helpful in understanding

the Commission’s reasoning, but, nevertheless, be[ ] careful not to impose upon the statement

the unreasonable demands about which Congress was concerned”).

213

See, e.g., Bus. Roundtable v. SEC, 647 F.3d 1144 1150–51 (D.C. Cir. 2011).

214

See 5 U.S.C. §§ 601–612.

215

16 C.F.R. § 1.13(f) (2020). The statute indirectly encourages the agency to make some

staff analysis public. Section 18(j) prohibits ex parte communication regarding facts not on the

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2022] Reassessing the Mythology of Magnuson-Moss 549

post-record comment period on this staff report and the presiding officer’s

recommended decision,

216

and gave the Commission the option to hear

again from a person who previously participated in the proceeding.

217

In to-

tal, the agency provided eight distinct opportunities for public input—only

four of which were required by the statute.

218

After reducing the large num-

ber of agency-imposed procedural steps in July 2021, this stage of a section

18 rulemaking no longer must take substantially longer than APA notice-

and-comment procedures. Now, the only time-additive requirements will be

the presiding officer’s report—which the revised rules mandate must issue

within sixty days of the close of informal hearings

219

—and the non-justicia-

ble Final Regulatory Analysis.

Taken as a whole, the preceding comparison of section 18’s require-

ments with the underlying procedures of the APA is strikingly incongruous

with the conventional understanding of FTC rulemaking. The text of the

statute provides little support for assertions that the variations section 18

adds around the edges of the APA notice-and-comment rulemaking process

make the process exceedingly onerous. Turning next to section 18’s record in

court, we will see that judicial construction of the statute does little more to

justify the conventional story—rather, it shows that the primary hurdles con-

fronting an FTC rule are the same ones faced by any agency’s administrative

rulemaking.

B. Lessons from Case Law

Proponents of FTC rulemaking should be heartened by the relevant

case law. After a few setbacks in 1979 and 1980, courts have largely upheld

FTC rules against challenges under the judicial review provisions of section

18 and the APA. While the Commission’s later aversion to section 18

rulemaking has left this case law somewhat dated, the agency’s track record

during the 1980s suggests that appropriately crafted rules do not face a mate-

rially greater legal risk than those promulgated using APA notice-and-com-

ment procedures.

Judicial review for section 18 rules is quite standard in one respect: A

court can review nearly all aspects of the rule on the familiar bases of 5

rulemaking between any Commission employee with “responsibility relating to any rulemaking

proceeding” and any Commissioner or their staff. 15 U.S.C. § 57a(j).

It is not evident why making staff analysis public ought to cause such work to take substan-

tially longer to complete. Yet, in the promulgation of the agency’s most recent section 18 rule,

sixteen months passed between the close of public input and publication of the staff report. See

75 Fed. Reg. 68,559, 68,559 (Nov. 8, 2010); 74 Fed. Reg. 29,149, 29,150 (June 19, 2009).

216

16 C.F.R. § 1.13(h) (2020).

217

See id. § 1.13(h)–(i) (2020).

218

The ANPRM comment period, NPRM comment period, oral presentations, and re-

buttals and cross-examination are required by statute. The post-comment-period solicitation of

proposals for designated disputed issues of material fact, petition period, post-record comment,

and discretionary option to permit oral appeals to the Commission were not. See 16 C.F.R.

§§ 1.11(a)(4), 1.13(b), (h)–(i) (2020).

219

See Revisions to Rules of Practice, 86 Fed. Reg. 38,542, 38,549 (July 22, 2021).

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550 Harvard Law & Policy Review [Vol. 16

U.S.C. § 706(2), with the exception of decisions regarding cross-examina-

tion or rebuttal.

220

Would-be litigants have sixty days after a section 18 rule

is promulgated to file a petition in a federal circuit court challenging the rule.

However, there are also a few less traditional aspects to the process.

One is that petitioners can “appl[y] to the court for leave to make additional

oral presentations or written submissions.”

221

If the petitioner can persuade

the court that the information would be material and there were reasonable

grounds not to have made the submission earlier, the court can remand back

to the Commission to accept that submission. This provision does not ap-

pear to have been litigated. Another is the requirement that the agency’s

action be “supported by substantial evidence in the rulemaking record . . .

taken as a whole.”

222

A final sub-section allows attack on Commission deci-

sions denying cross-examination or rebuttal rights or limiting their exercise,

although it imposes a daunting standard of review—and such decisions are

immune to challenge under the APA or any other provision of law.

223

Numerous parts of the proceeding are not subject to any judicial review

whatsoever. Some are explicitly immunized from judicial review by the text

of the statute, including the Preliminary and Final Regulatory Analyses, and

the Final Rule’s statement of basis and purpose, which includes the state-

ment as to the prevalence of the conduct governed by the rule.

224

Other re-

quirements feature legislative history evincing an intent that they not be

judicially enforceable, including the mandate that the Commission have

“reason to believe” the actions to be restricted by a proposed rule are preva-

lent before issuing an NPRM.

225

Returning to the aspects of section 18

rulemaking subject to judicial scrutiny, case law provides valuable insight

into how courts might analyze future FTC rules.

Substantial-Evidence & Arbitrary-or-Capricious Review—The D.C.

Circuit has held the standard for finding that the FTC’s actions were not

supported by substantial evidence in the record to be effectively identical to

the arbitrary-or-capricious standard applicable to all APA rulemaking. The

arbitrary-or-capricious standard at its essence assesses whether agency action

was the “product of reasoned decisionmaking.”

226

The D.C. Circuit wrote

that the section 18 substantial-evidence standard requires “the same degree

of evidentiary support needed to satisfy the arbitrary and capricious stan-

dard,” thereby reversing the court’s earlier “flirt[ation]” with a heightened

standard.

227

The FTC has had numerous rules upheld under these substan-

tial-evidence and arbitrary-or-capricious standards. These include the

220

See 15 U.S.C. § 57a(e)(3) (invoking 5 U.S.C. § 706(2)(A)–(D)).

221

Id. § 57a(e)(2).

222

Id. § 57a(e)(3)(A).

223

Id. § 57a(e)(3)(B), (5)(C).

224

Id. §§ 57a(e)(5)(C), 57b-3(c)(1).

225

S. R

. N

. 103-130, at 10 (1993), as reprinted in 1994 U.S.C.C.A.N. 1776 (“The

‘reason to believe’ standard is intended to bar any judicial review.”).

226

Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.

29, 52 (1983).

227

Consumers Union of U.S., Inc. v. FTC, 801 F.2d 417, 422 (D.C. Cir. 1986).

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agency’s Funeral Rule,

228

Credit Practices Rule,

229

and portions of its Eye-

glass Rule.

230

A future court making a substantial-evidence determination

would likely adopt the Supreme Court’s directed-verdict standard articulated

in Allentown Mack,

231

although its application “is essentially the same as re-

view under the arbitrary and capricious standard.”

232

The agency’s biggest concerns would come from recent decisions apply-

ing the APA, not section 18. For example, the D.C. Circuit held that nu-

merous authorities show “no basis” in section 18 to require the agency to

conduct a “rigorous, quantitative” cost-benefit analysis to satisfy the substan-

tial-evidence standard.

233

It is instead contemporary APA arbitrary-or-capri-

cious review cases, such as Business Roundtable v. SEC,

234

that have

sometimes demanded such quantified analysis. This imposition would apply

equally to rules issued pursuant to section 18 or to APA notice-and-com-

ment procedures.

Section 18’s standards still have some bite, however. The Second Cir-

cuit in Katharine Gibbs invalidated an agency rule after finding no rational

connection between specific examples of unfair or deceptive enrollment

practices of vocational schools in the rulemaking record and the challenged

rule’s provisions making it easier for all students to obtain tuition refunds.

235

Shifts in the legal landscape can also undermine the Commission on sub-

stantial-evidence grounds—the D.C. Circuit remanded the Eyeglass Rule

after holding that a Supreme Court decision issued during the rulemaking

process had changed the “core” circumstances to which the rule responded.

236

Presiding Officer Discretion—Courts have broadly upheld presiding of-

ficers’ decisions to streamline the section 18 rulemaking process, confirming

the capacious discretion suggested by statutory text. The Fourth Circuit in

Harry & Bryant v. FTC affirmed that presiding officers can not only set time

limits on individual presentations but also may limit the number of individu-

als permitted to present at all—even if this limitation affects unequal num-

bers of pro-rule and anti-rule witnesses.

237

The court stated, “Section 18 does

not guarantee every person a right to testify . . . [and] the right to testify is

expressly subordinated to the Commission’s authority under Section 18(c)(3)

to make rulings for the purpose of avoiding unnecessary costs or delay.”

238

The same case also supports the broad application of presiding officer

discretion regarding cross-examination. For example, the court upheld the

228

Pa. Funeral Dirs. Ass’n v. FTC, 41 F.3d 81, 92 (3d Cir. 1994); Harry & Bryant Co. v.

FTC, 726 F.2d 993, 999 (4th Cir. 1984).

229

Am. Fin. Servs. Ass’n v. FTC, 767 F.2d 957, 986–88 (D.C. Cir. 1985).

230

Am. Optometric Ass’n v. FTC, 626 F.2d 896, 915 (D.C. Cir. 1980).

231

Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 366 (1998).

232

Thomas J. Miles & Cass R. Sunstein, The Real World of Arbitrariness Review, 75 U.

. L. R

. 761, 764 & nn.25–26 (2008).

233

Am. Fin. Servs. Ass’n, 767 F.2d at 986.

234

Bus. Roundtable v. SEC, 647 F.3d 1144, 1155–56 (D.C. Cir. 2011).

235

Katharine Gibbs Sch. (Inc.) v. FTC, 612 F.2d 658, 664 (2d Cir. 1979).

236

Am. Optometric Ass’n v. FTC, 626 F.2d 896, 907, 909–11 (D.C. Cir. 1980).

237

See Harry & Bryant Co. v. FTC, 726 F.2d 993, 997 (4th Cir. 1984).

238

Id.

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552 Harvard Law & Policy Review [Vol. 16

presiding officer’s choice to personally conduct the cross-examination of one

class of participants (consumers) while permitting other classes of partici-

pants to be cross-examined in a more traditional fashion.

239

In the twelve

reported cases challenging section 18 trade regulation rules, it does not ap-

pear that any procedural determination by a presiding officer or the Com-

mission regarding the oral hearings has ever failed judicial review.

240

Recall as

well that these determinations are not subject to review under the APA’s

“observance of procedure required by law” requirement, making other prece-

dents inapt.

241

Specificity of the Regulation—An aspect of section 18 that caused trouble

in early rulemakings is the requirement to “define with specificity” the unfair

or deceptive acts or practices that a rule serves to prevent. The agency mis-

stepped in its Vocational Schools Rule by merely stating that violations of its

rules requiring improved tuition refund policies and disclosure of job-place-

ment rates would be considered unfair, rather that identifying the unfair in-

dustry practices to which its rulemaking responded.

242

The agency’s success

satisfying this requirement in several other rulemakings

243

—and the judicial

skepticism that the Katharine Gibbs court’s interpretation received

244

—sug-

gest that the agency has a viable path to meeting this requirement.

Ripeness—Section 18 proceedings are generally secure against any sort

of challenge outside of the sixty days following promulgation. Courts have

rejected attempted interlocutory challenges to Commission actions as unripe

when coming before this sixty-day window.

245

Attacks coming after these

sixty days are also foreclosed.

246

Other Issues—A variety of other, smaller questions have come before

courts in challenges to section 18 rules. Among them, the D.C. Circuit han-

dled allegations on two different occasions that chairmen participating in

rulemaking were impermissibly biased. The court announced a demanding

standard: Commissioners may be disqualified only if a litigant can make a

clear and convincing showing that the Commissioner has “an unalterably

closed mind.”

247

Unsurprisingly, this standard was met in neither case.

248

239

See id. at 997; accord Ass’n of Nat’l Advertisers, Inc. v. FTC (Nat’l Advertisers I), 565

F.2d 237, 240 (2d Cir. 1977).

240

Note, though, that the D.C. Circuit expressed “serious doubts about the validity” of the

Commission’s “experiment[al]” procedures announced under 16 C.F.R. § 1.20 for the Chil-

dren’s Advertising Rule, albeit in dicta in an opinion settled by questions of ripeness. Nat’l

Advertisers, Inc. v. FTC (Nat’l Advertisers II), 617 F.2d 611, 620–21 (D.C. Cir. 1979).

241

See 5 U.S.C. § 706(2)(D).

242

Katharine Gibbs Sch. (Inc.) v. FTC, 612 F.2d 658, 664 (2d Cir. 1979).

243

Am. Fin. Servs. Ass’n v. FTC, 767 F.2d 957, 984 (D.C. Cir. 1985); Harry & Bryant

Co., 726 F.2d at 999.

244

Am. Fin. Servs. Ass’n, 767 F.2d at 984 & n.30.

245

See Ass’n of Nat’l Advertisers, Inc. v. FTC (Nat’l Advertisers I), 565 F.2d 237, 239 (2d

Cir. 1977) (finding presiding officer determinations not to be final agency actions); Nat’l Ad-

vertisers II, 617 F.2d at 620–21 (dismissing attacks on procedural adequacy of trade regulation

rulemaking as unripe).

246

Mono-Therm Indus. v. FTC, 653 F.2d 1373, 1378 (10th Cir. 1981).

247

Ass’n of Nat’l Advertisers, Inc. v. FTC (National Advertisers III), 627 F.2d 1151, 1170

(D.C. Cir. 1979).

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2022] Reassessing the Mythology of Magnuson-Moss 553

Courts also limited the effect of FTC rules on state law, resisting field pre-

emption of state regulation

249

and restrictions on states’ ability to legislate on

a subject.

250

Narrower pre-emption of state regulations survived challenge in

1985 when it provided a regulatory floor above which states could add their

own requirements,

251

aligning with the trend in American law toward con-

flict pre-emption.

252

A few other issues’ treatment in judicial review is still undetermined.

One is prevalence. The non-justiciability of the discussion of prevalence in a

Final Rule’s statement of basis and purpose earned judicial validation in a

challenge to the FTC Funeral Rule.

253

However, the challenged rulemaking

had concluded before the 1994 enactment of a second prevalence require-

ment, that the agency have “reason to believe” acts or practices are prevalent

before issuing an NPRM.

254

Despite the clear legislative intent to exclude

this determination from judicial review,

255

no new section 18 rules have faced

challenge after 1994.

256

Thus, it is possible that a circuit court panel averse to

legislative history could demand more, as the 1994 prevalence requirement

lacks explicit statutory exemption from judicial review.

Another untested area is the boundary between a “rule with respect to

unfair or deceptive acts or practices,” which must use section 18 procedures,

and a rule “with respect to unfair methods of competition,” which could be

conducted using APA notice-and-comment procedures under the FTC’s

section 6(g) authority.

257

Many issues, such as data privacy, arguably impli-

cate both consumer protection and competition concerns. The potential cost

could be extreme if a court reviewing a Final Rule held that the Commission

had wrongly declined to satisfy section 18’s requirements. Such a ruling

could effectively require a redo of the entire proceeding if the agency had

never completed pre-proposal steps such as issuing an ANPRM or notifying

the relevant congressional committees.

248

Consumers Union of U.S., Inc. v. FTC, 801 F.2d 417, 427 (D.C. Cir. 1986); Nat’l

Advertisers III, 627 F.2d at 1154.

249

See Am. Optometric Ass’n v. FTC, 626 F.2d 896, 910 (D.C. Cir. 1980); Katharine

Gibbs Sch. (Inc.) v. FTC, 612 F.2d 658, 664, 666–67 (2d Cir. 1979).

250

See Cal. State Bd. of Optometry v. FTC, 910 F.2d 976, 981 (D.C. Cir. 1990).

251

Am. Fin. Servs. Ass’n v. FTC, 767 F.2d 957, 991 (D.C. Cir. 1985).

252

See, e.g., O’Melveny & Myers v. FDIC, 512 U.S. 79, 85 (1994).

253

See Pa. Funeral Dirs. Ass’n v. FTC, 41 F.3d 81, 86–89 (3d Cir. 1994).

254

Pub L. No. 103-312, § 15(b), 108 Stat. 1691, 1698 (1994).

255

See S. R

. N

. 103-130, at 10 (1993), as reprinted in 1994 U.S.C.C.A.N. 1776 (“The

‘reason to believe’ standard is intended to bar any judicial review.”).

256

The only new section 18 rule commenced after this requirement came into force was

not challenged. See 16 C.F.R. pt. 437 (2021).

257

15 U.S.C. § 57a(a)(2). This issue arose after the FTC purported to switch from con-

ducting a proceeding under both sections 6(g) and 18 to relying on section 6(g) alone after

legislation barred the agency from issuing rules relating to product certifications and standards

under section 18. See Am. Nat’l Standards Inst., Inc. v. FTC, No. 79-CV-1275, 1982 WL

20106, at *1 (D.D.C. Feb. 4, 1982). The court found it lacked jurisdiction due to final action

doctrine and the inapplicability of interlocutory review. Id. at *3, *6. The rule was abandoned

before promulgation, leaving the line between sections 6(g) and 18 unclear.

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554 Harvard Law & Policy Review [Vol. 16

C. Responses to Section 18 Skepticism

In contemporary conversation about the Commission’s powers, a bevy

of adjectives often stops consideration of section 18 rulemaking before it

starts. Take, for instance, the debate about possible revisions to FTC author-

ities following the 2008 financial crisis. The full Commission described sec-

tion 18’s “Magnuson-Moss” procedures as “onerous” and “burdensome”

processes,

258

which the Chairman believed leave the agency “hamstrung” in

the face of rapidly evolving misconduct in the economy.

259

Perhaps the lan-

guage employed in this advocacy was strategically overstated to some degree,

in an unavailing attempt to persuade Congress to replace section 18 with

standard APA notice-and-comment rulemaking authority.

260

But still,

outside observers have called section 18 procedures “too slow to be of much

use”

261

and “unworkable.”

262

This understanding could hardly be more differ-

ent from that shown in the 1970s and early 1980s when the popular press

wrote that the bill had “sen[t] new waves of energy through the commission,

dramatically increasing its power.”

263

Once one moves beyond mere rhetoric, three arguments against the use

of section 18 rulemaking emerge. Two are from those who would favor

greater FTC regulation but are under the impression that it would not be

practicable under the so-called Magnuson-Moss procedures. The third

comes from those who are skeptical of FTC rulemaking in principle, fearful

of a supposed roving bureaucracy.

The first form of section 18 skepticism can be labeled “the argument

from inaccurate history.” Conventional wisdom in Washington has consoli-

dated around a narrative that Congress, reacting to an agency it perceived as

out of control, enacted the Magnuson-Moss Act in an effort to constrain the

258

Consumer Credit and Debt: The Role of the Federal Trade Commission in Protecting the

Public: Hearing Before the Subcomm. on Com., Trade & Consumer Prot. of the H. Comm. on

Energy & Com., 111th Cong. 21, 23 n.56 (2009) (statement of the Fed. Trade Comm’n.).

259

Id. (response of Jonathan Liebowitz, Chairman, Fed. Trade Comm’n, to the question

of Rep. Bobby Rush, Chairman, Subcomm. on Com., Trade & Consumer Prot. of the H.

Comm. on Energy & Com.).

260

See, e.g., Financial Services and Products: The Role of the FTC in Protecting Consumers,

Part II: Hearing Before the Subcomm. on Consumer Prot., Prod. Safety & Ins. of the S. Comm. on

Com., Sci. & Transp., 111th Cong. 3 (2010), https://www.commerce.senate.gov/public/_cache/

files/1481149b-1f5d-4f17-92f3-a06396fdedcd/

406BAF26B63F093A9DBC85CC43C45834.pridgen-testimony.pdf [https://perma.cc/

FTT5-QD64] (statement of Prof. Dee Pridgen, Univ. of Wyo. Coll. of Law); Jeffrey S. Lub-

bers, It’s Time to Remove the “Mossified” Procedures for FTC Rulemaking, 83 G

. W

ASH

. L.

. 1979, 1979 (2015). Standard APA notice-and-comment rulemaking has also come under

criticism for becoming “ossified.” See Thomas O. McGarity, Some Thoughts on “Deossifying” the

Rulemaking Process, 41 D

UKE

L.J. 1385, 1386 (1992).

261

RIDGEN

& R

ICHARD

M. A

LDERMAN

, C

ONSUMER

ROTECTION AND THE

§ 12:14 (2021).

262

Mike Swift, FTC’s ‘Mag-Moss’ Rulemaking Authority Could Break Logjam on US Privacy

Legislation, ML

(Mar. 8, 2021, 12:00 AM), https://mlexmarketinsight.com/news-hub/edi-

tors-picks/area-of-expertise/data-privacy-and-security/ftcs-mag-moss-rulemaking-authority-

could-break-logjam-on-us-privacy-legislation [https://perma.cc/CDT7-HQNX].

263

Sulzberger, supra note 66.

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2022] Reassessing the Mythology of Magnuson-Moss 555

agency in a procedural straitjacket. Few batted an eye when a representative

of a prominent trade organization included in her written congressional tes-

timony a chronology in which the Commission launched the “Kidvid”

rulemaking to restrict television advertising to children, this effort garnered

massive pushback, and “[a]s a result, Congress took steps to curb such FTC

overreaching by enacting the Magnuson-Moss Act.”

264

Magnuson-Moss, of

course, was enacted in January 1975, more than twenty-seven months before

the Kidvid proceeding began.

265

This is no isolated error. Worryingly, the

Obama-era Director of the Bureau of Consumer Protection—who would

largely have determined whether the agency engaged in section 18 rulemak-

ing—seems to share this misconception, recently writing that “[t]hese hur-

dles were imposed by Congress precisely because Congress was concerned

about regulatory overreach in the 1970s.”

266

Advocates and scholars have re-

ferred to Congress’s “Magnuson-Moss shackles”

267

or the “Mag-Moss alba-

tross,”

268

connoting either punishment or penance. Even one of the most-

cited scholarly considerations of section 18 in the past decade writes of an

agency that had been “saddled” with these procedural requirements.

269

The history does not match this narrative. As detailed above, the 1975

Magnuson-Moss Act was architected by the very members of Congress and

staffers who had spent nearly a decade prodding the agency to take a more

active role on rulemaking. The mainstream press, too, framed the Act as

having “liberalized the commission’s rulemaking authority”

270

and “dramati-

cally increasing its power.”

271

Industry-led pushback to the agency’s rulemak-

ing, such as the “Stop the FTC” campaign, only began to change the

approach of many in Congress several years later. Charitably, adherents to

the conventional wisdom may invoke “Magnuson-Moss” as a shorthand for

all of the FTC’s rulemaking procedures, including those from the

Magnuson-Moss Act and from later legislation. But this does no better to

264

Financial Services and Products: The Role of the FTC in Protecting Consumers, Part II:

Hearing Before the Subcomm. on Consumer Prot., Prod. Safety & Ins. of the S. Comm. on Com.,

Sci. & Transp., 111th Cong. 7 (2010), https://www.commerce.senate.gov/services/files/

A8A7E41C-C291-44B9-ACAC-380EACAEBE5E [https://perma.cc/KNS5-GNAA]

(statement of Linda A. Woolley, Exec. Vice President, Direct Marketing Ass’n).

265

The Kidvid rulemaking began in April 1978 in response to a 1977 petition for

rulemaking. See 43 Fed. Reg. 17,967, 17,968 (Apr. 27, 1978).

266

Jessica Rich, Laura Riposo VanDruff, Alysa Z. Hutnik & William C. MacLeod, FTC

Chair Khan’s Vision for Privacy—and Some Dissents, A

L. A

CCESS

(Oct. 3, 2021), https://

www.adlawaccess.com/2021/10/articles/ftc-chair-khans-vision-for-privacy-competition-and-

big-tech-and-some-dissents/ [https://perma.cc/8ECZ-2Y2K].

267

Randy Milch & Sam Bieler, A New Decade and New Cybersecurity Orders at the FTC,

AWFARE

(Jan. 29, 2020, 8:00 AM), https://www.lawfareblog.com/new-decade-and-new-

cybersecurity-orders-ftc [https://perma.cc/QSJ2-J7RX].

268

Improving Consumer Protections in Subprime Home Lending: Hearing Before the Sub-

comm. on Interstate Com., Trade & Tourism of the S. Comm. on Com., Sci. & Transp., 110th

Cong. 8 (2008), https://www.commerce.senate.gov/services/files/02286A86-532A-4F2D-

A4BE-A0B461DCECBE [https://perma.cc/M3QG-4J9Y] (statement of Kathleen E. Keest,

Senior Policy Counsel, Center for Responsible Lending).

269

Lubbers, supra note 260, at 1980.

270

Potts & Isikoff, supra note 68.

271

Sulzberger, supra note 66.

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556 Harvard Law & Policy Review [Vol. 16

align history and narrative. The 1980 Act, passed at the apex of backlash to

the Commission, contained procedural requirements that were temporary,

relatively trivial, or held unconstitutional.

272

Former FTC Chairman Miles

Kirkpatrick expressed surprise afterward that, despite threats from Congress,

“now that the legislation has been finally approved and the dust has settled,

most people seem to agree that no real damage has been done . . . [and] no

fundamental changes have been imposed by the 1980 amendments.”

273

It was

the 1975 legislation—designed by proponents of greater FTC rulemaking—

that added the informal hearings and limited cross-examination that are

most associated with section 18.

This brings up a second thread of pessimism, which can be called “the

argument from misjudged empirics.” Its adherents could concede the first

point. Perhaps Congress did not intend to compromise the FTC’s ability to

issue rules, they say, but its well-meaning efforts to promote greater public

participation in rulemaking were a failure. Whatever the intention, the end

result was a set of impracticable and onerous statutory requirements.

This group of pessimists point to the observed length of rulemakings

under section 18 procedures. Professor Jeffrey Lubbers conducted the most

prominent version of this analysis, comparing the duration of FTC rulemak-

ings that were or were not conducted under section 18.

274

In addition to

typifying the conventional skepticism of section 18, this piece plays a central

role in advocacy against the use of the FTC’s discretionary rulemaking

power. Voices from law firms and trade groups representing companies likely

to be subject to new FTC rules point to the article as evidence of the “slow

and cumbersome nature” of section 18 procedures.

275

Numerous scholars also

cite the piece as support for the proposition that section 18 rulemaking is

impractical, with one going so far as to write that the article demonstrates

that section 18 “has been shown to lengthen the rulemaking process by more

than five times.”

276

This is not so. Given the prominence of Professor Lub-

bers’s piece in the debate, a rebuttal is necessary.

Professor Lubbers’s article shows a set of correlations. Rules completed

after the passage of Magnuson-Moss took an average of 5.57 years, while

rules completed beforehand averaged 2.94 years.

277

Rule amendments con-

ducted under section 18 took an average of 5.26 years, whereas recent rules

issued under APA notice-and-comment authority averaged only 287 days.

278

272

See supra, Part II.B.

273

Debate, supra note 83, at 1481–82.

274

Lubbers, supra note 260, at 1982.

275

Andrew Smith & Christina Higgins, Prospects for FTC Privacy Rules, P

RIV

. L. & B

Aug. 2021, at 15, 15, https://www.cov.com/-/media/files/corporate/publications/2021/08/

prospects-for-ftc-privacy-rules.pdf [https://perma.cc/B6F4-C4D7]; see also M

AUREEN

HLHAUSEN

& J

AMES

ILL

, U.S. C

HAMBER OF

., P

USHING THE

IMITS

?: A P

RIMER

FTC C

OMPETITION

ULEMAKING

(2021), https://www.uschamber.com/assets/archived/

images/ftc_rulemaking_white_paper_aug12.pdf [https://perma.cc/AU26-U7UH].

276

Ganesh Sitaraman, The Political Economy of the Removal Power, 134 H

ARV

. L. R

352, 368 (2020).

277

Lubbers, supra note 260, at 1997.

278

Id. at 1997–98.

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2022] Reassessing the Mythology of Magnuson-Moss 557

Ipso facto, many readers think, something about Magnuson-Moss must sub-

stantially slow down rulemaking. But what the Lubbers piece does not

demonstrate is causation. By failing to engage with four critical points, the

article produces a misleading picture.

First, the comparisons elide political context. While Lubbers acknowl-

edges in introduction that “the agency became less activist due to congres-

sional pressure” during the late 1970s,

279

the piece does not consider whether

fervent pushback from business, media, and Congress—including budget

gamesmanship and briefly shutting down the FTC—might be responsible

for any portion of the observed difference in rulemaking length after the late

1970s. Nor is it noted that the three rules initiated under Magnuson-Moss

procedures and finalized before President Reagan entered office took an av-

erage of 2.84 years—slightly quicker than their APA notice-and-comment

predecessors—while the three finalized in the 1980s after Reagan installed

an ideological foe of rulemaking as FTC Chairman took an average of 8.28

years.

280

Second, the article does not consider fundamental differences between

rules promulgated according to a specific legislative grant of authority and

those issued under discretionary rulemaking power. Indeed, the 287-day av-

erage of the APA notice-and-comment rules analyzed should raise an eye-

brow; the Government Accountability Office has found significant rules to

take an average of four years across agencies.

281

When Congress passes legis-

lation mandating that the FTC promulgate a particular rule, the investiga-

tive steps to determine whether that policy is prudent have effectively been

outsourced to the legislature. Additionally, many of the twelve FTC regula-

tions issued pursuant to specific acts of Congress are simple “implementing

rules” that require little more than a transcription of statutory text into regu-

lation.

282

A discretionary rule based on a general rulemaking power is neces-

sarily more involved, regardless of procedural requirements. Furthermore,

numerous of these congressional grants included statutory deadlines by

which to promulgate rules.

283

As a matter of agency prioritization, it is hard

to imagine the wisdom in delaying a task ordered by the body that controls

the FTC’s budget.

279

Id. at 1981 (emphasis omitted).

280

Id. at 1987–88 & nn.63, 65. Commissioner Pertschuk recounted that the rules com-

pleted during this period faced withering opposition from the FTC Chair and Director of the

Bureau of Consumer Protection and demands to repeat prior steps of the process—which seem

to have added substantially to the length of rulemakings. See M

ICHAEL

ERTSCHUK

, F

RADE

OMM

’

, FTC R

EVIEW

(1977–84), at 153–61 (1984).

281

See G

’

CCOUNTABILITY

FFICE

, GAO-09-205, F

EDERAL

ULEMAKING

: I

M-

PROVEMENTS

EEDED TO

ONITORING AND

VALUATION OF

ULES

EVELOPMENT AS

ELL AS TO THE

RANSPARENCY OF

OMB R

EGULATORY

EVIEWS

19 (2009).

282

The Contact Lens Rule provides an example of such near-verbatim transcription. Com-

pare, e.g., 15 U.S.C. § 7601(a)(1)–(2), with 16 C.F.R. § 315.3(a)(1)–(2) (2021). The Health

Breach Notification Rule provides another. Compare, e.g., 42 U.S.C. § 17937(a)–(b), with 16

C.F.R. § 318.3(a)–(b) (2021).

283

See, e.g., 15 U.S.C. § 7607 (setting a 180-day deadline to promulgate the Contact Lens

Rule).

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558 Harvard Law & Policy Review [Vol. 16

Third, the article does not attempt to disentangle the time required by

statutorily mandated procedural steps from delays produced by self-imposed

agency rules. As just one example, the “Mail or Telephone Order Merchan-

dise Amendment I” proceeding saw more than twelve months pass between

two interested parties requesting the opportunity to give post-record oral

presentations to the Commission and those presentations taking place—

more than one-quarter of the 3.81 year proceeding.

284

This procedural step

was required not by statute, but by an agency rule that was revoked in 2021.

It is difficult to consider internally set agency rules to be statutory shackles.

The piece’s discussion of the seven-year-long Funeral Rule proceeding simi-

larly fails to note that (1) a judicial setback for the Vocational Schools Rule

in Katharine Gibbs forced the agency to fundamentally rework the similarly

structured Funeral Rule,

285

(2) congressional gamesmanship regarding fund-

ing for the rule compelled the agency to make further substantive revi-

sions,

286

and (3) Congress imposed additional procedural hoops for the

Funeral Rule, in particular.

287

None of those features is a standard part of a

section 18 rulemaking.

Fourth, the analysis does not consider the relevance of the agency’s

broader move away from regulation during this era. Penalty Offense Author-

ity fell into disuse beginning in the 1980s.

288

Similarly, competition rulemak-

ing under section 6(g) has been unexplored since the 1970s despite operating

under APA notice-and-comment procedures.

289

Several specific grants of

standard APA rulemaking authority for consumer protection issues have sat

unused for as long as a quarter-century.

290

These parallel moves away from

regulation cannot be explained by the Magnuson-Moss Act or the 1980 Act.

They underscore, instead, that the FTC’s reticence to regulate during the

decades studied came irrespective of the applicability of section 18. The im-

prints of a scarring blowback to energetic rulemaking and an ideological

takeover by deregulatory leadership seem necessary to an accurate causal

story of the retreat from section 18 rulemaking.

A final argument against engaging in section 18 rulemaking is what

might be called “the argument from institutional role.” It comes from those

at the other end of the ideological spectrum, who would prefer limited levels

of administrative rulemaking by the FTC. As former FTC Chair William

Kovacic observed, “no regulatory agency in the United States matches the

breadth and economic reach of the Commission’s mandates.”

291

Some worry

that the agency lacks the expertise to issue prescriptive rules whose reach

284

Lubbers, supra note 260, at 1990.

285

See 47 Fed. Reg. 42,260, 42,263 (Sept. 24, 1982).

286

Federal Trade Commission Improvements Act of 1980, Pub. L. No. 96-252, § 19(b),

(c)(1), 94 Stat. 374, 392 (1980).

287

Id. § 19(b), (c)(2)(A).

288

See Chopra & Levine, supra note 34, at 98.

289

See Chopra & Khan, supra note 57.

290

See 15 U.S.C. § 45a. The FTC first invoked this authority twenty-six years after it was

enacted. See Notice of Proposed Rulemaking, 85 Fed. Reg. 43,162, 43,162 (July 16, 2020).

291

Letter, supra note 8, at 2.

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2022] Reassessing the Mythology of Magnuson-Moss 559

spans nearly the entire U.S. economy—or that a single, unelected body with

such broad rulemaking authority would not be democratically accountable.

The Republican Commissioners at the agency were singing from this

hymnal when they dissented from the recent administrative reforms to sec-

tion 18 rulemaking. They expressed fears that these reforms presage “a

sweeping campaign to replace the free market system with [the Commis-

sion’s] own enlightened views of how companies should operate.”

292

These

types of prudential and normative concerns are raised about all manner of

administrative rulemaking and go beyond the scope of this article.

293

Criti-

cally, they are also distinct from the descriptive question of whether section

18 procedures are particularly time-consuming.

IV. A

DMINISTRATIVE

EFORMS FOR

FFICIENT

ULEMAKING

As just discussed, the FTC Act does not impose dramatically greater

procedural requirements for section 18 rulemaking than are found in APA

notice-and-comment procedures. Thus, the common impression that Con-

gress had restrained FTC rulemaking in a straitjacket of onerous procedural

requirements is unfounded as a matter of history and of statutory interpreta-

tion. Until recently, though, many of the agency’s internally set Rules of

Practices imposed procedural demands above those required by the FTC Act

itself.

Reflecting a new moment at the FTC, one of the Commission’s first

acts under its new Chair, Lina Khan, was to streamline its internal proce-

dures governing section 18 rulemaking. The Commission stripped away de-

cades of rules that imposed red tape with little benefit. But while these

reforms will be critical to making future rulemaking more efficient, the

Commission should continue to consider additional reforms to ensure that

its rulemaking is both timely and robust in judicial review. Certainly, in

making any reform, the Commission must be sure to avoid “preclud[ing]

disclosure of disputed material facts which was necessary for fair determina-

292

Dissenting Statement of Comm’rs Christine S. Wilson and Noah Joshua Phillips Re-

garding the Commission Statement on the Adoption of Revised Section 18 Rulemaking Pro-

cedures 1 (July 9, 2021), https://www.ftc.gov/system/files/documents/public_statements/

1591702/p210100_wilsonphillips_joint_statement_-_rules_of_practice.pdf [https://perma.cc/

G25X-74LK].

293

The Roberts Court’s 6–3 conservative majority has moved to constitutionalize similar

concerns with expansive conceptions of the non-delegation doctrine and major questions doc-

trine. There is little principled basis to think either doctrine should pose a significant threat to

FTC rulemaking. Tellingly, a prominent scholarly call to strengthen the non-delegation doc-

trine portrays the FTC’s “unfairness” authority as an impermissible delegation—but seems

entirely to overlook the fact that Congress codified a statutory test for unfairness in 1994. See

Cary Coglianese, Dimensions of Delegation, 167 U. P

. L. R

. 1849, 1885–86 (2019).

Regarding major questions doctrine, it would take an extraordinary reading of history to

believe that Congress “spoke unclearly” when it expressly codified the agency’s ongoing prac-

tice of promulgating economy-wide trade regulation rules. Cf. Nat’l Fed’n of Indep. Bus. v.

Occupational Safety & Health Admin., 142 S. Ct. 661, 667 (2022) (Gorsuch, J., concurring).

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560 Harvard Law & Policy Review [Vol. 16

tion . . . of the rulemaking proceeding taken as a whole.”

294

The Commission

should nonetheless err on the side of making its valuable tool of consumer

protection rulemaking as efficient as possible. The agency would gain noth-

ing by being so risk-averse that it continues to allow section 18 to gather

dust.

A. Recent Amendments to Agency Rules

In its first meeting under Chair Khan, the Commission made well-

advised amendments to its Rules of Practice. The changes to the section 18

rulemaking process eliminated several unnecessary constraints that the Com-

mission had imposed upon itself, over and above the requirements of the

FTC Act. Selecting more appropriate presiding officers and harmonizing

the agency’s internal rules with the statute’s less-imposing demands will lead

to substantially streamlined rulemaking proceedings.

1. Reforming the Role of Presiding Officer

The Commission’s most consequential rulemaking reform of July 2021

ended the requirement that the agency’s Chief Administrative Law Judge

(“Chief ALJ”) supervise rulemaking proceedings. Prior rules had designated

the Chief ALJ as Chief Presiding Officer, outsourced to him the selection of

presiding officers for individual proceedings, and implied that those posi-

tions should be filled with ALJs.

295

Presiding officers are essential to an effectively run proceeding. Partici-

pants in an informal hearing can make dilatory requests of the presiding

officer that are as varied as lawyers are creative, from pushing for discovery to

moving to re-open comment periods. The presiding officer’s capacity to

drive forward a rulemaking in a self-sufficient fashion is vital because non-

public correspondence between the presiding officer and FTC Commission-

ers and staff regarding issues of fact is limited during the rulemaking.

296

The earlier practice of naming ALJs as presiding officers created an

inappropriate impediment to rulemaking. Given their training, ALJs are

likely to apply their discretion in ways that create a more formal and trial-

like rulemaking process than the one intended by Congress.

297

The vast ma-

294

15 U.S.C. § 57a(e)(3)(B); see also id. § 57a(e)(2).

295

See 16 C.F.R. §§ 0.14, 1.13(c)(1) (2021). These rules sharply limited the pool of po-

tential presiding officers—there is only one ALJ at the FTC. Administrative Law Judges: ALJs

by Agency, U.S. O

ERS

. M

GMT

. (Mar. 2017), https://www.opm.gov/services-for-agen-

cies/administrative-law-judges/#url=ALJs-by-Agency [https://perma.cc/EVY4-2AJJ].

296

See 15 U.S.C. § 57a(c)(1)(C).

297

Note that during the agency’s era of active rulemaking, presiding officers were drawn

from the Bureau of Consumer Protection staff from 1975–78 and Office of General Counsel

from 1978–80, see E

DWIN

S. R

OCKEFELLER

, D

ESK

OOK OF

FTC P

RACTICE AND

ROCE-

DURE

143 (3d ed. 1979), then the Office of Presiding Officers after the passage of the 1980

Federal Trade Commission Improvements Act, see 45 Fed. Reg. 36,338, 36,341 (May 29,

1980).

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2022] Reassessing the Mythology of Magnuson-Moss 561

jority of ALJs conduct formal APA adjudications in Social Security Admin-

istration (“SSA”) benefits hearings,

298

and other agencies usually hire their

ALJs from those at SSA.

299

These adjudications “provid[e] the full measure

of due process”

300

and are “unusually protective” of non-governmental par-

ties.

301

Section 18 explicitly distinguishes informal FTC rulemaking proceed-

ings from those formal processes.

302

Yet commenters have noted that, in

FTC rulemakings, “ALJs seem unable or unwilling to distinguish between

adjudicative and legislative fact” and provided cross-examination rights on

far too many topics.

303

Most ALJs have little or no experience with rulemak-

ing. Thus, they are ripe targets for financially interested parties seeking to

hinder a rulemaking by abusing section 18 procedures. Considering their

obstructive effects, it is unsurprising that the rules so empowering ALJs in

FTC rulemaking came under President Reagan’s final appointee as FTC

Chair.

304

In a brilliant stroke, the Commission in 2021 re-assigned the Chief

Presiding Officer role to the FTC Chair.

305

By statute, the Commission may

select anyone it pleases as presiding officer, so long as he or she is responsible

to a Chief Presiding Officer who is not responsible to “any other officer or

employee of the Commission.”

306

This rule change permits the Chair herself

to act as Chief Presiding Officer or to delegate the role to someone who is

broadly in support of consumer protection rulemaking.

The rule revisions further empower presiding officers by affording them

all powers “useful to” the end of “the orderly conduct of the informal hear-

ing.”

307

This new language expands beyond the prior grant of powers “neces-

298

See Brief for William A. Araiza et al. as Amici Curiae in Support of Neither Party at 9,

Lucia v. SEC, 138 S. Ct. 2044 (2018) (No. 17-130), 2018 WL 1156622 (“The vast majority of

ALJs, 1,655 out of 1,926, work for the Social Security Administration (SSA).”).

299

See Brief of Association of Administrative Law Judges as Amicus Curiae in Support of

Respondent at 19, Lucia v. SEC, 138 S. Ct. 2044 (2018) (No. 17-130), 2018 WL 1638089

(“[M]ost ALJs start at the Social Security Administration before moving to positions at other

agencies.”).

300

Robin J. Arzt, Adjudications by Administrative Law Judges Pursuant to the Social Security

Act Are Adjudications Pursuant to the Administrative Procedure Act, 22 J. N

’

DMIN

L. J

UDGES

279, 318 (2002), http://digitalcommons.pepperdine.edu/naalj/vol22/iss2/1 [https://

perma.cc/2ETC-TMK9] (quoting Letter from Kenneth S. Apfel, SSA Comm’r, to Judge

Ronald G. Bernoski, President, Association of Administrative Law Judges (Jan. 9, 2001)).

301

Heckler v. Day, 467 U.S. 104, 106 (1984).

302

See 15 U.S.C. § 57a(b)(1); see also Ass’n of Nat’l Advertisers, Inc. v. FTC (Nat’l Adver-

tisers III), 627 F.2d 1151, 1161 (D.C. Cir. 1979).

303

Cooper J. Spinelli, Far from Fair, Farther from Efficient: The FTC and the Hyper-For-

malization of Informal Rulemaking, 6 L

. & P

’

RIEF

129, 146 n.116 (2014) (citing

ENNETH

ULP

AVIS

& R

ICHARD

J. P

IERCE

, A

DMINISTRATIVE

REATISE

§ 7.7 (3d

ed. 1994)).

304

See Caroline E. Meyer, Daniel Oliver, W

ASH

. P

OST

(Apr. 27, 1987), https://

www.washingtonpost.com/archive/politics/1987/04/27/daniel-oliver/d53bb117-8327-4de8-

bcff-265ad9ee8093/ [https://perma.cc/7P7B-8VE2].

305

Revisions to Rules of Practice, 86 Fed. Reg. 38,542, 38,543 (July 22, 2021) (codified at

16 C.F.R. § 0.8).

306

See 15 U.S.C. § 57a(c)(1)(A)–(B).

307

Revisions to Rules of Practice, 86 Fed. Reg at 38549.

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562 Harvard Law & Policy Review [Vol. 16

sary to” such a goal.

308

The Chair should select presiding officers with

significant rulemaking experience who will use their authority to create an

efficient regulatory proceeding rather than the adversarial atmosphere of a

trial. It will also be valuable to choose presiding officers with expertise in the

subject matter of the proposed rule, whether they are drawn from the Office

of General Counsel’s new rulemaking group, the Bureau of Consumer Pro-

tection, or outside the FTC. Presiding officers with relevant experience will

be able to weigh the evidence more effectively if the Commission designates

any disputed issues of material fact and to ascertain more easily when partici-

pants seek to make an excessive number of duplicative presentations or cross-

examinations. Prior to the next informal hearing under section 18, the Com-

mission ought also to use its power to “prescribe such rules . . . concerning

proceedings in such hearings as may tend to avoid unnecessary costs or de-

lay” by releasing guidelines to ensure that the hearings reflect Congress’s

intent to create a workable rulemaking power.

309

The July 2021 reforms also re-established boundaries around the role of

the presiding officer. The presiding officer’s ambit had expanded far beyond

that required by the Magnuson-Moss Act or 1980 Act—or the “fact testing”

objective those statutes set for informal hearings.

310

Under the revised rules,

presiding officers will no longer designate disputed issues of material fact in

the first instance or be able to lengthen the informal hearing period unilater-

ally.

311

Nor will they expend enormous amounts of time on “recommended

decision” reports. Such reports will now be cabined to determinations re-

garding any designated disputed issues of material fact and will have to be

issued within sixty days of the end of the informal hearing period.

312

Past

presiding officer reports were far more sweeping and could take more than

fifteen months to complete after the close of informal hearings.

313

2. Harmonizing Agency Procedures with Statutory Requirements

Until recently, the FTC’s internal Rules of Practice had imposed nu-

merous procedural burdens on rulemaking beyond what is required by stat-

ute. The Commission’s July 2021 reforms included several changes to

308

16 C.F.R. § 1.13(c)(2)(i) (2020).

309

15 U.S.C. § 57a(c)(3).

310

ARRY

B. B

OYER

, A

DMIN

. C

ONF

OF THE

U.S., E

XECUTIVE

UMMARY OF

ARRY

OYER

EPORT

: T

RADE

EGULATION

ULEMAKING

ROCEDURES OF THE

EDERAL

RADE

OMMISSION

46 (1979), https://www.acus.gov/sites/default/files/documents/1979-

01%20Hy-

brid%20Rulemaking%20Procedures%20of%20the%20Federal%20Trade%20Commission.pdf

[https://perma.cc/498S-NN6M].

311

Revisions to Rules of Practice, 86 Fed. Reg. at 38,549.

312

Id.

313

See 44 Fed. Reg. 53,538, 53,538 (Sept. 14, 1979); ACUS 1979 R

ECOMMENDATION

supra note 50, at 7.

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2022] Reassessing the Mythology of Magnuson-Moss 563

harmonize the FTC’s administrative procedures with the statute’s less de-

manding requirements.

314

In the early stages of a section 18 rulemaking, these reforms removed

the agency-imposed requirement that an NPRM state the reasons for a rule

“with particularity”—which could have been interpreted to demand greater

evidence-gathering before issuance of the NPRM.

315

During informal hear-

ings, the new rules toughen the standard for when a participant may dissent

from the selection of a group representative for cross-examination and can

exercise cross-examination rights individually.

316

They also eliminated refer-

ences to “examination,” which may have erroneously implied that partici-

pants should operate with a lawyer in a format resembling direct

examination during trial.

317

Moreover, the reforms eliminated procedures for

the presiding officer to exercise a subpoena-like power, a move away from

the inappropriate litigation-style motion practice that caused heated conflict

during early proceedings.

318

The Commission also removed extra-statutory periods for public com-

ment and set limits on stages of proceedings that had proven lengthy in the

past. It discontinued the stand-alone comment period for participants to

propose disputed issues of material fact for designation.

319

Instead, the Com-

mission will decide which, if any, issues to designate on the basis of input

gathered during the ANPRM and NPRM comment periods.

320

The post-

record comment period was cut, as well. This appears to be a calculated risk

given the potential cost of a court remanding a finalized rule back to the

Commission for additional presentations.

321

The reformed rules also no

longer require publication of a formal staff report before the Commission

may finalize a regulation,

322

although the statute’s ex parte provisions will

still require any staff input to be placed on the rulemaking record.

323

Finally, the amendments imposed strict limits on several forms of ap-

peals to the Commission. Participants will have only ten days after an infor-

314

See generally Revisions to Rules of Practice, 86 Fed. Reg. at 38,542. Numerous of these

reforms were proposed in previous iterations of this article. See Kurt Walters, FTC Rulemaking:

Existing Authorities & Recommendations 26–28 (July 31, 2019), https://ssrn.com/

abstract=3794346.

315

Compare Revisions to Rules of Practice, 86 Fed. Reg. at 38,548, with 16 C.F.R.

§ 1.11(a)(3) (2020).

316

See Revisions to Rules of Practice, 86 Fed. Reg. at 38,548.

317

See id.; see also William Funk, Requiring Formal Rulemaking Is a Thinly Veiled Attempt

to Halt Regulation, R

. R

. (May 18, 2017), https://www.theregreview.org/2017/05/18/

funk-formal-rulemaking-halt-regulation/ [https://perma.cc/9KMN-S85U] (noting attorneys’

ability to use direct examination to “tie up” a rulemaking proceeding).

318

See Lionel Kestenbaum, Rulemaking Beyond APA: Criteria for Trial-Type Procedures and

the FTC Improvement Act, 44 G

. W

ASH

. L. R

. 679, 709 (1976); B

OYER

, supra note 310,

at 65 (explaining that “discovery requests were the largest and most important category” of

motions witnesses attempted to make).

319

Cf. 16 C.F.R. § 1.13(b), (c)(3)(ii) (2020).

320

See Revisions to Rules of Practice, 86 Fed. Reg. 38,542, 38,544 (July 22, 2021) (codi-

fied at 16 C.F.R. pt. 1).

321

See 15 U.S.C. § 57a(e)(2).

322

Revisions to Rules of Practice, 86 Fed. Reg. at 38,544.

323

15 U.S.C. § 57a(j).

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564 Harvard Law & Policy Review [Vol. 16

mal hearing to petition the Commission to review a presiding officer’s

decision and the Commission will have thirty days to resolve any such ap-

peals that it chooses to accept.

324

The streamlined rules omit a provision that

strongly favored granting leave for participants to make another set of oral

presentations directly to the Commission after the completion of all statuto-

rily required steps,

325

a process that added significantly to the length of some

past rulemakings.

326

B. Recommendations for Further Reforms

The Commission should treat its mid-2021 reforms to the section 18

rulemaking process as a foundation for further improvements. In several re-

spects, the FTC of 2022 is better positioned to make effective use of section

18 than the FTC of 1975 or 1980. Bodies such as ACUS and the American

Bar Association synthesized a series of best-practices recommendations for

FTC rulemaking around 1980, following the trial and error that inevitably

accompanies a new procedural framework.

327

By that point, though, the

agency had ceased beginning new section 18 proceedings and its incoming

leadership had more interest in halting ongoing rulemakings than adopting

these recommendations as agency practice. Today’s FTC can put to good use

the insights gained from real-world experience during the agency’s era of

frequent rulemaking.

The Commission can also leverage judicial developments that came af-

ter the decline in FTC rulemaking to prevent informal hearings from be-

coming a roadblock. Agency interpretations of the procedural requirements

imposed by the FTC Act are entitled to Chevron deference, a doctrine an-

nounced only in 1984.

328

By that point, the FTC had essentially ceased new

rulemaking activity. Articulating agency interpretations of ambiguous as-

pects of section 18 can strengthen the agency’s hand in later litigation.

1. Restoring the Cross-Examination Compromise

As recounted above, informal oral hearings with cross-examination

were section 18’s significant departure from the baseline of APA notice-and-

comment procedures.

329

The drafters of the Magnuson-Moss Act built in

several features intended to ensure that these informal hearings would not

“hamstring” rulemaking and to “assure that rulemaking conducted by the

Commission will be a far cry from the formal trial-type procedures under

sections 554 and 556 of the Administrative Procedure Act.”

330

The legisla-

324

Revisions to Rules of Practice, 86 Fed. Reg. at 38,550.

325

Compare id., with 16 C.F.R. § 1.13(i) (2020).

326

See Lubbers, supra note 260, at 1990 and text accompanying supra note 284.

327

See Dixon, supra note 89; 1980 ABA Report, supra note 178; B

OYER

, supra note 310.

328

See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43

(1984).

329

See supra Part III.A.3.

330

120 Cong. Rec. 40,711 (1974) (statement of Sen. Moss).

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2022] Reassessing the Mythology of Magnuson-Moss 565

tion’s architect thus saw the provision calling for informal hearings as only a

“modest compromise” from a proposal for APA notice-and-comment

rulemaking.

331

Yet, presiding officers and outside observers quickly found

that it was difficult during rapid-fire analysis of motions and pleadings to

insist on the distinction between the issues of “specific fact” that were meant

to be subject to cross-examination and the issues of policy or “legislative fact”

that were not.

332

The Commission can apply past experience to better effectuate con-

gressional intent and prevent informal hearings from impeding rulemaking.

It can do so with a two-tiered approach. On the front end of the process, the

agency should insist on the narrow meaning of “specific fact” that Congress

intended—and designate “disputed issues of material fact” far more sparingly

than it did in the 1970s. Later, during the informal hearing stage, presiding

officers should impose a strong presumption for allowing rebuttal submis-

sions rather than cross-examination. But when participants do conduct

cross-examination, presiding officers should learn from the “freedom for

time” tradeoff developed in early section 18 proceedings. They should focus

on the overall length of the proceeding rather than tightly policing the con-

tent of particular presentations or cross-examinations.

First, the Commission should clearly define criteria establishing when

the agency is to designate issues for cross-examination. The FTC’s recently

reformed Rules of Practice carried over a long-standing provision that stated

that an issue is appropriate for cross-examination when it “is an issue of

specific fact in contrast to legislative fact.”

333

Leaving these terms undefined

is a missed opportunity to earn Chevron deference for the agency’s interpre-

tation of critical language in the FTC Act: “disputed issues of material fact it

is necessary to resolve,” which defines the scope of cross-examination.

334

The Magnuson-Moss Act’s sponsors portrayed that phrase as a key to

orderly proceedings. Congressional skeptics, in turn, complained it “severely

limited” cross-examination.

335

Tracing the provenance of this provision illus-

trates clearly that Congress intended for cross-examination only to “arise oc-

casionally.”

336

The Commission has considerable flexibility to come to a

“reasonable interpretation” of this admittedly ambiguous phrase that stream-

lines the rulemaking process.

337

The Magnuson-Moss Act’s imposition of limited cross-examination re-

lied upon a distinction between “specific fact” and “legislative fact” that was

introduced in a 1972 ACUS recommendation:

331

ICHAEL

ERTSCHUK

, W

HEN THE

ENATE

ORKED FOR

: T

NVISIBLE

OLE OF

TAFFERS IN

OUNTERING

ORPORATE

OBBIES

151 (2017).

332

See Kestenbaum, supra note 318, at 709; see also Dixon, supra note 89, at 399.

333

Revisions to Rules of Practice, 86 Fed. Reg. 38,542, 38,548 (July 22, 2021) (codified at

16 C.F.R. § 1.12(b)(1)).

334

15 U.S.C. § 57a(c)(2)(B).

335

120 Cong. Rec. 40,724 (1974) (statement of Sen. Taft).

336

Ass’n of Nat’l Advertisers, Inc. v. FTC (Nat’l Advertisers III), 627 F.2d 1151, 1164

(D.C. Cir. 1979).

337

See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 844 (1984).

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566 Harvard Law & Policy Review [Vol. 16

[W]hen it has special reason to do so, [Congress] may appropri-

ately require opportunity for . . . trial-type hearings on issues of

specific fact. . . . Congress should never require trial-type proce-

dures for resolving questions of policy or broad or general fact.

Ordinarily, it should not require such procedures for making rules

of general applicability.

338

ACUS based this distinction on Professor Kenneth Culp Davis’s founda-

tional taxonomy of “adjudicative facts” and “legislative facts.”

339

Then-ACUS Chairman Antonin Scalia intervened to ensure that Con-

gress hewed closely to this framework. Scalia warned that the language in an

early version of Magnuson-Moss, which provided for cross-examination “as

may be required for a full and true disclosure of all disputed issues of mate-

rial fact,” was unworkable—it would have led to routine use of “a procedural

technique designed for the resolution of particularized factual disputes” in

crafting generally applicable rules.

340

The conference committee then revised

that passage, and the final language in the Act requires cross-examination

only “if the Commission determines that there are disputed issues of mate-

rial fact it is necessary to resolve.”

341

The Conference Report emphasized

that this change embraced the “specific fact” distinction: “[t]he only disputed

issues of material fact to be determined for resolution by the Commission are

those issues characterized as issues of specific fact in contrast to legislative

fact.”

342

Finally, the Office of Management and Budget asked for ACUS’s

interpretation of the Act’s language before President Ford would sign it.

ACUS’s Executive Secretary responded, “[s]ince consideration of many, if

not most proposed rules of general applicability involve exclusively questions

of legislative fact, the Commission would often be able to dispense with

cross-examination entirely.”

343

The Commission should formally embrace the understanding that

cross-examination is appropriate for FTC rulemaking only in limited cir-

cumstances. One, the Commission should more clearly emphasize that “dis-

puted issues of material fact it is necessary to resolve” (i.e., issues of “specific

fact”) are distinct from issues of policy, issues of general fact, “distractive

technical issues,” or issues that blend categories.

344

Two, it should specify

that such designated disputed issues should be capable of proof or disproof

with evidence, precluding matters of prediction or issues whose definitive

338

38 Fed. Reg. 19,782, 19,792 (July 23, 1973).

339

Cf. Kenneth Culp Davis, An Approach to Problems of Evidence in the Administrative

Process, 55 H

ARV

. L. R

. 364, 365–66 (1942); Kenneth Culp Davis, Facts in Lawmaking, 80

OLUM

. L. R

. 931, 932 (1980) (outlining a continuum from circumstances in which added

procedure is appropriate in rulemaking to those in which it is not).

340

Nat’l Advertisers III, 627 F.2d at 1164 n.29.

341

15 U.S.C. § 57a(c)(2)(B).

342

H.R. R

. N

. 93-1606, at 33 (1974) (Conf. Rep.), as reprinted in 1974 U.S.C.C.A.N.

7755, 7765.

343

Nat’l Advertisers III, 627 F.2d at 1164 n.29.

344

See P

ERTSCHUK

, supra note 331, at 152; 38 Fed. Reg. 19,782, 19,792 (July 23, 1973).

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2022] Reassessing the Mythology of Magnuson-Moss 567

“resolution” is unrealistic.

345

Three, it should state that an issue is appropriate

for cross-examination only if definitive resolution of that particular issue is

“essential to the formulation of the rule.”

346

Four, it can clarify that issues

that pertain to a large number of firms are more likely to be issues of general

fact—and thus inappropriate for cross-examination—than those whose reso-

lution requires information known only to a small number of entities. Last,

the Commission should express its view that these conditions will be met

only rarely, reflecting Congress’s original intent.

347

Most rulemaking pro-

ceedings would thus have few or no issues designated for cross-examination.

These guidelines should prevent situations such as the Mobile Homes

rulemaking, which had nineteen designated issues, including policy-laden

questions of the “adequacy” or “reasonableness” of the industry’s actions and

a request for predictions of “the probable economic effect” of the rule—in-

quiries incapable of definitive proof.

348

Second, the agency can streamline the informal hearings by applying a

strong presumption in favor of rebuttal submissions over cross-examination.

A Commission decision regarding cross-examination or rebuttal submissions

is a ground for judicial reversal only if it “precluded disclosure of disputed

material facts which was necessary for fair determination by the Commission

of the rulemaking proceeding taken as a whole.”

349

This standard will rarely

be met if a participant is allowed to make a rebuttal submission. It is difficult

to portray credibility attacks and impeachment of opposing presenters, the

focus of cross-examination in past FTC rulemakings, as themselves “disclo-

sure of disputed material facts” rather than attempts to undermine a prior

disclosure. Only when a cross-examination would induce the cross-examinee

to make a new “disclosure of disputed material fact” would the agency need

to allow cross-examination rather than a rebuttal submission.

Third, when cross-examination is permitted, presiding officers should

embrace the “freedom for time” tradeoff innovated in the 1970s.

350

This was

the practice by presiding officers of imposing strict time limits on cross-

examination but not attempting to police tightly whether questioning

crossed the line between designated issues and other subject matter. Presid-

ing officers found this approach manageable while not adding to the length

of proceedings. In fact, reducing some of the attempts at procedural appeals

resulted in hearings “taking very little longer than previous hearings [before

345

See A

DMIN

. C

ONF

OF THE

U.S., R

ECOMMENDATION

80-1: T

RADE

EGULATION

ULEMAKING

NDER THE

AGNUSON

-M

OSS

ARRANTY

-F

EDERAL

RADE

OMMISSION

MPROVEMENT

7 (1980) (separate statement of Kenneth Culp Davis), https://

www.acus.gov/sites/default/files/documents/80-1-ss.pdf [https://perma.cc/YN9R-CSP9].

346

See id.

347

See Nat’l Advertisers III, 627 F.2d at 1164 n.29.

348

Mobile Home Sales and Service, 42 Fed. Reg. 26,398, 26,399–400 (proposed May 23,

1977) (codified at 16 C.F.R. pt. 441).

349

15 U.S.C. § 57a(e)(3)(B).

350

Dixon, supra note 89, at 400, 427 (“Once the right sort of atmosphere is created, hear-

ings can then proceed free of any fear of cross-examination, for with the unused residual pow-

ers lurking in the background, the technique can be used, subject to the one simple limitation

of time.”).

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568 Harvard Law & Policy Review [Vol. 16

passage of the Magnuson-Moss Act] without cross-examination.”

351

When

the Commission designates only a few issues and clearly communicates rea-

sonable time limits, it will be up to participants to focus their cross-examina-

tion on designated issues. If participants engage in questioning on issues of

policy or general fact, this would belie later arguments that the agency’s time

limit precluded disclosure of disputed material facts. The experience of the

1970s also shows that the agency can affect the tenor of proceedings for the

better by carefully considering the physical space in which informal oral

hearings are held. A room with a panel-style layout may foster a less adver-

sarial atmosphere than one modeled on a courtroom, with a single adjudica-

tor raised above participants who are seated below.

352

2. Additional Steps

The FTC should also embrace Chevron with respect to the meaning of

“prevalence.” Although the legislative history is clear that both provisions

relating to prevalence in section 18 are intended to be non-justiciable,

353

some courts have overlooked this fact and examined the issue closely.

354

The

agency could limit uncertainty by releasing an interpretive rule with a non-

exhaustive list of factors and types of data that support a belief that a certain

practice is “prevalent.”

Because section 18 does contain some added procedural requirements,

agency leadership should start the clock for these proceedings as early as

possible. One key way to do so is to err on the side of publishing an

ANPRM quickly rather than waiting for bulletproof evidence that a chal-

lenged act or practice is “prevalent.” The agency must have reason to believe

a practice is prevalent only by the time it publishes an NPRM. The

ANPRM comment period should be an important source of data with which

to determine the prevalence of particular types of misconduct.

Finally, Commissioners interested in effective rulemaking should rec-

ognize that dedicating resources to rulemaking will create a virtuous feed-

back loop. Placing a priority on issuing well-crafted rules will build

experience with section 18 among agency personnel. This internally devel-

oped institutional knowledge, in addition to staffing the new Office of

Rulemaking with veterans of rulemaking from other federal agencies, will

make future rulemakings even more timely and efficient.

351

Id. at 400.

352

See 1980 ABA Report, supra note 178, at 362 (“The layout of the hearing room gives the

unexperienced witness the impression that the presiding officer has a role similar to that of a

judge in a formal adjudication.”).

353

See supra Parts III.A.1, III.A.4.

354

See Compassion Over Killing v. U.S. Food & Drug Admin., 849 F.3d 849, 855 (9th

Cir. 2017); Pa. Funeral Dirs. Ass’n v. FTC, 41 F.3d 81, 86–89 (3d Cir. 1994); see also Am.

Optometric Ass’n v. FTC, 626 F.2d 896, 906 (D.C. Cir. 1980) (considering the statement of

basis and purpose, despite legislative history indicating its contents are not subject to judicial

review).

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2022] Reassessing the Mythology of Magnuson-Moss 569

V. O

PPORTUNITIES FOR

EGULATION

Reviving consumer protection rulemaking would equip the FTC to better

address the disconcertingly broad range of business misconduct harming

consumers. The public is ill-served if the Commission attempts to fight eco-

nomic wrongdoing with only a subset of its authorities—employing the full

range of the FTC’s powers will allow the Commission to select the right

instrument for each job.

355

A spring 2021 FTC workshop on digital “dark patterns” suggests one

topic ripe for rulemaking.

356

Dark patterns are manipulative design tech-

niques that induce consumers to part with more money or more personal

data than they would if presented with an intuitive and fair user-experience

design. One common example is a service that makes it very easy for a user

to confirm a default option to share her data publicly but buries options to

limit data sharing or close her account beneath layers of confusing and diffi-

cult-to-navigate menus.

357

A rule restricting the use of dark patterns would

emulate the Cooling-Off Rule promulgated in 1972, which strengthened

consumers’ hands against the high-pressure sales tactics of the day used by

door-to-door salespeople.

358

That regulation provides consumers with up to

three days to cancel a transaction made at their door—after the potentially

aggressive salesperson has left their property.

359

Other relatively thorough

proposals of substantive topics appropriate for rulemaking include cyber-se-

curity and algorithmic transparency and fairness.

360

Each of the types of misconduct identified by former Commissioner

Chopra and Samuel Levine as suitable for Penalty Offense Authority could

also be addressed through rulemaking. Rulemaking on these subjects would

offer advantages of stronger equitable relief

361

and could remove legal de-

355

Rebecca Kelly Slaughter, Acting Chairwoman, Fed. Trade Comm’n, Remarks at the

Future of Privacy Forum: Protecting Consumer Privacy in a Time of Crisis 3–4 (Feb. 10,

2021), https://www.ftc.gov/system/files/documents/public_statements/1587283/

fpf_opening_remarks_210_.pdf [https://perma.cc/VA4H-D6FG].

356

Press Release, Fed. Trade Comm’n, FTC to Hold Virtual Workshop Exploring Digi-

tal “Dark Patterns” (Feb. 24, 2021), https://www.ftc.gov/news-events/press-releases/2021/02/

ftc-hold-virtual-workshop-exploring-digital-dark-patterns [https://perma.cc/WSQ4-NN62];

see also Justin (Gus) Hurwitz, Designing A Pattern, Darkly, 22 N.C. J.L. & T

ECH

. 57, 97

(2020) (suggesting an FTC rulemaking on this topic).

357

See Thomas Germain, How to Spot Manipulative ‘Dark Patterns’ Online, C

ONSUMER

EPS

. (Jan. 30, 2019), https://www.consumerreports.org/privacy/how-to-spot-manipulative-

dark-patterns-online-a7910348794/ [https://perma.cc/M53E-36DL].

358

Cooling-Off Period for Door-to-Door Sales, 37 Fed. Reg. 22,933, 22,934 (Oct. 26,

1972).

359

See 16 C.F.R. § 429.1 (2021).

360

See Ian M. Davis, Note, Resurrecting Magnuson-Moss Rulemaking: The FTC at a Data

Security Crossroads, 69 E

MORY

L.J. 781, 813 (2020); Rebecca Kelly Slaughter, Comm’r, Fed.

Trade Comm’n, Remarks at UCLA School of Law: Algorithms and Economic Justice 15–16

(Jan. 24, 2020), https://www.ftc.gov/system/files/documents/public_statements/1564883/re-

marks_of_commissioner_rebecca_kelly_slaughter_on_algorithmic_and_economic_justice_01-

24-2020.pdf [https://perma.cc/W5YD-S552].

361

Compare 15 U.S.C. § 57b(b), with id. § 53(b).

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570 Harvard Law & Policy Review [Vol. 16

fenses of inadequate notice by upstart firms that have not been noticed with

copies of relevant FTC cease-and-desist orders.

362

Penalty Offense Authority

and section 18 rulemaking might be viewed as complementary tools on these

topics, which include deceptive for-profit college recruitment, false earning

claims in recruiting workers, fake-review fraud and other online disinforma-

tion, and illegally targeted advertising using data protected by federal law.

363

Early indications suggest that the Bureau of Consumer Protection is moving

toward this multi-pronged approach, laying the groundwork to use both

Penalty Offense Authority and section 18 rulemaking to target specific cate-

gories of wrongdoing.

364

Each potential rulemaking can be classified into one of two broad cate-

gories, based on the extent of prior agency enforcement. The first is the

“restatement rulemaking” suggested by former Commissioner Chopra.

365

such a case, there are sufficient past FTC cease-and-desist orders, settlement

agreements, or judicial precedents to synthesize into a set of clear proscrip-

tions.

366

The rulemaking process then effectively operates as a complement to

case-by-case adjudication, unlocking greater remedial power for the Com-

mission. The FTC has issued two ANPRMs in recent months that signal it

intends to begin its return to section 18 rulemaking by crafting rules in this

archetype. The Commission is gathering and reviewing public comments on

potential rules to restrict government and business impersonation fraud and

to bar false future-earnings claims; each practice is the subject of an extensive

362

Cf. Statement of Comm’r Rohit Chopra Joined by Comm’r Rebecca Kelly Slaughter

Regarding Final Approval of the Sunday Riley Settlement 3 (Nov. 6, 2020), https://

www.ftc.gov/system/files/documents/cases/fi-

nal_rchopra_sunday_riley_statement_dated_11.6.pdf [https://perma.cc/U3HY-RVGV].

363

See Chopra & Levine, supra note 34, at 104–21.

364

Two of the first three Notices of Penalty Offenses that the Commission distributed in

October 2021 relate to false claims about future earnings or career prospects by for-profit

colleges and misleading claims of potential earnings by multi-level marketing firms or gig work

companies. See Press Release, Fed. Trade Comm’n, FTC Puts Businesses on Notice that False

Money-Making Claims Could Lead to Big Penalties (Oct. 26, 2021), https://www.ftc.gov/

news-events/news/press-releases/2021/10/ftc-puts-businesses-notice-false-money-making-

claims-could-lead-big-penalties; Press Release, Fed. Trade Comm’n, FTC Targets False

Claims by For-Profit Colleges (Oct. 6, 2021), https://www.ftc.gov/news-events/news/press-

releases/2021/10/ftc-targets-false-claims-profit-colleges.

A few months later, the Commission released its second section 18 ANPRM under Chair

Khan, which signaled interest in promulgating a rule barring false future-earnings claims. See

Deceptive or Unfair Earnings Claims, 87 Fed. Reg. 13,951, 13,951 (Mar. 11, 2022). That

notice explicitly noted the complementary nature of Penalty Offense Authority and section 18

rulemaking. See id. at 13,952 (“While the Commission recently issued a Notice of Penalty

Offenses concerning earnings claims, which will permit the Commission to seek civil penalties

for misleading earnings claims in some cases, this authority does not provide a basis for the

Commission to recover funds to return to injured consumers.”).

365

See Statement of Comm’r Rohit Chopra Regarding the Report to Congress on Pro-

tecting Older Consumers 2 (Oct. 19, 2020), https://www.ftc.gov/system/files/documents/pub-

lic_statements/1581862/p144400choprastatementolderamericansrpt.pdf [https://perma.cc/

6PJG-XLT6].

366

The recently issued ANPRM regarding Deceptive or Unfair Earnings Claims provides

an illustrative example. See 87 Fed. Reg. at 13,951–52 & nn.3–15 (collecting precedents and

synthesizing their core principles).

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2022] Reassessing the Mythology of Magnuson-Moss 571

body of past agency actions.

367

Because there is a smaller amount of novel

substantive ground to cover in such a proceeding, a restatement rulemaking

is a prudent option for a first new section 18 rulemaking. The agency will be

able to fine-tune its use of the recently amended FTC Rules of Practice and

rebuild institutional experience with section 18. Meanwhile, work on more

ambitious rules can begin.

The second category is proactive rulemaking, comparable to the types

of rules promulgated by most agencies. In areas in which enforcement activ-

ity has been held back by evidentiary challenges or the difficulties of provid-

ing adequate notice before beginning enforcement, there may not be much

precedent to restate. Moving expeditiously to a section 18 proceeding may

prove more efficient in many instances than crafting informal guidance and

waiting years for enforcement efforts to generate a critical mass of precedents

before initiating a rulemaking. Furthermore, section 18 empowers the

agency not only to specify acts or practices that violate section 5’s UDAP

prohibition, but additionally to impose “requirements prescribed for the pur-

pose of preventing such acts or practices.”

368

Under the FTC Act, a violation

of a rule’s preventive requirements is itself an unfair or deceptive act or prac-

tice.

369

These provisions are explicit authorization by Congress for FTC rules

to reach conduct that the agency could not proscribe solely through case-by-

case adjudications under its section 5 authority. It certainly may be wise to

avoid rulemaking regarding topics with which the agency has no experience

whatsoever. Still, the same tools that agency staff use when creating industry

guides or setting enforcement strategy—such as public workshops and sec-

tion 6(b) industry studies

370

—can inform rulemaking as well. Among the

wide range of candidates for rulemaking, a discussion of one that typifies

each of these categories follows.

A. Data Privacy

An area that calls out for a section 18 rulemaking is data privacy. It is a

rare issue on which a bipartisan majority of Commissioners has agreed that a

rulemaking may be warranted.

371

Action could be imminent—the Commis-

sion recently submitted a notice to OIRA indicating that it is “considering

initiating a rulemaking under section 18 of the FTC Act to curb lax security

practices, limit privacy abuses, and ensure that algorithmic decision-making

does not result in unlawful discrimination.”

372

The FTC has become the

367

See Trade Regulation Rule on Impersonation of Government and Businesses, 86 Fed.

Reg. 72,901, 72,903 & nn.25–27 (Dec. 23, 2021); 87 Fed. Reg. at 13,951–52 & nn.3–15.

368

15 U.S.C. § 57a(a)(1)(B) (emphasis added).

369

Id. § 57a(d)(3).

370

See id. § 46(b).

371

Swift, supra note 262.

372

Becky Burr, Walter Anderson & Landyn Rookard, What To Expect From FTC Unfair,

Deceptive Acts Rule Plans, L

360 (Feb. 17, 2022, 5:24 PM), https://www.law360.com/arti-

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572 Harvard Law & Policy Review [Vol. 16

country’s “de facto Data Protection Authority”

373

by enforcing the UDAP

prohibition that fills the gaps in the United States’ fragmented, sectoral ap-

proach to privacy and holding implementing authority over several specific

privacy laws.

374

Based on its experience as the leading American data privacy

enforcer and the breadth of its legal authority, the FTC is the agency best-

positioned to establish a national approach to data privacy.

375

The FTC’s adjudications have formed what scholars have persuasively

labeled a “common law” of privacy.

376

The Commission’s standards go far

beyond enforcing privacy promises; it also challenges data collection with

inadequate notice or through pretextual means, retroactive alteration of the

terms governing data use, and meager data security measures.

377

Unlike

traditional common law, though, the FTC’s variant generally does not in-

volve binding judicial precedent: “Respondents in FTC proceedings settle

almost all matters. Thus, FTC online privacy law is largely a body of com-

plaints and consent decrees.”

378

Through incremental, case-by-case evolu-

tion, the standards applied by the Commission “have become so specific they

resemble rules.”

379

But rules they are not. For that reason, the agency acts from a substan-

tially weaker position in attempting to secure relief for the public. Dissenting

Commissioners criticized FTC settlements with Zoom

380

and Facebook

381

inadequate even before AMG Capital eliminated the leverage provided by the

prospect of section 13(b) equitable remedies.

382

Furthermore, the agency re-

cently received a bracing reminder that its common law–style body of settle-

ments and complaints does not have binding effect when, in a rare privacy

matter that failed to settle, a federal appellate court held one of the FTC’s

standard cease-and-desist orders to be unenforceable.

383

cles/1465949/what-to-expect-from-ftc-unfair-deceptive-acts-rule-plans [https://perma.cc/

TYG6-F5TC].

373

Daniel J. Solove & Woodrow Hartzog, The FTC and the New Common Law of Privacy,

114 C

OLUM

. L. R

. 583, 584 (2014).

374

See Woodrow Hartzog & Daniel J. Solove, The Scope and Potential of FTC Data Protec-

tion, 83 G

. W

ASH

. L. R

. 2230, 2252, 2269 (2015).

375

Id. at 2271 (“[T]he FTC is the only agency currently capable of responding to a num-

ber of vexing privacy issues.”).

376

Solove & Hartzog, supra note 373, at 584.

377

See id. at 628–43.

378

OOFNAGLE

, supra note 135, at 159.

379

Solove & Hartzog, supra note 373, at 586.

380

Dissenting Statement of Comm’r Rohit Chopra Regarding Zoom Video Communica-

tions, Inc. 6 (Nov. 6, 2020), https://www.ftc.gov/system/files/documents/public_statements/

1582914/final_commissioner_chopra_dissenting_statement_on_zoom.pdf [https://perma.cc/

9CUJ-URWQ].

381

Dissenting Statement of Comm’r Rebecca Kelly Slaughter in the Matter of FTC vs.

Facebook 5–6 (July 24, 2019), https://www.ftc.gov/system/files/documents/public_statements/

1536918/182_3109_slaughter_statement_on_facebook_7-24-19.pdf [https://perma.cc/TQT3-

RV5F].

382

See AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1344 (2021).

383

LabMD, Inc. v. FTC, 894 F.3d 1221, 1237 (11th Cir. 2018). But see FTC v. Wynd-

ham Worldwide Corp., 799 F.3d 236, 247, 256 (3d Cir. 2015) (affirming the FTC’s authority

to police data security lapses and holding that the firm had adequate notice on the basis of

cease-and-desist orders issued to others).

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2022] Reassessing the Mythology of Magnuson-Moss 573

The FTC also faces challenges due to the nature of its deception and

unfairness authorities. The great majority of the agency’s past privacy actions

have been premised on a deception theory, which necessarily involves an

interaction between the harmed individual and the offending party. A re-

quired element of deception is “a representation, omission or practice that is

likely to mislead [a] consumer.”

384

Many privacy harms are only accessible

through an unfairness theory. A large proportion of actors in the data

ecosystem, such as data brokers, have no direct interaction with individuals

whose data they handle. They are therefore unlikely to mislead consumers,

as is necessary for a deception theory. Another hurdle is that the FTC’s

unfairness authority restricts conduct only if it causes or is likely to cause

substantial harm to consumers that is not outweighed by benefits to consum-

ers or competition.

385

Privacy harms are notoriously confounding for

courts

386

and pose challenges for this test. First, “the injury may appear small

when viewed in isolation,” even if the aggregate harm is significant “when

done by hundreds or thousands of companies.”

387

Second, “privacy harms

often involve increased risk of future harm,” a concept “the law struggles

mightily to grapple with.”

388

Both features of privacy harms may make it

more difficult to establish a substantial injury in an adjudication against a

single company than in an industry-wide rulemaking that takes a broader

view and builds a more robust record. Perhaps for this reason, a recent analy-

sis found that the Commission brought enforcement actions on a standalone

unfairness theory only four times over ten years, compared to sixty-one ac-

tions premised solely on its deception authority.

389

A solution to both the remedial and litigation challenges is to issue a

new trade regulation rule governing data privacy. A starting point for such a

rule is former Commissioner Chopra’s concept of a restatement rulemaking.

As Chopra noted, the Commission has entered into “scores of settlements

that address deceptive practices regarding the collection, use, and sharing of

personal data,” which mark out conduct that is indisputably illegal.

390

Syn-

thesizing the Commission’s privacy pseudo-precedents into a binding sec-

384

Letter from James C. Miller III, Chairman, Fed. Trade Comm’n, to Rep. John D.

Dingell, Chairman, H. Comm. on Energy & Com. 1 (Oct. 14, 1983), https://www.ftc.gov/

system/files/documents/public_statements/410531/831014deceptionstmt.pdf [https://

perma.cc/X3RF-V6US].

385

See 15 U.S.C. § 45(n).

386

See Danielle Keats Citron & Daniel J. Solove, Privacy Harms, 102 B.U. L. R

. (forth-

coming 2022) (manuscript at 2).

387

Id. at 3.

388

Id. at 19.

389

See G

’

CCOUNTABILTY

FFICE

, GAO-19-52, I

NTERNET

RIVACY

: A

DDI-

TIONAL

EDERAL

UTHORITY

OULD

NHANCE

ONSUMER

ROTECTION AND

ROVIDE

LEXIBILITY

43–50 (2019).

390

See Statement of Comm’r Rohit Chopra in the Matter of Everalbum and Paravision 2

(Jan. 8, 2021), https://www.ftc.gov/system/files/documents/public_statements/1585858/up-

dated_final_chopra_statement_on_everalbum_for_circulation.pdf [https://perma.cc/Q6K3-

JQM8].

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574 Harvard Law & Policy Review [Vol. 16

tion 18 rule would open the door to civil penalties and enhanced equitable

remedies.

The FTC should also go further. Section 18 rulemaking presents an

opportunity to extend beyond the notice-and-consent privacy regime, which

has been roundly criticized as inadequate to respond to contemporary privacy

harms.

391

Under the proceduralist notice-and-comment model, nearly any

use of data is permissible so long as an information collector discloses the

ways it plans to use an individual’s information (often in an unreadably long

or dense “notice”) and offers the chance for the individual to decline those

terms (frequently an illusory “choice,” due to the ubiquity of take-it-or-

leave-it policies imposed by critical services).

392

Rulemaking can be an effec-

tive means of moving toward substantive limits on the collection and use of

data.

393

Policymakers and advocates have proposed a bevy of approaches that a

new data privacy rule could take. Chief among them is “data minimization.”

Such a rule could limit data collection, use, and retention to that which is

reasonably necessary for the core functionality of an application or service.

394

In a variation to this approach, the Commission could deem the use of an

individual’s data beyond that person’s reasonable expectations to be an unfair

act or practice.

395

A rule provision of this kind would be an analogue to the

purpose limitation found in Europe’s General Data Protection Regulation

(“GDPR”).

396

An alternative model for a rule would restrict secondary uses of a more

narrowly defined category of data. Representatives Katie Porter and Jamie

391

See, e.g., John A. Rothchild, Against Notice and Choice: The Manifest Failure of the

Proceduralist Paradigm to Protect Privacy Online (or Anywhere Else), 66 C

LEV

. S

. L. R

. 559,

608 (2018).

392

See id. at 561–62.

393

See Statement of Chair Lina M. Khan Regarding the Report to Congress on Privacy

and Security (Oct. 1, 2021), https://www.ftc.gov/system/files/documents/public_statements/

1597024/state-

ment_of_chair_lina_m_khan_regarding_the_report_to_congress_on_privacy_and_security_-

_final.pdf.

394

See C

ONSUMER

EPS

. & E

LEC

. P

RIVACY

NFO

. C

., H

OW THE

FTC C

AN-

DATE

ATA

INIMIZATION

HROUGH A

ECTION

5 U

NFAIRNESS

ULEMAKING

16 (2022),

https://advocacy.consumerreports.org/wp-content/uploads/2022/01/

CR_Epic_FTCDataMinimization_012522_VF_.pdf; Rebecca Kelly Slaughter, Comm’r, Fed.

Trade Comm’n, Keynote Address to the National Advertising Division Annual Conference:

Disputing the Dogmas of Surveillance Advertising (Oct. 1, 2021), https://www.ftc.gov/sys-

tem/files/documents/public_statements/1597050/commis-

sioner_slaughter_national_advertising_division_10-1-2021_keynote_address.pdf.

395

Rebecca Kelly Slaughter, Comm’r, Fed. Trade Comm’n, Remarks at the Cybersecurity

and Data Privacy Conference: FTC Data Privacy Enforcement: A Time of Change 5–6 (Oct.

16, 2020), https://www.ftc.gov/system/files/documents/public_statements/1581786/slaugh-

ter_-_remarks_on_ftc_data_privacy_enforcement_-_a_time_of_change.pdf [https://perma.cc/

FZ92-LUZ2]; see also H

OOFNAGLE

, supra note 135, at 345–46; Dennis D. Hirsch, From

Individual Control to Social Protection: New Paradigms for Privacy Law in the Age of Predictive

Analytics, 79 M

. L. R

. 439, 448 (2020).

396

See Principle (b): Purpose Limitation, I

NFO

. C

OMM

’

., https://ico.org.uk/for-or-

ganisations/guide-to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/

principles/purpose-limitation/ [https://perma.cc/P6WW-V4AK].

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2022] Reassessing the Mythology of Magnuson-Moss 575

Raskin led more than forty members of Congress to urge the FTC to issue a

section 18 rule limiting the use of geolocation data. Their proposed rule

would define as an unfair practice “the sale, transfer, use, or purchase of

precise location data collected by an app for purposes other than the essential

function of the app” and establish as a deceptive practice “app developers’

mislabeling of users’ location data as ‘anonymous,’” because of the ease with

which data can be de-anonymized.

397

Two civil society groups have floated

the possibility of a similar rule restricting the processing of facial recognition

or other biometric data and the practice of “cross-device tracking” for secon-

dary purposes.

398

These proposals merely scratch the surface. Other concepts include

bans of particular harmful applications of data, such as the use of discrimina-

tory, data-fueled algorithms;

399

a requirement for companies to honor global

“do not track” opt-out signals;

400

and a prohibition of unequal treatment of

users who choose to exercise a right to restrict the use of their data.

401

mandate that companies grant each user a right to access or delete data that

pertain to that user seems like it could qualify as a “requirement[ ] prescribed

for the purpose of preventing” unfair or deceptive acts or practices such as

the use of data beyond a person’s reasonable expectations.

402

A rule with such

a requirement could function similarly to the GDPR right of access and

right to erasure.

403

The flowering of ideas just summarized occurred after the

FTC reformed its approach to section 18 rulemaking and started sending

signals that it was seriously considering a privacy rule. The prospect of sec-

tion 18 rulemaking ought to prompt similarly vibrant discussions among

policymakers and advocates in a number of consumer protection fields.

Promulgating a privacy rule will also simplify the FTC’s task in en-

forcement. The agency will then only have to demonstrate a violation of the

rule to prevail. In contrast, the FTC currently must engage in the factual

development necessary to prove every element of deceptiveness or unfairness

is satisfied by the specific conduct found in a particular case. Because chal-

lenges of section 18 rules can occur only within the first sixty days after

397

Letter from Rep. Katie Porter, Congresswoman, U.S. House of Representative, et al.

to Lina Khan, Chair, Fed. Trade Comm’n 2–3 (Dec. 9, 2021), https://raskin.house.gov/

_cache/files/b/b/bba089eb-7b97-4b74-a7ad-f44cef5fd1bc/

EA1DAC0E56C44CC379A28B713093351B.porter-raskin-location-data-privacy-letter-to-

ftc-fcc.pdf [https://perma.cc/CHM4-5LAD].

398

See C

ONSUMER

EPS

. & E

LEC

. P

RIVACY

NFO

. C

., supra note 394, at 19.

399

Slaughter, supra note 10, at 51–55.

400

Letter, supra note 129, at 2.

401

ONSUMER

EPS

. & E

LEC

. P

RIVACY

NFO

. C

., supra note 394, at 19.

402

See 15 U.S.C. § 57a(a)(1)(B).

403

Cf. Right of Access, I

NFO

. C

OMM

’

., https://ico.org.uk/for-organisations/guide-

to-data-protection/guide-to-the-general-data-protection-regulation-gdpr/individual-rights/

right-of-access/ [https://perma.cc/85DL-C9HH]; Right to Erasure, I

NFO

. C

OMM

’

https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-the-general-data-pro-

tection-regulation-gdpr/individual-rights/right-to-erasure/ [https://perma.cc/LP4V-UZXB].

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576 Harvard Law & Policy Review [Vol. 16

promulgation,

404

a privacy rulemaking would also limit the possibility of fu-

ture adverse surprises in court.

405

B. Drip Pricing

A candidate for a rulemaking that is more purely in the paradigm of

proactive rulemaking is online drip pricing. Drip pricing is the practice of a

seller first disclosing a low “base” price to a consumer and later revealing

additional mandatory fees in subsequent “drips” after a customer has taken

steps toward completing the transaction. An advocate shared an illustrative

example: For a particular major league baseball game in 2021, ticket sales

website Ticketmaster showed consumers prices as low as $15, but then—

only after consumers chose their seats and reached the final payment stage—

revealed a mandatory surcharge of $7.50 for a “service fee” and “processing

fee.”

406

The total price was fifty percent higher than initially shown. But

many frustrated consumers may simply give up and complete the transaction

rather than bearing the time cost to search out an entirely new alternative.

This dark pattern is particularly common in online sales of lodging and live

event tickets, and presents a straightforward opportunity for section 18

rulemaking.

Consumers experience considerable harm from the process, paying ap-

proximately twenty percent more when faced with drip pricing rather than

its opposite, “all-in” pricing.

407

The tactic exploits psychological biases such

as the tendency to “anchor” on the first prominent piece of information one

perceives about a potential transaction, such as the initially displayed price,

and to be unable to sufficiently adjust that internal estimate afterward.

408

Drip pricing appears to clearly meet the first two prongs of the FTC’s three-

part test for unfairness. That test is satisfied by conduct that (1) “causes or is

likely to cause substantial injury to consumers,” (2) which “is not reasonably

avoidable by consumers themselves,” and (3) which is “not outweighed by

countervailing benefits to consumers or to competition.”

409

The often-daunt-

ing third prong is even more straightforward. Not only do hidden fees fail to

provide any benefit to consumers, they undermine the transparency required

for comparison shopping between competing merchants.

410

Similarly, drip

404

15 U.S.C. § 57a(e)(1)(A).

405

Cf. LabMD, Inc. v. FTC, 894 F.3d 1221, 1237 (11th Cir. 2018) (holding language

frequently used by FTC in cease-and-desist orders to be unenforceably vague).

406

Max Sarinsky, Stop the Hidden-Fee Rip-Off, N.Y. T

IMES

(Aug. 2, 2021), https://

www.nytimes.com/2021/08/02/opinion/consumers-drip-pricing.html [https://perma.cc/J5N6-

2BVZ].

407

Tom Blake, Sarah Moshary, Kane Sweeney & Steve Tadelis, Price Salience and Product

Choice 10 (working paper) (July 7, 2020), http://faculty.haas.berkeley.edu/stadelis/AIP.pdf

[https://perma.cc/38ZK-Q23J].

408

David Adam Friedman, Regulating Drip Pricing, 31 S

TAN

. L. & P

’

. 51, 67–68

(2020).

409

See 15 U.S.C. § 45(n).

410

Ticket seller StubHub attempted to move to all-in pricing by default but abandoned

the feature after hemorrhaging sales to competitors that continued to use drip pricing. See

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2022] Reassessing the Mythology of Magnuson-Moss 577

pricing seems to satisfy the agency’s elements for deception: a representation,

omission, or practice that (1) is “likely to mislead the consumer,” (2) when

examined “from the perspective of a consumer acting reasonably in the cir-

cumstances,” and (3) is material.

411

A section 18 proceeding to restrict drip pricing would be a proactive

rulemaking, as the FTC has not yet brought an enforcement action directly

against the practice. But one benefit of rulemaking in this area is that much

of the preliminary work is already complete. The FTC held a public work-

shop in 2012 on the general issue of drip pricing, one of its Bureau of Eco-

nomics staff members published an economic analysis in 2017 surveying

hotels’ use of drip pricing to impose mandatory “resort fees,”

412

and agency

staff held another workshop in 2019 dedicated to the pricing practices of the

ticketing industry.

413

In addition to this fact-gathering, attorneys general in

the District of Columbia and Nebraska have sued hotel operators Marriott

and Hilton over drip pricing of mandatory “resort fees,” using their jurisdic-

tions’ versions of the FTC Act.

414

The Commission could build from this foundation to promulgate a rule

prohibiting drip pricing. Such a rule can establish it to be both unfair and

deceptive to display an upfront price for a product or service that fails to

include all mandatory surcharges added by the company.

415

The Commis-

sion might learn from the example of the Department of Transportation’s

2011 regulation that bars airlines from using drip pricing to obscure

mandatory fees.

416

Several foreign regulators already restrict drip pricing

more broadly and may also provide helpful models for FTC action. These

include the Australian Competition and Consumer Commission and the

Ethan Smith, StubHub Gets Out of ‘All-In’ Pricing, W

ALL

. J. (Aug. 31, 2015), https://

www.wsj.com/articles/stubhub-gets-out-of-all-in-pricing-1441065436 [https://perma.cc/

XDM4-K7MZ].

411

Letter from James C. Miller III, Chairman, Fed. Trade Comm’n, to Rep. John D.

Dingell, Chairman, H. Comm. on Energy & Com. 1 (Oct. 14, 1983), https://www.ftc.gov/

system/files/documents/public_statements/410531/831014deceptionstmt.pdf [https://

perma.cc/X3RF-V6US].

412

ARY

W. S

ULLIVAN

, B

UREAU OF

CON

., F

. T

RADE

OMM

’

, E

CONOMIC

NAL-

YSIS OF

OTEL

ESORT

EES

(2017), https://www.ftc.gov/system/files/documents/reports/

economic-analysis-hotel-resort-fees/p115503_hotel_resort_fees_economic_issues_paper.pdf

[https://perma.cc/KX5M-JX6J].

413

See Kaitlyn Tiffany, How Ticket Fees Got So Bad, and Why They Won’t Get Better, V

(June 12, 2019, 1:30 PM), https://www.vox.com/the-goods/2019/6/12/18662992/ticket-fees-

ticketmaster-stubhub-ftc-regulation [https://perma.cc/5RYF-SR3G].

414

See Press Release, Off. of the Att’y Gen. for the D.C., AG Racine Sues Marriott for

Charging Deceptive Resort Fees and Misleading Tens of Thousands of District Consumers

(July 9, 2019), https://oag.dc.gov/release/ag-racine-sues-marriott-charging-deceptive-resort

[https://perma.cc/2YSG-JTU3]; Press Release, Neb. Att’y Gen., AG Peterson Sues Hilton on

Behalf of Nebraska Consumers (July 23, 2019), https://ago.nebraska.gov/news/ag-peterson-

sues-hilton-behalf-nebraska-consumers [https://perma.cc/6VFG-HVSV].

415

One proposal of language for such a rule has been submitted to the Commission as a

formal petition for rulemaking. See Inst. for Pol’y Integrity, Petition for Rulemaking Concern-

ing Drip Pricing (July 7, 2021), https://downloads.regulations.gov/FTC-2021-0074-0002/

content.pdf [https://perma.cc/3RJQ-JCPW].

416

See 14 C.F.R. § 399.84 (2022).

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578 Harvard Law & Policy Review [Vol. 16

Canadian Competition Bureau,

417

each an FTC analogue. Both bodies have

proceeded through enforcement, although they may not face the same reme-

dial limitations as their American counterpart. In section 5 enforcement ac-

tions, the FTC often encountered difficulty in demonstrating consumer

harm with enough precision to support equitable relief, even before AMG

Capital undermined the agency’s remedial powers. This challenge is particu-

larly acute when the harm includes inducing consumers to make purchases

that they would not otherwise have made.

418

The civil penalties made availa-

ble by a trade regulation rule would accordingly be invaluable to deterring

drip pricing in the United States.

ONCLUSION

With new FTC leadership at the outset of the Biden Administration,

there could not be a more fitting time to revive the Commission’s consumer

protection rulemaking program. The imbalance between increasingly con-

centrated corporate actors and individual consumers—starker in many ways

than it has been since the last Gilded Age—makes a change of course des-

perately needed.

Restoring the use of section 18 rulemaking will return a powerful tool

to the agency’s arsenal. American consumers and honest businesses alike will

benefit when the country’s consumer protection watchdog embraces all of its

powers in the fight against bad actors’ use of unfair and deceptive tactics.

While any regulatory action takes time and carries costs, the pessimistic view

of section 18 has held back rulemaking activity to an unfounded degree. This

article’s review of the FTC’s history of rulemaking, its statutory authorities,

and the relevant case law shows that this pessimism about the FTC’s statu-

tory powers is based more in myth than in fact. The Commission’s rulemak-

ing program instead fell victim to ideologically driven shifts in agency culture

and self-imposed norms. Reagan-era leadership at the FTC decisively turned

the agency away from putting its regulatory powers to use. The current

Commission can learn from this example in carrying out a similar, but con-

verse, transformation.

The potential value of new FTC rules is difficult to overstate. A section

18 rule governing data privacy could finally roll back the near-inescapable

commercial surveillance at the heart of informational capitalism. A rulemak-

ing to bar drip pricing could save consumers hundreds of millions or billions

of dollars each year. Changes like stopping tip theft of gig workers and im-

posing real consequences for online fake review fraud can make the market-

place a more fair environment for customers, workers, and honest businesses.

Standards for algorithmic decision-making and penalties for the deceptive

417

See Friedman, supra note 408, at 85.

418

See Statement of Comm’r Rohit Chopra Joined by Comm’r Rebecca Kelly Slaughter

Regarding Final Approval of the Sunday Riley Settlement 6 (Nov. 6, 2020), https://

www.ftc.gov/system/files/documents/cases/fi-

nal_rchopra_sunday_riley_statement_dated_11.6.pdf [https://perma.cc/R7RS-WZ2K].

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2022] Reassessing the Mythology of Magnuson-Moss 579

use of emerging “deep fake” technology can protect against technologically

driven harms that are growing at exponential rates.

In a time of persistent legislative dysfunction and rampant corporate

predation, waiting for intervention by Congress is tantamount to a knowing

abdication of the FTC’s mission. An agency that fails to use the authorities

at its disposal leaves consumers and good faith businesspeople at the mercy

of economic bad actors. The Commission’s broad jurisdiction and latent

rulemaking powers thus create not just an opportunity but a responsibility.

Leaders at the FTC who wish to stand up assertively for the American con-

sumer will find the authority to do so is already on the books, waiting to be

used.

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