Kroger Challenges FTC: In-House Judges Under Fire

The legal battle

Kroger's legal action comes as the company faces scrutiny from the FTC over its proposed merger with Albertsons, a deal valued at $24.6 billion. The FTC, which has ramped up its antitrust enforcement under the Biden administration, is reviewing the merger for potential anti-competitive effects. Kroger's lawsuit argues that the FTC’s administrative law judges (ALJs) are unconstitutional because the President does not appoint them, and their decisions are not subject to review by an executive branch official.

Kroger’s legal team claims that this structure violates the Appointments Clause of the U.S. Constitution, which mandates that all "officers of the United States" be appointed by the President, courts, or department heads. They argue that ALJs wield significant authority, akin to federal judges, making their lack of presidential appointments problematic.

In the lawsuit, Kroger also takes issue with the lack of due process in the FTC’s administrative proceedings. The company contends that the FTC acts as both prosecutor and judge in cases brought before its ALJs, which creates an unfair advantage for the agency. Kroger’s legal filing states that this dual role undermines the impartiality of the process and deprives companies of a fair trial.

Broader implications

Kroger’s lawsuit is part of a broader pushback against the powers of federal regulatory agencies, particularly the FTC. In recent years, several companies have challenged the constitutionality of administrative proceedings conducted by agencies like the FTC and the Securities and Exchange Commission (SEC). These cases have gained traction, with some making their way to the Supreme Court.

In April 2023, the Supreme Court ruled in Axon Enterprise Inc. v. FTC that federal courts have the authority to hear constitutional challenges to the structure of federal agencies before those agencies conduct their internal proceedings. This decision has emboldened companies like Kroger to challenge the FTC’s administrative process directly in federal court.

If Kroger’s lawsuit succeeds, it could have far-reaching implications for the future of federal regulatory enforcement. A ruling in Kroger's favor could potentially strip the FTC and other agencies of their ability to use in-house judges, forcing them to bring cases to federal courts instead. This shift could significantly slow down the enforcement process and alter the balance of power between regulators and the companies they oversee.

What’s next?

As the case progresses, it is expected to draw significant attention from legal experts and the business community. A win for Kroger could set a precedent reshaping how federal agencies operate, potentially curtailing their ability to enforce regulations through administrative proceedings. However, it remains to be seen how the courts will rule on this issue and the broader implications for federal regulatory power.

The FTC has not yet commented on the lawsuit but is expected to vigorously defend its administrative process, which has been a cornerstone of its enforcement strategy for decades.