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Supreme Court believes it will be easier to challenge FTC, SEC



(Reuters) — The U.S. Supreme Court is set on Monday to hear arguments in two cases that could make it easier to challenge the regulatory power of federal agencies in disputes involving the Federal Trade Commission and the Securities and Exchange Commission.

The justices are considering an appeal by Scottsdale, Ariz.-based Axon Enterprise Inc. after a lower court rejected the Taser maker’s lawsuit challenging the constitutionality of the FTC’s structure in an attempt to thwart an antitrust action related to its acquisition of a rival.

In a separate case, the justices will consider the SEC’s appeal of a lower court ruling reviving an appeal brought by a Texas accountant named Michelle Cochran to the legality of its internal tribunal after it criticized her audits of publicly traded companies.

At issue in both cases is whether the targets of an agency̵

7;s enforcement action can challenge its structure or processes in federal district court or must first endure the agency’s administrative proceedings, which can be costly and time-consuming.

The FTC’s role is to protect consumers against anti-competitive and deceptive business practices. The SEC’s job is to maintain fair, orderly markets and enforce investor protection laws.

Eliminating the regulatory authority of federal agencies — which can enforce laws and regulations in key areas such as energy, the environment, climate policy and workplace safety — has been a key goal of many businesses and conservative groups, who complain about what they call the “administrative state.”

The Supreme Court has a 6-3 conservative majority. Its conservative justices have signaled skepticism about expansive regulatory power and the duty of judges, under Supreme Court precedent, to respect that authority. The final decisions in the two cases, due at the end of June next year, may be based on the latest rulings of the court’s regulatory authority.

A ruling last June, with the conservative justices in the majority and the liberals dissenting, limited the EPA’s authority to issue sweeping rules to reduce carbon dioxide emissions from power plants. In 2019, the court whittled down a legal doctrine that gave agencies room to interpret their own rules.

The Federal Trade Commission Act and the Securities Exchange Act send judicial review of adverse agency orders to federal appellate courts when those orders become final. The Justice Department, which represents the agencies, said in a legal filing that the statute allows Axon and Cochran to assert their claims at the end of agency rulings, not before.

“The question here is whether Axon and Cochran can short-circuit the review schedules established by Congress by preemptively suing in district court to enjoin agency procedures. They may not,” the Justice Department said.

Axon sued the FTC in 2020 in federal court in Arizona following an investigation by the agency into its 2018 acquisition of Vievu, a rival body camera provider.

The company said the agency is acting as “prosecutor, judge and jury” in violation of the U.S. Constitution’s Fifth Amendment guarantees of due process and equal protection under the law, and that its administrative law judges are illegally insulated from the president’s power to check the executive branch. civil servants according to Article II of the Constitution.

In 2021, the San Francisco-based 9th US Circuit Court of Appeals dismissed the case, ruling that under the FTC Act, Axon must first raise its claims in the administrative proceeding.

In Ms. Cochran’s case, an SEC judge found her to have failed to comply with auditing standards, fined her $22,500 and banned her from practicing as an accountant before the commission for five years.

After the Supreme Court ruled in 2018 that the way the SEC’s judges were appointed violated the Constitution, the agency overturned the decision against Cochran and assigned her case to a new, properly appointed judge.

Cochran sued in 2019 to stop the enforcement action, as Axon challenged the SEC’s Article II internal adjudicator.

A federal judge in Texas dismissed Ms. Cochran’s challenge, but the New Orleans-based 5th US Circuit Court of Appeals revived the case in 2021.


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