Walmart Inc. and the Federal Trade Commission (FTC) are locked in a deadly battle over the fate of the administrative state.
The FTC is claiming that Walmart is responsible for fraud committed via its money transfer services. Walmart has hit back, saying that the number of fraudulent transactions is “only a miniscule number” and that the company has actually, “stopped hundreds of thousands of suspicious transactions totaling hundreds of millions of dollars.”
But the corporation is making a further argument which has the potential to effect more than the direct parties involved. Walmart is taking aim at the FTC itself, saying its use of executive power is both unconstitutional and illegitimate, citing landmark Supreme Court cases from decades ago. (RELATED: Here’s How The Biden Admin Is Quietly Expanding The Government’s Control Over Health Insurance)
“The retail giant’s creative litigation strategy has set up a constitutional showdown with the FTC that might have some practical consequences,” Eli Nachmany, a law clerk to Judge Steven J. Menashi of the U.S. Court of Appeals for the Second Circuit, writes at the Regulatory Review.
— Washington Examiner (@dcexaminer) October 4, 2022
In its motion to dismiss the lawsuit in August, Walmart argues that, “the FTC lacks constitutionally valid authority to initiate litigation seeking monetary or injunctive relief.” (RELATED: Senate Confirms Biden’s ‘Radical’ FTC Pick Criticized For Anti-ICE Stance)
Currently, the FTC is classified as an independent regulatory agency, meaning the president cannot remove its commissioners from office at will. Thus, the commission can act independently of the authority of the president, who is elected by and accountable to the people. Except in very specific instances, such as “inefficiency, neglect of duty, or malfeasance,” the president has no control over the FTC, and cannot fire its members.
The Supreme Court addressed the constitutionality of this method of maintaining supposed “independence” for branches of the administrative state in the 1935 case Humphrey’s Executory v. United States. In the case, a commissioner with the FTC, William Humphrey, who was appointed by President Herbert Hoover, opposed the New Deal during the Franklin Delano Roosevelt administration. In response to this insubordination, FDR removed Humphrey from office, an action the commissioner claimed was unlawful. (RELATED: This Trump Decision Is A Major Blow To The Administrative State)
Walmart is asking the court to declare that the Federal Trade Commission’s ability to bring lawsuits is unconstitutional. pic.twitter.com/WXv77lucjF
— Matt Stoller (@matthewstoller) September 13, 2022
The Supreme Court ruled in this case that the FTC is not a part of the executive branch and operating under the power of the president, but an independent agency which Congress could limit the president’s power over. FDR famously called the administrative state the “fourth branch of the Government” after the decision.
In a 2021 clarification to the decision in Seila Law v. Consumer Financial Protection Bureau, the Supreme Court said that agencies exempt from executive oversight had to exercise no part of executive power and maintain nonpartisanship. (RELATED: Democrats’ Spending Bill Creates A ‘Privacy Bureau’ With A $500 Million ‘War Chest’)
“The problem for the FTC is that it does have executive power,” Joseph Postell, a professor Politics at Hillsdale College, said. “In amendments passed by Congress in the 1970s, decades after Humphrey’s Executor was handed down, the FTC was given the power to seek civil penalties and consumer redress in federal court—a quintessential executive power of prosecution.”
The Federal Trade Commission is suing Walmart, alleging the company should have done more to keep scammers from using its money transfer services to carry out schemes that cost consumers tens of millions of dollars.https://t.co/MioIGkauyT
— The Washington Post (@washingtonpost) June 29, 2022
Walmart alleges that the FTC’s use of executive power bringing such a lawsuit against the corporation for its alleged mishandling of money transfer services is unconstitutional itself under the definition of an independent regulatory agency in Humphrey’s Executory and Seila Law. Executive power of this nature, Walmart argues, can only be wielded by someone accountable to the president, elected by the people, and the FTC’s actions amount to executive power.
“Because Congress’ post-Humphrey attempts to vest the independent FTC with executive litigation powers were unconstitutional and void, the FTC’s suit must dismissed,” Walmart wrote in its motion.
If Walmart is successful in making the case that the FTC’s use of executive power as a so-called “independent branch” is unconstitutional, who knows what other arms of the administration state could be next on the chopping block?