Kim Wehle: Congress has lost its power over Trump

The Trump administration is now waging a two-pronged attack on the independence of all administrative adjudicators, including ALJs, and the agencies that employ them. The first prong involves telling agencies, via executive orders, how to exercise the discretion that Congress has given them to conduct adjudication. One such order, from October 2019, boasts the lofty title “Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication.” Among its provisions is a limit on when agencies may judge a private party’s past conduct to be unlawful based on a general legal standard. The executive order says that no such agency determination may be issued unless the agency has first warned the public—through a specific rule—that the general legal standard prohibits the conduct the agency would now challenge.

This may not sound like much, but in practice it would make the work of a number of federal agencies far more difficult. Consider this scenario: The FTC finds that a company has been using artificial intelligence in a novel way to ascertain which of its online customers can most effectively be tempted by a misleading, if not outright duplicitous, sales pitch. The FTC has never encountered the practice before. The FTC’s statute currently gives the agency discretion to launch an administrative proceeding against the company to determine whether the technique should be deemed a forbidden “unfair or deceptive trade practice.” If, based on the agency’s policy deliberations and a carefully assembled factual record, the FTC determines that the practice is “unfair” or “deceptive,” it could prohibit the company’s future use of that practice. What the FTC could not do would be to penalize the company for its pre-adjudication conduct—for example, by levying a fine—if no prior FTC proceeding had warned the company that it was violating federal law. The relief—as lawyers call a remedy to a legal problem—would have to be entirely forward-looking. The Supreme Court has approved this manner of administrative adjudication since 1947.

Under the Trump order, the FTC would not be allowed to proceed as I have described. It would first have to conduct a rule-making on the fairness of AI-guided online sales practices before it could go after any firm. This might be grossly inefficient and would disable the FTC from developing a nuanced factual understanding of regulated practices through individual cases. The Trump order does insist: “Nothing in this order shall be construed to impair or otherwise affect … the authority granted by law to an executive department or agency, or the head thereof.” The problem with this promise not to “impair” is that the order’s so-called fair-warning requirement, if applied to delay or prevent adjudication, would do just that. On this issue, Trump’s order either alters the discretion of administrative agencies or it is meaningless.