FTC Votes to Update Rulemaking Procedures, Sets Stage for Stronger Deterrence of Corporate Misconduct

New Rules Will Unlock Civil Penalties and Damages for Violators

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The Federal Trade Commission approved changes to its Rules of Practice to modernize the way it issues Trade Regulation Rules under Section 18 of the FTC Act, which will provide a roadmap for businesses, stop widespread consumer harm, and promote robust competition.

These changes bring agency procedures back in line with the 1975 statute that granted the agency Section 18 rulemaking authority, and they build on the agency’s announcement earlier this year of a Rulemaking Group within the office of the General Counsel. Commissioner Rebecca Kelly Slaughter was joined by FTC Chair Lina M. Khan and Commissioner Rohit Chopra in a statement, noting the changes will reinvigorate the FTC’s rulemaking procedures and vastly improve the Commission’s work on behalf of consumers and small businesses.

 “These changes show the FTC is turning the page on decades of self-imposed red-tape and returning to the participatory and dynamic process for issuing Section 18 rules that Congress envisioned. Clear rules help honest businesses comply with the law and better protect consumers and workers against bad actors. They will also lead to substantial market-wide deterrence due to significant civil penalties for rulebreakers,” said Commissioner Slaughter. “Streamlined procedures for Section 18 rulemaking means that the Commission will have the ability to issue timely rules on issues ranging from data abuses to dark patterns to other unfair and deceptive practices widespread in our economy.”

Recently, the Supreme Court ruled that courts can no longer award refunds to consumers in FTC cases brought under Section 13(b) of the FTC Act, reversing four decades of case law that the Commission has used to provide billions of dollars of refunds to harmed consumers. In light of that decision, pursuing violations of Trade Regulation Rules – also referred to as the Magnuson-Moss Rules – will allow the Commission to seek redress, damages, penalties, and other relief from wrongdoers.

The amendments make changes to the Commission’s procedure for initiating rulemaking proceedings, and the process by which members of the public can seek an informal hearing in a rulemaking. For example, under the revised rules, informal hearing procedures make it easier for stakeholders to participate. Other changes include elimination of requirements in the current rules that are not mandated by the FTC Act, including publication of a staff report containing an analysis of the rulemaking record and recommendations as to the form of the final rule for public comment. The rulemaking procedures build in extensive opportunities for public input, far in excess of the opportunities for public comment under the Administrative Procedure Act.

In addition, the notice clarifies the roles of several FTC offices to reflect the agency’s current operations including the Office of General Counsel, Office of International Affairs, and the FTC’s regional offices.

The Commission voted 3-2 in an open Commission meeting to approve the changes and publish the notice in the Federal Register. The changes will go into effect when the notice is published in the Federal Register. Chair Khan and Commissioners Chopra and Slaughter voted yes, and Commissioners Noah Joshua Phillips and Christine S. Wilson voted no. Commissioner Wilson issued a dissenting statement.

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