FTC arguments rejected

Summarizing the FTC’s arguments, judges said the agency contended that US law “did not require the Commission to conduct the preliminary regulatory analysis later in the rulemaking process,” and that “any alleged error was harmless because the NPRM addressed alternatives to the proposed amendments to the 1973 [Negative Option] Rule and analyzed record-keeping and compliance costs.”

Judges disagreed with the FTC, writing that “the statutory language, ‘shall issue,’ mandates a separate preliminary analysis for public review and comment ‘in any case’ where the Commission issues a notice of proposed rulemaking and the $100 million threshold is surpassed.”

Numerous industry groups and businesses, including cable companies, sued the FTC in four federal circuit courts. The cases were consolidated at the 8th Circuit, where it was decided by Circuit Judges James Loken, Ralph Erickson, and Jonathan Kobes. Loken was appointed by George H.W. Bush, while Erickson and Kobes are Trump appointees.

The judges said the lack of a preliminary analysis meant that industry groups and businesses weren’t given enough time to contest the FTC’s findings:

By the time the final regulatory analysis was issued, Petitioners still did not have the opportunity to assess the Commission’s cost-benefit analysis of alternatives, an element of the preliminary regulatory analysis not required in the final analysis. And the Commission’s discussion of alternatives in the final regulatory analysis was perfunctory. It briefly mentioned two alternatives to the final Rule, either terminating the rulemaking altogether and continuing to rely on the existing regulatory framework or limiting the Rule’s scope to negative option plans marketed in-person or through the mail. While the Commission’s decision to bypass the preliminary regulatory analysis requirement was certainly not made in bad faith or an “outright dodge of APA [Administrative Procedure Act] procedures,” Petitioners have raised ‘enough uncertainty whether [their] comments would have had some effect if they had been considered,’ especially in the context of a closely divided Commission vote that elicited a lengthy dissenting statement.

The 8th Circuit ruling said the FTC’s tactics, if not stopped, “could open the door to future manipulation of the rulemaking process. Furnishing an initially unrealistically low estimate of the economic impacts of a proposed rule would avail the Commission of a procedural shortcut that limits the need for additional public engagement and more substantive analysis of the potential effects of the rule on the front end.”