FTC To Shift Rulemaking Priorities In The Trump Administration

The Federal Trade Commission (FTC) is one of the independent agencies expected to undergo considerable changes in rulemaking priorities once President-elect Trump enters office. Chairwoman Lina Khan is expected to step down in the early days of the Trump administration. Trump will name a Republican acting chairperson, leading to an equal 2-2 partisan split in the commission until his nominee for chairperson is confirmed by the Senate. Khan-era rulemakings on so-called junk fees, noncompetes, click-to-cancel and others are set to be scaled back or changed in the Trump administration.

RULEMAKINGS

President Trump is expected to swiftly freeze any ongoing or recently finalized regulations issued by executive departments and independent agencies, including the Federal Trade Commission (FTC). This is a routine action taken by presidential administrations when party control of the White House changes. The order is likely to resemble Trump’s day-one 2017 memorandum on regulatory freezes pending review. Congress may also play a role in halting eligible final rules by using the Congressional Review Act (CRA). The CRA enables Congress to issue a joint resolution of disapproval to invalidate a final rule in its entirety by a simple majority vote in both chambers. The joint resolution of disapproval must be introduced within a 60-day legislative day lookback period, and the current time frame of the lookback period is approximately early August.

Trump’s FTC could also undo Khan-era FTC regulations by proposing changes that would eliminate or modify final rules. This effort would require the use of the notice and comment period as per the Administrative Procedure Act (APA), which could take months, if not years, to revoke or modify those rules. The FTC could also opt to stop its defense of rulemakings currently undergoing litigation.

In addition, Congress can use the annual appropriations process to limit the reach of rulemakings. Appropriations language might include prohibitions on the use of funds for certain rulemaking purposes, such as prohibiting the use of funds for finalizing proposed rules or carrying out enforcement of final rules. However, this method does not nullify existing regulation, and any final rules will continue to be binding.

Junk Fees

As part of the Biden administration’s crackdown on so-called junk fees, the FTC released a proposed rule that would prohibit companies from “charging hidden and misleading fees,” require them to show the “full price,” and impose related disclosure requirements. The proposed rule states that businesses that “offer, display, or advertise an amount a consumer may pay without clearly and conspicuously disclosing the total price” are engaging in an unfair and deceptive practice. As we previously highlighted, this is an example of the Biden administration’s broadening interpretation of agencies’ unfair or deceptive acts or practices (UDAP) and unfair, deceptive or abusive acts and practices authority (UDAAP).

This rulemaking is likely to get caught up in the Trump administration’s regulatory freeze, as the rule has not been finalized. If the FTC finalizes the rule before the Trump administration takes over, the effective date would likely be later than Jan. 20, 2025, ensuring that the rule’s effective date would, at a minimum, be temporarily postponed by 60 days, per the 2017 memorandum. Additionally, if finalized in the last months of the Biden administration, the rule would be subject to the CRA’s 60-day lookback period window, allowing the Republican-controlled Congress to rescind the rule.

Noncompetes

The FTC adopted a controversial rule for noncompete provisions on May 5, 2024. As expected, the final regulation, which was first proposed in January 2023, will prohibit virtually all noncompete arrangements, which the FTC claims will harm employees and the American economy. The final rule has faced several legal challenges since it was released. In Ryan LLC v. FTC (U.S. District Court for N.D. of Texas), the court issued a nationwide injunction of the FTC’s noncompete ban, finding that the FTC exceeded its statutory authority in issuing the rule. On Oct. 18, 2024, the FTC filed notice that it is appealing the lower court’s ruling. Separately, the FTC is also appealing the preliminary injunction issued by the U.S. District Court for the Middle District of Florida in the Properties of the Villages v. FTC case. The Florida district court found that the rule is likely improper under the major questions doctrine. In ATS Tree Services v. FTC, a Pennsylvania federal judge ruled that the FTC acted within its authority, which puts it at odds with separate decisions in the 5th and 11th Circuit Courts.

To date, the noncompete ban remains enjoined nationwide. The FTC may withdraw its appeals in the 5th and 11thh Circuit Courts, which would maintain the Texas federal court decision prohibiting the enforcement of the FTC’s rule in Ryan LLC v. Federal Trade Commission. The FTC could also opt to amend or repeal the rule, although it would take considerable time to undergo the notice and comment process. Trump’s FTC chairperson selection will have a significant impact on the future of the rule, especially if the nominee holds views that may counter conventional Republican positions.

Click-to-Cancel

On Oct. 16, the Federal Trade Commission (FTC) voted 3-2 to finalize its “click-to-cancel” rule that will introduce new requirements to simplify the cancellation process for consumers wishing to terminate their subscriptions or memberships. The rule applies to almost all products and services offered with a “negative option feature,” including business-to-business transactions. Accordingly, the rule encompasses a wide range of subscription services and membership programs, such as gym memberships, streaming platforms and cable TV, among others.

Once Trump enters office, he would likely support suspending the rule’s implementation, responding to opposition from the Republican commissioners and concerns with overregulating businesses. The rule is set to go into effect on two separate dates after publication in the Federal Register: (1) provisions relating to misrepresentations taking effect in two months and (2) the remainder of the rule taking effect in six months. The rule’s effective dates would, at a minimum, be temporarily postponed by 60 days, per the 2017 memorandum. The rule will be subject to the CRA’s 60-day lookback period window, allowing the Republican-controlled Congress to rescind the rule.

CARS Rule

The FTC finalized the sweeping Combating Auto Retail Scams Trade Regulation final rule, which impacts the ability to provide voluntary products for a variety of stakeholders. Brownstein has previously examined the CARS rule here. The final rule has been subject to litigation (National Automobile Dealers Association, et al. v. FTC) pertaining to the FTC’s procedural steps in the rulemaking. The FTC could drop its support in court, which could halt the implementation of the rule.

DATA PRIVACY

The FTC is likely to remain focused on privacy and artificial intelligence (AI)-related issues. Under a new Republican-driven FTC, industry may be looking for opportunities for tailored regulations in these areas with preemption that create workable federal regulations and avoid a patchwork of compliance.

Expected Staffing Changes

Chairwoman Lina Khan’s term expired on Sept. 25, 2024, and she is currently the FTC chairwoman even though she was not renominated by President Biden. On the first day of Trump’s presidency, either Republican commissioners, Melissa Holyoak or Andrew Ferguson, is likely to be named acting chairperson. Khan is expected to step down, and Trump’s selection for FTC chairperson would claim her seat after being confirmed by the Senate. Several positions within the agency, such as the director of the Bureau of Consumer Protection, often turn over with a change in administration. While Trump’s pick to lead the FTC has not been announced, and may not be announced for weeks, it is important to consider that Vice President-Elect J.D. Vance has praised Chairwoman Khan for her approach to antitrust enforcement. It is unknown if President Trump will pick someone in line with Khan’s thinking; however, it seems likely that certain Khan-era rulemakings will be the target for reversal no matter who is selected.

Brownstein’s Government Relations team is closely following and engaged in conversations about transition efforts and can continue to support clients through navigating any new opportunities or challenges.

THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING POSSIBLE CHANGES TO THE FTC UNDER THE TRUMP ADMINISTRATION. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.