In February of this year, the Federal Trade Commission (FTC) brought an administrative complaint to block Kroger Company’s $24.6 billion merger with Albertsons Companies, Inc., citing antitrust concerns. On August 19, 2024, Kroger fired back, suing the FTC in a Cincinnati federal court to block the regulator from reviewing the Albertsons merger. According to Kroger, the administrative proceeding violates Article II of the Constitution because the administrative law judge (ALJ) is unlawfully insulated from removal. Kroger next relies on the Supreme Court’s decision in SEC v. Jarkesy, in which the Court curbed the SEC’s ability to use its in-house judges in enforcement actions, to assert that the proceeding violates Article III.

Article II

Kroger asserts that the proceeding is unconstitutional under Article II because the ALJ overseeing it enjoys two levels of protection against removal for cause. Article II of the Constitution vests the executive power of the federal government in the president, who in turn may nominate executive officers to assist in performing those duties. These officers, whether principal (who must be confirmed by the Senate) or inferior (whose work must be directed and supervised by a principal officer) must be removable by the president. Kroger argues that, while inferior officers are entitled to one layer of protection from presidential removal, FTC ALJs may be removed only for “good cause” by the Merit Systems Protection Board — members of which, in turn, can only be removed for “inefficiency, neglect of duty, or malfeasance.” Kroger says this structure creates a two-layer insulation from presidential removal in violation of Article II.

Article III

Kroger also contends that the “administrative proceeding … violates the Constitution and should be enjoined because a federal administrative agency cannot lawfully adjudicate private rights.” In Jarkesy, the Court emphasized the Seventh Amendment’s guarantee that the right to a jury trial “shall be preserved” in “[s]uits at common law.” However, even when the Seventh Amendment applies, courts have recognized a “public rights” exception, which allows Congress to assign the matter for decision to an agency without a jury. The Court stressed, however, that the exception does not apply when a matter “from its nature, is the subject of a suit at common law.”

Kroger argues that “competition claims have a common-law history” and thus require adjudication in Article III courts. Kroger also maintains that the administrative proceeding implicates its private rights because “the FTC seeks to restrict Kroger’s private right to use, purchase, and dispose of property.” And because Kroger’s private rights are implicated in the FTC’s merger challenge, it must fall outside the “public rights” exception to the Seventh Amendment’s guarantee of Article III adjudication.

Antitrust Implications

A successful challenge to the FTC’s right to bring administrative proceedings — whether on Article II or Article III grounds — would cause a seismic shift in the way the FTC prosecutes merger challenges. The FTC routinely brings merger challenges on a dual track, adjudicating the matter in its own tribunals before seeking “civil penalties or consumer redress for violations of its orders to cease and desist or trade regulation rules.” And the discrepancy between the FTC’s track record in administrative tribunals and federal courts is stark. As Kroger notes, “while the FTC regularly loses preliminary injunction applications in federal court, it has not lost a single case in the past quarter-century in its administrative proceedings.”

Removing the administrative arrow from the FTC’s quiver would fundamentally alter American merger review. Kroger’s motion for preliminary injunction remains pending in the Southern District of Ohio.