The Loper Bright Impact: Agency Action Likely to Face More Scrutiny in Light of the Supreme Court’s Disposal of Chevron Deference

These days, it seems like there are three guarantees in life—death, taxes, and monumental Supreme Court administrative law opinions in the summer. As you’ve probably heard by now, the trend continues this year, including perhaps the largest fireworks display possible (in the administrative law context, that is). If for some reason you’ve been ignoring the news, just recently in Loper Bright Enterprises v. Raimondo, the Supreme Court overruled the Chevron decision and held that courts need not defer to an agency’s interpretation of a statute; rather, courts must exercise independent judgment when determining whether an agency acted within its statutory authority.

There’s a lot to unpack in the 109 pages of majority, concurring, and dissenting opinions. So, we’ll just focus on what this could mean for the recent uptick in agency action coming out of the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB).

Heightened Scrutiny for FTC Rulemaking and Enforcement

It’s no secret (at least for those following this blog) that the latest iteration of the FTC is flexing its rulemaking muscles in new areas—such as AI impersonation, junk fees, and consumer reviews—as well as further refining areas of scrutiny—such as implementing the Negative Option Rule beyond what the Restore Online Shoppers Confidence Act (ROSCA) curtails. This flurry of rulemaking results in large part from the Supreme Court’s AMG decision stripping the FTC of its equitable monetary relief authority. The Loper Bright opinion now presents several layers of issues for the FTC’s regulatory regime.

First, where statutes that the FTC enforces or implements are ambiguous, courts are no longer required to defer to the FTC’s interpretation of the statute. This has already impacted the FTC’s Non-Compete Clause Rule, which largely imposes a future ban on non-compete agreements. The FTC relied on Section 6(g) of the FTC Act as its purported authority to promulgate rules to prevent unfair methods of competition. Several parties challenged the rule, alleging that Section 6(g) does not authorize substantive unfairness rulemaking.

On July 3, the court hearing the case in the Northern District of Texas issued a preliminary injunction preventing the rule from taking effect. Relying on Loper Bright, the court concluded that the “text, structure and history of the [FTC] Act,” opposed to the FTC’s interpretation, demonstrates that the FTC lacks substantive rulemaking authority under Section 6(g). (Other potential ambiguities in the FTC’s enforcement regime could be the FTC’s policy view purporting to define “clear and conspicuous,” “material terms of the transaction,” and “simple mechanisms” to cancel under ROSCA.)

Second, Loper Bright casts a looming shadow on courts’ deference to an agency’s interpretation of its own rules—known as Auer deference. Though the Supreme Court recently reaffirmed Auer deference, that could prove difficult to square with the reasoning in Loper Bright. Specifically, Loper Bright is grounded in the principle that courts’ role is to recognize the bounds of the delegated authority and “ensur[e] the agency has engaged in reasoned decision making within those boundaries.” This also may arise in circumstances where, as the Court acknowledged, “the regulation is procedurally defective.”

Impact on CFPB Authority

The CFPB’s recent expansive exercise of its authority also leaves it susceptible to challenges after Loper Bright. As we and our colleagues have highlighted, the CFPB has begun to forgo notice and comment rulemaking, instead issuing circulars and advisory opinions to prescribe conduct it deems violative. Since these types of policy statements are not formal rules, they only provide insight as to how the CFPB seeks to enforce the statutes it is tasked with.

In light of Loper Bright, these policy statements may have diminishing value for the agency should a statutory ambiguity argument be raised. Furthermore, the CFPB’s broad interpretation of the Consumer Financial Protection Act’s unfair, deceptive, or abusive act or practices (UDAAP) restrictions may face additional headwinds. Specifically, Loper Bright may open the door to courts rejecting or scrutinizing the CFPB’s expansive view of what constitutes “unfair” or “abusive.”

However, the Court in Loper Bright took pains to observe that “although an agency’s interpretation of a statute cannot bind a court, it may be especially informative to the extent it rests on factual premises within the agency’s expertise.” Given this monumental shift away from Chevron deference, only time will tell what the wake of Loper Bright will look like.

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