De-Mythologizing Magnuson-Moss: Reviving Section 18 Rulemaking at the FTC

Abstract

America faces twin crises of metastasizing corporate power and foundering government capacity to respond. Cries for economic justice grow louder as corporate consolidation has reached record levels and “informational capitalism” has systematically shifted power from individuals to large, data-rich firms. Americans are left vulnerable to “dark patterns” that extract customers’ wealth, to gig work companies that siphon customer tips away from workers, and to algorithmic decisionmaking that exhibits racial and gender bias. Yet, many rightfully doubt that America’s elected branches of government remain functional enough to handle these emerging challenges, and the Supreme Court continues to impede efforts that Congress and the President do undertake. The Federal Trade Commission is well-positioned to step into this breach. Section 18 of the FTC Act grants the agency the authority to issue new consumer protection rules to police against unfair or deceptive business tactics, backed by tough penalties and consumer redress. Yet, this power has sat virtually dormant for the past thirty-seven years after a “Reagan Revolution” at the agency decisively ended its rulemaking activity. For the first time in decades, a majority of FTC Commissioners supports using this tool, but long-unchallenged received wisdom stands in the way. This common narrative holds that Congress saddled the agency with almost impossibly onerous “Magnuson-Moss” procedural requirements for rulemaking in reaction to overbroad and politically unpopular FTC regulation. This paper argues that the conventional story is mistaken. A review of the history, statutory text, and judicial constructions of section 18 show that this pessimistic view confuses a historical decline in rulemaking—which was driven by non-statutory factors including an ascendant corporate lobby, changing congressional pressures, and a deregulatory ideological moment—with supposed flaws in section 18. Puncturing the mythology that has grown up around the Magnuson-Moss Act provides a more clear-eyed view of the FTC’s authorities. Doing so makes apparent that the Commission can—and should—pick back up its powerful tool of consumer protection rulemaking. Future rules can rein in marketplace misconduct such as deceptive online “drip pricing,” unfair privacy abuses, and much more. Reinvigorating the FTC’s regulatory program can restore the agency as a champion of American consumers and a cornerstone of an administrative state that is able to counterbalance dominant corporations and establish a more just economy.