On March 20, the Fifth Circuit Court of Appeals held that the administrative adjudication of deceptive advertising claims by the Federal Trade Commission (FTC) violates the constitutional separation of powers, which grants exclusive judicial authority to Article III courts. Without deciding on the merits of the FTC’s deceptive advertising argument, the court concluded in Intuit v. FTC that the FTC must argue its claims in federal court, not in front of an in-house administrative law judge (ALJ).

FTC Administrative Adjudication Faces Constitutional Limits

This case extends the Supreme Court’s reasoning in Jarkesy, which held unconstitutional the Securities and Exchange Commission’s (SEC) use of ALJs to adjudicate securities fraud claims. Although the Intuit court’s ruling is limited to deceptive advertising cases, Jarkesy and Intuit raise significant doubt as to the FTC’s ability to issue administrative cease-and-desist orders under the FTC Act.

Last week, the Federal Trade Commission (FTC) announced it is sending warning letters to 97 auto dealership groups nationwide, reminding them that the price they advertise to consumers must reflect the total price consumers will be required to pay for the vehicle—including all mandatory fees but excluding taxes.

According to the FTC, advertising a price that does not include all required fees or other mandatory costs may constitute a deceptive practice under Section 5 of the FTC Act. The agency stated that transparent pricing is a current enforcement priority to ensure that the marketplace “functions efficiently and competitors are transparently competing on price.”

The letters encourage dealerships to review their advertising and pricing practices to ensure that advertised prices match the actual prices charged to consumers. The FTC also stated that it will continue monitoring the marketplace and may take additional enforcement action where appropriate.