Pending rulings from the Supreme Court could soon settle the issue.
In 2026 DSN readers should learn whether companies operating in the United States have the right to have legal claims brought against them by the federal government determined by courts, rather than through an administrative process designed and operated by the very federal government agency—such as the FTC—which brings the claims.
The US Supreme Court can step in and resolve conflicting interpretations of federal law issued by different federal intermediate appellate courts. In January 2026, the US Supreme Court announced that it will do just that. The Federal Communications Commission (FCC) and the Justice Department asked the US Supreme Court to resolve a split in opinion between the Fifth Circuit Court of Appeals (which has jurisdiction over federal court appeals in Texas, Louisiana and Mississippi) and the Second Court of Appeals (which has jurisdiction over federal court appeal in New York, Connecticut and Vermont).
The cases involve the FCC’s decision to issue almost $200 million in fines against AT&T, Verizon and T-Mobile (including Sprint, which it acquired) over alleged misuse of customer location data. The Fifth Circuit prohibited the FCC from using its own in-house administrative process to issue fines against AT&T whereas the Second Circuit allowed such a process against Verizon.
The Fifth Circuit’s opinion is consistent with a previous case, Jarkesy, wherein the US Supreme Court affirmed the Fifth Circuit’s opinion holding that another federal agency, the Securities & Exchange Commission (SEC), could not issue fines outside of court orders. The court wrote that “‘Traditional legal claims’ must be decided by courts, whether they originate in a newly fashioned regulatory scheme or possess a long line of common-law forebears. The Constitution prohibits Congress from ‘withdraw[ing] from judicial cognizance any matter which, from its nature, is the subject of a suit at the common law.’” The Court thus held the SEC’s administrative process unconstitutional for depriving the Seventh Amendment right to a jury trial.
How This Impacts Direct Selling
While the US Supreme Court considers these issues regarding the FCC’s administrative process, there is another case making its way up through the Fifth Circuit Court of Appeals challenging the FTC’s administrative process.
In Asbury et al. v. FTC national automobile dealer Asbury similarly seeks an order prohibiting the Federal Trade Commission (FTC) from taking further action in an administrative proceeding brought against it and one of its managers. Asbury’s experience outlined in its federal court complaint describes an experience with the FTC which is similar to that experienced by numerous retailers—including direct selling companies.
Asbury is among the largest franchised automotive retailers in the United States. Like many retailers, it became the target of the FTC. It spent two years and countless monies responding to the FTC’s civil investigative demand (CID).
After completing its document production, Asbury heard nothing from the FTC until months later when the FTC sent a draft administrative complaint. To avoid the filing of the draft complaint, the FTC demanded that Asbury agree to a consent order, including payment in an amount Asbury considered to be exorbitant and unjustified. Further, the FTC’s demand gave only a month to engage in “consent negotiations.” The FTC then gave only a week to make a counteroffer and the “framework for calculating harm.”
The FTC staff then recommended commencing an administrative proceeding which was approved and filed even though the FTC’s Acting Assistant General Counsel confirmed in response to a FOIA (Freedom of Information Act) request that the FTC had received no complaints from consumers over the preceding five years regarding the dealerships at issue.
The FTC nevertheless claimed to have a “survey” of consumers reflecting that the consumers were charged for “Add On” products without their consent, even though the consumers had repeatedly confirmed such purchases in writing. It also claimed to have an “analysis” evidencing “disparate impact” discriminatory charges. The FTC refused, however, to provide its “survey,” “analysis” or any details.
On October 4, 2024, the Asbury Plaintiffs filed their federal court lawsuit challenging the FTC’s administrative process. The lawsuit sets forth five challenges to the constitutionality of the FTC’s administrative process: Count I: Article III (Right to trial in a federal court: adjudicating private rights in a non-Article III tribunal); Count II: 7th Amendment (Right to a jury trial); Count III: 5th Amendment (Right to due process); Count IV: Article II (FTC Adminstrative Law Judges unconstitutionally protected from removal by the President); and Count V: Article II (FTC Commissioners unconstitutionally protected from removal by the President).
On August 11, 2025, the federal trial court in Ft. Worth, Texas initially issued its Order denying Plaintiffs’ request for a temporary injunction and granting the Defendants’ motions to dismiss certain of Plaintiffs’ claims. However, days later, the Fifth Circuit issued its decision in Space Exploration Technologies Corp. v. NLRB, holding the National Labor Relations Board’s (NLRB) administrative process unconstitutional with an analysis which conflicted with the Asbury trial court’s order.
The FTC thereafter dismissed its disparate impact claims and has agreed to stay the administrative proceeding while the Asbury federal court lawsuit makes its way through the courts.
It is not yet clear when the court will rule in Asbury, but the result will likely affect all retailers in the United States, including direct sellers.
EDWARD “ED” BURBACH chairs Foley & Lardner’s Government Solutions Practice, co-chairs its State Attorneys General and FTC Consumer Practices, and leads the Austin office, advising on regulatory and consumer protection matters. JANE FERGASON is a corporate partner focused on mergers, acquisitions and transactions across direct sales, franchising, distribution, retail and advertising.
The post Is the FTC’s Administrative Process Unconstitutional? first appeared on Direct Selling News.
