FTC’s Shift Away from Dual Track Merger Challenges

The Federal Trade Commission (“FTC”) Chair Andrew Ferguson recently announced that the agency will no longer pair preliminary injunction actions with parallel administrative proceedings when challenging mergers and will instead pursue permanent injunctive relief exclusively in federal court. The announcement follows the FTC’s December 2025 federal court challenge to Henkel AG & Co.’s proposed acquisition of the “Liquid Nails” brand, itself a notable departure from the agency’s longstanding practice of internal adjudication. The shift aligns the FTC with the Department of Justice’s (“DOJ”) procedures for challenging mergers in federal court, affecting the procedural and evidentiary framework for challenged deals and limiting future constitutional challenges to the FTC’s in-house process.

The FTC’s Traditional Two-Track Process

Historically, the FTC and DOJ have challenged mergers through different procedural paths. The FTC typically used a two-track approach: seeking a preliminary injunction in federal court under Section 13(b) of the FTC Act^[1] to preserve the status quo^[2] while simultaneously issuing an administrative complaint under Part 3 of the FTC’s Rules of Practice.^[3] In that administrative case, an FTC administrative law judge (“ALJ”) would manage the proceedings, conduct the merits hearing, and issue a recommended decision for review by the FTC commissioners.^[4] The FTC could stay the Part 3 case pending the federal court’s preliminary injunction ruling, or allow both proceedings to run concurrently, forcing the parties to litigate simultaneously in two forums under different procedural and evidentiary rules. The DOJ, by contrast, has no in-house adjudicative forum and litigates merger challenges exclusively in federal court, where the district court handles both preliminary relief and the merits — sometimes in separate stages and sometimes in a consolidated proceeding. Accordingly, which agency reviewed a deal affected the path and timing of any merger challenge, even though the underlying merits question was the same.

In practice, regardless of the dual-track structure, the preliminary injunction stage has typically determined the outcome of challenged transactions. If the government wins, parties often abandon or settle the deal; if the government loses, the parties generally close and the challenge often ends. But the FTC’s administrative case did not automatically end with the district court’s initial ruling. If the FTC obtained preliminary relief, companies could still proceed to a full Part 3 merits hearing. Likewise, even after an initial loss, the FTC could continue the administrative case, although that rarely occurred.

This structure has been the subject of debate. Critics have argued that the FTC’s combined prosecutorial and adjudicative roles give it a home-court advantage in internal merger cases, while others contend that the practical differences between FTC and DOJ procedures are overstated and reflect the administrative role the U.S. Congress assigned to the FTC. Congress has repeatedly considered legislation, including versions of the SMARTER Act passed by the U.S. House of Representatives in 2016 and most recently introduced again in 2020, that would have required the FTC to challenge mergers in federal court, like the DOJ, but Congress has not enacted any such legislation.

The Shift’s Effect on Constitutional Challenges

Since Axon Enterprise, Inc. v. FTC established that companies can bring structural constitutional challenges to the FTC’s administrative process directly in federal court, companies facing Part 3 proceedings have routinely filed such challenges.^[5] While Chair Ferguson’s announced shift would not affect any pending cases, if the FTC challenges mergers exclusively in federal court going forward, future merger cases would no longer give rise to the same challenges.

Although some of these challenges have failed,^[6] several others remain live, most notably the argument that the dual-layer removal protections for FTC ALJs are unconstitutional. The FTC may remove its ALJs “only for good cause established and determined by the Merit Systems Protection Board,”^[7] whose members are themselves removable only for cause.^[8] In Jarkesy v. Sec. & Exch. Comm’n, the Fifth Circuit held the SEC’s analogous ALJ structure unconstitutional on this basis, among other reasons.^[9] The Supreme Court affirmed on Seventh Amendment grounds alone, declining to reach the removal question and leaving it open.^[10] Chair Ferguson has previously signaled his support for this argument. While he was a commissioner at the FTC, he concluded that FTC ALJ tenure protections are unconstitutional; however, he also believed that the removal protections are severable, so FTC ALJs could still adjudicate cases.

Without Part 3 proceedings in merger cases, these challenges would largely become moot. As Chair Ferguson put it: “Every time we bring a merger case, an Axon challenge is filed against [the FTC] at the exact same time, arguing that our internal adjudication is unconstitutional. I eliminate Axon challenges entirely by not bringing these within the internal agency adjudicative process.”

Practical Implications for Merging Parties

• Evidentiary standards: If the FTC litigates merger challenges exclusively in federal court, the Federal Rules of Evidence will govern, replacing the more permissive FTC evidentiary rules.^[11] In Part 3 proceedings, ALJs have been willing to admit hearsay and investigative materials as evidence. In federal court, by contrast, the Federal Rules of Evidence require that investigational hearing transcripts, customer statements, or third-party documents fit a recognized hearsay exception and satisfy federal authentication requirements before a judge may rely on them.
• The gap between the FTC and DOJ preliminary injunctive standards and procedure narrows: Some have argued that the FTC faced a lower bar for obtaining preliminary relief because the DOJ must satisfy the traditional preliminary injunction factors, whereas the FTC need not show irreparable harm, and the likelihood-of-success factor under Section 13(b) is more lenient than under the traditional test, requiring only serious and substantial questions about a transaction. Others, however, have argued that the standards are essentially the same. To the extent there was any difference in the standards, this move brings the FTC closer to the DOJ’s approach. The DOJ ordinarily seeks permanent relief in federal court and, when needed, preliminary relief to keep the parties from closing before trial. It also often asks the court to consolidate the preliminary injunction and merits phases under Rule 65(a)(2) of the Federal Rules of Civil Procedure, whether by court order or party stipulation.^[12] Chair Ferguson acknowledged this result, stating that this move will “align [the FTC] with the standard that the [U.S.] Department of Justice has to comply with in order to get an injunction of a merger.”
• Some litigation burdens may become less duplicative: If the FTC no longer pursues a federal court action alongside a Part 3 proceeding, parties may avoid the cost and distraction of managing simultaneous discovery and expert work across two forums. In past cases, those parallel demands sometimes overlapped for weeks or even several months,^[13] which could increase pressure on parties deciding whether to litigate, settle, or abandon the transaction. This change will not make challenged deals inexpensive to defend, but it should reduce the duplicative work that the prior system occasionally imposed. Third-party witnesses in the litigation will also benefit from a streamlined, federal court-only process. Under the dual-track approach, third-party witnesses often had to seek in camera treatment of confidential documents in both the federal court and administrative trials and faced the prospect of testifying in both.

^[1] 15 U.S.C. § 53(b).

^[2] In some matters the FTC may not seek preliminary relief where there is no meaningful risk that the parties would close before the administrative process concluded — for example, because the transaction remains subject to another U.S. regulatory approval or to a foreign merger-control regime that bars the parties from closing until the relevant authority completed its review or granted clearance.

^[3] 16 C.F.R. pt. 3; 15 U.S.C. § 45(b) (statutory authorization for Part 3 proceedings).

^[4] 16 C.F.R. § 3.51; id. § 3.54.

^[5] Axon Enter., Inc. v. Fed. Trade Comm’n, 598 U.S. 175 (2023).

^[6] Illumina, Inc. v. Fed. Trade Comm’n, 88 F.4th 1036, 1046–47 (5th Cir. 2023).

^[7] 5 U.S.C. § 7521.

^[8] FTC commissioners likewise have for-cause protection. See 15 U.S.C. § 41. However, recent developments have suggested that the for-cause protection given to Merit Systems Protection Board (“MSPB”) members and FTC commissioners may be unconstitutional. In 2025, President Donald J. Trump removed FTC Commissioners Rebecca Slaughter and Alvaro Bedoya, and MSPB Member Cathy Harris, without invoking the statute’s for-cause standards on the theory that those restrictions are unconstitutional. See Harris v. Bessent, 160 F.4th 1235, 1245 (D.C. Cir. 2025), petition for cert. filed (U.S. Mar. 17, 2026) (No. 25-1110); Brief of Petitioners at 7–8, Trump v. Slaughter, No. 25-332 (U.S. Oct. 10, 2025). As of this writing the D.C. Circuit has upheld Harris’s removal and a certiorari petition is pending, and the Supreme Court heard argument in Trump v. Slaughter in December 2025 but has not yet ruled. See Harris, 160 F.4th at 1257; Oral Argument, Slaughter, No. 25-332 (U.S. Dec. 8, 2025). A decision holding FTC commissioners or MSPB members removable at will could affect, and potentially undercut, dual-layer removal challenges, although the implications for FTC ALJs are not yet settled.

^[9] Jarkesy v. Sec. & Exch. Comm’n, 34 F.4th 446, 464–65 (5th Cir. 2022), aff’d and remanded, 603 U.S. 109 (2024).

^[10] Sec. & Exch. Comm’n v. Jarkesy, 603 U.S. 109 (2024).

^[11] See 16 C.F.R. § 3.43.

^[12] See, e.g., United States v. Sungard Data Sys., Inc., 172 F. Supp. 2d 172, 179 (D.D.C. 2001).

^[13] See, e.g., FTC v. OSF Healthcare Sys., 852 F. Supp. 2d 1069 (N.D. Ill. 2012).