Body Camera Manufacturer Suit Challenging FTC Authority Dismissed

The Arizona District Court has dismissed Axon Enterprise Incorporated’s suit against the Federal Trade Commission, et al. Axon had previously filed a motion for preliminary injunction. They alleged that FTC action halting their merger with a competitor was unconstitutional. While the court acknowledged their arguments, they found they did not have subject matter jurisdiction over the issue.

Axon sells technology tools, such as body cameras, to law enforcement agencies. In May 2018, Axon acquired a competitor, Vievu, which caused the FTC to conduct an antitrust investigation. Axon states that it spent at least $1.6 million during the FTC’s investigation. When the investigation ended, Axon states that the FTC gave it the option to a “blank check” settlement, which would rescind its acquisition and transfer some intellectual property to the “newly restored Vievu.” If Axon did not accept, the FTC would begin an administrative complaint against Axon. However, Axon felt that the FTC was trying to make Vievu into another Axon.

In January, when the FTC was about to begin its formal administrative process to challenge Axon’s acquisition, Axon sued the FTC “to enjoin the administrative proceeding based on three constitutional claims.” Their first claim was that “the FTC’s structure violates Article II of the Constitution because its commissioners are not subject to at-will removal by the President and its administrative law judges (‘ALJs’), who are appointed by its commissioners, are also insulated from at-will removal”; second, that the “FTC’s combined role of ‘prosecutor, judge, and jury’ during administrative proceedings violates the Due Process Clause of the Fifth Amendment”; and third, the “FTC and the Antitrust Division of the U.S. Department of Justice…utilize an arbitrary and irrational ‘clearance’ process when deciding which agency will review a particular acquisition, in violation of the Equal Protection Clause of the Fifth Amendment.”

While the Arizona District Court notes that the claims Axon raises are “significant and topical,” it also states that this court “is not the appropriate forum to address Axon’s claims.” The judge states that it is “fairly discernable” in the FTC Act “that Congress intended to preclude district courts from reviewing the type of constitutional claims Axon seeks to raise here.” They suggest that Axon should raise these claims in the administrative process, and if necessary, for review in the Court of Appeals. As a result, the Arizona District Court lacks subject matter jurisdiction over this action, therefore, Axon’s preliminary injunction request was denied and the case was dismissed.

Axon was represented by Orrick, Herrington & Sutcliffe.