Axon v. FTC: Can Timing Make the Difference in an Antitrust Case?

Axon Enterprises is a manufacturer of various tools utilized by military, law enforcement, and emergency personnel such as tasers and body cameras. In 2007, VieVu LLC brought its own body cameras to market and became a chief competitor for Axon, with both competing to serve metropolitan police departments around the nation. That was until 2018, when Axon Enterprises acquired VieVu and attracted the attention of the Federal Trade Commission (FTC) in an antitrust matter. 

Even prior to the merger in 2018, there were relatively few firms producing body cameras and the market was highly concentrated. In this context, concentration refers to the market share of the firms in the industry, namely the largest firms. An industry where the largest firms serve a substantially larger share of the market than the smaller firms is highly concentrated, whereas an industry with similar market shares among the largest and smallest firms is less concentrated. In the former case, there is less competition between firms due to a smaller number of firms altogether; the body camera industry falls into this category. 

Prior to their merger in 2018, Axon and VieVu had the largest market shares in the body camera industry. While highly concentrated industries like the body camera market typically see less competition, the top two firms are still able to effectively compete with each other to the benefit of their consumers. In this case, the consumers were metropolitan police departments around the nation. The benefits they experienced were predictable: lower prices and greater innovation in the products, because whichever firm offered the better product for the lower price would receive more sales. In this regard, VieVu had an edge over Axon, opening accounts with some of the largest police departments in the country, including NYPD. 

This is the chief reason that Axon would have an incentive to merge with VieVu. The merger would add VieVu’s market share to Axon's, greatly increasing its market power and opening access to the accounts in places like New York City. This increase in market power would give Axon much more flexibility in its business operations to maximize its profits, effectively allowing it to act as a monopoly. 

After the merger, Axon faced little to no competition, which allowed it to lower its output and increase its prices to police departments across the country. In a textbook monopoly outcome, market concentration skyrocketed along with Axon’s stock prices, which is what caught the FTC’s attention. 

In terms of an antitrust matter, the case of Axon’s merger with VieVu is as typical as they come. Any merger of that size is presumed from the beginning to be illegal according to the Department of Justice and Federal Trade Commission’s Horizontal Merger Guidelines. Also, it is unlikely that more firms would enter the body camera market due to the high initial costs and difficulties necessary to create and sustain such a firm. Therefore, the merger will likely be permanently harmful to the police departments who purchase Axon’s products.

In any other antitrust case before the FTC, the matter would likely already have been brought to a close with the merger being overturned. In this case, however, Axon filed a lawsuit against the FTC in federal district court, challenging the structure of the FTC’s constitutionality. In Axon Enterprises v. FTC, Axon is alleging that the FTC’s administrative action violates its Fifth Amendment Rights, citing concerns of Due Process and Equal Protection due to differences in merger investigations between the DOJ and FTC and concerns of partiality toward the FTC among its administrative judges. Axon is additionally alleging that these judges are unconstitutionally provided with insulation from being fired by the President in violation of Article II. Finally, Axon is alleging that its merger with VieVu did not violate antitrust law.

Nonetheless, the chief question in this case is not any of those aforementioned issues brought up by Axon. Rather, it is the question of whether plaintiffs like Axon may bring suit against an administrative agency in federal district court before the administrative judicial proceedings are completed. This question is quite narrow, as it is about timing and jurisdiction, rather than the variety of antitrust, Constitutional, and administrative principles surrounding the case. 

Nevertheless, it is an important question to ask, as it could limit the power of the FTC and other administrative agencies while making it easier to sue them on constitutional grounds. The federal district court that initially heard Axon’s suit dismissed the case, saying that Congress “impliedly stripped the district court of jurisdiction” in the creation of the FTC, with the Ninth Circuit Appeals Court affirming. Effectively, this ruling meant that Axon would have to bring its constitutional challenges against the FTC forward in front of an FTC administrative judge. After Axon appealed the lower court’s decision to avoid such an outcome, Axon Enterprises v. FTC is on the Supreme Court’s docket for this term.

Under normal circumstances, the Supreme Court would be expected to affirm the lower courts’ rulings, as that is where precedent points. Given the Supreme Court’s recent trend of restricting administrative agencies’ power in cases like NFIB v. OSHA and West Virginia v. EPA, it is unclear to what extent the precedent in this case will govern how the Court will rule. If the Supreme Court continues the trend it has set this year by ruling in favor of Axon, then perhaps Axon’s constitutional challenges against the FTC will stand a greater chance. After all, its challenges would be heard by a federal district judge who is likely less partial than an FTC administrative judge. The same may even be true with regard to Axon’s merger with VieVu, perhaps giving Axon a greater chance to defend a once indefensible merger.

Axon Enterprises v. FTC will be heard by the Supreme Court this term along with another case regarding timing and jurisdiction, SEC v. Cochran. It can be expected that the Court will rule similarly in both cases regarding the jurisdiction of federal district courts over administrative judicial proceedings. With its record of limiting administrative agencies’ power, this Supreme Court seems more likely than any other in recent memory to make it easier to bring suit against administrative agencies on constitutional grounds. Such a ruling would have far-reaching effects in antitrust law by making it easier to merge with other companies and engage in anti-competitive behavior. The administrative state would also be more vulnerable, thus causing uncertainty regarding its role of effectively implementing legislation.

Nicholas Duffy is a junior at Brown University, concentrating in Economics. He is a staff writer for the Brown Undergraduate Law Review and can be contacted at nicholas_duffy@brown.edu.