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FTC Responds to Axon Lawsuit: It’s Not Up to District Court

In a rebuttal last week to Axon’s lawsuit, the Federal Trade Commission says its allegations against Axon must be settled in an administrative proceeding, which Axon has called unconstitutional.

by / February 3, 2020

The Federal Trade Commission is trying to split up Axon, the most prominent body-camera-maker in the U.S., and a rival firm that Axon acquired in 2018. Axon is suing the FTC for denying it due process.

Now, the FTC is arguing that Axon is simply trying to use the court system to evade circumvent the commission's authority.

The FTC's new motion is a response to a federal lawsuit by Axon on Jan. 3 seeking to stop an administrative review initiated by the FTC, and asking the court to declare parts of the FTC unconstitutional.

According to Axon’s complaint for declaratory and injunctive relief filed with the U.S. District Court of Arizona, Axon learned in December 2019 that the FTC had a problem with its acquisition of VieVu in May 2018. The company made an offer to avoid litigation: It would sell all its assets from VieVu and give the buyer $5 million in working capital. The FTC was concerned that the merger of VieVu and Axon, the nation’s largest provider of police body cameras, would drive up prices and reduce competition, so Axon felt its offer would ameliorate those concerns.

The FTC wasn’t satisfied, and it told Axon to also give the new buyer a license to Axon’s technology and intellectual property. Rejecting this possibility and anticipating litigation from the FTC, Axon pre-emptively sued the FTC in federal court. The FTC filed its own complaint later that day for an administrative proceeding, and now the two cases appear to be moving forward in parallel.

On Jan. 23, opposing Axon’s motion for a preliminary injunction in federal court, the FTC argued that the court “lacks subject matter jurisdiction” to grant Axon’s request. Counsel for the FTC cited seven cases adjudicated by six different courts between 2016 and 2019 that rejected constitutional challenges to an administrative law judge’s proceeding. Furthermore, the FTC argued that Axon couldn’t challenge an administrative proceeding until it’s finished, and any challenge must still allow the FTC to carry out its congressional mandate of enforcing the Federal Trade Commission Act of 1914. If Axon wants to fight the FTC’s administrative hearings, the FTC said, it must do so during that process and then through a court of appeals, not by seeking relief from a different court.

The issue of jurisdiction is part of Axon’s lawsuit. For its part, Axon has contended that a federal court should weigh in because the FTC’s administrative proceedings don’t grant due process since they’re overseen by the FTC’s own judges who Axon alleges consistently rule in the FTC’s favor.

An FTC administrative law judge in Washington, D.C., is scheduled to hear arguments in May.

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