New FTC decision could 'inject' DEI into business practices nationwide, GOP commissioner says

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The Federal Trade Commission (FTC) has issued a new decision that one Republican commissioner warns could incentivize diversity, equity and inclusion (DEI) practices in companies that offer price-varied goods and services nationwide.

The FTC brought and settled a case Thursday involving an Arizona car dealership the agency accused of having advertised misleading prices for vehicles to attract consumers to the dealerships — the actual prices were thousands of dollars more than advertised. 

The dealership was also accused of discriminatory financing practices and arranging financing with higher prices for Latino consumers than for non-Latino, White customers.

Republican FTC Commissioner Melissa Holyoak sided with the majority in assessing violations of the Equal Credit Opportunity Act (ECOA) in this case. But, she said that the majority also tacked on a "superfluous" violation of Section 5 of the FTC Act, which she said could have a "pernicious" effect on businesses in the future. 

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Lina Khan, Chair of the Federal Trade Commission (FTC), arrives to testify before the House Appropriations Subcommittee at the Rayburn House Office Building on May 15, 2024, in Washington, DC. (Photo by Kevin Dietsch/Getty Images)

"[N]o matter how well-intended, broad standards of liability under disparate impact theories can backfire — particularly ones that seek to regulate the entire American economy — creating risks of unlawful race-based practices," Holyoak said. 

"The solution to our Nation’s racial problems cannot come from policies grounded in affirmative action or some other conception of equity. Racialism simply cannot be undone by different or more racialism," she added, citing the recent Supreme Court decision in Students for Fair Admissions v. Harvard. That case outlawed race-based considerations in higher-ed admissions policies. 

Holyoak explained that "absent Congressional authorization, the Commission should not attempt to broaden the FTC’s unfairness consumer protection authority into a comprehensive civil rights authority — a new standard of liability that may have unintended and pernicious consequences."

"These consequences may be especially pernicious when the Commission assigns individual liability due to statistical disparities. Individuals may, for example, have strong incentive to shield themselves from liability by ‘inject[ing] racial considerations,’ practices, or audits into everyday business activities to fend off future unfair discrimination claims," she said. 

In short, the FTC's decision could effectively compel businesses that engage in sales and price differentiation to make business decisions based on race or other DEI-related factors to avoid FTC enforcement. 

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The seals of the Federal Housing Finance Association (FHFA) and the Federal Trade Commission (FTC) at the organization's headquarters in Washington, DC, on Monday, May 20, 2024. (Al Drago/Bloomberg via Getty Images)

The FTC is a federal agency that enforces consumer protection and competition laws across a variety of economic sectors. The FTC's mission is to protect the public from unfair business practices and competition through law enforcement, research, education and advocacy.

It is made up of five commissioners, currently two Republicans and three Democrats. Lina Khan was nominated by President Biden to serve as the chair. 

Fox News Digital reached out to Khan for comment on Holyoak's remarks.

"Bringing an ‘unfair discrimination’ claim here based on statistical analysis and disparate impact is consistent with a broader vision to achieve economy-wide, equity-oriented regulation of conduct that historically was never proscribed by Section 5 of the FTC Act," Holyoak wrote. 

Section 5 of the FTC Act is broad in scope, and prohibits ''unfair or deceptive acts or practices in or affecting commerce.'' The prohibition applies to all persons engaged in commerce.

Holyoak also added in a footnote, "It is no coincidence that the Commission has asserted its novel ‘unfair discrimination’ authority only outside the scrutiny of courts and in the context of consent orders."

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"Disparate impact theory has historically been used in the context of civil rights laws to examine whether a neutral policy has disproportionately impacted members of a class Congress designated for protection," Holyoak explained. 

"Importing disparate impact theory into Section 5, former Commissioner Chopra advocated in 2020 for disparate impact analysis and use of the FTC’s unfairness authority as a ‘gap-filler to combat discrimination across the economy," Holyoak noted. 

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"Understanding the broader motivation for the approach in this case — that is, as an effort to expand unfairness well beyond its traditional metes and bounds to ‘combat discrimination across the economy’ — makes clear the Majority’s purpose for including the otherwise superfluous unfair discrimination count," Holyoak said.