The Federal Trade Commission today announced a policy statement clarifying that the Commission will not pursue claims based on disparate-impact or “unfair discrimination” theories.
“Disparate-impact claims are nearly impossible to square with our colorblind Constitution,” said Chairman Andrew N. Ferguson. “They impose liability for discrimination without any evidence that anyone intended to discriminate, which pushes businesses to make race-based decisions in order to avoid liability. The Commission never had authority to impose disparate-impact liability. Today, we announce that the Commission will never do so again.”
The policy statement follows President Donald Trump’s issuance of an executive order last year on “Restoring Equality of Opportunity and Meritocracy” that set forth “the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible to avoid violating the Constitution, Federal civil rights laws, and basic American ideals.”
Disparate-impact theory presumes that a difference in outcome among demographic groups must be the result of unlawful discrimination, even if no evidence of discrimination exists. As the policy statement explains, the Commission lacks the statutory authority to consider claims under this novel legal theory. Moreover, disparate-impact analysis under its authorities would require race-based analysis of outcomes, which is pernicious and contrary to fundamental constitutional values.
The policy statement goes on to explain that there are no apparent limits to the policy implications of applying disparate-impact analysis, because “almost any conceivable policy or practice affects different groups differently.” Had Congress intended to grant the FTC such sweeping authority, it could have said so.
The statement sets forth how the Commission will pursue discrimination claims in appropriate contexts. For example, it will continue to assert disparate-treatment claims under the Equal Credit and Opportunity Act, but it will treat Section 5 of the FTC Act as the consumer-protection statute it has always been.
Under the new policy, the Commission reviewed past decisions that were based on statistical analyses designed to show disparate-impact liability and entered into agreements to modify certain compliance-related obligations for Napleton Inc., Passport Auto Group and an individual previously associated with Coulter Motor Company LLC.
The Commission vote authorizing the policy statement and approving the agreements was 2-0.
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