Businesses fear politicization as Trump gains more power over US agencies
The companies are bracing for the fallout of a Supreme Court ruling last week that allows the president to fire members of federal regulatory boards for any reason and strip those regulators of their independence from the White House.
The decision has ramifications for more than a dozen agencies that oversee energy companies, railroads, investment banks, labor disputes and the biggest technology companies. Now corporate executives and lawyers are grappling with the potential for these agencies — which set the rules and enforce them — to become even more political.
The decision “allows for a lot more mischief,” said Douglas Melamed, a former general counsel at chipmaker Intel and a former senior Justice Department official. “The president has complete freedom to run things and really squeeze these agencies.”
The decision adds to the unpredictability of doing business in the United States, where regulation has depended heavily on which party is in power. Republicans tended to loosen the rules, while Democrats tended to add restrictions.
Under the Biden administration, for example, regulators restricted drilling on public lands, banned non-compete agreements, and sued Adobe and Live Nation, arguing the companies violated antitrust and consumer protection laws. After President Trump took office for the second time, his appointees quickly reversed or abandoned those decisions and settled those lawsuits.
These political swings tended to be moderated by federal agencies that had long held the leadership of both parties. And federal law prohibited the president from firing regulators without cause.
As a result of the court ruling, more volatile policymaking could now be ahead, former corporate executives, former regulators and legal experts warned. Many companies plan for expansion and investment years in advance, and regulatory uncertainty often hampers growth.
“Stability is the most important thing,” said Samuel J. Palmisano, a former IBM executive and now a board member of the hedge fund, America’s Frontier Fund. The decision will “slow down innovation”.
Independent agencies affected by the court’s decision include the Federal Trade Commission, which seeks to protect consumers from practices such as deceptive advertising or practices harmful to competition; the Federal Energy Regulatory Commission, which oversees interstate power lines, natural gas operations, and regional power grid operators; the Surface Transportation Board, which regulates railroad rates; and the National Labor Relations Board, which resolves disputes between employees and employers.
The commissioners leading the agency — traditionally a mix of Republicans and Democrats — are appointed by the president. In 1935 the Supreme Court ruled that the president could not fire regulators because of political or policy differences.
That was true until last year, when Mr. Trump fired Democratic commissioners at agencies including the Federal Trade Commission, the National Labor Relations Board and the Surface Transportation Board.
Rebecca Kelly Slaughter, the fired FTC member, took her case to the Supreme Court, alleging she was wrongfully terminated. The court ruled against her last week.
FTC spokesman Joe Simonson said the agency offered “clarity to the business community that was under attack from the left-wing ideologues of the previous administration.” He added: “There is nothing new about President Trump’s position as the rightful leader of the executive branch, which the court upheld.
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Some regulatory experts and corporate advisers said it was unclear how much — if at all — the ruling could shift the agencies’ policy agendas. While independent, most regulators followed White House policy, they said.
“The idea that Slaughter is a big deal because it gives the president more composite power over the policy agenda is overblown,” said Joseph Grundfest, who was a commissioner of the Securities and Exchange Commission in the 1980s and is now a law and business professor at Stanford.
But agencies have traditionally ignored politics when taking legal action, he said. The White House could now assert more control over decisions such as whether to sue a company for insider trading.
Companies are trying to plan ahead, said Matthew L. Schwartz, chairman of the law firm Boies Schiller Flexner.
“They’re doing what smart people and smart companies do, which is asking for input from a lot of knowledgeable people about what could happen around the corner so they can try to do some contingency planning,” said Mr. Schwartz, who has represented companies including fantasy sports app DraftKings and insurer AIG.
The president’s new ability to fire decision-makers in federal agencies could lead to major changes in key sectors of the economy.
Two freight railroad companies, Union Pacific and Norfolk Southern, proposed a merger last year that would create the nation’s first network connecting the East and West coasts, a deal that requires approval by the Surface Transportation Board. Last year, Mr. Trump fired Robert E. Primus, a board member who voted against the next big railroad merger in 2023.
With Mr. Primus removed, Union Pacific and Norfolk Southern may have a better chance of getting the board to approve their merger, some railroad analysts said. A spokeswoman for the board declined to comment.
Some consumer advocacy groups are concerned about the potential impact of the partisan Federal Energy Regulatory Commission on energy prices.
“FERC has really gone through Republican and Democratic administrations and worked really hard to be nonpartisan,” said Tyson Slocum, director of the energy program at Public Citizen, a consumer advocacy group. “What the Supreme Court did is throw it out.
The decision also has implications for companies doing business before the NLRB, which includes reviewing labor practice cases and recognizing new unions.
If the agency loses — or even appears to lose — its political independence or appears beholden to the president, unions and companies will have less confidence in its decisions, experts said. State labor agencies may try to step in to fill the void, which could create a patchwork of conflicting rules.
The companies have already been trying to curry favor with the Trump administration over the past year and a half. Mr. Trump’s new power to fire regulators who disagree with him may accelerate that, corporate experts said.
Many companies have already sought connections to Mr. Trump’s inner circle or donated to his inauguration, his library or other pet projects, said Jill Zuckman, a partner at SKDK, a public affairs firm.
“It will increase what a lot of companies are doing,” said Ms. Zuckman, who represents technology and transportation companies and worked for the Obama administration.
Reporting by Ivan Penn in Los Angeles, Jordyn Holman in Chicago and Peter Eavis, Lauren Hirsch and Rebecca Davis O’Brien in New York.