On April 22, 2021, the U.S. Supreme Court ruled that the Federal Trade Commission (FTC) lacks authority to seek restitution or disgorgement under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), a statute that authorizes the FTC to seek injunctions in federal courts when the FTC has reason to believe the defendant is violating, or is about to violate, Section 5 of the Federal Trade Commission (FTC) Act, 15 U.S.C. § 45(a)(1).1 This decision ends — at least for now — the FTC’s decades long use of Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), as a tool for equitable monetary relief. As drafted, Section 13(b) authorizes the FTC to bring suits in federal district court to enjoin, preliminarily or permanently, activities it has reason to believe violate Section 5 of the FTC Act. Although other statutes grant the FTC authority to seek restitution, the FTC has used 13(b) as a quicker and easier tool to obtain restitution. This loss at the Supreme Court will impair the FTC’s strategy in a number of pending consumer protection and antitrust cases and will impede the FTC’s enforcement strategy going forward.
The FTC is seeking a legislative amendment to overturn the Supreme Court’s decision in AMG. But it is unclear if or when that will happen.
The FTC’s Use of Section 13(b)
For several decades, the FTC has relied on Section 13(b)’s injunction authority to seek (and obtain) monetary relief in the form of restitution or disgorgement in federal court. Initially, the FTC relied on the statute to seek preliminary injunctions on mergers pending the completion of the FTC’s administrative proceedings. It then began seeking preliminary injunctions in consumer protection cases pending before its administrative court. Starting in the early 1980s, in its cases challenging fraudulent practices, the FTC began to argue that its authority to seek injunctive relief under the statute also authorized equitable monetary relief.2
Although fraudulent conduct has remained a target of the FTC’s consumer redress requests under Section 13(b), the FTC has started using this procedure in a variety of consumer protection and antitrust cases. The FTC expanded this power into other consumer protection cases where there was a question of competing interpretations of advertisements or disagreements about the appropriate level of substantiation for a product claim.3 Consumer redress in antitrust cases has historically been far less frequent and reserved for “exceptional cases” where there was a “clear violation” of the law.4 But in 2012, the commission withdrew that policy statement, claiming it had taken “an overly restrictive view” of the FTC’s discretion to seek monetary awards.5 In the past decade, the number of times the FTC has sought monetary relief in antitrust cases has become far greater, particularly in cases aimed at pharmaceutical companies engaged in allegedly anticompetitive conduct.
Section 13(b) monetary relief cases have become an increasingly important tool of the FTC. From 2016 to 2020, for example, the FTC used Section 13(b) to obtain $11.2 billion in restitution through settlements and judgments.6 In 2017 alone, the FTC obtained $5.29 billion through court orders for restitution and disgorgement. By contrast, in 2011, the FTC obtained only $223.7 million. Through this threat of large monetary damages, the FTC has been able to obtain significant settlements against major companies. While the FTC has targeted many different industries, technology and life sciences companies have become common targets. Indeed, as of this writing, the FTC is seeking a total of $2.4 billion in monetary relief under Section 13(b) in 24 active federal court cases.7
The Supreme Court’s Decision in AMG
In FTC v. AMG, the Supreme Court unanimously held in a decision authored by Justice Stephen Breyer that “§13(b) as currently written does not grant the Commission authority to obtain equitable monetary relief.”8 The Court reasoned that the plain language of Section 13 authorizes only injunctions, not restitution or disgorgement. The Court explained that Section 13(b) is focused on prospective rather than retrospective relief. The Court went on to identify that because Section 19 of the FTC Act explicitly provides for “other and further equitable relief,” as well as “refund of money or return of property,” in limited circumstances, Section 13(b) should not be interpreted to allow unlimited equitable relief. Finally, the Supreme Court made clear that the commission should not view the decision as limiting its enforcement authority because it could use Section 19 of the FTC Act to obtain monetary relief, and if the FTC was dissatisfied with this authority, it was free to request additional power from Congress. But the Court made clear that the FTC could not simply continue its previous practice that went beyond its statutory authority.
How the FTC Will Respond
The FTC is not left without enforcement tools. First, it can still use Section 13(b) to obtain a prospective injunction in federal court. Thus, it can stop unlawful conduct as before.
Second, if the FTC wants to obtain monetary relief, it can use Section 19 of the FTC Act, 15 U.S.C. § 57b. This provision allows a federal court to grant FTC monetary relief in matters filed by the FTC after it has issued a final cease-and-desist order and subject to its demonstration that “the act or practice to which the cease or desist order relates is one which a reasonable man would have known under the circumstances was dishonest or fraudulent.” This requires the FTC to first bring an administrative proceeding and obtain a cease-and-desist order. The order may be challenged, in which case it is subject to appeal. Only after the FTC obtains a final cease-and-desist order can it bring the Section 19 claim to federal district court. The court will not grant monetary relief absent the FTC showing the conduct was dishonest or fraudulent under a reasonableness standard. Given the lengthy process under Section 19, the FTC had found Section 13(b) to be the more effective and efficient route toward consumer redress.
The FTC may also try to use other statutory authority to obtain monetary relief. For example, the FTC recently sought monetary penalties under the COVID-19 Consumer Protection Act in a complaint filed by the U.S. Department of Justice on the FTC’s behalf. This act, passed in 2020, makes it illegal “under the FTC Act to engage in deceptive marketing related to the treatment, cure, prevention, mitigation or diagnosis of COVID-19, or any government benefit related to COVID-19.”9 The statute expressly permits the FTC to seek monetary relief for violations of this act. The FTC brought its first case under the act on April 15, 2021, which FTC Commissioner nominee Lina Khan endorsed in her recent confirmation hearing, adding that she hopes the FTC will vigorously use this new authority.10
Other Gap Fillers
Other consumer protection agencies and plaintiffs’ lawyers may also try to step in and fill the gap in FTC consumer protection actions. Many states have statutes that similarly prohibit unfair or deceptive acts or practices. These state laws — which are enforced by Attorneys General — often expressly authorize monetary relief and civil penalties.11 The states often work together in multistate investigations or litigation. We expect to see an increase in state and multistate enforcement actions following the Court’s decision in AMG.
Private plaintiff lawyers, including class action lawyers, will also likely gear up to bring additional cases for money damages.
Legislative Fixes
The FTC is already lobbying Congress to amend the statute to restore it with authority.
Immediately following the Supreme Court’s decision, the FTC stated, “In AMG Capital, the Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior,” noting that “[w]ith this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”12
On April 20, Rep. Tony Cárdenas, D-Calif., introduced HR 2668, the Consumer Protection and Relief Act, which would amend Section 13(b) to grant explicit authority to obtain monetary relief for the violation of all laws enforced by the FTC. In February 2021, Sen. Amy Klobuchar, D-Minn., introduced the Competition and Antitrust Law Enforcement Reform Act, a bill that would give the FTC new power to levy civil fines and increase its enforcement budget. The timing and breadth of any legislative solutions are unclear.
Some are advocating to allow the law to work as it was initially drafted and intended. Others are seeking a narrow amendment restoring the FTC’s equitable monetary relief authority only in cases with fraud or clear violations of law. Those who are seeking to provide the FTC with broad authority to obtain consumer redress are likely to face substantial opposition.
Congress has a number of competing priorities for legislative action, and no amendments to the FTC Act are expected imminently.
1 AMG Capital Management, LLC v. Federal Trade Commission, 593 U.S.___ (2021).
2 J. Howard Beales III and Timothy J. Muris, Striking the Proper Balance: Redress Under Section 13(b) of the FTC Act, 79 ANTITRUST L.J. 1, 23 (2013).
3 See e.g., FTC v. Quincy Bioscience Holding Co., No. 17-cv-00124 (S.D.N.Y).
4 Policy Statement on Monetary Equitable Remedies in Competition Cases, 68 Fed. Reg. 45821 (Aug. 3, 2003), 2003 WL 21780660.
5 Withdrawal of the Comm’n Policy Statement on Monetary Equitable Remedies in Competition Cases, 77 Fed. Reg. 47071 (Aug. 7, 2012), 2012 WL 3163476.
6 Acting Chairwoman Rebecca K. Slaughter, Prepared Statement of the Federal Trade Commission: The Urgent Need to Fix Section 13(b) of the FTC Act, Before the Committee on Energy and Commerce Committee on Consumer Protection and Commerce (Apr. 2, 2021), https://www.ftc.gov/system/files/documents/public_statements/1589400/p180500house13btestimony04272021.pdf at 2.
7 Id.
8 FTC v. AMG, Slip Op. at 14.
9 COVID-19 Consumer Protection Act of the 2021 Consolidated Appropriations Act, Pub. L. No. 116-260, 134 Stat. 1182.
10 https://www.washingtonpost.com/technology/2021/04/21/lina-khan-ftc-nomination-hearing/
11 See National Consumer Law Center, “Consumer Protection in the States, A 50-State Evaluation of Unfair and Deceptive Practices Laws, Appendix C State-by-State Summaries of State UDAP Statutes, Consumer Protection in the States,” 2018, https://www.nclc.org/images/pdf/udap/udap-appC.pdf.
12 https://www.ftc.gov/news-events/press-releases/2021/04/statement-ftc-acting-chairwoman-rebecca-kelly-slaughter-us This is incorrect as the Supreme Court was doing its constitutional duty to interpret the law. Marbury v. Madison, 5 U.S. 137 (1803) (“It is emphatically the duty of the Judicial Department to say what the law is.”).
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