FTC Stripped of Authority to Pursue Equitable Monetary Relief in Federal Court – What Now?

Rothwell, Figg, Ernst & Manbeck, P.C.
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On April 22, 2021, the Supreme Court issued a unanimous decision finding that the FTC lacks authority to pursue equitable monetary relief in federal court under Section 13(b) of the Federal Trade Commission Act (the “FTCA”). The result means that defendant Scott Tucker does not have to pay $1.27 billion in restitution and disgorgement, notwithstanding that his payday loan business was found to constitute an unfair and deceptive practice.  The result also means that onlookers everywhere are scratching their heads thinking “what now?”  If the FTC is stripped of its authority to pursue equitable monetary relief, then will unfair and deceptive practices run rampant, knowing that the “worst case” scenario is that they will be enjoined (but get to keep any ill-gotten profits earned in the interim)?

Not entirely and probably not for long.

First, the FTC was never the only enforcement mechanism for policing unfair competition and deceptive practices violations.  Thus, there remain other agencies and statutes available to pursue wrongdoers, and many of these allow for the pursuit of equitable monetary relief.  For example, there are other federal agencies that have jurisdiction in certain situations (e.g., the Consumer Financial Protection Bureau).  Also, state attorneys general and state UDAP laws often have broad jurisdiction and authority to pursue monetary relief.

Second, Sections 5 and 19 of the FTCA give district courts the authority to impose monetary penalties and award monetary relief where the FTC has issued cease and desist orders.  So, the FTC is not currently stripped of all authority to pursue equitable monetary relief in federal court – it just needs to issue a cease and desist order first.

Third, the FTC has been pressuring and continues to pressure Congress to amend Section 13(b) of the FTCA to broaden the scope of relief available.

Fourth, the FTC could promulgate more rules and strengthen its existing rules under its rulemaking process (Section 18 of the FTCA).  Last month, acting Chairwoman Slaughter announced the formation of a new, centralized rulemaking group in the General Counsel’s office.

In sum, the Supreme Court’s decision will undoubtedly have some effects on the policing of unfair and deceptive trade practices, but there are numerous processes in place to ensure that the system is not derailed, and it is likely that the FTC will have authority to pursue monetary relief in the future.

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