The Federal Trade Commission generally seeks monetary civil penalties when it is alleging violations of rules that the agency enforces, such as the Made in USA Labeling Rule, the Restore Online Shoppers’ Confidence Act and the Review and Testimonials Rule.
The FTC increases its maximum civil penalty amounts annually for violations of Sections 5(l), 5(m)(1)(A) and 5(m)(1)(B) of the FTC Act. Effective January 17, 2025, the FTC increased its maximum civil penalty amounts to $53,088, per violation. This number reflects the maximum amount that the FTC can see during litigation. However, the reality is that the FTC possesses flexibility during negotiations because, oftentimes, a strict calculation would result in such an enormous number that it would be virtually impossible for anyone to pay.
In general, monetary civil penalties are available to the FTC for the violation of a rule respecting unfair or deceptive acts or practices with actual knowledge or “knowledge fairly implied” on the basis of objective circumstances that such act is unfair or deceptive and is prohibited by a rule. In the case of a continuing violation of a rule, each day and each occurrence may potentially be treated as a separate violation.
In determining the amount of such a civil penalty, the FTC and a court may take into account various mitigating arguments, including the degree of culpability, any history of prior such conduct, the ability to pay, any effect on the ability to continue to do business, and such other matters as justice may require. Experienced FTC defense counsel can advocate using relevant facts and applicable law during the course of litigation or in settlement discussions.
The FTC does not routinely impose the maximum possible penalties. Courts and the FTC are required to consider several factors when calculating monetary civil penalties. However, the FTC often initiates settlement negotiations close to the maximum possible amount. As a result, digital marketers should consult with an experienced FTC defense lawyer to implement compliance protocols into marketing operations and negotiate optimal resolutions in the event of an investigation or enforcement action.
Takeaway: There is no bright-line rule when calculating monetary civil penalties. Courts and the FTC can consider a number of mitigating factors including those set forth above, as well as others such as the amount of revenue attributable to the alleged unlawful conduct, and the scope and timing of remedial action.
