On July 9, 2020, the U.S. Supreme Court announced that it would review the Federal Trade Commission’s authority to seek restitution in federal court for consumers who have been harmed by fraud and other misconduct in the marketplace. Just three weeks after the Court upheld the SEC’s authority to seek disgorgement of profits in civil enforcement proceedings, the Court agreed to take up a circuit split regarding the FTC’s authority to seek monetary relief under the Federal Trade Commission Act (the “Act”). Depending on the outcome, the Court’s decision could severely limit what the FTC considers one of its “most important and effective enforcement tools”1—upending its enforcement strategy in both consumer protection and competition cases.
Section 13(b) of the Act authorizes the FTC to file suit in federal court seeking temporary injunctive relief when it has “reason to believe” that a party “is violating, or is about to violate” any provision of law enforced by the FTC, and permanent injunctions “in proper cases.”2 For decades, however, the FTC has taken a far more expansive view of its authority under Section 13(b). It maintains—and the majority of courts of appeals have agreed—that in addition to authorizing injunctive relief, the Act implicitly authorizes the agency to seek monetary equitable relief, including restitution to remedy past violations.3 Critics have long said that interpretation goes beyond the scope of the FTC’s statutory authority and enables the agency to seek both monetary and backwards-looking relief for past misconduct in contravention of the Act. Now, prompted by a opposite holdings from the Ninth and Seventh Circuits, the Supreme Court will consider the question.
In August 2019, the Seventh Circuit in FTC v. Credit Bureau Center, LLC, broke with thirty years of its own precedent, and the majority of appeals courts, in holding that “Section 13(b)’s grant of authority to order injunctive relief does not implicitly authorize an award of restitution.”4 In that case, the FTC sued a company for advertising “free” credit reports to consumers online, without adequately disclosing that they would subsequently be enrolled in a credit monitoring service costing $30 per month, in violation of unfair trade practices laws. The FTC sought, and the district court ordered, a permanent injunction preventing the company from engaging in further violations and restitution of over $5 million. On appeal, the Seventh Circuit overturned the district court’s order of restitution, rejecting the FTC’s argument that the Act implicitly grants it authority to seek restitution and other monetary relief, and holding that the plain language of Section 13(b) permits only injunctive relief.
Taking the exact opposite position, the Ninth Circuit in FTC v AMG Capital Management, LLC upheld the district court’s order of over $1.2 billion in restitution to consumers harmed by online payday loan companies in violation of the Act and the Truth in Lending Act.5 In that case, the court concluded that it was “bound by [its] prior interpretation” of Section 13(b), authorizing the agency to seek monetary relief, and that the Act “empowers district courts to grant any ancillary relief necessary to accomplish complete justice, including restitution.”6 Notably, however, two judges issued a special concurrence stating that the Ninth Circuit’s interpretation of the Act is “no longer tenable,” because it permits the FTC to seek remedies beyond the clear limits of its statutory authority.
In granting certiorari, the Supreme Court consolidated the Seventh and Ninth Circuit cases for review. Although the cases involve consumer protection violations, the Supreme Court’s decision could also greatly impact the FTC’s strategy in competition cases because the agency relies on Section 13(b) to seek monetary remedies for antitrust violations, including disgorgement of profits in pharmaceutical pay-for-delay cases.7 Therefore, an unfavorable decision by the Court could eliminate an important enforcement tool that the FTC “depends heavily on . . . in carrying out its mandate to protect consumers and competition.”8 Indeed, in 2018 alone, “consumers received over $1.6 billion in redress stemming from FTC enforcement actions.”9 If the Court rules against it, the FTC would likely ask Congress to enact legislation granting the agency explicit authority to seek monetary relief to remedy past violations, and to seek injunctions without having to show imminent violations of the law. Given the bipartisan support to expand federal agencies’ enforcement powers in recent years, those efforts may be well-received in Congress.10
The Court’s decision to grant review underscores recent efforts to limit other federal agencies’ authority to seek monetary relief in civil enforcement actions. In 2017, in Kokesh v. SEC, the Supreme Court held that the SEC’s disgorgement remedy is a “penalty” subject to a five-year statute of limitations, but declined to expressly answer whether it could seek disgorgement as a form of equitable relief.11 That decision reportedly caused the SEC to forgo over $800 million in potential disgorgement in 2018.12 In June 2020, the Supreme Court, in Liu v. Securities and Exchange Commission, confirmed that the SEC may continue seeking disgorgement as an equitable remedy, but only in cases where the disgorgement does not exceed the net profits earned, and the remedy specifically benefits the actual victims of the misconduct rather than “the public at large.”13 As the latest chapter in an ongoing debate as to whether federal agencies have implicit authority to seek equitable monetary relief in federal court, the Court’s decision in Credit Bureau Center/AMG Capital Management will surely be one of the most important decisions affecting the FTC’s enforcement strategy in both consumer protection and competition cases going forward.
1 Petition for a Writ of Certiorari at 1, FTC v. Credit Bureau Center, LLC, No. 19- 825 (Dec. 19, 2019), available at https://www.supremecourt.gov/DocketPDF/19/19-825/126165/20191219140044609_No.%2019-__%20PetitionForAWritOfCertiorari%20and%20Appendix%20FTC%20v.%20Credit%20Bureau%20Center.pdf.
2 15 U.S.C. § 43 (2018).
3 A Brief Overview of the Federal Trade Commission’s Investigative, Law Enforcement, and Rulemaking Authority, FTC (Oct. 2019), https://www.ftc.gov/about-ftc/what-we-do/enforcement-authority#:~:text=In%20the%20competition%20context%2C%20the,of%20an%20FTC%20administrative%20proceeding.
4 FTC v. Credit Bureau Ctr., LLC, 937 F.3d 764, 767 (7th Cir. 2019) (explaining that the Supreme Court has “specifically instructed” courts of appeals “not to assume that a statute with ‘elaborate enforcement provisions’ implicitly authorizes other remedies”(internal citation omitted)).
5 FTC v. AMG Capital Mgmt., LLC, 910 F.3d 417 (9th Cir. 2018).
6 Id. at 426.
7 See, e.g., FTC v. AbbVie Inc., 329 F. Supp. 3d 98, 143 (E.D. Pa. 2018) (ordering, pursuant to Section 13(b), disgorgement of $448 million in profits stemming from defendant’s alleged sham patent lawsuits), appeal pending, No. 18-2621, 18-2748 & 18-2758 (3d Cir. 2020).
8 Petition for a Writ of Certiorari, supra note 1, at 5.
9 Oral Statement of Commissioner Christine S. Wilson, FTC, Before the U.S. House Committee on Energy and Commerce Subcommittee on Consumer Protection and Commerce (May 18, 2019), https://www.ftc.gov/system/files/documents/public_statements/1519254/commissioner_wilson_may_2019_ec_opening.pdf.
10 See H.R. 4344, 116th Cong. (2019) (creating 14-year statute of limitations for SEC disgorgement actions in response to Supreme Court decision in Kokesh v. SEC); see also Tracey Longo, House Bill Would Make It Easier To Recoup Money From Fraudsters, Financial Advisor (Sept. 25, 2019), https://www.fa-mag.com/news/house-bill-would-make-iteasier-to-recoup-money-from-fraudsters-51844.html (House Financial Services Committee voted 49-5 to send the bill to the full House).
11 Kokesh v. S.E.C., 137 S. Ct. 1635, 1639 (2017).
12 Steve Peikin, Remedies and Relief in SEC Enforcement Actions, SEC (Oct. 3, 2018), https://www.sec.gov/news/speech/speech-peikin-100318.
13 Liu v. S.E.C., 140 S. Ct. 1936, 1948 (2020).