Supreme Court Limits FTC's Power to Seek Damages

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In AMG Capital Management v. FTC, a unanimous Supreme Court recently struck the Federal Trade Commission’s (the FTC) power to obtain monetary relief under § 13(b) of the FTC Act (the Act). Under § 13(b), the FTC can seek the aid of a court to obtain a permanent injunction. The issue the court addressed is whether Congress, by enacting § 13(b) and using the words “permanent injunction”, granted the FTC authority to obtain monetary relief directly from the courts rather than through the administrative process, which ultimately allows for such relief. The Court held the FTC is not authorized to obtain monetary relief under § 13(b) and must use the administrative process prescribed to it under § 5 and § 19 of the Act.

For years, the FTC used judicial enforcement under § 13(b) rather than the administrative processes under § 5 and § 19 of the Act. Section 5 articulates the process of adjudication for claims brought by the FTC. Under § 5, the FTC may challenge unfair or deceptive acts or practices, unfair methods of competition, or violations of other laws enforced through the Act. If the FTC’s complaint is contested, it is adjudicated before an administrative law judge. Either party may appeal the administrative judge’s initial decision to the United States Court of Appeals and ultimately to the Supreme Court.

Section 19 of the Act provides redress after an administrative order is entered. After all judicial review is complete, the FTC “may seek redress from the respondent in federal district court for consumer injury caused by the conduct that was at issue in the administrative proceeding.” Id. A “reasonableness” standard is used in these suits for monetary relief. However, rather than seeking redress after an administrative review, as set out in § 19, the FTC was immediately asking the court for monetary relief and using § 13(b) as its vehicle.

Before this ruling, courts permitted the FTC to bring claims for monetary relief under § 13(b), and the FTC used this process to bring numerous consumer-protection and anti-trust enforcement actions. The FTC was often successful in these cases and recovered billions of dollars from defendants engaged in deceptive or unfair business practices.

The FTC Chairwoman, Rebecca Kelly Slaughter, criticized the Supreme Court’s decision, saying “In AMG Capital, the Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior.”      

In its ruling, the Court said that if the FTC doesn’t want to use § 5 and § 19, then it can ask Congress to broaden the FTC’s powers under § 13(b).

Currently, the House of Representatives is considering Bill 2668, which would amend the Act to provide the FTC with the authority to seek monetary relief.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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