The Supreme Court Prohibits the FTC From Seeking Monetary Relief in Federal Court Under Section 13(b) of the FTCA

Kramer Levin Naftalis & Frankel LLP

[co-author: Daniela Manzi]*

On April 22, 2021, the Supreme Court issued a unanimous decision prohibiting the Federal Trade Commission (FTC) from using its preferred tool for regulating marketplace misconduct. The Court held that Section 13(b) of the Federal Trade Commission Act (FTCA), which allows the FTC to seek injunctive relief in federal court, does not extend to monetary relief in the form of restitution or disgorgement.

Sections 5 and 19 of the FTCA have long been used by the FTC to seek monetary damages through administrative proceedings. Section 13(b) gives the FTC the power to seek injunctive relief in federal court to halt deceptive practices that harm consumers. Since the late 1990s, the FTC has increasingly used Section 13(b) to pursue monetary awards against defendants.[1] In 2019, for example, the FTC obtained 81 permanent injunctions netting more than $700 million in restitution and disgorgement, compared to only 21 final administrative orders obtained by the FTC.[2]

The Supreme Court case AMG Capital Management, LLC v. FTC arose from a suit the FTC brought against Scott Tucker and his payday lending companies, alleging that he extracted more than $1.3 billion in deceptive charges by inducing consumers, without proper disclosure, to enter into loans that renewed automatically. The district court ultimately ordered Tucker’s companies to pay $1.27 billion in restitution and disgorgement under Section 13(b). Tucker appealed.

In a unanimous opinion, the Court ruled that Section 13(b)’s “permanent injunction” language did not give the FTC power to pursue restitution and disgorgement in court without first using its administrative procedure powers. The Court pointed to several factors that indicate that Section 13(b) does not allow the FTC to pursue such monetary relief. It found that the language of Section 13(b) refers only to injunctions, which the Court held are “not the same as an award of equitable monetary relief.”[3] The Court noted that the FTC has the power to seek monetary relief under Sections 5 and 19 of the FTCA in administrative proceedings, and held that the FTC cannot use Section 13(b) to circumvent Sections 5 and 19.[4]

While the Supreme Court’s decision limits the FTC’s enforcement powers in federal court, consumer-facing companies should not relax their existing compliance regimes. First, the FTC may still seek disgorgement and restitution through administrative proceedings. Second, earlier this week, the House of Representatives Energy and Commerce Committee announced that it would hold a legislative hearing on April 27 focused on amending Section 13(b) to allow the FTC to bring federal actions for equitable monetary relief, an idea which has received bipartisan support.[5] Following the decision, FTC Acting Chairwoman Rebecca Kelly Slaughter issued a statement calling on Congress “to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”[6] In the interim, the FTC will likely use administrative procedures to obtain monetary awards on behalf of consumers.


[1] AMG Capital Mgmt., LLC v. FTC, 593 U.S. ___ (2021) slip op at 5.

[2] Id. at 6.

[3] Id. at 6.

[4] Id. at 9-10. The Court stressed that the FTC may still file suit for injunctive relief simultaneously with administrative proceedings, but may not seek money damages in court.

[5] See “E&C Announces Hearing on Legislation to Preserve FTC’s 13(b) Consumer Protection Powers,” House Committee on Energy and Com. (April 20, 2021), https://energycommerce.house.gov/newsroom/press-releases/ec-announces-hearing-on-legislation-to-preserve-ftc-s-13b-consumer.

[6] “Statement by FTC Acting Chairwoman Rebecca Kelly Slaughter on the U.S. Supreme Court Ruling in AMG Capital Management LLC v. FTC,” The Federal Trade Commission. (April 22, 2021), https://www.ftc.gov/news-events/press-releases/2021/04/statement-ftc-acting-chairwoman-rebecca-kelly-slaughter-us.

 

*Law Clerk

[View source.]

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.

© Kramer Levin Naftalis & Frankel LLP | Attorney Advertising

Written by:

Kramer Levin Naftalis & Frankel LLP
Contact
more
less

Kramer Levin Naftalis & Frankel LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.