Third Circuit rules FTC cannot obtain disgorgement under FTC Act Section 13(b)

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Last week, in FTC v. AbbVie Inc., the U.S. Court of Appeals for the Third Circuit ruled that Section 13(b) of the Federal Trade Commission Act, which expressly gives the FTC authority to obtain injunctive relief, does not allow a district court to order disgorgement.  In July 2020, the U.S. Supreme Court agreed to decide whether Section 13(b) allows a district court to order restitution.

In a complaint filed in federal district court, the FTC charged that AbbVie illegally blocked American consumers’ access to lower-cost alternatives to a drug whose patent was held by AbbVie through the filing of baseless patent infringement lawsuits against potential generic competitors.  In June 2018, the district court ruled that AbbVie used sham litigation to illegally maintain its monopoly and ordered $448 million in monetary relief to consumers who were overcharged for the drug as a result of AbbVie’s conduct.  According to the FTC, the order represented the largest monetary award ever in a litigated FTC antitrust case.

In ruling that the district court erred in ordering disgorgement, the Third Circuit observed that while Section 13(b) authorizes district courts to enjoin antitrust violations, it does not explicitly empower district courts to order disgorgement.  It also found support for its interpretation in other FTC Act provisions that address the FTC’s enforcement powers.  .

The Supreme Court agreed to decide the question of whether Section 13(b) authorizes the FTC to obtain restitution to resolve a circuit split.  It granted petitions for certiorari in two cases that reached opposite conclusions.  One case is AMG Capital Management, LLC v. FTC, in which the Ninth Circuit, agreeing with six other circuits, held that by authorizing injunctive relief, Section 13(b) also allows a district court to grant ancillary relief, including monetary relief such as restitution.

The other case is FTC v. Credit Bureau Center, LLC, in which the Seventh Circuit reversed its own precedent and created the circuit split by holding that the FTC cannot obtain restitution under Section 13(b) because its plain terms provide solely for injunctive relief.

In its decision, the Third Circuit refers to disgorgement as a form of restitution.  It also cites the Seventh Circuit’s decision in Credit Bureau Center as support for its ruling.  Curiously, the Third Circuit makes no reference to the Supreme Court’s grant of certiorari.

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