Revealing Potential New Strategy, FTC Partners With States After Supreme Court Regulatory Agency Banned From Seeking Monetary Remedies Under Section 13 (b) Of FTC Act | Akin Gump Strauss Hauer & Feld LLP
- Last month, the Supreme Court dismantled a long-standing FTC enforcement tool in a unanimous decision declaring that the FTC law did not allow the agency to use its power to seek an injunction under section 13 (b) as a means of pursuing pecuniary remedies against offenders.
- In its first major use of section 13 (b) since that ruling, the FTC sought help from states whose competition laws allow restitution, restitution and other monetary remedies.
- This potential new strategy notwithstanding, the FTC continues to urge Congress to act to restore its rule under section 13 (b).
The history of Article 13 (b)
In 1973, Congress amended the Federal Trade Commission Act of 1914 (the “FTC Act”) by adding Section 13 (b), which gave the agency the power to seek injunctions in the Federal District Court to end injunctions. unfair and deceptive practices. Despite the reference to an injunction, Section 13 (b) has become a well-established FTC tool for seeking ancillary relief, including monetary remedies for consumers. The use of Section 13 (b) to obtain monetary remedies has allowed the FTC to shorten an otherwise protracted process in which the FTC must sue and win several separate actions under its separate authority under section 19. For example, in the most famous use of the authority of Section 19 of the FTC, United States v. Figgie Int., Inc., 994 F.2d 595 (9th Cir. 1993), the FTC spent ten years in litigation only to obtain $ 4 million in refunds for consumers. Meanwhile, the FTC obtained a cease and desist order under Section 5 of the FTC Act, prevailed in an administrative lawsuit, prevailed in an appeal to the FTC commissioners, and triumphed over an appeal to the 4th circuit. Only then was the FTC able to bring a Section 19 action to seek redress from consumers. In that action, the FTC prevailed over summary judgment from the district court and won on appeal to the 9th Circuit. Notably, the 9th Circuit warned that Section 19 does not necessarily flow from Section 5 responsibility, meaning the FTC must prevail at every turn to ultimately obtain relief under Section 5. 19.
To avoid this process, the FTC has relied on Section 13 (b), actively using it to seek monetary compensation in settlements and in the courts. Although it has become common practice, the use of section 13 (b) to obtain damages has long been criticized, and in recent years, criticism has started to gain ground in the courts. . In FTC v AMG Capital Mgmt, LLC, 910 F.3d 417, 421 (9th Cir. 2018), the 9th Circuit upheld the FTC’s power to seek monetary remedies under Section 13 (b) based on the 9th Circuit precedent, but two of the panel’s judges reached an agreement that called into question the accuracy of the precedent. Then, in 2019 and 2020, Circuit 7 and Circuit 3, respectively, both ruled that the FTC law did not allow the agency to seek monetary relief under section 13 (b). With a split circuit firmly in place, the Supreme Court granted a certificate in AMG Capital Mgmt.
The SCOTUS decision
AMG Capital Management, LLC v FTC, 141 S. Ct. 1341 (2021), involved deceptive payday lending practices. In that case, the Section 13 (b)-only FTC sought a permanent injunction to prevent the business owner from committing future violations as well as over $ 1 billion in restitution and restitution. The district court granted relief and the 9th Circuit upheld it. A unanimous Supreme Court disagreed. Justice Breyer wrote for the Court. In a concise opinion, he explained that the wording of section 13 (b) focuses on a remedy that is “prospective, not retrospective” and that the statutory provisions of the FTC Act, in particular the monetary remedy permitted to the section 19, confirm that Congress did not intend to grant the FTC the power to obtain fair pecuniary relief directly in the court of first instance.
Consequences and way forward
Acting President Rebecca Slaughter was quick to express her displeasure with the court’s decision. She described the court as having “ruled in favor of crooks and dishonest companies” and “depriving[ing] the most powerful tool we have available to help consumers when they need it most. The Acting President and other Commissioners had urged Congress even before the ruling (in a letter of November 22, 2020 and in testimony on Hill on April 20, 2021) to secure the FTC’s power to seek monetary remedies in under Article 13 (b) by amending Article 13 (b) to clarify that it provides for monetary relief. On April 27, 2021, just five days after the AMG decision, Acting President Slaughter was once again on the Hill speaking in favor of a bill that would do just that. Although there is bipartisan support in the FTC for amending Section 13 (b), the current Consumer Protection and Recovery Act bill does not have Republican co-sponsors and it does not have Republican co-sponsors. It is unclear whether corrective legislation will be adopted this year. . That said, we anticipate that Section 13 (b) will eventually be amended to give the FTC the right to seek some form of monetary relief.
Stripped of a long-used tool, the FTC is now trying to sidestep the Supreme Court ruling by joining states that can seek monetary redress under state laws to challenge allegedly unfair and deceptive conduct. In a lawsuit filed earlier this week in California against an internet service provider, the FTC joined five states (Arizona, Indiana, Michigan, North Carolina, Wisconsin) and Los Angeles and Riverside counties in California asking an injunction under section 13 (b) and seeking monetary compensation in accordance with the laws of the various states authorizing “restitution, repayment of monies paid, restitution of ill-gotten monies and other equitable remedies [including civil penalties and attorneys’ fees], to prevent and / or stop continued deception or unfair acts or practices caused by violations of the law of the State of the defendants. ” Fed. Trade Comm’n et al v Frontier Commc’ns Corp. In the complaint, the plaintiffs assert that the court has additional jurisdiction over the various claims of state law; arguments as to whether this is correct could complicate and prolong the litigation. Regardless of the outcome, the path the FTC chooses will almost certainly be faster and easier than the Figgie International result discussed above.
Even as the FTC tries to circumvent the AMG decision, there is no doubt that the Supreme Court severely hampered the FTC’s ability to seek monetary redress against companies accused of unfair or deceptive practices. Until Article 13 (b) is revised, companies facing such allegations will have more bargaining power in settlement negotiations, but the Border complaint makes it clear that the FTC has not waived consumer redress.