Supreme Court Unanimously Limits FTC’s Ability to Seek Pecuniary Remedies | Vinson & Elkins LLP
On April 22, 2021, the Supreme Court limited the ability of the Federal Trade Commission to seek restitution or restitution under Section 13 (b) of the FTC Act. Judge Stephen G. Breyer, author of the 9-0 unanimous decision, interpreted the wording and history of the law to conclude that the FTC’s ability to obtain equitable monetary remedies under the law would allow ” a small statutory tail to wag a very large dog. . “1
Context and history of the proceedings
Section 13 (b) of the Federal Trade Commission Act (the “Act”) authorizes the FTC to seek a “permanent injunction” in federal court against “any person, partnership or corporation” suspected of “violating, or [which] is about to violate any provision of the law “which the FTC enforces” where appropriate. “2 The FTC has interpreted this provision broadly over the past decades to allow it to seek fair damages in Federal Court. Federal courts and the majority of appellate courts have endorsed the FTC’s position that Section 13 (b) allows the agency to seek restitution and restitution as well.3 Section 13 (b) differs from Sections 5 and 19 of the Act, which expressly authorizes the FTC to seek monetary relief on behalf of consumers when the FTC initiates administrative proceedings to seek penalties for breach of an order. prohibition and withdrawal.4
In AMG Capital, the FTC filed a lawsuit in Federal District Court against Scott Tucker, owner of several payday loan companies, alleging unfair and deceptive acts in violation of section 5 of the law. Tucker, through several companies, has provided borrowers with short-term payday loans totaling over $ 1.3 billion on allegedly deceptive terms.5
The FTC relied on Section 13 (b) to seek – and obtain – not only a permanent injunction, but also $ 1.27 billion in restitution and restitution. A Ninth Circuit skeptic upheld the district court’s damages order, noting that “Tucker’s argument has some force, but it is excluded by our [30 years of] previous.”6 The Ninth Circuit ruling aligned with the rulings of other circuit courts, with the exception of a recent Seventh Circuit ruling which rejected the argument that Section 13 (b) allowed the FTC to seek a restitution and other pecuniary reparations (V&E previously discussed this matter here).
The reasoning of the Court
The Supreme Court granted certiorari to resolve the circuit court split and revised the Ninth Circuit. The Supreme Court concluded that the clear text of 13 (b) does not allow the FTC to seek or a court to grant fair pecuniary relief such as restitution or restitution.7 Finding that the FTC does not have such power, the Court concluded that:
- The statutory grant of an “injunction” does not automatically authorize a court to grant monetary relief.8
- The provision uses terms such as “violated” or “is about to violate”, suggesting that the law focuses on prospective remedy (such as an injunction) and not retrospective (such as monetary compensation).9
- The Court identified instances in the Act, under Sections 5 and 19, where the FTC is expressly authorized to impose limited pecuniary penalties and grant pecuniary relief,ten and ruled that Congress would have done the same in 13 (b) if that had been its intention.11 To rule otherwise, the Court said, would effectively allow the FTC to circumvent Section 19 of the FTC Act, which allows the FTC to seek relief, including fair pecuniary relief, after meeting certain requirements, including the issuance of a cease and desist order and filing lawsuit in federal court and other limitations.
The court appeared to recognize that its ruling was perhaps not the most desirable outcome, but left it up to Congress to decide whether or not to grant the FTC the power to obtain retrospective monetary relief. Judge Breyer explained that the FTC is “free to ask Congress to grant it additional remedial power.”12
To take away
The court ruling will force the FTC to rethink its enforcement strategy. The FTC has relied heavily on Section 13 (b) to collect billions of dollars in monetary penalties in recent years. In 2016 alone, the FTC used its Section 13 (b) authority to receive $ 12 billion due to restitution and disgorgement, with approximately $ 10 billion from its settlement with Volkswagen AG. due to the diesel emissions scandal.13 In fiscal 2019, the FTC obtained 81 permanent injunctions and orders, resulting in $ 723.2 million in consumer redress or restitution.14
Without its ability to use Section 13 (b) to seek monetary relief, the FTC will have to rely on its administrative capacity, which it has historically used much more sparingly than its powers under Section 13 (b ). In 2019, the FTC issued just 21 new administrative complaints and 21 final administrative orders, less than half of the 49 complaints filed in federal court.15 The FTC uses its administrative powers less frequently because it can only seek equitable monetary remedies for those “who initiate[d] in any unfair or deceptive act or practice. . . in respect of which the Board has made a final cease and desist order that applies to that person. “16 As a result, the FTC is much more limited in its ability to seek monetary remedies through its powers under Sections 5 and 19.
The decision is also likely to elicit a response from Congress. FTC Acting President Rebecca Kelly Slaughter said the court ruling “robbed the FTC of the most powerful tool we have to help consumers when they need it most.” The President “urges[d] Congress must act quickly to restore and strengthen the agency’s powers so that we can make amends for aggrieved consumers. “17 The FTC also asked Congress for this authority in a recent congressional hearing. For its part, Congress is considering at least one bill, with potentially more in the pipeline.18 Such Congressional action in response to judicial restrictions on agency authority has recent precedent. In 2020, Congress used the annual National Defense Authorization Act to expand the ability of the Securities and Exchange Commission to seek restitution and other fair remedies after the Supreme Court limited the ability of the agency to obtain restitution.19
Until Congress acts, the FTC will not be able to pursue monetary relief in the same way it has done for the past several decades. The FTC preferred 13 (b) actions over administrative actions because it provides the FTC with a wider range of equitable remedies. The ruling will cut off a key aspect of FTC enforcement in the consumer protection space, as it has often used 13 (b) to seek restitution from companies for fraud or misrepresentation. The ruling will also impact the FTC’s toolkit in tackling suspected anti-competitive practices in the pharmaceutical industry, such as “payment for delay” agreements. Going forward, the FTC will only be able to seek financial redress if a business violates an existing cease and desist order or rule for a specific act.
1 AMG Capital Mgmt., LLC v FTC, No. 19-508, op. 8 to 9 years old (United States, April 22, 2021) (“AMG Capital”).
2 87 Stat. 592, 15 USC § 53 (b).
3 A Brief Overview of the Federal Trade Commission Investigative, Law Enforcement, and Rulemaking Authority, FTC (October 2019), https://www.ftc.gov/about-ftc/what-we-do/enforcement-authority#:~: text = In% 20the% 20competition% 20context% 2C% 20the, of% 20an% 20FTC% 20administrative% 20processing.
4 AMG Capital Mgmt., brief op. at 4 o’clock.
5 AMG Capital Mgmt., slide op. at 2 hours.
6 Fed. Trade Comm’n vs. AMG Cap. Mgmt., LLC, 910 F.3d 417, 426 (9th Cir. 2018), revoked and dismissed, AMG Capital Mgmt., LLC v FTC¸ N ° 19-508, sliding op. (April 22, 2021).
7 AMG Capital Mgmt., slide op. to 1.
8 Identifier. At 11 o’clock.
9 Identifier. to 7 – 8.
ten Identifier. at 9 o’clock.
12 Identifier. to 14.
13 Press Release, Federal Trade Commission, In the Court’s final summary, the FTC reports that Volkswagen reimbursed more than $ 9.5 billion to car buyers who were deceived by the “Clean Diesel” ad campaign (July 27 2020), https://www.ftc.gov/ news-events / press-releases / 2020/07 / final-court-summary-ftc-reports-volkswagen-repaid-more-than-9-billion.
14 AMG Capital to 6 (citing FTC, Fiscal Year 2021 Congressional Budget Justification 5 (February 10, 2020), https://www.ftc.gov/system/files/documents/reports/fy-2021-congressional-budget-justification/fy_2021_cbj_final .pdf .).
16 Identifier. to 4 (citing § 57b (a) (2))
17 Statement by Acting FTC President Rebecca Kelly Slaughter on U.S. Supreme Court ruling AMG Capital Management LLC v FTC, (April 22, 2021), https://www.ftc.gov/news-events/press-releases/2021/04/statement-ftc-acting-chairwoman-rebecca-kelly-slaughter-us.
18 AMG Capital Mgmt., slide op. to 6.
19 See Kokesh v. DRY, 137 S. Ct. 1635 (2017); Liu vs. SEC, 140 S. Ct. 1936 (2020).