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The Federal Trade Commission (FTC) has long used its purported authority under Section 13(b) of the Federal Trade Commission Act (<a href="https://www.law.cornell.edu/uscode/text/15/53" target="_blank" rel="noopener">15 U.S.C. § 53(b)</a>) to obtain sometimes large monetary awards for consumers in federal court litigation, even though that statutory provision does not expressly provide authority for a court to award such a remedy. The U.S. Supreme Court has put an end to that practice, at least for now.

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On April 22, the Supreme Court unanimously held in AMG Capital Management, LLC v. FTC that the FTC cannot go directly to court to seek and obtain equitable monetary relief such as restitution or disgorgement under Section 13(b). Instead, the Court reasoned that the FTC must utilize its own administrative procedures to pursue such relief. Even before the decision was announced, however, the FTC had already begun lobbying Congress to provide it with the statutory authority to go directly to court.

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Justice Stephen Breyer’s <a href="https://www.supremecourt.gov/opinions/20pdf/19-508_l6gn.pdf" target="_blank" rel="noopener">unanimous opinion</a> focused on the FTC Act’s text, structure, and history, explaining that the FTC has statutory authorization to prevent “[u]nfair methods of competition” and “unfair or deceptive acts or practices” in two ways: administrative proceedings and court actions. The FTC’s power to file an administrative complaint traces back to the agency’s creation in 1914, but in the 1970s, Congress amended the FTC Act to allow the FTC to seek and obtain temporary, preliminary, and permanent injunctive relief directly in federal court without first pursuing an administrative cease-and-desist order, and other relief, including the “refund of money or return of property,” in cases where the FTC has issued a cease-and-desist order. The former authority, codified in Section 13(b), was at issue in AMG Capital Management. The Court’s opinion noted that the FTC “used this authority to seek and win restitution and other forms of equitable monetary relief directly in court” and also asserted that Section 13(b) provided the “authority in antitrust cases to seek monetary awards, such as restitution and disgorgement – again without prior use of traditional administrative proceedings.” Slip Op., at 5. Indeed, the FTC “presently uses §13(b) to win equitable monetary relief directly in court with great frequency,” even more than it utilizes the statutory administrative procedure. Id. at 5-6.

The Court framed its task as “answer[ing] a more purely legal question: Did Congress, by enacting §13(b)’s words, ‘permanent injunction,’ grant the Commission authority to obtain monetary relief directly from courts, thereby effectively bypassing the process set forth in §5 and §19?” Id. at 6. The Court answered that question in the negative, reasoning that the text of Section 13(b) “refers only to injunctions”; the structure of Section 13(b) demonstrates its “limited purpose” of focusing on “prospective, not retrospective,” relief to halt “seemingly unfair practices from taking place while the Commission determines their lawfulness”; it is “highly unlikely that Congress would have enacted provisions expressly authorizing conditioned and limited monetary relief if [Section 13(b)] had already implicitly allowed the Commission to obtain that same monetary relief and more without satisfying those conditions and limitations”; and it is also unlikely “that Congress, without mentioning the matter, would have granted the Commission authority so readily to circumvent its traditional §5 administrative proceedings.” Id. at 7-10.

The Court considered and rejected the FTC’s arguments, including its policy argument that “it is undesirable simply to enjoin those who violate the Act while leaving them the profits earned at the unjustified expense of consumers,” noting that the FTC has such authority through the use of its administrative procedure and if it feels “that authority is too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority.” Id. at 14. The Court concluded “that §13(b) as currently written does not grant the Commission authority to obtain equitable monetary relief.” Id.

The FTC, through Acting Chairwoman Rebecca Kelly Slaughter, issued a <a href="https://www.ftc.gov/news-events/press-releases/2021/04/statement-ftc-acting-chairwoman-rebecca-kelly-slaughter-us" target="_blank" rel="noopener">statement</a> denouncing the decision and asserting that “the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.” Indeed, the FTC presented <a href="https://www.ftc.gov/system/files/documents/public_statements/1589164/prepared_statement_of_the_ftc_before_the_senate_committee_on_commerce_science_and_transportation.pdf" target="_blank" rel="noopener">testimony to the Senate</a> just two days before the AMG Capital Management decision urging “Congress to affirm the FTC’s authority to return money to consumers using Section 13(b).” This followed an October 22, 2020 letter from all five FTC Commissioners to the House Energy and Commerce Committee requesting that Congress expand the FTC’s powers under Section 13(b). Additionally, on April 27, Acting Chairwoman Slaughter will appear before the House Subcommittee on Consumer Protection and Commerce “to advocate on behalf of consumers for Congress to act quickly and advance legislation to protect and strengthen the FTC’s powers.” If Congress acts, it will not be the first time it has expanded an agency’s power after a Supreme Court decision narrowly construed the scope of the agency’s authority. Congress did just that after the Supreme Court’s decision last year in <a href="https://www.supremecourt.gov/opinions/19pdf/18-1501_8n5a.pdf" target="_blank" rel="noopener">Liu v. Securities &amp; Exchange Commission</a>¸ 140 S. Ct. 1936, which struck down the SEC’s ability to obtain disgorgement awards that exceeded the wrongdoer’s net profits.

As a corollary, on March 25, the FTC <a href="https://www.ftc.gov/news-events/press-releases/2021/03/ftc-acting-chairwoman-slaughter-announces-new-rulemaking-group" target="_blank" rel="noopener">announced</a> the creation of a new rulemaking group “to strengthen existing rules and to undertake new rulemakings to prohibit unfair or deceptive practices and unfair methods of competition.” The FTC’s announcement also asserted that “clear rules” allow for easier compliance with the law and have a deterrent effect because of the potential for “significant civil penalties for rulebreakers.”

In sum, the AMG Capital Management decision comes amid seemingly increased interest in greater enforcement of antitrust and consumer protection laws. Interested parties should stay tuned to see whether the FTC and other agencies successfully pursue additional power by advocating for legislation from Congress or through their own statutory rulemaking authority and how the courts react to those pursuits.

Mark R. Butscha, Jr. 216.566.5897 <a href="mailto:Mark.Butscha@ThompsonHine.com">Mark.Butscha@ThompsonHine.com</a>

Matthew David Ridings, CCEP 216.566.5561 <a href="mailto:Matt.Ridings@ThompsonHine.com">Matt.Ridings@ThompsonHine.com</a>

Thomas F. Zych 216.566.5605 <a href="mailto:Tom.Zych@ThompsonHine.com">Tom.Zych@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel. This document may be considered attorney advertising in some jurisdictions.

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Supreme Court Rules FTC Cannot Obtain Equitable Monetary Relief Directly in Court

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