The Supreme Court unanimously held that Section 13(b) of the Federal Trade Commission Act does not give the Commission authority to bypass administrative proceedings and seek equitable monetary relief directly from the federal courts.
Section 13(b) of the FTC Act provides that when the Commission “has reason to believe that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission . . . in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction.” For over four decades the Commission has relied on this Section to bring consumer protection and antitrust actions directly before federal courts seeking injunctions and monetary relief, such as restitution and disgorgement, bringing “far more cases in court than it does through the administrative process.” And through this path, the Commission has obtained billions of dollars in relief, securing $11.2 billion in consumer refunds during the past five years alone.
In 2012, relying on Section 13(b), the Commission filed a complaint in federal court against Scott Tucker and his companies, claiming that their short-term payday lending practices were deceptive, unfair, and violated Section 5(a) of the FTC Act. At summary judgment, the district court granted the FTC’s request for an injunction and monetary relief, ordering Tucker to pay $1.27 billion in restitution and disgorgement, which was to be used by the Commission to provide “direct redress to consumers.” On appeal to the Ninth Circuit, Tucker contended that Section 13(b) does not give the Commission the authority to seek the monetary relief awarded by the district court. Adhering to its precedent, the Ninth Circuit found that Section 13(b) “empowers district courts to grant any ancillary relief necessary to accomplish complete justice, including restitution.” The Supreme Court granted Tucker’s petition for certiorari to address the recent Circuit split concerning the “scope of Section 13(b).”
As previously discussed here , during oral arguments Tucker maintained that because Section 5(l) expressly authorizes the Commission to seek “an injunction and other further equitable relief” in district courts against respondents who violate an Administrative Law Judge’s final cease and desist order, and this provision was amended concurrently with the enactment of Section 13(b), Congress intentionally restricted the Commission’s authority under Section 13(b) to “permanent injunctions” only. On the other side, the Commission argued that the textual variances reflected the functional differences between bringing a claim through the administrative process first versus going directly to the federal courts, and the enactment of Section 13(b) was Congress giving the Commission a choice of enforcement options.
The Supreme Court ultimately reversed the Ninth Circuit’s judgment and concluded that, based on the statutory language, Section 13(b) “does not grant the Commission authority to obtain equitable monetary relief.”
Specifically, the Court found that not only does Section 13(b) solely reference the ability to seek “injunctions,” but when considering the provision as a whole, including the grammatical structure—“is violating” and “is about to violate” —13(b) “focuses upon relief that is prospective, not retrospective.” Additionally, the Court considered the structure of the Act and the other provisions that explicitly authorize the Commission to seek monetary relief in federal courts only after going through the administrative process and obtaining a cease and desist order. This includes Section 5(l), which authorizes district courts to award “such other and further equitable relief as they deem appropriate”, and Section 19, which allows for “such relief as the court finds necessary to redress the injury to consumers.” Based on these provisions, the Court found it “highly unlikely” that 13(b) would allow the Commission “to obtain that same monetary relief and more” without first having to satisfy the conditions and limitations of going through the administrative process as required by Sections 5(l) and 19.
The Court concluded by remarking that the gap in the Commission’s authority made by its decision may be filled by a legislative fix. Following the decision, the FTC’s acting Chairwoman, Rebecca Kelly Slaughter, issued a statement urging Congress to “act swiftly and restore and strengthen the powers of the agency so we can make wronged consumers whole.” Until and unless Congress acts, advertisers are likely to see more administrative proceedings with the FTC, as well as the Commission seeking alternative routes for pursuing monetary relief no longer available under Section 13(b). Chairwoman Slaughter reaffirmed that during her opening statement on April 27, 2021 before the U.S. House Committee on Energy and Commerce Subcommittee on Consumer Protection and Commerce: “[A] word about the FTC’s other authorities: we will use them all—administrative proceedings, penalty offense authority, more rule-violation cases, more rulemaking, more civil penalty cases where we have specific statutory authority. But, without Congressional action, none of these options will come close to protecting consumers and incentivizing compliance as much as our lost 13(b) authority. I hope you will move swiftly to restore it.” To be continued, now in the halls of Congress.
The case is AMG Capital Management, LLC v. Federal Trade Commission, Docket No. 19-508, 593 U.S. __ (April 22, 2021).
© 2021 Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
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