Unanimous Supreme Court Limits FTC’s Ability to Seek Monetary Remedies
By Darren Tucker, Ryan Will, and Mike Mathews
On April 22, 2021, the Supreme Court limited the Federal Trade Commission’s ability to seek restitution or disgorgement under Section 13(b) of the FTC Act. Justice Stephen G. Breyer, author of the unanimous 9-0 decision, interpreted the language and history of the statute to find that the FTC’s ability to obtain equitable monetary remedies under the statute would allow “a small statutory tail to wag a very large dog.”1
Background and Procedural History
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” believed to be “violating, or [which] is about to violate, any provision of law” that the FTC enforces “in proper cases.”2 The FTC has interpreted this provision expansively over the last few decades to authorize it to seek equitable monetary damages in federal court. Federal courts and the majority of courts of appeal have agreed with the FTC’s position that Section 13(b) allows the agency to seek restitution and disgorgement as well.3 Section 13(b) differs from Sections 5 and 19 of the Act, which expressly allows the FTC to seek monetary relief on behalf of consumers when the FTC engages in administrative proceedings to seek penalties for violations of a cease and desist order.4
In AMG Capital, the FTC filed a lawsuit in federal district court against Scott Tucker, an owner of several payday lending companies, alleging unfair and deceptive acts in violation of Section 5 of the Act. Tucker, through several companies, provided borrowers with short-term payday loans amounting to more than $1.3 billion under allegedly misleading 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 disgorgement. A skeptical Ninth Circuit upheld the district court’s monetary damages order, noting that “Tucker’s argument has some force, but it is foreclosed by our [30 years of] precedent.”6 The Ninth Circuit’s decision aligned with decisions of other circuit courts except for a recent Seventh Circuit decision that rejected the argument that Section 13(b) permitted the FTC to seek restitution and other monetary relief (V&E previously discussed this case here).
The Court’s Reasoning
The Supreme Court granted certiorari to resolve the circuit court split and revised the Ninth Circuit. The Supreme Court found that the plain text of 13(b) does not permit the FTC to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.7 In holding that the FTC does not have such power, the Court found that:
- A statutory grant of an “injunction” does not automatically authorize a court to provide monetary relief.8
- The provision uses language such as “is violating” or “is about to violate,” suggesting that the law is focused on relief that is prospective (such as an injunction), not retrospective (such as monetary awards).9
- The Court highlighted instances in the Act, under Section 5 and 19, where the FTC is explicitly authorized to impose limited monetary penalties and to award monetary relief,10 and reasoned that Congress would have done the same in 13(b) had that been its intent.11 To find otherwise, according to the Court, would effectively allow the FTC to bypass Section 19 of the FTC Act, which allows the FTC to seek redress, including equitable monetary relief, after following certain requirements, including issuing a cease and desist order and filing suit in federal court, and other limitations.
The Court seemed to recognize that its decision may not be the most desirable outcome, but left to Congress the decision of whether to grant the FTC power to obtain retrospective monetary relief. Justice Breyer explained that the FTC is “free to ask Congress to grant it further remedial authority.”12
The Court’s decision will require the FTC to rethink its enforcement strategy. The FTC has relied heavily on Section 13(b) to collect billions in monetary penalties in recent years. In 2016 alone, the FTC utilized its Section 13(b) authority to receive $12 billion due to restitution and disgorgement, with about $10 billion coming from its settlement with Volkswagen AG due to the diesel-emissions scandal.13 In fiscal year 2019, the FTC obtained 81 permanent injunctions and orders, resulting in $723.2 million in consumer redress or disgorgement.14
Without its ability to use Section 13(b) to seek monetary relief, the FTC will need to shift reliance to its administrative capabilities, which it has historically used far more sparingly than its Section 13(b) powers. In 2019, the FTC only issued 21 new administrative complaints and 21 final administrative orders, less than half of the 49 complaints filed in federal court.15 The FTC utilizes its administrative powers less frequently because it can only seek equitable monetary remedies for those “who engage[d] in any unfair or deceptive act or practice . . . with respect to which the Commission has issued a final cease and desist order which is applicable to such person.”16 Therefore, the FTC is much more limited in its ability to seek monetary remedies through its Sections 5 and 19 powers.
The decision is also likely to provoke a Congressional response. Rebecca Kelly Slaughter, Acting Chairwoman of the FTC, found that the Court’s decision “deprived the FTC of the strongest tool we had to help consumers when they need it most.” The Chairwoman “urge[d] Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”17 The FTC also asked Congress for that authority in a recent Congressional hearing. For its part, Congress is considering at least one bill, with potentially more in the pipeline.18 Such action by Congress in response to judicial restrictions on agency authority has recent precedent. In 2020, Congress utilized the annual National Defense Authorization Act to expand the Securities and Exchange Commission’s ability to obtain disgorgement and other equitable remedies after the Supreme Court limited the agency’s ability to obtain disgorgement.19
Until Congress acts, the FTC will not be able to pursue monetary relief in the same manner it has for the last few decades. The FTC has preferred 13(b) actions over administrative actions because it affords the FTC a wider range of equitable remedies. The ruling will cut off a key facet of the FTC’s enforcement in the consumer protection space as it often used 13(b) to seek restitution against companies in cases of fraud or misrepresentation. The ruling will also impact the FTC’s toolkit in combating alleged anticompetitive practices in the pharmaceutical industry, such as “pay-for-delay” arrangements. Moving forward, the FTC will only be able to seek monetary relief if a company violates an existing cease and desist order or rule targeting a specific act.
1 AMG Capital Mgmt., LLC v. FTC, No. 19-508, slip op. at 8 – 9 (U.S. Apr. 22, 2021) (“AMG Capital”).
2 87 Stat. 592, 15 U.S.C. § 53(b).
3 A Brief Overview of the Federal Trade Commission’s Investigative, Law Enforcement, and Rulemaking Authority, FTC (Oct. 2019), https://www.ftc.gov/about-ftc/what-we-do/enforcement-authority#:~:text=In%20the%20competition%20context%2C%20the,of%20an%20FTC%20administrative%20proceeding.
4 AMG Capital Mgmt., slip op. at 4.
5 AMG Capital Mgmt., slip op. at 2.
6 Fed. Trade Comm’n v. AMG Cap. Mgmt., LLC, 910 F.3d 417, 426 (9th Cir. 2018), rev’d and remanded, AMG Capital Mgmt., LLC v. FTC¸ No. 19-508, slip op. (Apr. 22, 2021).
7 AMG Capital Mgmt., slip op. at 1.
8 Id. at 11.
9 Id. at 7 – 8.
10 Id. at 9.
12 Id. at 14.
13 Press Release, Federal Trade Commission, In Final Court Summary, FTC Reports Volkswagen Repaid More Than $9.5 Billion to Car Buyers who were Deceived by “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 at 6 (citing FTC, Fiscal Year 2021 Congressional Budget Justification 5 (Feb. 10, 2020), https://www.ftc.gov/system/files/documents/reports/fy-2021-congressional-budget-justification/fy_2021_cbj_final.pdf.).
16 Id. at 4 (citing § 57b(a)(2))
17 Statement by FTC Acting Chairwoman Rebecca Kelly Slaughter on the U.S. Supreme Court Ruling in AMG Capital Management LLC v. FTC, (Apr. 22, 2021), https://www.ftc.gov/news-events/press-releases/2021/04/statement-ftc-acting-chairwoman-rebecca-kelly-slaughter-us.
18 AMG Capital Mgmt., slip op. at 6.
19 See Kokesh v. SEC, 137 S. Ct. 1635 (2017); Liu v. SEC, 140 S. Ct. 1936 (2020).
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.