Supreme Court Rules FTC Cannot Get Section 13 (b) Monetary Relief – Consumer Protection

United States: Supreme Court Rules FTC Cannot Get Section 13 (b) Monetary Relief

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On April 22, 2021, in a unanimous decision, the United States Supreme Court in AMG Capital Management v. FTC ruled that permission to seek a “permanent injunction” under Section 13 (b) of the Federal Trade Commission Act does not allow the FTC to obtain fair monetary relief such as restitution and restitution.

In the underlying litigation, the FTC sued an individual and several entities for engaging in “unfair or deceptive acts or practices” by deceiving consumers into providing short term payday loans online. . In addition to seeking a permanent injunction, the FTC also sought restitution and restitution. The district court issued a permanent injunction and granted the monetary relief sought by the FTC in the amount of nearly $ 1.27 billion. The United States Court of Appeals for the Ninth Circuit asserted, relying on its precedent, that section 13 (b) “empowers district courts to grant any ancillary relief necessary to achieve full justice, including restitution ”. FTC vs. AMG Cap. Management., LLC, 910 F.3d 417, 426 (9th Cir. 2018) (inner quotes omitted). The Ninth Circuit ruling was in agreement with six other circuit appeal courts that interpreted section 13 (b) similarly, but in 2019, the United States Court of Appeals for the Seventh Circuit ruled that created a circuit split when it ruled that restitution was not available under Article 13 (b).

Writing for the Court, Justice Breyer resolved the circuit split and in so doing disagreed with the Ninth Circuit, holding that “as presently written” Article 13 (b) “does not authorize the Commission to obtain fair monetary relief”.

Key points to remember

  • The FTC can still seek monetary redress through Section 19 of the Act for deceptive or unfair acts or practices that violate Section 5 of the Act, as the Supreme Court expressly noted. This path, however, can be longer and more difficult for the agency to follow. Section 19 can only be used after the FTC has entered into an administrative dispute that resulted in a final cease-and-desist order, and then initiates a district court action in which it establishes that the conduct to which the cease and desist order relates is a “reasonable man” would have known in the circumstances to be “dishonest or fraudulent”.
  • While the FTC does not have a generally applicable civil sanction power for all Section 5 violations, civil penalties where available (such as for violations of certain rules such as the Personal Protection Act) Children’s Online Privacy (COPPA) and violations of consent orders) are unaffected by the Court Decision.
  • Non-monetary remedies also remain unchanged. Particularly in matters of privacy and data security, the FTC has long relied on remedial measures such as requirements that companies build and maintain internal programs or adopt certain technical practices.
  • Acting FTC President Rebecca Kelly Slaughter expressed his disappointment in the court ruling, stating that “the court has deprived the FTC of the most powerful tool we have to help consumers when they need it most.” She plans to call on Congress “to act quickly and advance legislation to protect and strengthen the powers of the FTC.” It remains to be seen how Congress will act, including whether it could legislate to provide the equitable monetary relief capacity sought by the FTC in the future. AMG capital management case or maybe even offer greater monetary relief options to the FTC.
  • Even if Congress does not act, state attorneys general may step in to seek restitution in cases where the FTC obtains other remedies. Many states have their own unfair and deceptive acts and practices laws that allow state attorneys general to seek redress (as well as civil penalties). Lawyers for class action plaintiffs can also seek pecuniary relief in cases where the FTC is unable to do so.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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