Unanimous Decision by the U.S. Supreme Court Recently Halts Federal Trade Commission’s Ability To Seek Monetary Relief Under § 13(b) of Federal Trade Commission Act
A recent decision by the U.S. Supreme Court has taken away the Federal Trade Commission’s (“FTC’s”) most employed tool for seeking monetary relief: § 13(b) of the FTC Act. In AMG Capital Management, LLC v. FTC, the Court unanimously held that the FTC could not seek monetary relief, such as restitution or disgorgement, in federal court under § 13(b), without first completing its administrative process, subject to Commission and judicial review, and satisfying other conditions and limitations under § 19 of the FTC Act. AMG Cap. Mgmt., LLC v. Fed. Trade Comm’n, 141 S. Ct. 1341, 1344-45, 1351 (2021).
Section 13(b) was passed by Congress in 1973 and provides, in relevant part, “a temporary restraining order or a preliminary injunction may be granted,” and “in proper cases the Commission may seek, and . . . the court may issue, a permanent injunction.” 15 U.S.C. § 53. For decades, the FTC has sued companies in federal court under § 13(b) seeking not only an injunction, but also equitable monetary relief. Over the years, commenters, including amici curiae in AMG, have criticized this use of § 13(b) as dramatically altering the enforcement environment and parties’ expectations, and as bypassing Congress’s statutory scheme under §19. In FTC v. Credit Bureau Center, LLC, the Seventh Circuit created a circuit split when it held that § 13(b) does not allow the FTC to seek monetary relief. 937 F.3d 764, 767, 786 (7th Cir. 2019).
In AMG the Supreme Court followed the reasoning of the Seventh Circuit. The Court analyzed the statutory language of § 13(b) and emphasized the presence of prospective language such as “is violating” and “is about to violate,” and the absence of retrospective language such as “has violated.” 141 S. Ct. at 1348. The Court concluded that the language expressly providing only for prospective injunctive relief did not provide also for retrospective monetary relief. See id. The Court also concluded that Congress would not have enacted § 19 if § 15 already provided for monetary relief without satisfying the requirements of § 19. See id. at 1349-51.
This holding is likely to have a significant impact on the FTC, as the agency has used § 13(b) to seek monetary awards in antitrust and consumer protection cases with growing frequency over the past forty years. See id. at 1346-47. The FTC’s Acting Chairwoman Rebecca Kelly Slaughter referred to this ruling as a deprivation of “the strongest tool we had.” 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). In the past five years alone, the FTC’s § 13(b) enforcement cases have resulted in the return of $11.2 billion to consumers. Id.
The FTC is already seeing an impact on its pending cases. As of April 2021, the FTC had 24 active federal court cases that relied exclusively on § 13(b) for monetary relief. These 24 cases represented $2.4 billion in potential recoveries. The Consumer Prot. and Recovery Act: Returning Money to Defrauded Consumers, Virtual Hr’g Before Subcomm. on Consumer Prot. and Commerce, Comm. on Energy and Commerce, 117th Cong. (Apr. 27, 2021). On the competition front, affected cases include the Martin Shkreli “Pharma Bro” matter in which defendants raised drug prices from $17.50 to $750, and a matter in which a district court awarded $493 million dollars in restitution to consumers harmed by inflated drug prices. Id. In FTC v. Surescripts, LLC, the FTC stipulated to withdraw its request for equitable monetary relief, without prejudice to its ability to seek leave to reinstate such request should Congress subsequently authorize the FTC to seek such relief. Case 1:19-cv-01080-JDB (D.D.C.), Dkt. 92, 93.
Congress’s authorization of the FTC to seek monetary relief under § 13(b) is possible. Justice Breyer, writing for the Court, contextualized the holding in AMG with this very possibility by stating that “if the Commission believes that authority too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority.” 141 S. Ct. at 1352. The FTC is, in fact, seeking Congress’s passage of the Consumer Protection and Recovery Act, H.R. 2668, which would provide the FTC with the authority to seek equitable relief, including disgorgement. However, the bill is drafted to impose a new ten-year statute of limitations. While there appears to be bipartisan support for the bill, its terms continue to be discussed.
The FTC’s efforts are not unprecedented. In Kokesh v. SEC and Liu v. SEC, the U.S. Supreme Court limited the Securities and Exchange Commission’s (“SEC’s”) ability to seek disgorgement as a remedy. 137 S. Ct. 1635 (2017); 140 S. Ct. 1936 (2020). In 2021, Congress assented to the SEC’s calls for legislative reform by passing § 6501 of the National Defense Authorization Act, amending § 21(d) of the Securities and Exchange Act, and expressly authorizing the SEC to seek disgorgement. 15 U.S.C. § 78u.
The FTC’s timeline for potential reform of § 13(b) may be accelerated because it is occurring against the backdrop of other legislative efforts that are seeking to make sweeping changes to the antitrust laws. For example, Senators Mike Lee (R-UT) and Amy Klobuchar (D-MN) recently introduced the State Antitrust Enforcement Venue Act of 2021, and Senator Amy Klobuchar also introduced the Competition and Antitrust Law Enforcement Reform Act. With the active congressional hearings on § 13(b) and a legislative environment of sweeping antitrust reform, the response to AMG should be closely watched.
In the meantime, the FTC is not without significant power. It still may seek monetary relief in federal court under § 19, subject to its statute of limitations and other requirements. 15 U.S.C. § 57b; see FTC v. Figgie Int’l, Inc., 994 F.2d 595, 598, 601, 606-07 (9th Cir. 1993). In addition, it may coordinate with state attorneys general, who may seek monetary relief under state law.