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WSGR | The FTC Can No Longer Go to Court for Monetary Relief Under Section 13(b)

On April 22, 2021, the United States Supreme Court unanimously decided the closely watched case AMG v. FTC. Petitioners argued that the Federal Trade Commission (FTC) had no authority to get monetary relief under Section 13(b) of the FTC Act, which by its text provides for, at most, “a permanent injunction.” The decision marks the end of the FTC’s broad exercise of 13(b) authority to get money back from those who violate the FTC Act—for now.

Section 13(b) has been a cornerstone of the FTC’s consumer fraud program, and the agency has used the provision to litigate some antitrust violations as well. Under the provision, the commission frequently sued alleged violators directly in federal district court—bypassing any administrative process. It was a powerful stick for negotiating with alleged violators and an effective follow-through when those entities chose not to settle.

In a unanimous decision written by Justice Breyer, the Supreme Court held that the statute does not authorize the FTC to seek “equitable monetary relief such as restitution or disgorgement.” In essence, the Court decided that Section 13(b)’s reference to a “permanent injunction” means just that and no more. So, for monetary relief, the FTC is now left with its existing authority under Section 19 of the FTC Act. Section 19 imposes a number of hurdles: the FTC must obtain a final administrative order and then file a separate action in federal district court to obtain consumer redress, refund of money, and “payment of damages.” Significantly, to obtain monetary relief under Section 19, the FTC must prove that a reasonable person would have known under the circumstances that the conduct was dishonest or fraudulent.

But this decision does not come in a vacuum. It is part of a broader trend by lower courts of even further stripping the FTC’s 13(b) injunctive authority amidst countervailing signs that Congress may expressly enlarge that authority. Wilson Sonsini attorneys Christopher Olsen and Stephen Schultze analyze these developments in their article, “FTC Authority Under Siege: Monetary and Injunctive Relief at Risk in Courts as Congress Contemplates a Response,” published on April 21, 2021 in the ABA journal, The Antitrust Source.

While the Supreme Court settled an important issue today, the law around FTC enforcement authority is in flux. Indeed, just the day before the decision was announced, the FTC testified before Congress that “Section 13(b) is a critical tool in support of our enforcement missions, but its effectiveness is currently imperiled [by AMG and further curtailments by circuit courts], and this uncertainty is hurting our ongoing enforcement efforts.” The commission called for legislation, and a bill that would reverse the effect of AMG was introduced on April 21 in the House with a subcommittee hearing scheduled for next week. We will watch closely for developments in this area.

Contacts:

  • Lydia Parnes, Partner | lparnes[at]wsgr.com
  • Christopher Olsen, Partner | colsen[at]wsgr.com
  • Stephen Schultze, Associate | sschultze[at]wsgr.com
  • Kelly Singleton, Associate | ksingleton@wsgr.com

Compliments of Wilson Sonsini Goodrich & Rosati – a member of the EACCNY.