On April 22, 2021, the United States Supreme Court unanimously held that § 13(b) of the Federal Trade Commission Act (the Act) does not authorize the Federal Trade Commission (FTC) to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.1 The FTC previously used § 13(b) as a significant enforcement tool, recovering billions of dollars in a variety of cases, including telemarketing fraud, anticompetitive practices, data security and privacy, and deceptive practices.
The Supreme Court’s decision in AMG Capital Management, LLC v. FTC settles a prior split between the circuit courts, and leaves the FTC without one of its most important enforcement tools; at least for now.2
The Act authorizes the FTC to investigate and file suits to stop conduct constituting “[u]nfair methods of competition” and “unfair or deceptive acts or practices.” 15 U.S.C. § 45(a)(1)-(2). The FTC has always had the ability to enforce the Act through administrative proceedings, as outlined in § 5 of the Act. In the 1970s, Congress authorized the FTC to seek additional remedies in court, adding § 13(b). This permitted the FTC to proceed directly to court to seek injunctive relief, including both temporary and permanent injunctions. 15 U.S.C. § 53(b). However, for many years, the FTC has relied on its authority under § 13(b) to seek and obtain fines, in the form of disgorgement and restitution.3 Thus, in 2019, the FTC filed 49 complaints in federal court, obtained 81 permanent injunctions, and collected $723.2 million in restitution or disgorgement. During the same time, the FTC filed only 21 administrative orders.4
In AMG Cap. Mgmt., the FTC filed suit against Scott Tucker in 2012, alleging a payday lending scheme involving “unfair or deceptive acts or practices in or affecting commerce,” in violation of § 5 of the Act.5 Rather than using the administrative proceedings outlined in § 5 of the Act, the FTC sought a permanent injunction preventing Tucker and his companies from committing future violations pursuant to § 13(b) of the Act. In September 2016, the U.S. District Court for the District of Nevada granted the FTC’s request for an injunction, along with restitution and disgorgement under § 13(b), and ordered Tucker to pay $1.27 billion.6 Tucker appealed that decision to the Ninth Circuit, arguing that § 13(b) of the Act does not authorize the award of equitable monetary relief, an argument the Ninth Circuit rejected although some circuits had held otherwise.7 The U.S. Supreme Court held oral arguments on the matter on January 13, 2021.
9-0 Supreme Court holds § 13(b) doesn’t permit equitable monetary relief
On April 22, 2021, Justice Breyer delivered the opinion of the unanimous Supreme Court, holding that § 13(b) Act does not authorize the FTC to seek, or any court to award, equitable monetary relief.
First, the Court explained that the language of the statute itself only refers to injunctions, and the language and structure of § 13(b) taken as a whole indicates that the equitable relief authorized thereunder is prospective, rather than retrospective, in nature.8
Second, the Court noted that Congress, through § 5(l) and § 19, authorized district courts to impose limited monetary penalties and award monetary relief in cases where the FTC has issued cease and desist orders after administrative proceedings. The Court noted that it is highly unlikely that Congress would have so provided if it had intended to provide the FTC with even broader authority to seek monetary relief under § 13(b).
Third, the Court also found each of the FTC’s arguments to be unpersuasive. The Court rejected as inapposite two cases in which the courts permitted the agencies to seek monetary relief because unlike the Act, those statutes clearly reflected Congress’s intent to authorize the agencies to seek and recover monetary relief. The FTC also argued that Congress intended to create two avenues of enforcement – one judicial and one administrative – leaving the decision of which course to pursue to the FTC. The Court dismissed this argument, opining that it “cannot believe that Congress merely intended to enact a more onerous alternative to § 13(b) when it enacted § 19 two years later.”