Supreme Court Ruling Complicates FTC’s Ability to Obtain Consumer Redress

On April 22, the Supreme Court unanimously ruled in AMG Capital Management v. Federal Trade Commission that § 13(b) of the Federal Trade Commission (“FTC”) Act does not authorize the FTC to obtain equitable monetary relief, such as restitution for consumer harm.  This development will make it more complicated for the FTC to obtain consumer redress.  While the FTC will still be able to seek consumer redress through other legal avenues, especially § 19 of the FTC Act, these avenues generally impose additional legal requirements beyond what § 13(b) required.  This decision may prompt Congress to consider amending the FTC Act to increase the availability of consumer redress.  It may also encourage the CFPB to be more assertive in areas where the agencies share jurisdiction.

Prior to AMG Capital Management, the FTC had used § 13(b) to obtain consumer redress for decades.  For instance, in a 2002 case involving the FTC’s § 13(b) authority to seek consumer redress, the Seventh Circuit wrote that “the court’s authority to order restitution to the victims [using § 13(b) authority] … is not and cannot be questioned.”  See FTC v. Think Achievement Corp., 312 F.3d 259, 262 (7th Cir. 2002).  Indeed, a 1988 article by Robert D. Paul in the Antitrust Law Journal entitled “The FTC’s Increased Reliance on Section 13(b) in Court Litigation” noted that “in a suit for permanent injunction under Section 13(b), the Commission may seek, and courts have not hesitated to grant, not only permanent prohibitory relief, but restitution or disgorgement of monies to defrauded consumers.”  According to the FTC’s brief in AMG Capital Management, the FTC currently “brings dozens of [§ 13(b)] cases every year seeking [consumer redress].”

Despite the agency’s substantial current and historical reliance on § 13(b) as means of obtaining monetary relief, the Court held that this use of §13(b) was unlawful.  The Court rested its decision on the text of § 13(b).  § 13(b) is entitled “Temporary Restraining Orders; Preliminary Injunctions” and provides that, when the FTC has reason to believe a law it enforces is being violated and it would be in the public interest to enjoin such violation, “the Commission … may bring suit in a district court of the United States to enjoin [the violation].  Upon a proper showing that, weighing the equities and considering the Commission’s likelihood of ultimate success, such action would be in the public interest, and after notice to the defendant, a temporary restraining order or a preliminary injunction may be granted without bond …”  The Court noted that “the language refers only to injunctions” and is “buried in a lengthy provision that focuses upon purely injunctive, not monetary, relief.”  The Court also noted that Congress’s creation of § 19’s more cumbersome pathway to monetary relief would not make sense if Congress had intended Section 13(b) to provide such relief, but that “read[ing] § 13(b) to mean what it says, as authorizing injunctive but not monetary relief, produces a coherent enforcement scheme.”

The Supreme Court’s decision will require the FTC to resort to other, more cumbersome processes when it wishes to seek consumer redress.  For instance, for UDAP violations, the FTC will likely rely on § 19(a)(2) of the Act.  Unlike § 13(b), § 19(a)(2)’s provisions require the FTC to obtain a final cease and desist order before pursuing monetary relief.  In addition, § 19(a)(2) requires the FTC to prove that “a reasonable man would have known under the circumstances” that the challenged conduct “was dishonest or fraudulent” in order to obtain relief.  Under § 19(a)(2) it will be more difficult, although certainly not impossible, for the FTC to obtain consumer redress.

Congress may respond to AMG Capital Management by amending the FTC Act to explicitly restore the FTC’s power to seek redress in the manner which it had previously used § 13(b) to do.  In its decision, the Court noted that “the Commission has recently asked Congress” to do so in a 2020 statement to the Senate Committee on Commerce, Science and Transportation, and “Congress has considered at least one bill that would do so” (citing a 2020 Senate proposal).  Another bill filed on April 20, just two days prior to AMG Capital Management, would also explicitly restore the FTC’s earlier § 13(b) powers if enacted.  See H.R. 2668.

In the short term, this decision may also prompt the Consumer Financial Protection Bureau (“CFPB”) to be more assertive in areas where the two agencies share jurisdiction, such as regulating the debt collection industry.  The CFPB has broad power to seek consumer relief.  As long as the FTC’s ability to seek consumer relief is complicated by AMG Capital Management, the CFPB may take the lead in more cases where it can use its power to pursue consumer relief directly.

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