May 14, 2021

Volume XI, Number 134

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FTC Defense Lawyer on the Highly Anticipated Supreme Court Decision in AMG Capital Management and a Potential Legislative Fix to the FTC’s Embattled Enforcement Authority Under 13(b)

The issue in AMG is whether the FTC is statutorily entitled to use Section 13(b) of the FTC Act to obtain monetary remedies in federal court.

On April 20, 2021, the Senate Commerce Committee convened a hearing titled, “Strengthening the Federal Trade Commission’s Authority to Protect Consumers.”  The hearing addressed the Commission’s endangered consumer redress authority; the Commission’s efforts to fight fraud during the pandemic - including its new first-time civil penalty authority for COVID-related scams - and the Commission’s tools and capabilities in the information age, including $30.4 million in funding for consumer protection matters that Congress provided in the American Rescue Plan Act.

Majority Statement of U.S. Senator Maria Cantwell (D-WA), Chair of the Senate Committee on Commerce, Science, and Transportation:  We are here this morning to have our first hearing of this 117th Congress with the Federal Trade Commission.  So, I welcome the acting Chairwoman and Commissioners for this very first hearing.  I'd like to begin with a discussion of a report released yesterday by the FTC.  The report shines a spotlight on COVID-related fraud and scams preying on American consumers and their families during the pandemic.  These bad actors are kicking consumers when they are already down; peddling fake COVID cures, trolling for personal data in order to commit identity theft, and selling counterfeit PPP to first responders.  The FTC report shows a 45% increase in the number of consumer complaints filed for 2020 over 2019.  This matches the increase in consumer complaints filed with the Washington Attorney General's office during the height of the pandemic.

That's why we're here today, to strengthen the Commission's ability to fight for consumers. Unfortunately, the FTC’s long standing authority to return money to victims is endangered now at the Supreme Court.  This authority, the so called “13B authority” is the bread and butter of the FTC’s consumer protection mission.  For more than 40 years, 13B has been used by the FTC to return funds illegally taken from consumers.  The FTC has returned hundreds of millions of dollars to Americans injured by unlawful business practices.  For instance, in 2019 The FTC returned $34 million to consumers in a settlement with the Office Depot organization which ran bogus virus scans on consumers computers and used false results to persuade consumers to pay more for repairs.  Because of 13B, relief to consumers included more than $3.7 million to 58,000, residents of Texas, more than $800,000 to 12,000 residents from Tennessee and more than $1.2 million to about 20,000 Washington consumers.

Similarly in 2019, a settlement against the University of Phoenix, the FTC secured over $40 million in cash to over 146,000 U.S. students, as well as student debt cancellation.  The University of Phoenix attracted students with a false claim of job opportunities, including ads that had targeted military and Hispanic consumers.  The FTC returned more than $1.1 million to around 3,500 consumers in Tennessee and 3,000 consumers in Washington.  These cases just demonstrate the need to maintain the long standing FTC authority, and the COVID pandemic has intensified, I believe, the need for that consumer protection.  Since the beginning of the pandemic, the country has been besieged by scams and deception.  For example, last April, the FTC sent a warning letter to a health clinic in Olympia, Washington, that was making unproven claims that it could treat COVID-19 with just a high dose of vitamin injections.  The Seattle microbiologist marketed and sold unauthorized Corona vaccines to consumers for up to $1,000 each.  The FTC sent him a warning letter and he was later sued by our state's attorney general.  So all of these scams along with one that was perpetrated about making the moniker of an N95 mask when it really didn't meet that standard, all of these things are why we want to make sure that the FTC has appropriate authority.  The Commission filed a complaint last week, which used their new authority that we just gave them against another alleged seller of a sham COVID cure. So, we very much appreciate that you're using the new authority and working.

We need honest businesses, many of them small businesses, should not have to compete with businesses who are using these unfair tactics.  So it's not only good for consumers, it's also good for our economy, and other businesses that are playing by the rules.  So, I know that today we'll hear much more about this, but we have to do everything we can to protect this authority, and if necessary, pass new legislation to do so.  So thank you all for being here.  I'll introduce you in a minute, but now I'm turning to my colleague for his comments.

Thank you Senator Wicker. Thank you for that comprehensive statement. I certainly appreciate you mentioning those issues that I definitely inclined to query the Commission today on data security rules because I agree there's more that needs to be done there.  I hope that we will have a hearing in May on this issue of market dominance on the news because clearly there's so many issues there that both the DOJ and the FTC should be looking into. We've just been looking for the right time for us to get necessary work out the door so we can turn to that focus, but clearly we produced a report on some of this last year about their tech companies market dominance as it relates to media, so definitely very concerned about that.  And just thank you for your leadership on it, I certainly appreciate the work that you and your team and others,  Senator Booker and Blumenthal, everybody's been doing on such an important issue.  So you're right, it's a good chance to also ask them about that.  So, I don't think in an information age there's a shortage of issues that the FTC should be more aggressively involved in.  So, we're glad you're here. Let me introduce the Honorable Rebecca Slaughter, who is the acting Chair of the Federal Trade Commission, the Honorable Noah Philips, a member of the FTC, the Honorable Rohit Chopra, who is with us as Commissioner of the FTC and remotely, the Honorable Christine Wilson.  Welcome to you all again we're glad you're here.  Thank you for your ongoing work and Madam Chair, we'll start with you.

Cantwell made it clear that she did not desire a post-AMG “free rein” scenario and expressed her intent to act expeditiously in the event of an adverse ruling.

Minority Statement of Ranking Member Roger Wicker:  Thank you, Madam Chair, and indeed this is a distinguished panel of witnesses.  It’s always good to hear from them, and I am glad to have you back before our committee.  I look forward to your testimonies.

 

For over 100 years, the FTC has been the chief consumer protection agency in the United States.  Its mission, stated plainly in the FTC Act, is to protect consumers from unfair or deceptive acts or practices in the marketplace, such as deceptive advertising, harmful technology, illegal robocalls, and scams.  It also includes protecting consumers from businesses that misuse their personal data or attempt to process their data in discriminatory ways.  

As the distinguished Chair has already said, unfortunately, the COVID-19 pandemic has created new avenues for scammers and cybercriminals to take advantage of consumers.  The unprecedented nature of the virus has opened the door to scams related to fake cures and vaccines, as well as fake virus tests.  Most recently, the pandemic has created a market for counterfeit vaccination cards purportedly from the CDC.  This adds to a long list of frauds, scams, and bad business practices the FTC is continually working to address.

To combat fraud and protect consumers from unfair or deceptive practices in the marketplace, the FTC has historically relied upon its assumed authorities under Section 13(b) of the FTC Act.  This has enabled the FTC to stop illegal activity or require scammers to give money back to those who have been defrauded.  Last Congress, in anticipation of the Supreme Court’s plans to address challenges to the scope of the FTC’s authority under 13(b), I included a provision in my proposed data privacy bill, the SAFE DATA Act, that would clarify the Commission’s authority under the law to stop fraudulent activities and obtain monetary redress for consumers.

This morning, I look forward to examining how Congress can further clarify the statute to empower the FTC not only to enjoin improper behavior, but also to compensate victims for their losses.  I also look forward to discussing how to ensure the proper assessment of monetary remedies and that legitimate businesses are given fair notice about practices the FTC may deem to be unfair as it expands its use of 13(b) to stop wrongdoing.

The pandemic has further underscored the need for strong, uniform data privacy legislation.  Over the past year, our normal activities of work, school, and visiting with family moved online to prevent further spread of the coronavirus.  However, without no national data privacy law in place, continued virtual interactions could purpose serious and negative risks for exposure – and potential exploitation – of the personal data of millions of Americans.

I am sure Commissioners will want to discuss what the FTC has been doing during the pandemic to protect the privacy and security of personal data and what additional tools the agency needs to safeguard consumers’ information from misuse.

The FTC also plays an essential role in overseeing and preventing unfair methods of competition in the marketplace.  Although the Commission’s work on competition is not within the jurisdiction of this Committee, it does impact consumer welfare and informs how companies may attempt to defraud, mislead, or discriminate against consumers in the marketplace.

In this regard, Big Tech’s dominance is of particular concern.  This dominance has led to an abuse of their market power in the form of censorship and content suppression, as well as the abuse of consumers’ data in the form of repeated privacy violations and data misuse. As Justice Thomas opined two weeks ago, we now have a society in which a few Silicon Valley CEOs decide what films you can stream, which books you can buy, and what scientific discourse is allowed in public.

Today’s hearing is an opportunity to discuss what more the FTC can do to address these matters in furtherance of its consumer protection mission.

Finally, this committee has been working to develop bipartisan legislation to establish a national framework permitting college athletes to be compensated for the use of their name, image, or likeness (NIL).  As this work continues, it is clear that the FTC’s expertise in protecting consumers will be a necessary asset in ensuring compliance with any NIL law and guarding student athletes and their families from exploitation.

I hope Commissioners will discuss what additional tools, resources, and personnel expertise the FTC would need if takes on this important work and oversees this collegiate sports marketplace as part of its consumer protection mission.

Clearly there is much to discuss today.  I thank the Commissioners their testimonies, and I thank the Commissioners for their Bipartisan work. I look forward to an informative discussion.

At this point, Madam Chair, I would mention that you and I received a letter dated this morning from Mr. Neal L. Bradley, on behalf the Chamber of Commerce.  He is the Executive Vice President and Chief Policy Officer, consisting of three pages and addressing issues of importance with regard to the bill of trade commission and their interpretation of section 19 of the act and section 13(b) of the act.  And I would ask that that letter be added to the record at this point.

FTC Commissioners, Combined Testimony:  Despite the unprecedented challenges of the past year, the Federal Trade Commission has endeavored to protect consumers and competition.  A key part of this work has been combatting COVID-related harms.  The Commission staff recently released a report describing the major challenges consumers face from the pandemic and the Commission’s efforts to help: using reports from consumers to identify and respond to emerging unlawful practices in real time; filing more than a dozen law enforcement cases; directing the removal of deceptive claims related to COVID-19 made by more than 350 companies; and educating consumers and businesses through more than 100 alerts on COVID related topics.

The civil penalty authority in the newly-enacted COVID-19 Consumer Protection Act and additional funding the Commission recently received from the American Rescue Plan will enable us to intensify our efforts to protect consumers from unscrupulous actors that seek to exploit the pandemic and its economic fallout.  The Commission just brought its first action seeking monetary penalties under its new authority, targeting deceptive COVID-19 marketing of vitamin D and zinc products.

In this testimony, we provide a high-level summary of the Commission’s efforts and highlight the pressing need, in light of legal challenges, for Congress to affirm the FTC’s authority to return money to consumers using Section 13(b) of the Federal Trade Commission  Act.

The Commission has worked diligently to identify and address the effects of the COVID19 pandemic on American consumers and businesses.  The Commission’s response to COVID-19 has included law enforcement, consumer education and outreach, and data collection, each of which is discussed in more detail below.

Most recently, the FTC deployed its new authority under the COVID-19 Consumer Protection Act to charge that a chiropractor and his company deceptively marketed products containing vitamin D and zinc as scientifically proven to treat or prevent COVID-19.  This action is merely the latest in a long line of enforcement efforts that began early in the pandemic.

The FTC issued its first warnings to consumers about COVID-19 related scams in February 2020, even before the declaration of a national emergency.  As schemes proliferated in response to demand for scarce goods, to peddle treatments and cures, and to exploit consumers’ and small businesses’ financial distress, the FTC moved quickly to challenge deceptive claims.  The agency filed its first action just one month after the President declared a national emergency concerning the COVID-19 outbreak on March 13, 2020.  Since then, the FTC has sued entities for allegedly breaking promises to quickly ship personal protective equipment (PPE) and cleaning products, tricking consumers into paying for sanitizing products that were never delivered, falsely claiming that their products could treat and/or prevent COVID-19, and making deceptive claims regarding stimulus benefits.  In addition, to protect consumers attempting to replace or supplement income during the pandemic, the Commission—along with 19 federal, state, and local partners—led a nationwide crackdown against scams making false promises of income and financial independence.

Starting in March 2020, the FTC also launched a campaign to challenge companies’ deceptive COVID-19 claims—directing the companies to cure violations and pursuing enforcement actions if problematic claims were not quickly removed.  To date, the FTC has issued more than 350 warning letters, many in conjunction with the Food and Drug Administration (FDA), to sellers and marketers that claimed that their products could treat or prevent COVID-19.  The Commission also issued warning letters with the Small Business Administration regarding small business relief and joint letters with the Federal Communications Commission (FCC) to Voice Over Internet Protocol service providers and others “assisting and facilitating” illegal telemarketing calls, including calls to market products such as fraudulent home test kits.  The Commission has monitored responses to these warning letters closely, and has been pleased to see that in the overwhelming majority of cases, letter recipients removed problematic claims quickly.  The Commission is determined to pursue swift enforcement action against noncompliant warning letter recipients.

In light of the eviction crisis caused by the pandemic, the Commission has partnered with fellow enforcers at the Consumer Financial Protection Bureau (CFPB) to focus on ensuring renters are not subjected to unlawful practices.  The Commission also will continue its efforts to ensure that tenant screening companies comply with the Fair Credit Reporting Act, so that consumers who have gone or will go through an eviction are not further stigmatized by incomplete or inaccurate information as they seek new housing.  The Commission is also monitoring and investigating conduct by multistate landlords that may violate the FTC Act or other laws if they evict tenants in violation of national, state, or local eviction moratoriums, as Acting Chairwoman Slaughter and Acting CFPB Director Uejio recently warned in a joint statement.

The Commission will remain vigilant in order to protect the public from harms that stem directly and indirectly from the COVID-19 pandemic.  The FTC is committed to tackling emerging threats, adjusting our strategies wherever necessary, and working in close coordination with our partners.

The Commission has buttressed its law enforcement actions with consumer and business education.  Since the beginning of the pandemic, the FTC has worked aggressively to dispel misinformation and confusion about the pandemic and related issues that have fueled COVID related scams.  The Commission’s education campaign has several facets: consumer and business alerts; a multi-media campaign; substantive business guidance; and outreach with partners.

Early in the pandemic, the Commission began issuing alerts warning consumers and the business community of COVID-related frauds.  To date, the FTC has issued more than 100 consumer and business alerts on a wide range of COVID-related topics, including economic impact payments, health claims, online shopping, privacy in a virtual environment, contact tracing, government imposter scams, job scams, and misinformation.  The FTC sends its alerts to more than 367,000 email subscribers, which include consumers, businesses, partners, and the media.  In turn, many of these subscribers share the information with their communities, greatly expanding the reach of the agency’s message.  The FTC has developed a multimedia campaign with a dedicated website (ftc.gov/coronavirus) that contains a library of materials for consumers and businesses in several different languages.

As the pandemic required many work, school, recreational, and social activities to transition from in-person to online and virtual platforms, the shift to digital life presented new opportunities for bad actors to exploit.  The Commission worked to prevent this exploitation from occurring in the first instance.  Accordingly, in April 2020, the Commission published guidance for education technology companies and schools regarding their duties to protect children’s privacy and personal data—including warnings of the parental consent requirements for data collection imposed by the Children’s Online Privacy Protection Act (COPPA).  The FTC also took enforcement actions to stop digital harms.

Finally, FTC staff has engaged in national and local outreach with partners to reach a variety of audiences, including older consumers, ethnic and community media, housing organizations, re-entry groups, library patrons, and the military community. The staff has used webinars, tele-town halls, Twitter chats, Facebook Live events, and interviews with local and national media to reach its audiences.  During the pandemic, FTC staff has participated in COPPA Guidance for Ed Tech Companies and Schools during the Coronavirus.  Although the conduct in these matters occurred before the COVID-19 outbreak, the relief in these orders seeks to protect consumers from digital harms that have been exacerbated by the pandemic.

The FTC also has used new methods to reach people in economically and geographically diverse communities who are targeted by COVID-19 scam artists.  For example, the FTC conducted a national radio media tour, mailed post cards to communities with low broadband access, and delivered letters to community health professionals in 5,000 rural and urban health clinics to help people avoid COVID-related fraud.

As the pandemic has deepened, some new consumer financial issues have arisen and others have been exacerbated.  To ensure we are responding appropriately to the issues consumers are facing, the FTC coordinated a series of virtual listen-and-learn sessions across the country.  Participants have included representatives from legal services, social services, elder justice centers, departments of aging, housing counselors, Catholic Charities, the Better Business Bureau, and the offices of State Attorneys General.  Based on input from stakeholders, the FTC is enhancing and expanding its COVID-19 financial recovery and resiliency campaign, the centerpiece of which will be a web-based toolkit available in multiple languages.

The FTC’s Consumer Sentinel Network collects millions of reports from the public about fraud, identity theft, and other consumer problems, and makes them available to thousands of law enforcement users across the country.  In the weeks following the first known cases of COVID-19 in the U.S., the FTC developed systems to track and alert the public to shifts in Sentinel reporting.  On ftc.gov/exploredata, the FTC launched public dashboards showing aggregate Sentinel data on reports associated with COVID-19 by age, type of fraud, and geographic location, with figures that are updated daily.  Since January 2020 and as of April 7, 2021, the FTC has received more than 436,000 such reports, reflecting $399 million in fraud losses.

The FTC’s monitoring and analyses of Sentinel data reveal increased fraud activity in 2020. Specifically, the number of fraud, identity theft, and other reports to Sentinel (excluding Do Not Call) increased more than 45% over 2019 numbers, and reported losses from fraud grew from more than $1.8 billion in 2019 to $3.3 billion in 2020.  Being able to use Sentinel data to spot trends has helped the FTC respond to emerging scams in real time—from bringing cases to halt fraudulent activity, to targeting alerts warning of the newest fraud, to addressing specific threats, such as the proliferation of identity theft related to unemployment insurance benefits.

Ensuring that the experiences of all consumers are represented in Sentinel is critically important to the agency’s work.  To expand accessibility, the FTC launched a new modernized reporting website, ReportFraud.ftc.gov, in October 2020.  The updated site includes a COVID-19 banner, providing an easy way for consumers to report COVID-related issues.  Recently, the FTC launched the Community Advocate Center, which is part of the agency’s ongoing work to collaborate with legal services organizations to learn about consumer protection needs and problems affecting the lower-income communities they serve.  The Center provides a new way for organizations that provide free and low-cost legal services to report fraud and other illegal business practices directly to the FTC on behalf of their clients.

Over the past four decades, the Commission has relied on Section 13(b) of the Federal Trade Commission Act to secure billions of dollars in relief for consumers in a wide variety of cases, including telemarketing fraud, anticompetitive pharmaceutical practices, data security and

privacy, scams that target seniors and veterans, and deceptive business practices, among many others.  More recently, in light of the pandemic, the FTC has used Section 13(b) to take action against entities operating COVID-related scams.  Section 13(b) enforcement cases have resulted in the return of billions of dollars to consumers targeted by a wide variety of illegal scams and anticompetitive practices, including $11.2 billion in refunds to consumers during just the past five years.

Section 13(b) is a critical tool in support of our enforcement missions, but its effectiveness is currently imperiled, and this uncertainty is hurting our ongoing enforcement efforts.

Section 13(b) of the FTC Act is the agency’s primary and most effective way of returning money to consumers that was unlawfully taken from them.  The relevant portion of Section 13(b), often referred to as the “second proviso,” authorizes the FTC to sue directly in federal court for violations of the FTC Act and states that “in proper cases, the Commission may seek, and after proper proof, the court may issue, a permanent injunction.” 

Beginning in the 1980s, seven of the twelve courts of appeals, relying on longstanding Supreme Court precedent, interpreted the language in Section 13(b) to authorize district courts to award the full panoply of equitable remedies necessary to provide complete relief for consumers, including disgorgement and restitution of money.  For decades, no court held to the contrary.

In 1994, Congress ratified its intent to enable the FTC to obtain monetary remedies when it expanded the venues available for FTC enforcement cases, strengthening the Commission’s ability to bring redress cases.  Recent judicial rulings, however, indicate a dramatic shift in how courts are interpreting and applying Section 13(b) in FTC cases.

For example, in 2019, the Seventh Circuit, in FTC v. Credit Bureau Center, LLC, overruled its three decades of precedent and held that Section 13(b) no longer allows the FTC to obtain monetary relief.  The Credit Bureau Center opinion held that the word “injunction” in the statute allows only behavioral restrictions and not monetary remedies.  Last fall, the Third Circuit, in FTC v. AbbVie, relying heavily on the analysis in Credit Bureau Center, similarly concluded that the Commission could not obtain any monetary relief under Section 13(b).  In AbbVie, for example, the court held that the defendant drug company violated the antitrust laws by engaging in sham litigation to keep out generic competition, but nonetheless reversed the district court’s award of $448 million meant to repay overcharged consumers. The net effect of the AbbVie ruling is that an adjudicated violator is nonetheless free to keep substantial ill-gotten profits extracted from consumers, based on a legal interpretation of Section 13(b) that no court of appeals had adopted prior to 2019.

This issue is now pending before the U.S. Supreme Court, and the agency presented oral argument before the Court in January 2021.  Although the Commission hopes to obtain a favorable ruling, the recent judicial trends exemplified by Credit Bureau Center and AbbVie are concerning.  If the Supreme Court were to adopt the Seventh and Third Circuit’s interpretation of Section 13(b), it would eliminate the primary tool that the FTC uses today to return money to consumer victims.

The uncertainty in the law is taxing the Commission’s law enforcement resources.

Defendants now routinely attempt to delay ongoing litigation for as long as possible in the hope that the Supreme Court will allow them to escape liability for any monetary relief, and several matters have been stayed pending the forthcoming Supreme Court decision.  Defendants are also refusing to engage in settlement discussions unless the Commission agrees to abandon all claims for monetary relief.  One defendant has gone as far as to initiate preemptive litigation in the Seventh Circuit to take advantage of the fact that the Commission already is precluded from seeking monetary relief under Section 13(b) there.  These developments have slowed the resolution of our pending enforcement cases, requiring the Commission to expend more resources, and preventing staff from taking on new work.

In addition, two other recent Third Circuit decisions reinterpreting Section 13(b) jeopardize the FTC’s ability to enjoin illegal conduct in federal court.  In FTC v. Shire ViroPharma, a case involving a drug company’s alleged abuse of FDA’s citizen petition process to delay generic competition, the court held that the FTC can bring enforcement actions under Section 13(b) only when a violation is either ongoing or “impending” at the time the suit is filed.  That decision unnecessarily limits the Commission’s ability to obtain monetary relief for consumers who have been harmed by unlawful conduct that occurred entirely in the past.  And, in the Third Circuit’s decision in FTC v. AbbVie, the court cited Shire ViroPharma in dicta while agreeing, incorrectly, that the FTC cannot sue under Section 13(b) unless conduct is imminent or ongoing.   Notably, in its motion to dismiss the Commission’s antitrust complaint, Facebook has cited these decisions and argued that Section 13(b) bars the federal court suit.

These decisions hamper the Commission’s longstanding ability to protect consumers by enjoining defendants from resuming their unlawful activities in cases where the conduct has stopped but there is a reasonable likelihood that the defendants will resume their unlawful activities in the future.  These decisions also limit the FTC’s ability to settle cases efficiently.

Targets of FTC investigations now routinely argue that they are immune from suit in federal court because they are no longer violating the law, despite the fact that there is a likelihood of recurrence, and they make these arguments even in cases when they stopped violating the law only after learning that the FTC was investigating them.

Overall, the judicial threats outlined above are grave and, if Congress does not act promptly, the FTC’s ability to protect consumers and execute its law enforcement mission will be significantly impaired.

Throughout the past year, the Commission has worked tirelessly to stop bad actors from exploiting the pandemic at the public’s expense.  But the Commission’s work is far from over.  COVID-related scams are likely to persist as the country continues to grapple with this pandemic.  Combatting these scams will remain a top priority for the Commission, and we will continue to use every tool we have to stop this predatory behavior, including seeking civil penalties under the newly enacted COVID-19 Consumer Protection Act, where appropriate. 

We also request that Congress act to clarify Section 13(b) of the FTC Act and preserve the FTC’s ability to enjoin illegal conduct and restore to consumers money they have lost.  A legislative solution that addresses the threat to the FTC’s authority to obtain redress for consumers would enhance our efforts to protect consumers from COVID-related harms.

Consult with an experienced FTC defense lawyer if you are interested in learning more about the FTC’s endangered Section 13(b) authority and legislative proposals designed to bolster the agency’s ability to use 13(b) to pursue wrongdoers.

Addendum:

U.S. Supreme Court Halts FTC’s Ability to Obtain Ill-Gotten Gains

On April 21, 2020 in the matter of AMG Capital Management, the U.S. Supreme Court effectively made it more difficult for the Federal Trade Commission to force those that engage in deceptive business practices to return ill-gotten gains obtained from consumers.

The unanimous ruling was written by Justice Stephen Breyer and is a victory of sorts to digital marketers.  In short, the Court held that the FTC does not possess the authority under the FTC Act to seek court orders that direct wrongdoers to return money via restitution or disgorgement.

In the absence of a legislative fix, the FTC will not be forced to initiate and utilize a much more burdensome and lengthier process to obtain monetary redress for consumers.

“Section 13(b) as currently written does not grant the Commission authority to obtain equitable monetary relief,” Breyer wrote, noting that the FTC can seek restitution under other provisions of the law.  “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.”

“Taken as a whole, the provision focuses upon relief that is prospective, not retrospective,” Breyer wrote.

“To read those words as allowing what they do not say, namely, as allowing the Commission to dispense with administrative proceedings to obtain monetary relief as well, is to read the words as going well beyond the provision’s subject matter.  In light of the historical importance of administrative proceedings, that reading would allow a small statutory tail to wag a very large dog.”

It is anticipated that the Supreme Court’s ruling will directly impact the Credit Bureau Center case currently pending before the Court.

The ruling is nothing short of a huge blow to FTC’s consumer protection, privacy and antitrust efforts.

“Enforcement actions will slow and redress for consumers will dry up if Congress does not act quickly to affirm our full authority under 13(b),” acting FTC Chair Rebecca Kelly Slaughter testified at a Senate hearing Tuesday.

Breyer added that the FTC still has the authority to obtain financial restitution on behalf of consumers under other sections of the FTC Act.

Here is the opinion.

Congress is already considering legislation to address the Supreme Court decision.

 

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© 2021 Hinch Newman LLPNational Law Review, Volume XI, Number 112
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About this Author

Richard Newman, FTC Defense Lawyer, Internet Marketing, Hinch Newman Law Firm

Richard B. Newman is a nationally recognized FTC defense lawyer and advertising compliance attorney.  He regularly provides advertising counsel and represents clients in high-profile investigations (CIDs) and enforcement proceedings initiated by the Federal Trade Commission, state attorneys general, departments of consumer affairs, and other federal and state agencies with jurisdiction over advertising and marketing practices.  Richard’s practice also concentrates upon transactional matters relating to the dissemination of national advertising campaigns, including the...

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