As we predicted in Steptoe's client webinar last week on "Antitrust Enforcement in the Biden Administration - What We Know from The First 100 Days," on April 22, 2021 the US Supreme Court put an end to the Federal Trade Commission's (FTC) longstanding practice under § 13(b) of the FTC Act of seeking disgorgement or restitution orders in cases brought by the agency in federal courts.
Writing for a unanimous Court, Justice Breyer's opinion in AMG Capital Management, LLC, et al. v. Federal Trade Commission reversed the decision of the US Court of Appeals for the Ninth Circuit and determined that a $1.27 billion restitution order against payday loan tycoon Scott Tucker was beyond the powers of the FTC.
The FTC had sued Tucker under § 13(b) of the FTC Act to obtain restitution of profits Tucker had gained as a result of his fraudulent and deceptive practices in extending and then collecting on low-dollar "payday" loans. After a federal district court ordered him to pay restitution to the victims of the fraud, Tucker appealed to the Ninth Circuit claiming that because § 13(b) only authorizes a "permanent injunction," a federal court could not order monetary relief. The Ninth Circuit upheld the FTC's use of § 13(b) in Tucker's case (as six other appellate courts had done in similar cases), but the FTC lost a similar case in the Seventh Circuit in 2019. The Supreme Court's ruling resolves the split among the appellate circuits.
In doing so, the Court looked to the plain language of the FTC Act, holding that "§ 13(b)'s 'permanent injunction' language does not authorize the Commission directly to obtain court-ordered monetary relief.” The Court added: "An 'injunction' is not the same as an award of equitable monetary relief" and concluded that "[t]he language and structure of § 13(b), taken as a whole, indicate that the words "permanent injunction" have a limited purpose—a purpose that does not extend to the grant of monetary relief."
As a result of the Court's opinion, the FTC can continue to use its in-house administrative proceedings under § 5 of the FTC Act to adjudicate claims to seek restitution or disgorgement, but it cannot use the federal courts under § 13(b) to do so directly.
This decision will have broad implications for the FTC's enforcement efforts because § 13(b) has been a valuable part of the FTC’s toolbox in combatting not only unfair and deceptive trade practices, but also antitrust violations. As the Court noted, in fiscal year 2019, the Commission filed 49 complaints in federal court and obtained 81 permanent injunctions and orders, resulting in over $723 million in restitution or disgorgement.
Immediately following the decision, FTC Acting Chairwoman Rebecca Kelly Slaughter issued a statement calling for Congress to grant to the FTC the power to seek restitution and disgorgement directly in federal court: "With this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole." And Democrats on the Hill have spoken about a swift legislative fix to this issue.
With the alternative being a more cumbersome administrative process in the FTC, there likely will be pressure on Congress to grant such powers to the FTC. See Lahlou, Luib, and Weiner, "High Stakes at the High Court: The FTC's Disgorgement Comes Before the Supreme Court," ANTITRUST (Fall 2020). How soon the fix will come remains to be seen.