Yesterday, the Third Circuit issued an opinion in Federal Trade Commission v. AbbVie, Inc., joining the Seventh Circuit in holding that the FTC is not entitled to seek disgorgement under Section 13(b) of the FTC Act. The decision reflects a potential turning of the tides on how courts view FTC’s statutory authority to seek monetary relief.
By way of background, the district court ordered the AbbVie defendants to disgorge $448 million in alleged ill-gotten profits from anticompetitive conduct regarding the patented drug AndroGel. Though the Third Circuit held that the district court properly concluded that AbbVie had monopoly power in the relevant market, it struck down the $448 million award.
The Third Circuit provided four reasons why the disgorgement order was contrary to the FTC’s authority under Section 13(b). First, the court found that the structure of the FTC Act does not support a disgorgement award under Section 13(b) because the FTC has “multiple instruments in its toolbox” to seek monetary relief for unfair or deceptive acts or practices other than Section 13(b). Specifically, Section 5 of the FTC Act allows the FTC to initiate administrative proceedings, obtain a cease-and-desist order, and then sue in federal court for violations of that order to obtain injunctions and “other and further equitable relief.” Section 19 of the FTC Act also allows the FTC to obtain “the refund of money or return of property” and “the payment of damages” for rule violations. The court noted that, in contrast, nothing in Section 13(b) “explicitly empower[s] district courts to order disgorgement. Instead, Section 13(b) simply provides the FTC with the ability to obtain injunctions in federal court for ‘ongoing or imminent illegal conduct.’”
Second, the court found that disgorgement was not contemplated in Section 13(b) because the statutory provision plainly provides relief for ongoing or imminent conduct, and disgorgement of funds is solely focused on past misconduct. Underlying this rationale is the Third Circuit’s decision in FTC v. Shire ViroPharma, Inc. in which the court held that the FTC must plead facts sufficient to show that a defendant “is” or “is about to” violate the law in order to proceed under Section 13(b).
Third, the court noted that the timing of the enactment of Section 13(b) demonstrates that Congress could have explicitly provided for equitable monetary relief in Section 13(b) if it meant to do so. Specifically, around the same time that it enacted Section 13(b), Congress also enacted Section 5, which expressly provides for “other and further equitable relief,” and Section 19, which includes a laundry list of forms of monetary relief. The Third Circuit reasoned that Congress’s explicit authorization of equitable relief in Sections 5 and 19 demonstrate its intent not to do so in Section 13(b).
Finally, the Third Circuit rejected the FTC’s reading of prior equitable-remedy Supreme Court cases. Those cases held that courts “may order restitution unless there is a clear statutory limitation on the district court’s equitable jurisdiction.” (emphasis added). However, the court reasoned that those cases did not apply because Section 13(b) explicitly limits the equitable remedies the FTC is entitled to seek to injunctions.
This decision comes on the heels of Supreme Court review of the very same issue in AMG Capital Management v. FTC and Credit Bureau Center v. FTC. Though oral argument is yet to be set, we can expect a decision from the Supreme Court before the end of its term — June 28, 2021. We will be monitoring developments closely and reporting them here.
The authors and others at Venable have considerable experience representing clients in Federal Trade Commission investigations and law enforcement actions, including matters litigating the FTC’s enforcement authority under Section 13(b) of the FTC Act and issues related to regulatory compliance, risk management, and other consumer protection concerns.