While Europe is leveraging hefty fines against violators of the EU General Data Protection Regulation (GDPR) (here is a tracker of recent fines: https://www.enforcementtracker.com/), the United States Supreme Court heard oral arguments last month on whether the FTC – the chief federal agency on privacy policy and enforcement since the 1970s – lacks authority to demand monetary relief.

The oral arguments in AMG Capital Management v. FTC focused on the question of whether Section 13(b) of the Federal Trade Commission Act, by authorizing “injunction[s],” also authorizes the FTC to demand monetary relief such as restitution. If it is found that the FTC is not authorized to demand monetary relief this would affect all cases before the FTC, which has broad authority to enforce both consumer protection and antitrust laws under Section 5 of the FTC Act (providing that “unfair or deceptive acts or practices in or affecting commerce … are … declared unlawful”).

More specifically, the issue on appeal concerns Section 13(b) of the FTC Act, codified at 15 U.S.C. § 53(b).  Section 13(b) permits the FTC to seek, and federal courts to issue, “a permanent injunction” to enjoin acts or practices that may violate the FTC Act. In the decades since the statute was enacted in 1973, courts have broadly construed the term “injunction” to also include other equitable relief, such as monetary relief in the form of restitution or the disgorgement of ill-gotten gains. However, in recent years, several courts have questioned this statutory interpretation, instead relying on the more modern, strictly textual approach.

In 2019, for instance, in FTC v. Credit Bureau Center, the Seventh Circuit refused to read an implied remedy of restitution into the text of the statute. Similarly, in September of 2020, in FTC v. Abbvie et al., the Third Circuit held that the FTC was not authorized to seek disgorgement as a remedy under Section 13(b). This turning of the tides set the stage for a circuit split on the issue, which ripened for review last summer when the Supreme Court granted certiorari to consider the question as presented in the instant case.[1]

At oral arguments, counsel for the FTC argued that the language of the statute should be interpreted in the context in which it was drafted, using what Chief Justice Roberts called the “free-wheeling” approach, not confined by the specific language and looking more to the drafters’ intent. This understanding, the FTC argued, has been used by courts in nearly 50 years of equity jurisprudence finding that the FTC has the authority to order the return of funds from an unjustly enriched transgressor. In particular, counsel highlighted the Supreme Court cases, Porter v. Warner Holding Co. and Mitchell v. Robert DeMario Jewelry, Inc., which both applied this principle to analogously-worded statutes and held a more expansive view of the FTC’s authority.

Yet, as Justice Kavanaugh recognized, the problem with the FTC’s argument is the text of the statute itself. There is simply no mention of any additional equitable relief available to the FTC. Counsel for AMG expanded on this argument, explaining that the best way to determine Congress’s intent at the time is “by looking at the words on the page.” AMG and several Justices also noted that Sections 5(l) and 19 of the FTC Act, drafted at the same time as Section 13(b), expressly provide monetary relief, leading a reader to believe that the omission in Section 13(b) was in fact intentional. And in response to Justice Breyer’s concerns about overturning years of precedent, AMG countered that longstanding error is still error, and the Supreme Court has a duty to correct such error now that the issue is before the Court.

AMG’s position was further bolstered by concerns about the constitutional issues with due process and notice, should the FTC be permitted to seek monetary remedies in the first instance of wrongdoing. Yet on the other hand, several of the Justices also raised the concern about a reasonable person, knowing and understanding that his or her conduct was deceptive, keeping the ill-gotten gains obtained from fraudulent schemes and violating the law.

In the end, as Justice Breyer joked, “Blue brief, I think you’re right. Red brief, I think you are right. They can’t both be right.” Despite very reasonable and plausible arguments on both sides, the Justices will have to make a decision. And that decision comes with high stakes. Specifically, an adverse decision from the Supreme Court will significantly limit the FTC’s enforcement authority and very likely impact which avenues it will take (via state court, federal court, or through the agency’s own power) to protect consumers based on the remedies available.

Based on the line of questioning from the Justices, the skepticism of the FTC’s statutory purpose arguments, and the Court’s recent shift towards strict textual interpretation, some commentators say the writing is on the wall. However, even if the Supreme Court holds that FTC does not have explicit statutory authority to seek monetary relief under Section 13(b), all is not lost for the FTC. As Justice Kavanaugh suggested, “Why isn’t the answer here for the Agency to seek this new authority from Congress for us to maintain a principle of separation of powers?” This may well be the best path forward for the FTC, an option that it began to explore late last year after the adverse decisions from the Third and Seventh Circuits. In a letter sent back in October, the Commission urged Congress to clarify that the Commission may “obtain monetary relief, including restitution and disgorgement” under Section 13(b) and ultimately “restore Section 13(b) to the way it has operated for four decades.”

We will provide an update on this case once the Supreme Court issues a decision.

 

[1] The underlying facts of AMG Capital Management v. FTC are fairly straightforward. Scott Tucker was the owner of AMG Capital Management, a provider of high-interest, short-term payday loans. In April 2012, the FTC filed suit against Tucker, alleging that Tucker’s loan enforcement practices were harsher than the terms consumers had actually agreed to in the loan notes. The District of Nevada found that Tucker was engaging in unfair or deceptive trade practices, in violation of Section 5 of the FTC Act, and ordered him to pay $1.27 billion in equitable relief to the FTC to ultimately be distributed to the victims. Tucker appealed, and the Ninth Circuit affirmed, noting that its precedent squarely holds that Section 13 of the FTC Act “empowers district courts to grant any ancillary relief necessary to accomplish complete justice.”