A unanimous US Supreme Court dealt a blow to the Federal Trade Commission, limiting the FTC’s ability to seek monetary redress, such as restitution, for unfair or deceptive acts under Section 13 (b) of the FTC Act.
With the AMG Capital Management LLC v. Federal Trade Commission decision, the agency lost one of the most frequently used tools in its toolbox. FTC has increased its annual Section 13 (b) return and return penalties by 23 between 2012 and 2018. The agency now has three potential avenues to seek redress from victims of unfair or deceptive practices.
The most likely path is for the FTC to solidify its alliance with state attorneys general who can and frequently use their statutory power to seek redress and other sanctions. The FTC and state AGs already work together regularly, but we expect this cooperation to skyrocket after this move.
AMG Capital Management offered “payday” loans on Native American lands to avoid state usury caps and was ordered to pay $ 1.27 billion in restitution. The question posed to the Supreme Court was simple: Does the FTC have the power under section 13 (b) to seek restitution when it acts to prevent “unfair or deceptive acts” that affect commerce? ?
The business community, led by professional organizations such as the National Retail Federation and the United States Chamber of Commerce, filed amicus briefs in support of a textual interpretation of Article 13 (b). They supported AMG Capital’s assertion that the plain language of Section 13 (b) limits the FTC to injunctive relief only. Meanwhile, consumer organizations and a bipartite group of 30 GA supported the FTC.
The likely path: strengthening the partnership with State AGs
The FTC and GAs have been working together for a long time, as the Brief of amicus AG who called the FTC a “crucial partner” for states. As noted in the brief, states often rely on information uncovered during FTC investigations as well as the FTC’s expertise in analyzing complex financial cases and expert analysis conducted by the FTC. FTC in their own cases.
We anticipate that the FTC will increase its collaborative efforts with GAs to seek equitable monetary relief. The majority of states have laws that expressly allow their attorneys general to seek redress. Many GAs are likely to eagerly accept increased and sustained cooperation from the FTC.
In this scenario, there will be more joint investigations, protracted settlement negotiations and litigation. This could be the perfect storm for business: a well-funded ally prompted by loss of Article 13 (b) restitution authority to partner with already effective MAs.
The Supreme Court’s decision in AMG Capital restricted the authority of the FTC. The question now becomes, what will it trigger instead?
The FTC will inevitably seek to work more closely with states on existing and new investigations. There may be practical problems with such a union between the FTC and the AGs, as they are separate rulers with their own ways of doing things and their own agendas. We anticipate that investigations will take longer to complete and involve more difficult, lengthy and costly settlement negotiations with the business community.
The FTC can still seek restitution under Section 19 of the FTC Act. But, as Justice Stephen Breyer noted, these actions are “cumbersome” and take a long time to prosecute. It is only after an administrative review that the FTC can sue in federal court and seek restitution. Thus, the use of Article 19 would require more resources and would take more time.
Another solution lies in Congress, which could amend section 13 (b) to expressly give the FTC the power to obtain restitution. A invoice was presented to the House on April 20 for this purpose. An important question is whether this law will apply retroactively, or only to conduct that occurs after the law is passed. Another important question is whether and what limits will be placed on the scope of restitution.
Even if the bill gets to the Senate, filibuster effectively requires a super majority of 60 votes to pass the law, which is unlikely in an equally divided Senate with expected opposition from business, unless the legislation is not very narrowly designed. Changing the FTC law through the budget reconciliation process to avoid filibuster also seems unlikely.
This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owners.
Bernie nash is Co-Chair of Cozen O’Connor’s State Attorneys General Group in Washington, DC Former SEC Attorney General and Advisor to the US Senate Subcommittee on Antitrust and Monopoly, he has experience in State regulatory and decades-long relationships with individual AGs and their staff and advise on AG investigations and litigation, and the interaction between state and federal agencies.
Milton A. Marquis is a member of the Cozen O’Connor State Attorneys General Group in Washington, DC.
Mira E. Baylson is a member of the Cozen O’Connor State Attorneys General Group in Philadelphia. She represents national companies in their dealings with federal and state agencies and offices, as well as those under investigation by state MAs and other government agencies, including the DOJ and CFPB.