ANALYSIS: AMG Holding Still Has FTC Scrambling as Footing Shifts

In April 2021, the US Supreme Court held 9–0 that the FTC Act Section 13(b) doesn’t authorize the Federal Trade Commission to seek equitable monetary relief in cases brought in federal court.

Before the court’s holding in the case, AMG Capital Management, LLC v. FTC, the FTC had been, for decades, seeking and winning disgorgement against those that federal courts found had committed fraudulent and unfair trade practices.

The FTC could regain its Section 13(b) authority through a legislative “fix.” But there isn’t a guarantee that amending the FTC Act would be a one-and-done solution.

That’s because the primary problem for the agency is much broader than this one statutory interpretation: The court has taken numerous decisions that reduce the independence, power, and role of the expert agencies. That theme is echoed both in the completed 2023–24 Supreme Court term and in the term beginning this October.

Even if the FTC works around its loss of Section 13(b) to continue seeking redress for harmed or defrauded consumers, the agency might be playing whack-a-mole with the court. It’s not clear that a legislative solution would solve that fundamental problem.

How Big Is the Hole?

In the years before AMG, the FTC’s recovery of “consumer redress or disgorgement” was very uneven—from a low recovery of $171 million in 2013 to a high of $16.5 billion in 2017 (when the FTC’s $11.5 million recovery in the Volkswagen “clean diesel” scandal inflated the recovery total).

But the general impact of the AMG order is clear in both the amount of the FTC’s recoveries and the number of court orders it has obtained, both of which have dropped precipitously since the 2021 ruling.

In FY 2020, the last full year during which the FTC was able to seek disgorgement, the FTC recovered $796.9 million in disgorgement through 81 court orders. Since the AMG decision, the FTC has consistently recovered less than $200 million in total consumer redress or disgorgement per fiscal year, and has consistently obtained only about 40 court orders on those measures.

Testifying before Congress in April 2022, Commissioner Rebecca Kelly Slaughter estimated that, in the first year after the AMG decision, the ruling had “caused consumers to already lose out on more than $1.5 billion of relief that the agency previously could have obtained under Section 13(b).”

How Has the FTC Responded?

The FTC didn’t sit idle upon losing its Section 13(b) powers. It’s made the case to Congress that legislation to restore the agency’s 13(b) powers is imperative to protect consumers (although a legislative fix has not passed to date, and likely isn’t forthcoming). And the FTC has also worked to find other mechanisms for seeking consumer redress. Unfortunately, none of them is an easy replacement for the 13(b) authority that the FTC lost in AMG.

For example, the agency has undertaken rulemaking using its Magnusson-Moss authority. This is a cumbersome process that can take five to six years to complete—but does come with the ability to seek civil penalties under the FTC Act once completed. It’s not a quick fix.

The FTC has also sent out thousands of “notices of penalty offense"—NoPOs for short—that warn businesses that their conduct has been adjudicated unfair and deceptive in a prior FTC order. There are definite limitations to this procedure, however, because there are limited existing FTC orders to rely upon in sending such notices and they are mostly several decades old.

Unfair practices tend to evolve over time, often sliming between the cracks of past legal determinations. That makes it challenging to definitively connect current bad conduct with past FTC orders, and might form the basis for a challenge if the FTC follows through on NoPOs to seek consumer redress.

The FTC has also leaned into cooperation with other authorities, like state attorneys general, that can issue penalties. And it’s using its authority under FTC Act Section 19, which grants substantial powers for the agency to seek redress. Section 19, however, only applies to dishonest or fraudulent conduct and involves a multi-step process. And while many companies settle charges under Section 19, a challenge to this authority might also result in a shrunken FTC toolbox.

In short, the FTC has been creative about leaning into its other statutory authorities to continue to recover funds for consumers and to hold fraudsters to account. But because these novel approaches are subject to court challenge, and some courts are demonstrably hostile to regulatory authority, the FTC is at risk of becoming a kind of Schrödinger’s Enforcer: It has the power to protect consumers so long as it doesn’t actually use that power.

The Hits Keep Coming

The FTC’s position is precarious because the AMG case wasn’t a single blow to the agency; it’s part of a larger volley of shocks to the administrative state that demonstrates a longer-term and ongoing threat to enforcement.

Even if Congress followed the Supreme Court’s instructions and explicitly authorized disgorgement under Section 13(b), that might not be enough to reprise the FTC’s former course of enforcement. That’s because the court seems to be involved in a broader anti-regulatory project, so there’s no guarantee that it won’t find any legislative fix to 13(b) untenable for any number of reasons.

Continued Supreme Court decisions since AMG show the difficulties that agencies like the FTC face.

SEC v. Jarkesy

During the Supreme Court’s previous term, for example, the court decided 6–3 in SEC v. Jarkesy that civil securities fraud allegations invoke the Seventh Amendment right to a jury trial, and therefore can’t be decided by an administrative law judge (ALJ). That has implications for the FTC, which brings fraud-like cases before its ALJs in its own administrative proceedings (that are expressly authorized by statute).

But perhaps the bigger issue for the FTC from the court’s Jarkesy decision is that the ruling left intact a Fifth Circuit holding that Congress overstepped in explicitly delegating power to the SEC. In a decision that breaks with almost a century of precedent, the Fifth Circuit had held that a statute permitting the SEC to choose between bringing a lawsuit or pursuing administrative adjudication violates the nondelegation doctrine.

The Supreme Court let that decision stand unexamined. The Fifth Circuit has since concluded in another instance that Congress unconstitutionally let an agency exercise legislative powers. Reviving this 1930s doctrine bespeaks a shift in legal thinking that threatens the entire New-Deal structure of the federal government—but nowhere so clearly as with the expert agencies like the FTC.

Consumers’ Research v. CPSC

In the coming term, there is a petition pending to overturn and/or reexamine another foundation of the administrative state: Humphrey’s Executor v. U.S. (1935). Once again, the case is an appeal from a Fifth Circuit decision about executive agencies’ fundamental authority.

That decision, while upholding existing precedent, notes in its first sentence that the Supreme Court has been “reexamining foundational notions of federal regulatory power.” The Fifth Circuit panel then invites the court to overturn “one of the fiercest (and oldest) fights in administrative law"—restrictions on the president’s authority to remove the commissioners of independent agencies.

Humphrey’s Executor is about the FTC. It holds that when Congress authorizes commissioners of an executive agency to exercise legislative and judicial authority, rather than executive authority, those commissioners can constitutionally be insulated from “at will” removal by the president.

Because FTC commissioners are such officers, the court held, Congress could legislate that the commissioners serve for a term and are removable only “for cause” during that term. This holding has since been expanded to the other federal expert agencies. Limiting Humphrey’s Executor to its facts, therefore, would spare the FTC’s current bipartisan structure but undermine every other independent agency. Overturning it would end the FTC’s independence as well.

The court hasn’t ruled on the petition for certiorari in Consumers’ Research v. Consumer Prod. Safety Comm. The question presented is limited to the Consumer Product Safety Commission’s independence, but as amicus briefs in the case make clear (and indeed, the Fifth Circuit stated), the case is a vehicle for formally overturning Humphrey’s Executor.

Storm Warning

The problems in FTC enforcement that require a statutory fix are likely to keep coming, because every facet of the agency’s enforcement power faces potential constitutional challenges in courts that are, in some quarters, bent on reshaping the regulatory state. And some of these attacks can’t be fixed legislatively, because the Supreme Court could hold (as the Fifth Circuit invites it to) that Congress cannot constitutionally delegate enforcement power to the agency in the first place. Decisions under the nondelegation doctrine outlaw the authorizing statute itself.

In the meantime, regulations old and new are tied up in court battles, independent agencies see their authority shift unpredictably, and those agencies might lose their executive-branch independence entirely in the coming Supreme Court term. If legitimate business interests are adverse to regulatory “uncertainty,” the current circumstances can’t be great for honest business. They certainly aren’t ideal for the federal agency tasked with keeping commerce on the up and up.

Other Supreme Court cases covered in the report are: Malwarebytes v. Enigma Software (2020); West Virginia v. EPA (2022); and Coinbase v. Bielski (2023).

The full report is available for download here for nonsubscribers. Subscribers can directly access the report from our Bloomberg Law Reports page.

Bloomberg Law subscribers can find more information on the Supreme Court’s docket in Bloomberg Law’s Supreme Court Today Tracker.

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