A unanimous U.S. Supreme Court delivered a blow to the Federal Trade Commission, curtailing the FTC’s ability to seek monetary relief, 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. The FTC increased its yearly restitution and disgorgement penalties under Section 13(b) more than 23-fold between 2012 and 2018. The agency now has three potential paths forward to seek compensation for victims of unfair or deceptive practices.
The most likely path is that the FTC will solidify its alliance with state attorneys general who can and do utilize their statutory power frequently to seek restitution and other penalties. The FTC and state AGs already work together regularly, but we expect this cooperation to skyrocket after this decision.
AMG Capital Management offered “payday” loans from Native American lands to avoid state usury caps and was ordered to pay $1.27 billion in restitution. The question presented to the Supreme Court was straightforward: Does the FTC have the authority under Section 13(b) to seek restitution when it acts to prevent “unfair or deceptive acts” that affect commerce?
The business community, led by trade organizations such as the National Retail Federation and the U.S. Chamber of Commerce, filed amicus briefs in support of a textual interpretation of Section 13(b). They supported AMG Capital’s contention that the plain language of Section 13(b) limits the FTC to injunctive relief only. Meanwhile, consumer advocacy organizations and a bipartisan group of 30 AGs supported the FTC.
The Likely Path: Strengthen Partnership With State AGs
The FTC and AGs have a long history of collaborating, as highlighted in the AG amicus brief which called the FTC a “crucial partner” to the 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 records, and expert analyses conducted by the FTC in their own cases.
We predict the FTC will increase its collaborative efforts with AGs to pursue equitable monetary relief. The majority of states have statutes which expressly authorize their attorneys general to seek restitution. Many AGs will likely eagerly accept increased and sustained cooperation from the FTC.
Under this scenario, there will be more joint investigations, protracted settlement negotiations, and litigation. It could be the perfect storm for businesses: A well-funded ally incentivized by the loss of Section 13(b) restitution authority to partner with already effective AGs.
The Supreme Court’s decision in AMG Capital has reined in the authority of the FTC. The question now becomes, what will it unleash instead?
The FTC will inevitably seek to work more closely with the 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 sovereigns with their own ways of doing things and their own agendas. We anticipate investigations will take longer to conclude, and involve more difficult, protracted and costly settlement negotiations with the business community.
The FTC may still seek restitution under Section 19 of the FTC Act. But, as noted by Justice Stephen Breyer, these actions are “cumbersome” and take a long time to prosecute. Only after administrative review may the FTC commence an action in federal court and request restitution. Thus, use of Section 19 would require more resources and take longer.
Another solution lies with Congress, which could amend Section 13(b) to expressly provide the FTC authority to obtain restitution. A bill was introduced in the House on April 20 to do just that. An important question is whether this legislation will apply retroactively, or only to conduct that occurs after legislation is enacted. Another important question is whether and what limitations will be placed on the scope of restitution.
Even if the bill makes its way to the Senate, the filibuster effectively requires a 60-vote super majority to pass the legislation, unlikely in an evenly-divided Senate with expected opposition from the business community unless the legislation is very narrowly tailored. Amending the FTC Act via the budget reconciliation process to sidestep the filibuster also seems improbable.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Bernie Nash is a co-chair in the Cozen O’Connor State Attorneys General Group in Washington, D.C. A former SEC trial attorney and counsel to the U.S. Senate Subcommittee on Antitrust and Monopoly, he has experience in state regulatory matters and decades-long relationships with individual AGs and their staffs and advises on AG investigations and litigation, and the interplay between state and federal agencies.
Milton A. Marquis is a member in the Cozen O’Connor State Attorneys General Group in Washington, D.C., and previously served as an antitrust and consumer protection litigator in the Massachusetts and Virginia AG offices, and at the Justice Department.
Mira E. Baylson is a member in 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 facing investigations from state AGs and other government agencies, including the DOJ and CFPB.