Justices unanimously reject FTC’s authority to compel monetary relief

Unanimous court curtails FTC’s ability to obtain restitution for deceptive practices

Opinion analysis

From Ronald Mann

at 5:16 pm

My contribution, which summarized the hearing in AMG Capital Management v Federal Trade Commission, suggested that this was not good for the FTC, given that Judge Stephen Breyer himself had the broad authority that the Commission had in its efforts the recovery of funds from accused companies alleged failing to deceive perceived consumers. This understanding arose on Thursday when Breyer’s opinion in favor of a unanimous court ruled the Commission’s argument and categorically rejected it.

As Breyer explains, the case concerned the tension between “two enforcement options” that Congress has granted the FTC, “administrative and judicial”. The administrative process begins with Section 5 of the Federal Act on the Trade Commission, which enables the Commission to “lodge a complaint against the alleged infringer”, “decide on his claim” and, in due course, “issue an order requesting the party will stop and refrain from illegal behavior. “In 1975, Congress added an enforcement option to this appeal that allowed the Commission to appeal to a federal district court under Section 19 of the Act and” obtain relief that the court deems necessary to remedy consumer harm ” The second, purely judicial, option concerns Section 13 (b) of the 1973 FTC Act (two years prior to Section 19). This section enables the Commission to go directly to a federal court – without the hassle of going through administrative procedures or obtaining an injunction – and to obtain an “injunction” against a company that “is violating a company or is about to violating it provision of laws enforced by [the commission]. ”

Breyer explains: “In the late 1990s, the Commission began using the” permanent injunction “of Section 13 (b) to request monetary rewards such as refunds and disgorgations – again without prior application of traditional administrative procedures.” In addition, “the Commission is currently using Section 13 (b) to obtain fair monetary relief directly in court with great frequency.” Breyer summarizes statistics that show, for example, that the FTC has almost four times as many permanent injunctions in the past fiscal year Section 13 (b) as issued under Section 5 injunctions.

Breyer offers several reasons to support the Commission’s denial of the power to use Section 13 (b) to obtain “judicial pecuniary relief”. The simplest is that “the language only refers to injunctions” that “are not the same as granting fair monetary relief”, since an injunction “usually offers prospective relief against continuing or future damage” and “a reimbursement Usually a retrospective relief provides “reparation for past damages. Breyer also relies heavily on the “language and structure of Section 13 (b) as a whole,” which “indicates that the words” permanent disposal “have a limited purpose – one other than to provide monetary relief Extends. ”With a block quotation from the statute for almost a full page, he shows that“ the words are buried in a long provision that focuses on purely temporary injunctions and not financial relief. ”For Breyer, the“ words reflect that the provision addresses a specific problem and … prevents seemingly unfair practices from taking place while the Commission decides on their legality. “He is unwilling” to read these words to allow what they do not say, namely that the Commission can dispense with administrative procedures in order to obtain financial relief “.

Breyer cites the explicit “power to … grant pecuniary relief in cases where the Commission has issued injunctions,” and states that Congress “likely did not intend Section 13 (b) to be a much broader language for permanent injunctions.” has scope. The statement reiterates an issue raised at the hearing and highlights the “important limitations” in Section 19 that do not exist in Section 13 (b), including the limitation on cases where the FTC is one Proceedings under Section 5 initiated within three years of the underlying breach and requested financial relief within one year of the injunction and in cases where “a reasonable man would have known under the circumstances [that the conduct was] dishonest or fraudulent. “

For the court: “[i]It is highly unlikely that Congress would have decided that [in 1975] Provisions that expressly authorize conditional and limited cash relief when the law of Section 13 (b) had already implicitly allowed the Commission to receive the same cash relief and more without meeting those conditions and restrictions. “Conversely, reading” §13 (b) to mean what it says … leads to a coherent enforcement scheme “that provides” money relief “from invoking the” administrative procedures of the Commission and then the appeal provisions of §19 “As well as on” omission relief “is dependent while administrative proceedings are planned or ongoing or when [the commission] only seeks injunctive relief. “

Breyer briefly addresses the Commission’s arguments to the contrary, emphasizing that previous cases that allowed for fair monetary relief under the provisions authorizing “injunctive relief” were based on different laws. He also emphasized the importance of the “structure of the legal system”, which is of central importance for AMG Capital’s decision. The opinion concludes by recognizing the “policy implications of the Commission’s permission to use Section 13 (b) to obtain financial relief” and the “billions of dollars that the Commission returned to consumers under Section 13 (b) has) efforts ”, but states that the FTC is free for“ us ”[e] his authorization according to §5 and §19 to receive this relief. Breyer suggests that if this path is “too cumbersome or otherwise inadequate, [the commission] It is of course free to ask Congress to provide further corrective action, ”notes that Congress only considered such a request from the Commission last year.