The Supreme Court’s decision in AMG Capital Management LLC et al. v. FTC deals a serious blow to the Federal Trade Commission’s ability to seek monetary relief in consumer protection and antitrust cases. A unanimous Court held that the FTC’s decades-long practice of utilizing Section 13(b) of the FTC Act to seek financial redress for consumers via cases filed directly in federal court was not supported by the statute’s plain language and structure. Instead, the provision provides a vehicle only to injunctive relief without the possibility of immediate equitable restitution.
The decision will have immediate consequences as the FTC has lost, at least for now pending any Congressional action, its long-preferred mechanism to obtain fast-track monetary relief via direct federal court litigation.
But several Commissioners have already signaled that they intend to utilize largely dormant “backup” options for seeking monetary relief, with a focus on Section 19(a)(2) of the FTC Act. Use of that provision would require a multi-step process with a somewhat higher burden of proof. Before seeking monetary relief in federal court under Section 19(a)(2), the FTC would first need to prevail in a liability-only Section 5(b) administrative proceeding before an FTC Administrative Law Judge, and any appeals first to the Commissioners and then to a federal court of appeals, resulting in a conduct-specific cease and desist order. Only then would the FTC be permitted to seek monetary relief in a federal court action premised on that specific conduct and under a standard requiring a showing of objectively dishonest or fraudulent conduct.
Critically, however, this “backup” avenue to monetary relief is available only in consumer protection cases but not available in antitrust cases. By losing its Section 13(b) authority the Commission has lost its ability to pursue monetary relief in cases alleging unfair methods of competition—that is, anticompetitive conduct—because the language of Section 19(a)(2) applies only to cases targeting “any unfair or deceptive act or practice.” This is a highly material impact of the Supreme Court’s decision, particularly since the FTC has obtained significant monetary settlements for alleged anticompetitive conduct in recent years, including several involving the pharmaceutical industry.
At bottom, the Court’s decision represents a significant and meaningful limitation on the current scope of remedies available to the FTC. Although that scope may yet change again given congressional interest in a statutory fix, the current paradigm resulting from the Supreme Court’s decision creates several important practical considerations for companies facing potential FTC scrutiny.
Practical Effects for Companies Facing FTC Scrutiny
- The FTC has lost its ability to pursue monetary relief in antitrust conduct cases alleging unfair methods of competition, and will be limited to injunctive relief barring future congressional action.
- FTC litigation in pursuit of monetary awards in consumer protection cases may take longer given the requirement to file and win an administrative case (and appeals) before federal litigation seeking monetary relief.
- The FTC may be selective with Section 19(a)(2) consumer protection litigation, especially at the outset, pursuing only the most serious cases and focusing on cases with the “best” facts that will create favorable case law for the FTC’s future litigation efforts.
- This new litigation landscape may provide more opportunity for early settlements without a monetary component or with at least a significantly limited one.
- The FTC may attempt to leverage the nuisance value and cost of extended litigation, which could pose challenges for smaller companies less financially equipped for drawn-out, multi-stage litigation.
- Because litigation in pursuit of monetary relief will necessarily take longer, any payment of monetary awards would be delayed many years after litigation commences.
- This new paradigm may well change quickly yet again. New legislation or rulemaking is likely as the FTC and its congressional allies push to curb the effect of the Supreme Court’s decision. Several members of Congress have already described plans for a legislative fix regarding Section 13(b).
- State Attorneys General may also become more aggressive with litigation involving financial remedies in an attempt to fill the gap left by the Supreme Court’s decision.