U.S. Supreme Court Rejects Federal Trade Commission’s Restitution Authority

April 22, 2021

On April 22, 2021, the U.S. Supreme Court unanimously held that Section 13(b) of the Federal Trade Commission Act does not grant the Federal Trade Commission (FTC) authority “to seek, [or] a court to award, equitable monetary relief such as restitution or disgorgement.” (Slip Op. at 1.) This ruling in the closely watched AMG Capital Management v. Federal Trade Commission case resolves a circuit split over the FTC’s authority to seek monetary relief from courts.

Section 5 of the FTC Act grants the commission the authority to police “unfair methods of competition” and “unfair or deceptive acts or practices” through its own administrative proceedings or by filing suit directly in federal court. If the commission uses its administrative proceedings and issues a final cease and desist order, it may then file an action in federal court under Section 19 to enforce the order through mandatory injunctions and other equitable relief, including monetary relief. However, the FTC increasingly has filed suit directly in court under Section 13(b) rather than using its own administrative process. Section 13(b) of the FTC Act authorizes the commission to obtain a “permanent injunction” when filing directly in court, and the commission frequently relies on Section 13(b) to obtain equitable monetary relief.

This is what occurred in AMG Capital Management. The FTC filed district court litigation seeking a permanent injunction and equitable monetary relief under Section 13(b) of the FTC Act. It did so against Scott Tucker’s payday loan business, which the commission alleged deceived consumers through automatic loan renewals generating additional charges. The district court issued the commission’s requested injunction and ordered Tucker to pay $1.27 billion in restitution and disgorgement. The 9th U.S. Circuit Court of Appeals affirmed.

The Supreme Court held, however, that the FTC Act’s structure foreclosed the FTC’s reading of Section 13(b). Writing for a unanimous court, Justice Stephen Breyer explained that other provisions of the FTC Act, like Section 19, do explicitly allow the commission to seek monetary relief, albeit with conditions and limitations. Section 13(b), however, refers only to a “permanent injunction” when describing the relief available. According to the Supreme Court, Section 13(b)’s silence on monetary relief indicates it does not provide the authority the FTC claimed. The opinion further rejected the FTC’s arguments that 1994 and 2006 amendments to the FTC Act, which did not modify Section 13(b), reflected Congress’s acceptance of lower court rulings upholding the FTC’s interpretation.

Though the commission and its amici argued that Section 13(b) had provided an essential tool to provide monetary relief to consumers, which should continue as a matter of public policy, the Supreme Court held that this issue was for Congress to resolve. In fact, the commission has already asked Congress to codify the FTC’s reading of Section 13(b), and Congress has considered a bill that would do so. 

Accordingly, for the FTC to obtain monetary relief going forward, it must use administrative proceedings under Section 5, and if necessary, a follow-up enforcement suit under Section 19. The commission can no longer use a direct action under Section 13(b) to obtain monetary relief. This decision imposes a significant limitation on the FTC’s preferred enforcement mechanism. Unless Congress acts to expand the FTC’s authority under Section 13(b), to obtain monetary relief, the FTC likely will bring more administrative proceedings under its Section 5 powers and more potential follow-up cases under Section 19.