Megan Olsen is Vice President and Associate General Counsel of the Council for Responsible Nutrition (CRN). Katie Bond is a partner with Lathrop GPM LLP in its Washington, DC office. Samuel A. Butler is an associate with Lathrop GPM LLM in its Washington, DC office.
Last Thursday, a unanimous Supreme Court held in AMG Capital Management LLC .v. FTC, that the FTC can only obtain restitution or disgorgement under Section 13(b) of the Federal Trade Commission Act (“FTCA”) (15 U.S.C. § 53(b)) after having issued a final cease and desist order through its administrative proceedings. In so doing, the Court resolved a 7-2 circuit split—in favor of the 2. Those 2—the Seventh Circuit’s decision in FTC v. Credit Bureau Ctr., 937 F.3d 764, 767 (7th Cir. 2019), and the Third Circuit’s decision in FTC v. AbbVie Inc., 976 F.3d 327 (3d Cir. 2020)—themselves in fact overruled prior precedent in those Circuits.1 These cases were, however, the first to examine closely the text and structure of the FTCA in assessing the grant of equitable relief.
There has never been any significant question that the FTC can obtain the equitable remedies of restitution or disgorgement. The FTC has always been able to initiate proceedings before the agency’s Administrative Law Judge (“ALJ”), who has the authority to issue a cease and desist order. 15 U.S.C. § 45(b). A party against whom such an order is issued can then seek review of the order before the agency’s Commissioners and, eventually, a circuit court. Id. § 45(b)–(c).
In 1973, Congress amended the FTCA to add Section 13(b), codified at 15. U.S.C. § 53(b). The amendment permits the FTC to seek a temporary restraining order or preliminary injunction from an Article III court even before the ALJ issues a cease and desist order. “[I]n proper cases,” the Article III court can also issue a permanent injunction. The same legislation also amended Section 5(l) of the FTCA (15 U.S.C. § 45(l)) to authorize district courts to issue civil penalties for violation of cease and desist orders, as well as “mandatory injunctions and such other and further equitable relief as they deem appropriate in the enforcement of such final orders.”
Two years later, Congress expanded district courts’ authority under the FTCA once again, by an amendment of Section 19, permitting courts to order the “refund of money or return of property” to redress injury to consumers. 15 U.S.C. § 57b(b). Again, however, a court is only empowered to grant such relief after the FTC has issued a final cease and desist order. Id. § 57b(a)(2).
Soon after these amendments, the FTC began to argue that it could use Section 13(b) to obtain mandatory injunctions, disgorgement, and restitution from district courts without initiating administrative proceedings. Courts generally accepted the FTC’s interpretation of the statute, and administrative proceedings became largely displaced by federal court proceedings.
The Supreme Court took stock of this history in AMG and decided that Section 13(b)’s grant to district courts of the authority to issue injunctions prior to the issuance of a final administrative order is a grant to district courts of the authority to issue injunctions only—not to order restitution or disgorgement. In reaching this conclusion, the Court noted that Section 13(b) is about prospective, injunctive relief rather than retrospective relief like restitution or disgorgement. It also noted the contemporaneous changes Congress made to the FTCA providing for monetary penalties and monetary relief, and the fact that the statute establishes the issuance of a final cease and desist order as a prerequisite for such relief. If Congress had intended for such relief to be available under Section 13(b), the Court concluded, it would not have enacted these further amendments to establish “a more onerous alternative to § 13(b).”
The AMG decision resolves numerous lingering questions about how the FTC has undertaken enforcement in recent decades, while leaving open questions about what Congress might do next. Below are a few practical notes on the immediate effects of the decision.
- Based on enforcement activity while the Supreme Court case was pending, it appears that the FTC will be bringing injunction-only actions in federal court while initiating proceedings on the merits in its administrative court. See, e.g., FTC, Press Release, “Thrive” Supplement Marketer Agrees to Preliminary Order Barring Him from Claiming It Can Treat, Prevent, or Reduce the Risks Associated with COVID-19 (Apr. 28, 2020); FTC, Press Release, FTC Approves Final Administrative Consent Order with Marketer of Product Falsely Claiming to Prevent or Treat COVID-19 (Oct. 19, 2020).
- The FTC has rarely (if ever) used its Section 19 authority to obtain monetary relief, and historically, it rarely agrees to monetary settlements in its administrative court citing a lack of legislative authorization. The Supreme Court’s opinion clearly acknowledges the Section 19-based ability to seek monetary remedies and sets no apparent barriers to settlements under Section 19 in administrative court. The FTC appears lately to be agreeing to significant monetary settlements in its administrative court, and that trend could continue. See, e.g., Prop’d Consent Order, com Inc., FTC File No. 1923123 ($61.7 million administrative settlement over Amazon Flex driver tips).
- Agencies no doubt have been reviewing and will continue to review enabling statutes to determine any effect of AMG as well as Liu v. Sec. & Exch. Comm’n, 140 S. Ct. 1936 (2020). In Liu, the Supreme Court allowed disgorgement of profits against a defendant where the Securities and Exchange Commission’s enabling statute allowed “equitable relief” in federal court versus “injunctions,” as was the case in
- The FTC may have an edge in obtaining legislative changes given the current makeup and Hill savvy of the Commission. Acting Chair Rebecca Slaughter (Democrat) is former Chief Counsel to Senate Majority Leader Charles E. Schumer (D-NY), while Commissioner Noah Phillips is former Chief Counsel to Senator John Cornyn (R-TX). Legislation has already been introduced.
- The AMG Supreme Court decision gives a welcome nod to AbbVie Inc. The Court cited AbbVie, along with the Seventh Circuit decision in FTC v. Credit Bureau Center, LLC, 937 F.3d 764 (7th Cir. 2019), as the prior precedent rejecting the FTC’s longtime interpretation of Section 13(b). AbbVie Inc. is a particularly important part of the body of case law because the Third Circuit relied on another case, FTC v. Shire ViroPharma, Inc., 917 F. 3d 147 (3d Cir. 2019) in reaching its decision. Shire was a variation on the theme of courts moving toward a strict reading of 13(b). There, the Third Circuit held that to obtain an injunction under 13(b), the FTC must meet the statutory language and allege facts sufficient to show a defendant “is” or “is about to” violate the law. With a positive cite to AbbVie, Shire is likely strengthened, as well, and like the U.S. Supreme Court’s AMG decision, it provides welcome clarity as to the limits on the FTC’s existing enforcement authority.