In a unanimous Supreme Court decision, the Supreme Court has held, “Section 13(b) does not authorize the Commission to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.”
Translated into English: The FTC has been abusing its power for decades.
It’s a devastating blow to the FTC’s credibility. To recap: the FTC was brought before the Supreme Court over their ability to extract money from defendants via their “13(b)” power. We wrote about it here. To summarize, section 13(b) says, “Whenever the [FTC] has reason to believe that any person . . . is violating, or is about to violate [the FTC Act] . . . [u]pon a proper showing . . ., and after notice to the defendant, a temporary restraining order or a preliminary injunction may be granted. . .”
The law says nothing about the FTC’s ability to recover MONEY via 13(b); thus, the issue before the Supreme Court. Section 13(b) has obviously been the FTC’s preferred method when pursuing companies. It’s their most violent tool in the toolbox, allowing them to sue companies in Federal Court and obtain quick relief (and money) with minimal effort. The Supreme Court highlighted this when it wrote, “There’s no question that the agency brings far more cases in court than it does in the administrative process. . . [the FTC] obtained 81 permanent injunctions resulting in $732.2 million in consumer redress or disgorgement.”
$732 million….in 2019 alone.
The Supreme Court just held, unanimously, 9-0, that the FTC has been abusing its power.
This is a humiliating blow to the FTC. The Court made it clear that the FTC has other ways, ways that provide more due process for defendants, to extract monetary penalties from companies. The liberal justices, who could have thrown the FTC a bone, basically said “yea, you all took it too far.”
The key part of the opinion:
“Did Congress, by enacting 13(b)’s words, ‘permanent injunction,’ grant the Commission authority to obtain monetary relief directly from courts, thereby effectively bypassing the process set forth in section 5 and section 19?”
Answer: “Several considerations have been taken together, convince us that 13(b)’s ‘permanent injunction’ language does not authorize the Commission directly to obtain court-ordered monetary relief.”
Also in the opinion: “to read §13(b) to mean what it says, as authorizing injunctive but not monetary relief, produces a coherent enforcement scheme: The Commission may obtain monetary relief by first invoking its administrative procedures and then §19’s redress provisions (which include limitations). And the Commission may use §13(b) to obtain injunctive relief while administrative proceedings are foreseen or in progress, or when it seeks only injunctive relief. By contrast, the Commission’s broad reading would allow it to use §13(b) as a substitute for §5 and §19.”
The Court gives treatment to the amicus briefs it received, with the authors hoping the Court would allow the FTC to maintain its ability to deprive companies of due process and shoot on site. The Court held that the FTC has other tools it can use, tools that provide more due process rights for defendants. In other words, the FTC can no longer rush into a federal courtroom, whip up a judge to assume the absolute worst of a company, freeze assets BEFORE a hearing, and proceed from there.
It was not even close. There was not a SINGLE justice that decided in favor of the FTC, sending a clear message: government power has limits. Those limits are set by Congress, the peoples’ chosen representatives.
I assumed the opposite outcome: I figured we’d see a 5-4 vote in favor of the FTC. I figured a loss would be too embarrassing for the FTC; thus, the Supreme Court would somehow allow the FTC to preserve some credibility. I was wrong. I have never been more happy to have been WRONG.
This is, without question, the most pathetic statement I’ve ever seen by an agency (any agency) in response to a Supreme Court decision. Acting Chairwoman Kelly Slaughter said this in response to the 9-0 Supreme Court decision:
“In AMG Capital, the Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior,” Acting Chairwoman Rebecca Kelly Slaughter said. “With this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most.”
In other words, she’s right, the 9 Justices (all of them) are idiots. It shows very little respect for a co-equal branch of government. It further sours the reputation of the FTC, in my opinion. I want you to imagine the FBI losing before the Supreme Court on a 4th amendment issue. Imagine their top leader saying, “The Courts are siding with criminals…they’re making it easier for criminals!” There should be more respect shown for the highest court in the country. It’s fine to disagree with the outcome. But the tone was childish.
FTC Going Forward
The FTC, in my opinion, should be contrite. They should do things to regain trust from the marketplace. Do things like seeking feedback, lobbying Congress, conversing with stakeholders on all sides. Instead, they’re obviously going to double down and find creative ways to carry on their work. The FTC is already leaning towards a new-ish approach known as “Penalty Offense Authority.” This resurrection of an old “tool” allows the FTC to seek monetary penalties. The FTC claims it provides defendants with more due process. Candidly, I don’t trust them. The future of the agency is going to be interesting to follow.
Obviously, I’m glad they had ZERO friends on the bench at the Supreme Court. At no point am I suggesting that scammers should be allowed to keep their money. I am suggesting that, on occasion, the FTC pursues innocent companies that settle because they’re not able to endure the hell of 13(b) litigation. As the saying goes, better 9 guilty people go free than 1 innocent go to prison. I believe in Due Process. So does the Supreme Court. So should you.
Click here to read the Supreme Court decision. Or see below if you’re on the website.