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U.S. Supreme Court Curtails FTC’s Authority to Obtain Restitution and Disgorgement

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Yesterday, the U.S. Supreme Court, in AMG Capital Management, LLC v. FTC, sharply curtailed the ability of the Federal Trade Commission to obtain restitution and disgorgement in enforcement actions. In a 9-0 decision, the court found that Section 13(b) of the FTC Act, which authorizes the FTC to seek permanent injunctions in federal court, did not also authorize the Commission to obtain court-ordered monetary relief. 

The AMG decision will have a major effect on FTC enforcement actions.  Indeed, the FTC Chairwoman noted in a statement yesterday that the ruling deprives the FTC of its “strongest tool.”  The Commission already had expressed concern about its limited authority to obtain monetary relief in certain matters, such as data privacy actions.  The Court’s recent decision will only exacerbate the Commission’s position and likely hit the FTC’s fraud program the hardest.  In cases in which FTC believes that it has uncovered serious fraud, the Commission files actions in federal court immediately seeking ex parte injunctions to freeze assets in an attempt to maintain funds to return to consumers as restitution if the FTC’s litigation efforts are successful.  The FTC’s ability to take such action has been impaired considerably by the Court’s decision. 

Moving forward, the FTC likely will engage in various strategies to obtain monetary relief as part of its enforcement actions, including: 

  • calling for Congress to pass legislation reaffirming that the agency has authority to seek monetary relief in actions brought under Section 13(b) – indeed, the FTC Commissioners made such a plea earlier this week in testimony before Congress prior to the Court’s ruling;
  • in investigating matters, attempting to identify violations of rules – such as the Telemarketing Sales Rule, CAN-SPAM, and COPPA, which allow the Commission, with assistance from the Department of Justice, to obtain civil penalties under a separate provision of the FTC Act – relatedly, the Commission has pledged to undertake new rulemakings, including possibly in the privacy and data security area, to potentially expand the areas in which it can seek civil penalties; and
  • partnering more often with state attorney generals, which enforce unfair and deceptive practice laws similar to the FTC Act, and are not bound by the AMG decision’s limitations placed on the FTC Act.
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