House responds with bill to restore Commission’s restitution powers
House Bill 2668, which Congressman Cárdenas introduced last week, addresses the two significant judicial limitations to Section 13(b) of the FTC Act.
—Rebecca Kelly Slaughter, Acting Chairwoman, FTC
To the relief of many direct sellers, the U.S. Supreme Court issued a unanimous ruling in the closely-followed AMG Capital Management, LLC v. Federal Trade Commission case.
In a April 22 decision authored by Justice Stephen Breyer, the court held that Section 13(b) of the FTC Act does not authorize the Commission to seek “equitable monetary relief such as restitution or disgorgement,” ruling that the “permanent injunction” reference in Section 13(b) only grants the FTC the ability to stop future actions of a targeted individual or company.
This ruling forces the Commission to use the two sections of the FTC Act, Sections 5 and 19, that do explicitly allow for monetary relief when it decides to go after a target’s bank account. These two sections provide paths for equitable as well as punitive monetary relief, but only through federal court and after issuing a cease and desist order—a much more time-consuming and involved process and one that FTC critics have long-contended provides for due process in a way that Section 13(b) does not. Thus, FTC detractors argue that the Commission has been abusing its powers for decades by using 13(b) to seek monetary relief. Clearly, the high court agreed.
Having seen the writing on the wall long before the decision was handed down, the FTC has been lobbying Congress over the past year to amend Section 13(b) to unequivocally establish the Commission’s ability to go after a company’s “ill-gotten gains,” bypassing the procedures laid out in Sections 5 and 19. SSN has reported on the recent efforts of current and former FTC members, along with consumer rights advocates, to push Congress for the 13(b) amendment.
House Bill 2668 Introduced
Their voices were apparently heard, as U.S. Rep. Tony Cardenas (D-California) introduced H.R. 2668 on April 20: “To amend the Federal Trade Commission Act to affirmatively confirm the authority of the Federal Trade Commission to seek permanent injunctions and other equitable relief for violations of any provision of law enforced by the Commission.”
FTC Acting Chairwoman Rebecca Kelly Slaughter appeared before the House Subcommittee On Consumer Protection and Commerce one week later, on April 27, to support the new House bill and highlight two components of the proposed legislation that the FTC is eager to see passed into law.
“House bill 2668, which Congressman Cárdenas introduced last week, addresses the two significant judicial limitations to Section 13(b) of the FTC Act. First, late last week, the Supreme Court ruled that courts can no longer award refunds to consumers in FTC cases brought under 13(b), reversing four decades of case law that the Commission has used to provide billions of dollars of refunds to harmed consumers.
“Second, some courts recently have ruled that the Commission cannot seek injunctive relief under 13(b) in cases where the unlawful conduct is no longer occurring, even if there is a reasonable likelihood that it will re-occur,” Slaughter said in written testimony.
The topic of retroactivity will undoubtedly be a hotly contested point of contention as debate on this bill begins. If passed, this provision will grant the FTC a 10-year statute of limitations for the pursuit of monetary equitable relief, bestowing it the ability to go after companies for conduct no longer in practice and, conceivably, giving the Commission incentive to initiate action against companies that it chose not to pursue in years past.
U.S. Chamber of Commerce Sides with FTC Opponents
The U.S. Chamber of Commerce weighed in on this debate with a letter submitted as evidence to an April 20 Senate Commerce Committee hearing titled, “Strengthening the Federal Trade Commission’s Authority to Protect Consumers.”
In the letter, the Chamber argued that the FTC has not been following the law with previous 13(b) actions and urged senators not to grant the Commission additional powers beyond those already codified in Sections 5 and 19.
“The agency (FTC) has proposed legislative text in an effort to transplant its authority for monetary remedies that resides within Section 19 into Section 13(b),” the letter stated. “We have significant concerns with this approach as it seeks to dramatically extend FTC authority in unbounded ways, instead of narrowly addressing the problem with a technical change focused on Section 19.”
The Chamber of Commerce also expressed concerns about the proposed retroactivity the new House bill would build into the FTC’s monetary relief powers, arguably increasing the scope of 13(b) power beyond that which it carried prior to the AMG ruling and potentially granting it the ability to extend even beyond the proposed 10-year statute of limitations.
“A major problem with the insertion of ‘has violated’ into 13(b) is that the draft language offers no clear statute of limitation for how far back the agency can go to address past conduct that is no longer occurring in the market,” the Chamber’s letter concluded.
Much Debate Still to Come
As with most bills sent up in the current political environment, H.R. 2668 has a long and difficult road ahead before it has a chance to become law. Proponents of the bill can be encouraged that public sentiment for consumer protection is at a high point after a year of COVID-19-related focus on anti-fraud measures. Those against the bill who believe that the FTC is seeking an unlawful power-grab can take heart that the U.S. Chamber of Commerce is on their side. They can also anticipate that changes and tweaks will inevitably be made as the bill makes its way through the House and, if it survives passage there, a split Senate is likely.
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