United States: SCOTUS Oral Argument: Does FTC Have Authority To Obtain Monetary Relief Under Section 13(b) Of The FTC Act?

The Supreme Court heard oral argument in AMG Capital Management, LLC v. Federal Trade Commission to address the issue of whether Section 13(b) of the Federal Trade Commission Act authorizes the FTC to obtain monetary relief, such as restitution, under the scope of authorized "injunction[s]" on January 13, 2021.  For decades, courts have interpreted the statutory language liberally as allowing monetary relief.  But the new, more conservative composition of the Court may signal the end of the FTC's authority to recover such damages and change the legal landscape for the FTC, advertisers, and advertising law practitioners alike. 

Section 13(b) of the FTC Act provides that when the Commission "has reason to believe that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission . . . in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction."

The Justices focused their questions on four central issues: 1) the tension between the FTC's reliance on congressional intent at the time 13(b) was passed and AMG's argument for a textual (and more commensurate with the times) approach to interpretation, 2) the time elapsed since enactment and uniformity of interpretation by the lower courts, 3) the statutory language and structure of Sections 5 and 19 of the FTC Act, and 4) the implications of permitting the FTC to avoid the protections required by Sections 5 and 19.

After a brief opening by Petitioner AMG, Chief Justice Roberts kicked off the questioning and asked why the Court should construe the statute under the modern "disciplined approach" to statutory interpretation rather than the "more free-wheeling approach" the Court applied when 13(b) was enacted.  AMG argued that the concurrent enactment of Section 5(1), which expressly authorized "an injunction and other further equitable relief," indicates it was Congress' intent at the time of enactment to restrict the meaning of "permanent injunction" under Section 13(b).

Justices Breyer and Kavanaugh asked whether, regardless of the congressional intent, the 50 years that had elapsed since the passing of the statute and the subsequent uniform interpretation by lower courts should have any effect on the Court's decision about interpretation.  Further, should the Court agree with AMG, Justice Kavanaugh questioned how the Court should address two prior Supreme Court cases, Porter and Mitchell, which state that "nothing is more clearly the subject of a suit for an injunction than the recovery of that which has been illegally acquired and which has given rise to the necessity for injunctive relief."  In response to these questions, AMG first argued that, regardless of the time passed, the issue was before the Court for the first time and intervention by the Court was required to resolve the recent split among circuits.  AMG then distinguished the Court's previous cases by stating that "in neither case did Congress elsewhere authorize an injunction and . . . further equitable relief, making it clear that Congress didn't presume that an injunction carried with it all equitable relief."

Focusing on this distinction and recognizing that Congress had indeed used different language for injunctive relief in the various sections of the Act–stopping at "injunctive relief" in one section and adding "and further equitable relief," in another–Justices Thomas, Sotomayor, and Kagan pressed the FTC on the variances in language.  The FTC contended that the variances reflect functional differences of the sections which required Congress "to say exactly what remedies it wanted."  For example, Section 5(1) is used to enforce cease and desist orders through which there "already basically is an injunction on the books."

Building on these variances, Justice Kagan addressed the inclusion of certain protections–a statute of limitations, heightened proof requirement, and notice to victims–in Sections 5 and 19 which would be irrelevant if the Court adopted the FTC's interpretation of Section 13.  The FTC clarified that while Sections 5 and 19 of the Act provide remedies "when the Commission chooses to enforce the Act administratively", Section 13 permits the FTC to seek remedy through the court.  As a result, the FTC argued that while the Section 13 pathway to federal court may be more attractive than the administrative pathway of Sections 5 and 19, this approach is balanced by what the Commission has to give up when it decides to pursue litigation in federal court.  Acting together, the sections were designed to give the Commission a choice of enforcement options.

Finally, Justices Breyer, Gorsuch, and Kavanaugh questioned the FTC about the implications of adopting its broad interpretation.  Justice Breyer reminded the Court of the FTC's history, namely the suspicion at the time of enactment by the business community that felt the FTC would abuse its power.  To prevent this potential for abuse, Justice Breyer stated the FTC is required to find misconduct before issuing an order.  With the FTC's proposed interpretation, Justice Breyer suggested that the fears of the business community would be confirmed–"[b]efore you know the thing is wrong, they hit you with bad damages."  The FTC responded that because a court is "bound by principles of constitutional due process and notice," where the party "couldn't possibly understand what was required of him" it will find a remedy unavailable.

The question remains for the Court.  Will it maintain its trend toward strict textual statutory interpretation or, as Justice Breyer put it, should the Court leave decades of precedent undisturbed and "let bygones be bygones"? 

And are we bound to see a sequel of this fight in Congress because the issue is ripe for a legislative fix?  In October 2020, five FTC Commissioners sent a letter to Congress urging it "to take quick action to amend Section 13(b) to make clear that the Commission" may "obtain monetary relief, including restitution and disgorgement, if successful."  According to the FTC, "Amending Section 13(b) in such a manner will restore Section 13(b) to the way it has operated for four decades."

The case is AMG Capital Management, LLC v. Federal Trade Commission, Docket No. 19-508 (Argued Jan. 13, 2021).

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