U.S. Supreme Court Holds That Federal Trade Commission Lacks Authority to Seek Restitution or Disgorgement

As the principal federal agency responsible for consumer protection, the Federal Trade Commission has long relied on the use of equitable remedies, such as restitution for injured consumers and disgorgement of unjust enrichment, as part of its arsenal to combat fraudulent and deceptive practices.   In enforcing its “Do Not Call” Registry against telemarketing operations, for example, the FTC’s resolutions of enforcement actions resulted in $112 million in restitution or disgorgement – nearly two-thirds as much as the more than $178 million that the FTC recovered in civil penalties.

On April 22, the U.S. Supreme Court, in AMG Capital Management LLC v. Federal Trade Commission, unanimously held that section 13(b) of the Federal Trade Commission (FTC) Act, which authorizes the FTC to seek permanent injunctions, does not authorize the FTC to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.  Justice Breyer, writing for the Court, stated that while “the Commission presently uses §13(b) to win equitable monetary relief directly in court with great frequency,” the language of section 13(b) contained no language explicitly authorizing the Commission to obtain such relief directly from courts.

Justice Breyer took note of sections 5(l) and 19 of the Act, which gives federal district courts explicit authority to impose limited monetary penalties and to award monetary relief in cases where the Commission has engaged in administrative proceedings (i.e., issued cease and desist orders).  He contrasted those sections with section 13(b), which lacked such explicit authorizing language.  He noted that Congress “likely did not intend for §13(b)’s more cabined ‘permanent injunction’ language to have similarly broad scope.”

In his conclusion, Justice Breyer observed that nothing that the Court’s opinion said

“prohibits the Commission from using its authority under §5 and §19 to obtain restitution on behalf of consumers. If the Commission believes that authority too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority.  Indeed, the Commission has recently [in 2020] asked Congress for that very authority, . . . and Congress has considered at least one bill that would do so . . . .”

The Court’s decision undoubtedly came as a blow to the FTC.  Even so, there is reason to expect that Congress will respond to the decision by amending the FTC Act to provide specific textual language to authorize restitution and disgorgement.  The FTC’s use of restitution is popular with the general public, and the Biden Administration is certain to support such remedial language to reinforce the FTC’s consumer protection authority.

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