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Financial Services Law Insights and Observations

FTC asks Congress to restore redress authority

Federal Issues FTC FTC Act U.S. Supreme Court Consumer Redress U.S. House Federal Legislation Enforcement

Federal Issues

On April 27, acting FTC Chairwoman Rebecca Kelly Slaughter asked the House Energy and Commerce Subcommittee on Consumer Protection and Commerce to pass legislation to clarify Section 13(b) of the FTC Act and restore the Commission’s ability to return money to harmed consumers following the U.S. Supreme Court’s decision in FTC v. AMG Capital Management. As previously covered by InfoBytes, on April 22, the Court unanimously reduced the FTC’s powers by holding that Section 13(b) of the FTC Act “does not authorize the Commission to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.”

Section 13(b), Slaughter testified, has been “the agency’s primary and most effective way of returning money to consumers,” as it authorizes the Commission to sue directly in federal court for violations of the FTC Act. Until recently, “seven of the twelve courts of appeals, relying on longstanding Supreme Court precedent, interpreted the language in Section 13(b) to authorize district courts to award the full panoply of equitable remedies necessary to provide complete relief for consumers, including disgorgement and restitution of money,” Slaughter emphasized, noting, however, that a shift in recent court interpretations of Section 13(b) has “significantly limited the Commission’s primary and most effective tool for providing refunds to harmed consumers.” Slaughter also stressed that “if Congress does not act promptly, the FTC will be far less effective in its ability to protect consumers and execute its law enforcement mission.”

H.R. 2668, introduced by House Democrats, seeks to affirmatively confirm the FTC’s authority to seek permanent injunctions and other equitable relief for violations of any law under its enforcement authority. In her prepared statement, Slaughter told the Subcommittee that legislation such as H.R. 2668 is “urgently needed to address legal challenges to critical authority that enables the FTC to do its job of protecting consumers and competition.” She further noted that legislation is needed to ensure that the FTC is able to prevent harmful conduct from reoccurring. Slaughter pointed to two recent decisions issued by the U.S. Court of Appeals for the Third Circuit that reinterpreted Section 13(b) and “jeopardize[d] the FTC’s ability to enjoin illegal conduct in federal court.” The decisions “hamper the Commission’s longstanding ability to protect consumers by enjoining defendants from resuming their unlawful activities when the conduct has stopped but there is a reasonable likelihood that the defendants will resume their unlawful activities in the future,” she stated.

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