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Financial Services Law Insights and Observations

FTC seeks to restore Section 13(b) redress authority

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

Federal Issues

On May 19, acting FTC Chairwoman Rebecca Kelly Slaughter published a letter reaffirming the need to 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 held 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.” Last month, Slaughter testified before both House and Senate subcommittees on the need for Congressional action to clarify Section 13(b) and affirmatively confirm the FTC’s authority to seek permanent injunctions and other equitable relief for violations of any law under its enforcement authority (covered by InfoBytes here).

Slaughter’s letter, directed to Senators Maria Cantwell (D-WA) and Roger Wicker (R-MS)—the chair and ranking member of the Senate Committee on Commerce, Science, and Transportation, respectively—addressed several issues raised by the U.S. Chamber of Commerce concerning recently introduce legislation (see H.R. 2668), which is intended to restore the FTC’s ability under Section 13(b) to seek consumer compensation in antitrust and consumer protection cases. Among other things, Slaughter disagreed with the Chamber’s position that Congress always intended for Section 13(b) to be used only in so-called “fraud cases.” She pointed to a 1994 action, in which Congress “directly ratified the FTC’s reliance on Section 13(b) in all manner of cases by expanding its venue and service of process provisions without placing any limitations on the types of cases to which Section 13(b) applies,” and noted that to date, the FTC has obtained billions of dollars of monetary relief for consumers, many of which were in non-fraud consumer protection cases. According to Slaughter, limiting the FTC’s ability to seek monetary relief to only “cases involving ‘egregious’ frauds” would allow companies and individuals “adjudicated to have engaged in unfair, deceptive, or anticompetitive practices” to keep money earned from unlawful conduct at the expense of harmed consumers.

Slaughter also emphasized that limiting Section 13(b) to only ongoing or imminent conduct does not make sense. Waiting for violations to recur in order to obtain a federal court injunction, Slaughter argued, “creates weak incentives for compliance, and is an inefficient enforcement mechanism that will result only in more consumer harm.” In addressing the Chamber’s concern that statutory fix proposals lack a statute of limitations for monetary relief under Section 13(b), Slaughter emphasized that H.R. 2668 would provide a 10-year limit on monetary relief.

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