On July 9, 2020, the U.S. Supreme Court announced that it would review the Federal Trade Commission’s authority to seek restitution in federal court for consumers who have been harmed by fraud and other misconduct in the marketplace. Just three weeks after the Court upheld the SEC’s authority to seek disgorgement of profits in civil enforcement proceedings, the Court agreed to take up a circuit split regarding the FTC’s authority to seek monetary relief under the Federal Trade Commission Act (the “Act”). Depending on the outcome, the Court’s decision could severely limit what the FTC considers one of its “most important and effective enforcement tools”1—upending its enforcement strategy in both consumer protection and competition cases.
Section 13(b) of the Act authorizes the FTC to file suit in federal court seeking temporary injunctive relief when it has “reason to believe” that a party “is violating, or is about to violate” any provision of law enforced by the FTC, and permanent injunctions “in proper cases.”2 For decades, however, the FTC has taken a far more expansive view of its authority under Section 13(b). It maintains—and the majority of courts of appeals have agreed—that in addition to authorizing injunctive relief, the Act implicitly authorizes the agency to seek monetary equitable relief, including restitution to remedy past violations.3 Critics have long said that interpretation goes beyond the scope of the FTC’s statutory authority and enables the agency to seek both monetary and backwards-looking relief for past misconduct in contravention of the Act. Now, prompted by a opposite holdings from the Ninth and Seventh Circuits, the Supreme Court will consider the question.
In August 2019, the Seventh Circuit in FTC v. Credit Bureau Center, LLC, broke with thirty years of its own precedent, and the majority of appeals courts, in holding that “Section 13(b)’s grant of authority to order injunctive relief does not implicitly authorize an award of restitution.”4 In that case, the FTC sued a company for advertising “free” credit reports to consumers online, without adequately disclosing that they would subsequently be enrolled in a credit monitoring service costing $30 per month, in violation of unfair trade practices laws. The FTC sought, and the district court ordered, a permanent injunction preventing the company from engaging in further violations and restitution of over $5 million. On appeal, the Seventh Circuit overturned the district court’s order of restitution, rejecting the FTC’s argument that the Act implicitly grants it authority to seek restitution and other monetary relief, and holding that the plain language of Section 13(b) permits only injunctive relief.
Taking the exact opposite position, the Ninth Circuit in FTC v AMG Capital Management, LLC upheld the district court’s order of over $1.2 billion in restitution to consumers harmed by online payday loan companies in violation of the Act and the Truth in Lending Act.5 In that case, the court concluded that it was “bound by [its] prior interpretation” of Section 13(b), authorizing the agency to seek monetary relief, and that the Act...
