FTC Commissioners Appeal to Hill on Section 13(b)

Last week, all five FTC Commissioners – Chairman Joseph Simons (R), and Commissioners Christine Wilson (R), Noah Phillips (R), Rebecca Slaughter (D), and Rohit Chopra (D) – sent a letter to the Chairs and Ranking Minority members of the Senate Commerce and House Energy & Commerce Committees urging the Committees to pass legislation that would “restore Section 13(b) to the way it has operated for four decades.” The full letter appears here. Its most salient paragraph:

Without congressional action, the Commission’s ability to use Section 13(b) to provide refunds to consumer victims and to enjoin illegal activity is severely threatened. As explained below, courts of appeals in the Third and Seventh Circuits have recently ruled that the agency cannot obtain any monetary relief under Section 13(b). Although review in the Supreme Court is pending, these lower court decisions are already inhibiting our ability to obtain monetary relief under 13(b). Not only do these decisions already prevent us from obtaining redress for consumers in the circuits where they issued, prospective defendants are routinely invoking them in refusing to settle cases with agreed-upon redress payments. Moreover, defendants in our law enforcement actions pending in other circuits are seeking to expand the rulings to those circuits and taking steps to delay litigation in anticipation of a potential Supreme Court ruling that would allow them to escape liability for any monetary relief caused by their unlawful conduct. This is a significant impediment to the agency’s effectiveness, its ability to provide redress to consumer victims, and its ability to prevent entities who violate the law from profiting from their wrongdoing. Accordingly, it is imperative that Congress act quickly so that the FTC can continue to effectively protect American consumers.

Prospects in Congress are uncertain. Most believe that, if there is any action on this following the November 3 election, it would come from the Senate as part of the SAFE DATA Act (a comprehensive data privacy bill). Prospects that the privacy bill will move, however, are considered by many to be a long-shot.

On a related note, yesterday Commissioner Rohit Chopra and his Attorney Advisor Samuel A.A. Levine released a paper entitled “The Case for Resurrecting the FTC Act’s Penalty Offense Authority." In it, Commissioner Chopra and Mr. Levine contend that the Commission should “resurrect one of the key authorities it abandoned in the 1980s: Section 5(m)(1)(B) of the FTC Act, the Penalty Offense Authority.” The Penalty Offense Authority allows the Commission to formally declare a practice as unfair or deceptive in a cease-and-desist order, rendering that practice a “Penalty Offense.” Companies (or individuals) that later engage in that practice, with knowledge, would be subject to stiff financial penalties.

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