Following a presentation from Bureau of Consumer Protection Acting Deputy Director Audrey Austin, the Commissioners opined on the loss of – in Chair Lina Kahn’s words – “the key engine of our law enforcement efforts for four decades” and the inability to adequately obtain monetary relief for consumers.

Chair Kahn and fellow Democratic Commissioner Rebecca Slaughter commended the agency’s alternative enforcement approaches over the past year in AMG’s wake. They highlighted the use of Section 19; new rulemakings to codify conduct that the courts had already determined was unfair or deceptive; additional administrative proceedings to “preserve a pathway” for monetary relief; warning letters to businesses and the threat of civil penalties; and coordination with State Attorneys General. Under those alternative enforcement pathways, however, Commissioner Slaughter said the agency’s “best outcomes are still justice diminished or delayed.”

While all four current Commissioners indicated support for legislation to clarify the agency’s enforcement authority under Section 13(b), comments from Republican Commissioner Christine Wilson reflect ongoing stakeholder concerns that appear to have stood in the way of Senate action following the House’s passage last summer of Representative Cárdenas’s (D-CA) Consumer Protection and Recovery Act on a nearly party-line vote (see more on the Cárdenas bill here).

Specifically, Commissioner Wilson stressed the need for statutory guardrails to address: (1) the absence of a statute of limitations; (2) the potential “unbounded” use of Section 13(b) to achieve disgorgement in antitrust cases; and (3) the application of Section 13(b) in consumer protection cases involving legitimate businesses selling legitimate products and services, albeit with deceptive claims. Another potential legislative flash point is the possible retroactive application of any new penalty authority. Today, Commissioner Slaughter noted that $1 billion in relief “could be preserved if action were taken now to restore 13(b) to all current and future cases.” While one can imagine a legislative framework that satisfies both sides, such a framework has not yet materialized.

Further, the agency’s internal politics could portend trouble for champions of an expeditious legislative solution. In a broad rebuke of Chair Kahn’s Federal Trade Commission, Commissioner Wilson warned that Congress may be wary to expand the FTC’s power given recent examples of the agency using its authority in a way that exceeds statutory boundaries or undermines Congressional intent. She urged her colleagues to “tread carefully” and noted the importance of demonstrating the agency will be “careful stewards” of any new enforcement authority bestowed upon it.

As we have written before, while there is bipartisan support for holding “scammers and fraudsters” accountable and providing for consumer redress, Congress’s sense of urgency to pass legislation clarifying the FTC’s authority under Section 13(b) seems to have waned as partisan tensions – both in Congress and the agency – have intensified.

Meanwhile, the Senate may vote as soon as next week on Alvaro Bedoya’s nomination to serve on the Federal Trade Commission. The confirmation vote had originally been expected this week, but was delayed due to the absence of two Democratic Senators. Perhaps reflective of those above-mentioned partisan tensions, Commissioner-designate Bedoya is expected to need the votes of all 50 Senate Democrats, in addition to the tie-breaking vote of Vice President Kamala Harris.

A: As an initial matter, it’s Important to emphasize that the Supreme Court did not take any authority away from the FTC; it concluded 9-0 that the FTC did not have the authority in the first place. Justice Breyer put it this way: Section 13(b) produces a “coherent enforcement scheme. The Commission may obtain monetary relief by first invoking its administrative procedures and then Section 19’s redress provisions; it can use Section 13(b) to obtain injunctive relief while administrative proceedings are foreseen or in progress, or when it seeks only injunctive relief.”

The inability to obtain equitable monetary relief under Section 13(b) has taken away the FTC’s weapon of choice, but it has not left it without other means to carry the attack, and it continues to push the boundaries of its authority. Chair Khan has made clear that it will litigate on principle, and that often means without regard for litigation risk. In many ways, the agency is less predictable and, from a respondent’s or defendant’s perspective, dangerous. I had expected more restraint, given the AMG decision.

During oral argument, Justice Kavanaugh commented that, as former Executive Branch employee, he understands how “with good intentions the agency pushes the envelope and stretches the statutory language to do the good or prevent the bad – the problem is it results in a transfer of power from Congress to the Executive Branch.”

I heard something similar from Commissioner Wilson, in her concurring opinion in Resident Home. There, she said that AMG “should have been a wake-up call, a reminder to the Commission that, no matter how egregious the conduct or righteous our cause, the Commission is not entitled to go beyond the bounds of what the law permits.” Despite these warnings, in response to AMG, continues to explore the frontiers of its authority.

This means that the FTC has assumed an aggressive adversarial position, using all means at its disposal in an attempt to redress what it perceives to be consumer injury, even if it means advancing a litigation position that is ultimately unsuccessful. In short, I doubt that companies currently adverse to the FTC consider the agency to be compromised to any significant extent – in many ways, it is emboldened.

Q: Last Spring, many practitioners speculated that the FTC would shift strategies in existing cases and new matters by tying their requests for relief to different statutory provisions like ROSCA or TCPA or focus enforcement activity on statutory violations that provide for monetary relief. Has this happened?

A: One of the first cases was FTC v. Cardiff. There, the FTC attempted to pursue monetary relief post-AMG by way of a different statute: The Restore Online Shoppers’ Confidence Act (ROSCA). While the court agreed with the FTC that it could have pursued monetary relief under ROSCA, it held the FTC had waived the right to request such relief by not including the ROSCA theory of recovery in its Rule 26 disclosures, and had only disclosed its ROSCA expert after discovery closed (and, conveniently, after AMG was decided).

While the defendants in Cardiff were no doubt pleased with the result, what is really important here is the ROSCA allegation. This case signaled that the FTC would stretch for any plausible authority that will allow the agency to pursue monetary relief. Could be ROSCA, TCPA, HBNR, etc.

And it is exactly what they did in the MoviePass settlement, which was the first time the Commission alleged a violation of ROSCA when the “undisclosed material terms do not relate specifically to the negative option feature but, instead, to the underlying good or service marketed through the feature.”

In his MoviePass dissent, Commissioner Phillips commented that the Commission’s decision to apply ROSCA broadly and expand its reach “comes just weeks after the Supreme Court’s decision in AMG” but the FTC’s “loss of authority under one statute does not somehow create authority elsewhere.”

Interestingly, the Cardiff case recently settled. In its press release, the FTC pulled no punches, expressly stating that, despite having presented evidence that consumers lost $18.2 million, no money could be returned to consumers, because of last year’s ruling in AMG Capital. A message that seemed intended for Congress.

Q: What can we expect with regard to Section 19 actions?

A: There is very little law that helps us understand the contours of Section 19 for a simple reason: the FTC has not historically relied on Section 19 to obtain monetary relief – they have relied almost exclusively on Section 13(b). That is all about to change, and we have already seen some interesting developments.

For example, in FleetCor [Disclosure: I am counsel to the CEO in FleeetCor], with discovery complete in federal court litigation and summary judgment motions on Judge Tottenberg’s desk, the Commission voted to file an administrative complaint under Section 19, while moving to stay or dismiss without prejudice the federal court complaint. The FTC intended to then file for summary judgment in the administrative proceeding, which would be heard by virtually the same Commission that voted out the complaint in the first place. They would then pursue redress under Section 19.

Judge Tottenberg denied the FTC’s request, stating that “under the totality of the circumstances, the most equitable course is to promptly move forward with adjudicating the merits in the proceeding.” Despite the FTC’s efforts to put the case on an administrative fast-track, where it would hope to establish liability and then pursue redress under Section 19, the case remains in federal court, with trial scheduled to begin first week of June.

There is also the issue of what measure of damages is appropriate under Section 19, with disagreement among Commissioners on display in statements issued in Resident Home: In simple terms, Chair Khan, along with Commissioners Chopra and Slaughter, asserted that Section 19 expressly authorizes payment of redress and damages, including consequential damages to consumers and “honest businesses that lose out on sales.” The Commission did not deem proof of injury to be a necessary predicate for monetary penalties.

Commissioners Wilson and Phillips disagreed with the majority’s position. In dissent, the two Commissioners contended that Section 19 does not permit the Commission to accept monetary remedies in an administrative settlement. More specifically, according to Commissioners Wilson and Phillips, the settlement amount “exceeds any injury suffered by those consumers who saw the deceptive statement and purchased a DreamCloud mattress or any reasonable estimate of damages.” The dissenting commissioners highlighted the absence of evidence of injury to “other persons,” rendering the payment a penalty or disgorgement of ill-gotten gains, which the Commission has no authority to obtain under the applicable statute.

Another Section 19 issue that I expect will be hotly contested concerns the Section 19 “dishonest or fraudulent” standard, more specifically, whether conduct could be “dishonest” without being “fraudulent,” and if so, how would “dishonest” be defined. Defendants will argue that the terms should be read together to set a single standard, and there is support for that contention. In Figgie, the Ninth Circuit described a fraudulent scheme – the marketing of heat detectors as equal in efficacy to smoke detectors – in order to define “dishonest,” and goes on to state that such conduct would be either “dishonest or fraudulent.”

Similarly, Macmillian and Turner both hold that “fraudulent or dishonest” conduct must, at a minimum, fall “within the scope of the activities which would be deemed fraudulent for purposes of the mail fraud statute” and must be “calculated to deceive.” The case law is consistent with the dictionary definitions of dishonest conduct, which are defined interchangeably with “fraudulent. This strongly suggests that, for purposes of Section 19, the inclusion of “dishonest” is not intended to establish a separate lower standard, but is meant to be read in conjunction and interchangeably with the term “fraudulent.”

Finally, with regard to Section 19, the Intuit (Turbo Tax) filing last week is of note. There, the FTC is pursuing its case in under Section 19, while simultaneously seeking a temporary restraining order (TRO) under Section 13(b) – exactly the “coherent enforcement scheme” Justice Breyer and his Supreme Court colleagues believed Congress intended. It will be interesting to see how the court rules on the motion for a TRO, given that the FTC’s filing was almost certainly pre-dated by a lengthy Part 2 investigation, which may cause the court to question whether harm is actually imminent, thus justifying extraordinary relief.

Q: When the Supreme Court determined that that the FTC didn’t have authority to obtain equitable monetary relief under Section 13(b), many expected Congress to implement a fix. Why hasn’t this occurred?

A: There was a whole lot of momentum in Congress immediately after AMG, with Commissioners beating the drum on the Hill and Democrats empowered, while Republicans were not paying close attention. Many, including me, thought that legislation would come quickly, providing the FTC with even more authority under Section 13(b).

It seemed so certain that Congress would act, in the aftermath of AMG, that a principal question was whether Congress would make the amendment retroactive -- allow for monetary remedies against companies whose alleged wrongful actions pre-dated the statutory change? This was a big deal for the defendants in the approximately numerous pending federal court cases that alleged Section 13(b) violations.

We even saw the Commission in Quincy (disclosure, our case) unsuccessfully urge a judge Louis Stanton in the SDNY to exercise “discretion” and not rule on motions to dismiss pending what Complaint Counsel hoped would be passage of a bill by Congress that would authorize the FTC to obtain monetary relief to redress consumer injury.

But the Republicans woke up and, like so many issues in Congress, nothing is moving on 13(b) reform now. Many Republicans are asking why a 13(b) fix is even necessary, given the muscularity and dexterity shown by this Commission in seeking other ways to pursue monetary remedies by relying on existing statutes, coordinating with State AGs, and loudly proclaiming its Penalty Offense Authority through the issuance of nearly 2,000 notices to U.S. businesses.

Q: Many practitioners speculated that the FTC will engage in more rulemaking under Section 18, which would give the FTC the ability to seek redress, damages and penalties. The FTC indicated in its 2022 Statement of Priorities that rulemaking will be high priority for the FTC with no Congressional fix in sight. What is the outlook?

A: The FTC’s July rule changes stripped away some steps that had been added to the statutory requirements – including the need for a written staff report and provisions allowing the presiding officer to compel in-person attendance and production of documents and written answers to questions. Even without these added steps, however, Mag-Moss remains a long road, especially for (1) complex rules with dozens of mandates, each of which must be shown to be unfair or deceptive, as well as prevalent and (2) controversial matters, which are likely to prompt multiple requests for hearings, cross examinations, rebuttals, exemptions, and court review.

Q: Do you expect the FTC to rely on its recently issued Penalty Offense Authority notice letters in an enforcement matter?

A: I can’t imagine the FTC would start down this road and issue nearly 2,000 notices and not test this authority. I expect that many of these notices were precursors to Part 2 investigations, which are currently underway. My guess is that they are carefully considering their targets right now, looking for the lowest hanging fruit. Whoever that may be, they will not be without available defenses. We would expect these companies to allege a lack of due process. FTC case decisions are not written like a rule, and facts are contested and often complex. One would expect subsequent defendants to distinguish the underlying case – some dating back to the 1940s! -- and claim that it did not give them adequate notice that their activity was also unlawful.

Also, keep in mind that, unlike 13(b) actions, which the FTC can bring on its own, it will have to persuade DOJ to bring civil penalty cases. And as we know, there is not always agreement between the FTC and DOJ.

In practical terms, however, these notices likely have their greatest value in consent negotiations. The FTC will dangle the sword of the synopses and astronomical penalties ($43,280 for every time a false or deceptive claim is made) over everyone who received the notice and whose claims vaguely resemble the generic nuggets the Commission delivered. But I do think that we can expect that these efforts could generate more Hopkins and AMG-like decisions if the Commission attempts to press its position in the courts.

Q: Many consumer protection lawyers also speculated that the FTC would increase coordination with state attorneys general. Has this happened?

A: We saw this in Frontier, where the Commission filed a complaint in California federal court along with Attorneys General from six states. That did not work out too well, at least in terms of FTC/multi-state cooperation, as the claims made by five states other than California based on pendent jurisdiction were dismissed. It now appears that that case is headed for settlement. In mid-March, the court entered an order to continue the case pending the Commission’s review of a proposed settlement.

Q: Final thoughts?

A: There is an expression, understood to have originated as a Chinese curse, “may you live in interesting times.” Well, from the perspective of FTC enforcement, we are doing just that.

In a joint statement issued after the vote, House Energy and Commerce Committee Chair Frank Pallone (D-NJ) and Consumer Protection and Commerce Subcommittee Chair Jan Schakowsky (D-IL) said: “The Consumer Protection and Recovery Act will restore the FTC’s ability to force scammers that have broken the law to repay those who have been harmed or defrauded.” Chairs Pallone and Schakowsky moved quickly to usher the bill through their committee and the House just three months after the Supreme Court ruled in AMG Capital Management, LLC v. FTC that the Federal Trade Commission did not have the authority to pursue monetary penalties under Section 13(b).

Facing increasing legal uncertainty in the months leading up to the AMG decision, bipartisan FTC Commissioners had urged Congress to clarify the agency’s enforcement authority – and bipartisan Members of Congress expressed support, citing a shared desire to protect consumers and hold fraudsters accountable. Those bipartisan sentiments, however, did not translate to bipartisan legislative text. As we’ve written previously, House Energy and Commerce Committee Republicans have voiced process concerns, accusing Democrats of rushing the legislation through the House. Republicans have also stressed the need for statutory “guardrails” to ensure due process and protect legitimate businesses. Throughout the legislative process, for instance, Republicans have sought to amend the legislation to reduce the 10-year statute of limitations and to more narrowly tailor the language to target outright fraudulent acts. Republicans have also expressed concerns about retroactivity, questioning the legality of allowing the FTC to go after prior conduct with the expanded authorities included in H.R. 2668.

Ahead of the vote, Consumer Protection and Commerce Subcommittee Ranking Member Gus Bilirakis (R-FL) said, “…this bill before us will provide the FTC with new authorities that far outpace the need supported by a consensus of the FTC Commissioners.” He went on to say that the expanded authority granted to the agency in the legislation “signals a return to the broad overreach we saw with the FTC in previous decades – a situation so bad that a Democratic Congress crippled the FTC’s funding and stripped it of its authority at that time.”

Additionally, House Republicans argue that any 13(b) fix should be part of a broader package of FTC reforms and should move in concert with legislation establishing a national privacy framework – an issue itself full of partisan landmines.

H.R. 2668 now heads to the Senate, where bipartisan Members of the Commerce Committee have expressed interest in a legislative fix – and where Democrats don’t have the luxury of disregarding Republican opposition. Perhaps in a nod to that reality, ahead of the bill's passage, Representative Cárdenas said on the floor, “It’s unfortunate that we weren’t able to negotiate more into this bill and make it bipartisan, but there will be other opportunities as we are a two-chamber legislature, and I’m sure the Senate has some ideas about how to make this bill better. And we’re all open to that opportunity.”

For his part, President Biden appears ready to sign the bill, should it make it to his desk. Ahead of the House vote, the White House issued a strong statement of support: “The Administration applauds this step to expressly authorize the FTC to seek permanent injunctions and pursue equitable relief for all violations of law enforced by the Commission and ensure that the cost of illegal practices falls on bad actors, not consumers targeted by illegal scams.”

As readers of this blog know, we closely followed the aftermath of the Supreme Court’s AMG ruling, especially as it pertains to ongoing FTC actions. And we have seen the FTC make good on its promise to pursue a variety of theories in an attempt to recover monetary penalties intended to redress consumer injury.

In doing so, the FTC has taken varying positions as to whether and how it still seeks monetary remedies: in some cases, the FTC, acknowledging that 13(b) money remedies are no longer available post-AMG, has withdrawn its claim for monetary relief; in others, the FTC requests that the court delay decision on monetary relief in the light of the possibility of future congressional action providing 13(b) monetary powers; and in others still, the FTC has withdrawn its request for 13(b) monetary relief, but attempted to obtain money judgments through another statutory provision.

FTC v. Cardiff fits this third category. Pending in the Central District of California, the FTC attempted to pursue monetary relief post-AMG by way of a different statute: ROSCA. While the court agreed with the FTC that it could have pursued monetary relief under ROSCA, the court found the FTC had waived the right to request such relief in this case.

The court noted that, in the FTC’s Rule 26 disclosures, the Agency had only calculated damages under 13(b), not under ROSCA, and had only disclosed its ROSCA expert after discovery closed (and, conveniently, after AMG was decided). The court concluded that the FTC had forfeited its right to seek monetary relief under the alternate statutory provision, and granted Cardiff’s motion for summary judgment, confirming that the FTC was entitled to no monetary relief.

The court’s Cardiff decision is a significant blow to the FTC. Stephen Cochell, one of the party’s lawyers (who, by the way, has racked up an impressive 13(b) won-lost record), provided the following comment:

The Court's exclusion of evidence for violating Rule 26 sends a signal that the FTC is subject to the same rules as any other litigant in federal court litigation. Overcharging, under-disclosing or late-disclosing information in Rule 26 Disclosures will not be tolerated. The FTC will need to give more thought as to how they are going to establish damages and timely comply with Rule 26.

So while it is not Facebook, the Cardiff case is important for defendants that are already deeply enmeshed in litigation with the FTC. It strongly suggests that courts may not allow the FTC to change its legal theory for damages on such short notice, especially where such a modification could prejudice the defendant.

Coming Up: FTC Commissioners expected to testify before the Energy & Commerce Consumer Protection and Commerce Subcommittee on July 28^th.

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While the official line is that the FTC does not lobby Congress, the Agency is making its preferences known. In the words of Acting Chairwoman Rebecca Kelly Slaughter:

In AMG Capital, the Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior. . . . With this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.

Putting aside issues with this characterization, there can be no doubt that the FTC is actively and aggressively seeking explicit allowance of monetary remedies. But the possibility of a legislatively revitalized Section 13(b) in the near future raises some big questions. Here’s one: if Congress amends Section 13(b) to explicitly allow for monetary remedies, would the FTC be able to use the new legislative language to pursue monetary remedies against companies whose alleged wrongful actions pre-dated the statutory change? For defendants in the approximately 75 pending federal court cases alleging Section 13(b) violations, this is a very important question.

Without a clear statutory provision providing for retroactive liability, it is highly unlikely that the courts would allow the FTC to use the new statutory language to “look back” at actions committed prior to the newly enacted legislation’s codification date. The Supreme Court has repeatedly affirmed that, in the absence of a clear statutory intent, there is a generally applicable presumption against retroactivity, in which courts “presume that the [new] statute does not apply to [prior] conduct.” Martin v. Hadix, 527 U.S. 343, 352 (1999). The Supreme Court has raised serious Constitutional concerns regarding the retroactive imposition of burdens or obligations on parties based on newly enacted statutory provisions. Due to those concerns, in 1994, the Supreme Court in Landgraf v. USI Film Prods, 511 U.S. 244, established a two-part test to determine whether new statutory language may apply retroactively.

Under the Landgraf test, courts first look to see if the statute facially applies retroactively. If the statute is silent as to its retroactive reach, the court must examine whether the statute’s retroactive application “takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past.” Id. at 269.

The Landgraf Court specifically referenced “a statute introducing damages liability” as the type of statute that courts should not apply retroactively. Id. at 285 n. 37. The point of any new Section 13(b) would, of course, be to do just that, introducing new “damages liability” for conduct that previously would only have occasioned injunctive relief.

Parties currently at odds with the FTC over past practices can take some comfort in the Supreme Court’s language in Landgraf. If Congress amends the statute and does not include an express retroactive provision, parties arguing that the new law should not apply to their past conduct will have the better argument.

The question becomes more thorny if the new legislative language explicitly calls for retroactive applicability, which the House bill introduced by Representative Tony Cardenas (D-CA) expressly does. But, if Representative Cardenas’s proposed expansive language is adopted, while the statute’s text would be clear as to retroactivity, its constitutionality would not be. Even where a retroactivity provision is expressly incorporated in a statute, the Supreme Court in Landgraf explained that the Constitution’s “Due Process Clause [] protects the interests in fair notice and repose that may be compromised by retroactive legislation.” Id. at 266.

While any retroactive statutory changes would implicate due process, imposing monetary penalties retroactively is arguably the clearer Due Process violation, because the legislative change directly implicates a taking of property without due process. The Supreme Court's dictum that "a justification sufficient to validate a statute's prospective application under the [Due Process] Clause may not suffice to warrant its retroactive application" should be applicable in this instance. See Landgraf, 511 U.S. at 266. In the face of this due process challenge, the FTC will likely be required to show that a company was on "notice" that there may have been a monetary obligation for the conduct at issue when the conduct occurred.

Of course, the FTC will argue that, when the conduct occurred, there had been 40 years of case law in their favor, which put companies that are currently litigating under Section 13(b) on notice. This argument is not as strong as it seems at first glance. Can a company be on notice when the plain language of the statute does not allow for monetary remedies? Aren’t companies entitled to rely on the plain language of the statute as interpreted by the highest court in the land, notwithstanding that lower courts have gotten it wrong for decades? This is an issue that will be front and center for companies currently in litigation with the FTC under Section 13(b).

And while the outcome of any such constitutional challenge may be unclear, what is clear is that any legislation purporting to retroactively establish monetary liability, when the Supreme Court in AMG so clearly held that the prior statutory language could not establish such liability, will be challenged. Thus, while AMG clarified the current ambit of 13(b), the role of the courts in establishing the contours of a future 13(b) is likely far from over.

Of course, the constitutional issue posed by retroactivity will not ripen without a revised Section 13(b); as any congressional observer should know, new legislation is uncertain. From Politico this morning:

An aide for Republicans on the House Energy and Commerce Committee signaled there’s already some partisan bickering over the upcoming hearing and how to address the [13(b)] issue through legislation. "A 9-0 vote by the Supreme Court sends a clear signal that the FTC did not use their authorities in the most effective means to seek restitution,” the aide said. “It is unfortunate when Committee Democrats will not let all commissioners appear before the Energy and Commerce Committee to discuss a consensus solution."

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This morning, the Supreme Court released its long-awaited opinion in AMG Capital Management v. FTC. Judge Breyer issued the decision for a unanimous Court. As we had predicted following oral arguments, the Supreme Court found that Section 13(b) of the FTC Act does not allow for monetary remedies.

The Court’s conclusion, stated at the outset, is straightforward and unambiguous: “The question presented is whether th[e] statutory language” allowing the FTC to seek injunctive relief “authorizes the Commission to seek, and a court to award, equitable monetary relief such as restitution or disgorgement. We conclude that it does not.”

The first half of Justice Breyer’s AMG opinion details a history of the FTC’s enforcement capabilities. Justice Breyer points out that, historically, the FTC’s use of Section 13(b) to obtain monetary remedies is an aberration. To the contrary, “[e]ver since the Commission’s creation in 1914, it has been authorized to enforce the Act through its own administrative proceedings.” It was only in the late 1970’s that the FTC started using Section 13(b) “without prior use of the administrative proceedings in §5.” While the FTC argued that its use of 13(b) to obtain monetary relief was a necessary norm, Justice Breyer’s thorough review of the historical record shows that that is not the case.

Whether or not the FTC’s use of Section 13(b) to bypass administrative proceedings and go directly to Federal Court is good policy, the unanimous Court concluded that it is not good law. Most importantly, in reaching its decision, the Court noted that the statutory “language refers only to injunctions . . . An ‘injunction’ is not the same as an award of equitable monetary relief.” If that was not enough, the context of the statutory provision confirms that it does not extend to non-injunctive remedies. As Justice Breyer explained, “The language and structure of §13(b), taken as a whole, indicate that the words ‘permanent injunction’ have a limited purpose—a purpose that does not extend to the grant of monetary relief.”

Justice Breyer concluded that reading Section 13(b) the way the FTC seeks to would be illogical. By contrast, the logical textual reading is also the most coherent: “to read §13(b) to mean what it says, as authorizing injunctive but not monetary relief, produces a coherent enforcement scheme: The Commission may obtain monetary relief by first invoking its administrative procedures and then §19’s redress provisions (which include limitations). And the Commission may use §13(b) to obtain injunctive relief while administrative proceedings are foreseen or in progress, or when it seeks only injunctive relief. By contrast, the Commission’s broad reading would allow it to use §13(b) as a substitute for §5 and §19.”

Shortly after the Court released its opinion, Acting FTC Chairwoman Rebecca Kelly Slaughter issued a highly critical statement. Ignoring the historical record Justice Breyer relied on, Slaughter attempted to reframe the High Court’s decision as a victory for scammers. Slaughter’s press release is surely directed at Congress, where the FTC is already lobbying to reinvigorate Section 13(b), with circulated language that would, if adopted, increase the FTC’s 13(b) enforcement authority.

As the Supreme Court has now gutted Section 13(b), it will be up to Congress to revitalize the statutory provision with stronger enforcement mechanisms. Of course, Congress can also choose to do nothing. In that case, the FTC will have to take to heart the Supreme Court’s recommendation that it make more use of the traditional—and statutorily founded—administrative enforcement procedures found in Sections 5 and 19 of the Act.