The Section 13(b) Fix: Stand-Still on the Hill?Following House passage of 13(b) legislation this summer, Congressional Democrats seem to have lost some of the urgency with which they were moving to strengthen the FTC’s penalty authorities in the wake of the Supreme Court’s AMG decision. This is partly due to their preoccupation with a months’-long effort to move President Biden’s “Build Back Better” agenda and partly due to the need for some degree of bipartisan consensus in the Senate. With the caveat that Congress can – and often does – surprise us, the prospects for a 13(b) fix any time soon remain murky at best.

Beyond Democrats’ pending budget reconciliation legislation, Congress’s focus through the end of the year is on deadlines for several “must-pass” bills (e.g., government funding, the debt ceiling, and the annual defense authorization bill). While attaching policy riders to these year-end legislative initiatives is standard practice, it is unclear how hard Democrats may be pushing to include a 13(b) fix in the face of myriad legislative distractions, nor is it clear that Senate Republicans are ready to play ball.

Yes, there is always next year, but 2022 is projecting to be an even uglier legislative environment (if it could be imagined). And while this could work either way for 13(b) – Democrats may be more desperate to make a deal (if they think they won’t be in power come 2023) and Republicans may be less willing to compromise (for the same reason) – it is unlikely that any legislative fix will include the exact language preferred by the FTC. The end result could be that nothing happens here, with Republicans content to sit tight, and Democrats unwilling to beat their chests about 13(b) on the campaign trail.

Since most of our readers don’t regularly swim in these waters, let’s recap –

On July 20, the House passed H.R. 2668, the Consumer Protection and Recovery Act (Rep. Cárdenas (D-CA)) on a largely party-line vote. H.R. 2668 would explicitly authorize the FTC to seek permanent injunctions and other equitable relief, including restitution and disgorgement, to redress perceived consumer injury – the authorities would apply to pending cases (making it retroactive) and future cases. Ahead of the floor vote, the White House issued a statement in support of the legislation.

While bipartisan Members of the Senate Commerce Committee have expressed varying levels of interest in 13(b) legislation, a legislative framework has not yet come together, suggesting that the legislation may have hit its high-water mark. At the time it was introduced, the Supreme Court had recently ruled in AMG, certain Commissioners were declaring the Court’s decision to be an existential threat to the FTC’s enforcement program, President Biden’s first 100 days were winding down, and reconciliation and infrastructure weren’t ready yet. The timing favored the FTC, but that no longer is the case. Recent bickering at high levels at the Commission has shown this FTC to be highly partisan, making Republicans on the Hill much less likely to provide blank-check authority. It seems like the air has gone out of the tire.

So where does that leave Congressional Democrats? With budget reconciliation the lone exception (discussed below), Democrats will need the support of at least ten Republicans to move a 13(b) fix in the Senate. A tall order, indeed.

What’s more, procedural reasons make it unlikely that the Senate takes up a stand-alone bill, meaning Democrats are almost certainly eyeing a larger vehicle to which they can attach a 13(b) fix. A glimmer of hope, right? Remember, legislation clarifying the SEC’s penalty authority was enacted as part of an annual defense authorization at the end of the last Congress.

At this point, however, Democrats have given no indication that they will try to include a 13(b) fix in their pending budget reconciliation bill – the only legislative vehicle that can move through the Senate on a simple majority vote (i.e., with no Republican support).

You may correctly point out, there is more than one way to arrive at the desired outcome. After all, House Democrats have included two FTC enforcement-related provisions in their version of the bill:

  • $500 million in funding to establish a new privacy bureau; and
  • New authority under Section 5 of the FTC Act to seek civil penalties for “unfair or deceptive acts or practices.”
Maybe the 13(b) fix gets tucked in here in some way? Yet, at this point, it is uncertain (or even, unlikely), that the Section 5 language will survive procedural challenges in the Senate, where opponents will argue that the language is extraneous and its revenue impacts are merely incidental to a broader policy objective. Those procedural rules are most likely what has kept the Cárdenas language out of the reconciliation package from the start. In this broader context, such an indirect “solution” feels a lot like pie-in-the-sky, and even under the Democrats’ most optimistic scenarios, likely leaves the Agency without the extensive authority it thought it had pre-AMG.

Democrats could seek to add the 13(b) fix to other year-end legislation, with the most-likely vehicle a government funding bill. If this were to occur, however, Democrats would likely need to acquiesce to at least some Republican demands for guardrails. A recent privacy and data security discussion draft makes clear that House Energy and Commerce Committee Republicans – who unanimously rejected the Cárdenas bill in committee – intend to address 13(b) on their terms: in the context of a broader FTC/privacy bill with provisions intended to protect legitimate businesses (e.g., restitution and disgorgement limitations, a shorter statute of limitations, no retroactivity, etc.).

But many of those same Republicans might ask why a 13(b) fix is even necessary, given the muscularity and dexterity shown by this Commission in seeking out 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 1,870 notices to U.S. businesses in recent weeks (even if the recent use of POA might be DOA when it is challenged in court).

Nevertheless, as we bear down on year-end, it is increasingly seeming like Democrats will have to balance the need for an expeditious fix with their underlying desire to provide the FTC with more sweeping authorities, particularly when there is no consensus among FTC commissioners on what form that authority should take.

The Section 13(b) Fix: Stand-Still on the Hill?

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