FTC Requests Congressional Clarification of Its Ability to Obtain Monetary Relief Under Section 13(b)

Yesterday, Commissioner Christine Wilson testified before the U.S. House Committee on Energy and Commerce Subcommittee on Consumer Protection and Commerce, and asked Congress to clarify the extent of the FTC’s authority to obtain monetary relief under Section 13(b) of the FTC Act.

The Commissioner’s remarks reflect the agency’s concern over the recent decision of the U.S. Court of Appeals for the Third Circuit in FTC v. Shire Viropharma Inc., holding that the FTC may only bring a case under Section 13(b) of the FTC Act when the FTC can articulate specific facts that a defendant “is violating” or “is about to violate” the law. And Shire may not be a one-off decision; the same issue is under review in the Seventh Circuit, which heard argument last month in FTC v. Credit Bureau Center, is likely headed to the U.S. Court of Appeals for the Eleventh Circuit in FTC v. Hornbeam Special Situations, and is before the Ninth Circuit, where Judge Diarmuid O’Scannlain in FTC v. AMG Capital Management, urged the Circuit to sit en banc to review what he sees as wrongly-decided prior decisions that had allowed the FTC to pursue monetary damages under Section 13(b).

In her remarks, Commissioner Wilson provided some perspective on how important this issue is to the FTC:

Decades of cases have established two key principles. First, the FTC may bring actions in federal district court to obtain injunctive relief. Second, the authority to grant injunctive relief confers upon courts the full panoply of equitable remedies, including equitable monetary relief. Our ability to protect consumers relies heavily on this authority. For decades, the FTC has used Section 13(b) to halt unfair and deceptive practices that have caused billions of dollars in consumer injury.

Commissioner Wilson referred to Shire and AMG Capital Management, noting that “recent decisions have raised questions about our authority that conflict with the clear intent of Congress and long-established case law.” She rejected the reasoning of the Third Circuit, which concluded that the FTC cannot seek injunctive relief when the challenged conduct is not “ongoing or imminent” adding that “fraudsters frequently cease their unlawful conduct when they learn of an impending law enforcement action” or “often suspend dubious advertising claims or anticompetitive conduct during the pendency of an FTC investigation.” She concluded that “this outcome is contrary to both Congressional intent and the vast majority of Section 13(b) case law” and urged Congress to provide clarification consistent with the FTC’s reading of the statute.

Representative Tony Cardenas (D-CA) was sympathetic to the appeal for clarification. He noted that, in 2018, the FTC was able to provide $2.3 billion in refunds to consumers who were defrauded. He asked for further comment about the implications of the recent decisions. Chairman Joseph Simons characterized the effect as devastating to fraud enforcement efforts and the FTC’s ability to make consumers whole. In response to this this exchange, Representative Cardenas stated that he agreed that Congress needs to clarify the law.