Post-FTC v. AMG: Consumer Redress Through Other Means

In the aftermath of a scam, consumers have government agencies in their corner fighting to refund their losses and shut down bad actors. However, in FTC v. AMG Capital Management (2021), the Supreme Court eliminated one of the Federal Trade Commission’s most relied-upon methods for consumer redress in federal courts: a decades-old interpretation of the Federal Trade Commission Act (the “FTC Act”) construing equitable monetary relief as available through Section 13(b) of that Act. Justice Breyer, writing for a unanimous court, reasoned that the text of Section 13(b) did not authorize restitution or disgorgement and instead allowed only for injunctive relief.

In AMG, the Court reversed a holding from the Ninth Circuit Court of Appeals that had affirmed a district court order for AMG to pay $1.27 billion in restitution and disgorgement under Section 13(b). The case involved a payday lender that misled borrowers about the need to affirmatively opt out of automatic renewals and extra charges. The district court had ordered the funds (collected from deceptive charges on more than five million loans from 2008 to 2012) to be returned directly to affected consumers, to provide other equitable relief, and to be deposited with the U.S. Treasury as disgorgement.

AMG resolved a circuit split on the availability of monetary relief under Section 13(b). The Third and Seventh Circuits took the view, in FTC v. AbbVie (2020) and FTC v. Credit Bureau Center (2019) respectively, that Section 13(b) did not empower the FTC to seek monetary relief. In contrast, the Ninth Circuit in FTC v. Commerce Planet (2016), relying on its earlier analysis in FTC v. H.N. Singer, Inc. (1982), had previously held that Section 13(b) “empower[ed] district courts to grant ‘any ancillary relief necessary to accomplish complete justice, including restitution.’” Ultimately, the Court sided with the Third and Seventh Circuits, holding that Section 13(b) “as currently written does not grant the Commission authority to obtain equitable monetary relief.”

I. The FTC Act

The heart of the FTC Act is Section 5, which prohibits “unfair or deceptive acts or practices in or affecting commerce.” This is the enforcement hook for the agency. Section 5 also lays out the administrative process of having an administrative law judge (ALJ) rule on a matter through an initial decision. 

In 1973, an amendment to the FTC Act added Section 13(b), which allowed the FTC to proceed directly to court for injunctions without first going through an ALJ. Two years later, in 1975, Congress added Section 19, which allowed courts to grant relief necessary to redress consumer injury if the FTC first issued a final cease-and-desist order to the relevant defendant. Thus, while Section 13(b) provides swifter access to injunctive relief, Section 19 imposed more demanding limitations on the availability of monetary relief—these include a statute of limitations and a knowledge requirement.

During the 1970s, the FTC often relied on the “permanent injunction” language in Section 13(b) to seek redress—such as equitable monetary relief—without issuing a cease-and-desist order in consumer protection cases. It also applied this approach to antitrust cases in the 1990s. Later, the FTC promulgated (in 2003) and then withdrew (in 2012) guidance attempting to cabin that application of Section 13(b) to exceptional cases involving clear violations of antitrust law, ultimately extending Section 13(b)’s reach in antitrust cases.

In AMG, the Court rejected the FTC’s reading of Section 13(b), with Justice Breyer emphasizing that “[a]n ‘injunction’ is not the same as an award of equitable relief” and that the FTC’s interpretation of the statute would “allow a small statutory tail to wag a very large dog.” Although the FTC argued that the Court had read injunctive relief to include equitable monetary relief in two other statutes—the Emergency Price Control Act of 1942 and the Fair Labor Standards Act—the Court rejected that argument in AMG in light of the Whole Act Rule. Applying that canon of construction, the Court noted that the laws cited by the FTC did not include any provisions which expressly or impliedly limited access to restitution or lost wages. In contrast, Section 19 of the FTC Act expressly provides for equitable monetary relief and establishes limitations on access to that relief, creating a presumption that equitable monetary relief is unavailable through other provisions of the FTC Act, like Section 13(b), that do not expressly provide for it. In short, the FTC’s interpretation of Section 13(b) rendered Sections 5 and 19 moot on the issue and was thus rejected by the Court.

II. Enforcement after AMG

The FTC relied on its Section 13(b) enforcement authority for more than 30 years. As noted in a law firm client alert, the FTC recovered and refunded $11.2 billion in equitable monetary relief to consumers between 2016 and 2020.

After AMG, Section 19 is the main route available to the FTC to attempt to recover monetary damages. Prior to AMG, the FTC had rarely sued using the joint track of Section 13(b) and Section 19. In 1993, the commission pursued the Section 19 administrative litigation track against Figgie International but has not revisited that strategy for decades. Section 19 also allows the FTC to seek redress in federal court without going through an ALJ if the defendant has violated certain agency rules. However, a case search for violations of the Telemarketing Sales Rule (TSR)—which covers any “plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate telephone call”—as one example of an agency rule potentially subject to redress through Section 19 revealed few results where the FTC won refunds for consumers.

During the commission’s April 28, 2022 open meeting, an official from the Bureau of Consumer Protection presented about the effects of the AMG decision one year later. Staff have adjusted by using Section 19 more often, by initiating new rulemakings about unfair or deceptive practices, and by bringing more administrative proceedings. The FTC has also sent warning letters to companies to put those companies on notice that they may be subject to civil penalties for engaging in other behavior the FTC has previously declared unfair or deceptive.

Seeking monetary relief through Section 19, however, has significant drawbacks compared to the pre-AMG Section 13(b) approach. First, Section 19 has a three-year statute of limitations. Filing a timely suit is challenging since scams may go undetected for some time and the commission’s own investigations may further delay the initial filing of a complaint. Second, securing monetary relief for injured parties under Section 19, even following a timely filed complaint, often takes meaningfully longer than under the pre-AMG Section 13(b) approach. Previously, under Section 13(b), securing monetary relief through the courts might have taken two to four years before refunds were issued. In contrast, obtaining relief under Section 19 might take seven to twelve years from the filing of the first complaint.

Penalty power is another route for recovering money after AMG. The Penalty Offense Authority in Section 5(m)(1)(B) allows the commission to designate certain practices as unfair and deceptive and then seek civil penalties against companies who engage in those designated practices.1 For example, the COVID-19 Consumer Protection Act provided civil penalties that the FTC began to enforce in April 2021. This authority, however, is temporary and only in effect for the duration of the COVID-19 public health emergency. Its jurisdiction covers only deceptive practices in or affecting commerce related to COVID-19 treatment, cures, prevention, mitigation, diagnosis, or associated government benefits.

Additionally, the FTC can—and often does—litigate alongside its state partners to seek relief under state statutes. The FTC, in coordination with attorneys general or other state law enforcement officers in Arizona, California, Indiana, Michigan, North Carolina, and Wisconsin, sued Frontier Communications Corporation in the Central District of California in May 2021. The complaint cited state laws authorizing plaintiff states to seek equitable relief. The case survived a motion to dismiss that did not decide the equitable relief issue in October 2021 and settled in May 2022. This approach is not a new practice and certainly serves a useful purpose to recover money for wronged consumers post-AMG—especially since some state consumer protection laws provide for additional monetary relief.

Finally, legislative vetoes of the Supreme Court are possible. Consider the U.S. Securities and Exchange Commission: the Supreme Court narrowed its ability to obtain disgorgement remedies in Liu v. SEC (2020) and Kokesh v. SEC (2017), and Congress stepped in to restore and reshape that authority through the Thornberry National Defense Authorization Act for Fiscal Year 2021. There are three bills pending on Capitol Hill that would empower the FTC to seek new forms of monetary relief or civil penalties, and similarly minded antitrust reform is also pending. Yet it has already been more than one year since AMG, and given the current legislative gridlock in Congress, it seems unlikely that this stalled legislation will deliver the legislative fix the Supreme Court advised the FTC that it is “free to ask Congress to grant it.”

III. Looking Forward

As the FTC embarks on a more assertive era under Chair Khan,2 the loss of Section 13(b) remains a problem for consumer protection and antitrust enforcement. The FTC’s authority to enforce consumer protection and competition laws and deter unfair and deceptive practices comes from both prospective and retrospective action. The FTC is committed, for example, to consumer education and regular outreach with partners in government and non-governmental organizations to prevent harm in the first place. Yet as described above, several procedural hurdles prevent the FTC from bringing cases or stopping bad actors before their continuing schemes harm many more consumers. And after AMG, without claims for monetary relief under Section 13(b), the overall deterrence power of the FTC has been seriously weakened.

One opportunity is for Congress to enact a law similar to the COVID-19 Consumer Protection Act so that the FTC can use its penalty powers to respond to new threats quickly. This approach may be particularly appropriate in light of the impact of recent natural disasters, which are becoming more severe and more frequent due to climate change. If commissioners in the minority remain concerned about expansive regulatory and penalty power, piecemeal authority for specific vulnerable populations (such as veterans or low-income hurricane or wildfire survivors) may nonetheless be palatable to congressional actors.

But overall, the FTC is operating in a legal landscape where well-financed defendants and their advocates push legal strategies that diminish federal enforcement power. The FTC, in turn, must be increasingly creative when working within its own governing statutes and with its choice of litigation partners, co-counsel, and venues to fulfill its important public mission.

• 1Former Commissioner Rohit Chopra and his then-attorney advisor Samuel Levine previously co-authored an article advocating for this approach. As of summer 2022, Chopra is the director of the Consumer Financial Protection Bureau, which serves a sister mission to the FTC, and Levine is the appointed director of the Bureau of Consumer Protection.
• 2With the confirmation of privacy scholar Alvaro Bedoya as the fifth commissioner, the Democratic appointees now hold a majority.