In a significant decision issued on Thursday, April 22, 2021, the US Supreme Court unanimously ruled in an eagerly anticipated case that the Federal Trade Commission (FTC) does not have the legal authority under Section 13(b) of the FTC Act to obtain court-ordered monetary equitable relief (such as restitution or disgorgement). In AMG Capital Management, LLC v. Federal Trade Commission, the FTC obtained summary judgment at the trial court level against a defendant and his “payday loan” companies. The FTC claimed in its case, which it filed directly in federal court rather than through an administrative proceeding, that the defendants engaged in “unfair or deceptive acts or practices” under the broad authority set forth in Section 5 of the FTC Act. In its judgment, the trial court granted the FTC’s request – relying on Section 13(b) – for a permanent injunction, as well as $1.27 billion in restitution and disgorgement.

In overruling the Ninth Circuit’s decision, the Supreme Court held that Section 13(b) provides “prospective, not retrospective[,]” relief because the plain terms of the statute are aimed to “stop[] seemingly unfair practices from taking place while the Commission determines their unlawfulness.” In light of this, the statute cannot be read to allow the FTC to “dispense with administrative proceedings to obtain monetary relief[.]” To do so, in the view of the unanimous Court, “would allow a small statutory tail to wag a very large dog.”

Despite the language in Section 13(b), the FTC has increasingly used Section 13(b) to obtain permanent injunctive relief, along with monetary equitable relief like disgorgement and restitution, without following the administrative enforcement process. This is likely because the monetary penalties and monetary relief available to the FTC in Section 5 and Section 19 of the FTC Act only apply to cases where cease-and-desist orders have been issued in administrative proceedings, among other limitations.

The Court’s ruling today produces what it described as a “coherent enforcement scheme” in which monetary relief can be obtained, but only after the FTC first invokes its administrative procedures and the provisions set forth in Section 19. And the Court has now resolved a circuit split in clearly articulating that Section 13(b)’s proper relief is only for “obtain[ing] injunctive relief while administrative proceedings are foreseen or in progress, or when [the FTC] seeks only injunctive relief.” Because “Congress . . . does not . . . hide elephants in mouseholes,” the Supreme Court has now clarified that Section 13(b) is not a monetary-relief substitute for Section 5 or Section 19 of the FTC Act.

In November 2019, DLA Piper filed an amicus curiae brief on behalf of the US Chamber of Commerce and the National Retail Federation in support of the petitioners in this case. We will be posting a more detailed analysis of the case in the near future.

For more information, please contact Andrew Serwin, Jeff Tsai, or Ilana H. Eisenstein.