Supreme Court Reins in Federal Trade Commission’s Disgorgement Authority

The Supreme Court has ruled that the Federal Trade Commission (FTC) does not have authority under Section 13(b) of the FTC Act to seek disgorgement or restitution from defendants. The agency has increasingly relied on this authority to seek monetary penalties from defendants in antitrust cases, and the FTC’s desire to obtain such monetary remedies has influenced the FTC to bring cases in federal district courts instead of in administrative proceedings at the Commission. Following the decision, the Acting FTC Chair urged Congress to provide the agency with monetary remedies no longer available under 13(b).¹

Key takeaways

• The FTC can no longer rely on Section 13(b) of the FTC Act to pursue disgorgement or restitution in antitrust or consumer protection cases.
• Although more typically used in consumer fraud cases, over the last decade the FTC has substantially increased its pursuit of disgorgement in antitrust cases – including in 70% of its monopolization cases.
• The FTC has requested Congress to amend 13(b) to grant the agency explicit authority to seek disgorgement and restitution.
  Congress granted a similar request earlier this year for the Securities and Exchange Commission (SEC), following two Supreme Court decisions that pared back the SEC’s disgorgement authority.
• Whether the FTC is able to seek disgorgement in antitrust cases will have implications for the FTC’s enforcement of the antitrust laws and for companies under its jurisdiction.

Background on FTC Remedies Under Section 13(b)

Section 13(b) of the FTC Act allows the FTC to seek an injunction against a defendant in a federal court while the FTC also pursues an enforcement action against that defendant through the FTC’s administrative proceedings. The FTC, however, has also used Section 13(b) for a different purpose—to obtain certain equitable remedies otherwise not available to the FTC in its administrative proceedings.  

For the first quarter of a century after Section 13(b) was passed in 1973, the FTC used it primarily in consumer protection cases. Since 2000, however, the FTC also has relied on 13(b) to obtain disgorgement remedies from antitrust defendants. 

Although the agency issued a policy statement in 2003 that it would pursue disgorgement only for “clear violations” of the antitrust laws, the FTC rescinded that statement in 2012. In the following eight years, the FTC sought disgorgement in more than 25% of its cases alleging violations of Sherman Act Section 1 (joint conduct) or Section 2 (monopolization). Focusing just on monopolization cases, that number was 70%.²

Supreme Court Decision

In AMG Capital Management, LLC v. FTC,³ the Supreme Court ruled unanimously that Section 13(b) of the FTC Act does not authorize federal courts to award equitable monetary relief, such as disgorgement or restitution. Notwithstanding the fact that there is no explicit mention of monetary relief in the statute, no fewer than seven appellate courts had sided with the FTC in finding such authority dating back to 1982. Last year, however, both the Third and Seventh Circuits held that 13(b) does not authorize disgorgement.

The Supreme Court in AMG relied primarily on a plain reading of the statute, holding that, while 13(b) authorizes permanent injunctions, an injunction is not the same as equitable monetary relief. As the Court noted, reading monetary relief into the statute “would allow a small statutory tail to wag a very large dog.”⁴  

The Court also found that the structure of the FTC Act beyond 13(b)—including separate provisions allowing the agency to pursue disgorgement under certain limited circumstances—further supported its conclusion that Congress did not intend to authorize disgorgement under 13(b). Finally, the Court reiterated that it recently has taken a more restrictive approach to implied remedies, whereby a statute’s grant of an injunction or other equitable powers does not automatically authorize a court to provide monetary relief.

Potential Legislation

The FTC has been asking Congress for explicit disgorgement authority under 13(b) since the first appellate court ruled against the agency on this issue. The four sitting FTC Commissioners recently testified before the Senate, requesting Congressional action to affirm the agency’s ability to pursue monetary relief.⁵  As discussed in a recent OnPoint, Congress took action earlier this year to restore and codify the SEC’s authority to obtain disgorgement in federal court following Supreme Court decisions in 2017 and 2020 that narrowed that authority. Even if Congress were to do the same for the FTC, it might place limits on that remedy, such as limiting to consumer protection cases—where disgorgement traditionally was used—or to certain types of antitrust cases.  

Footnotes

1) See Statement by FTC Acting Chairwoman Rebecca Kelly Slaughter on the U.S. Supreme Court Ruling in AMG Capital Management LLC v. FTC (Apr. 22, 2021), https://www.ftc.gov/news-events/press-releases/2021/04/statement-ftc-acting-chairwoman-rebecca-kelly-slaughter-us. 

2) For additional background on Section 13(b) and the FTC’s historical pursuit of disgorgement, see Shari Ross Lahlou, Greg Luib & Michael Weiner, High Stakes at the High Court: The FTC’s Disgorgement Authority Comes Before the Supreme Court, Antitrust, Fall 2020,  https://www.dechert.com/knowledge/publication/2020/12/high-stakes-at-the-high-court--the-ftc-s-disgorgement-authority-.html. 

3) AMG Capital Management, LLC v. FTC, No. 19-508, slip op. (Apr. 22, 2021), https://www.supremecourt.gov/opinions/20pdf/19-508_l6gn.pdf.

4) Id. at 8-9. 

5) See Prepared Statement of the Federal Trade Commission: Strengthening the Federal Trade Commission’s Authority to Protect Consumers, before U.S. Senate Committee on Commerce, Science, and Transportation, at 9-13 (Apr. 20, 2021), https://www.ftc.gov/system/files/documents/public_statements/1589164/prepared_statement_of_the_ftc_before_the_senate_committee_on_commerce_science_and_transportation.pdf.