The Federal Trade Commission Act (“Act”) declares “unfair methods of competition to be unlawful” and gives the Federal Trade Commission (“FTC”) multiple tools to combat such conduct. Section 5(b) of the Act provides the FTC with an administrative remedy that serves as its traditional enforcement tool. However, under section 5(b), the FTC must first succeed through an administrative proceeding in obtaining a cease-and-desist order, then seek judicial enforcement of that order—a process that can take some time.
In an effort to expedite the FTC’s ability to redress violations of the law, Congress added section 13(b) to the Act, authorizing the FTC to seek preliminary and/or permanent injunctive relief through the judicial system whenever the FTC has “reason to believe” that any party “is violating, or is about to violate” a law enforced by the FTC. Furthermore, since its adoption in 1973, section 13(b) has been interpreted by the FTC to authorize judicial review whenever the agency can establish a past violation and a reasonable likelihood of recurrent future conduct. In other words, under the FTC’s interpretation, even if the offensive conduct had altogether ceased, the FTC maintained that it could seek preliminary and/or permanent relief through the courts if it could prove a “reasonable likelihood of recurrent conduct.”
However, the U.S. Court of Appeals for the Third Circuit recently held that the FTC’s interpretation of section 13(b) was simply wrong. This decision makes clear that unless there is evidence that unlawful conduct is either ongoing or about to occur—a literal reading of section 13(b)—no preliminary relief through the court system is available. As a result, the FTC’s ability to address expeditiously prior violations of the Act may have suffered a serious blow.