Yesterday, the Federal Trade Commission testified before the House Committee on Energy and Commerce's Subcommittee on Consumer Protection and Commerce, asking Congress to restore its ability to go to federal court to get restitution for violations of the FTC Act. Last week, the U.S. Supreme Court held that the FTC does not have the authority to obtain equitable monetary relief -- such as restitution or disgorgement -- from defendants by going directly to court. Acting FTC Chairwoman Rebecca Kelly Slaughter called the decision "a devastating outcome for consumers and honest businesses."
In Chairwoman Slaughter's Opening Statement, she said that the Supreme Court's decision that takes away the FTC's authority to obtain restitution under Section 13(b) of the FTC Act, "eliminates the Commission's primary and best tool to seek monetary remedies when a company violates the FTC Act."
Slaughter explained that, over the past five years, under Section 13(b), the FTC has obtained more than $11 billion of relief in a wide range of cases, including telemarketing fraud, antitrust, data security and privacy, scams that target seniors and veterans, and COVID-related scams. Slaughter also said that the Supreme Court's decision threatens more than twenty-four pending federal court cases that are seeking more than $2 billion of restitution. Slaughter further explained, "The loss of 13(b) will result in emboldened defendants with little incentive to agree to return money to consumers or to provisions requiring them to change their behavior in meaningful ways."
In addition, Slaughter said that while the FTC will use its other enforcement authority to protect consumers -- including administrative proceedings, penalty offense authority, rule-violation cases, rulemaking, and and civil penalty cases -- "none of these options will come close to protecting consumers and incentivizing compliance as much as our lost 13(b) authority."
The full Commission presented joint testimony to the Subcommittee as well, urging Congress to pass recently-introduced legislation, the Consumer Protection and Relief Act, that restores the FTC's restitution authority and also confirms the FTC's ability to obtain injunctive relief when the defendant is no longer engaging in unlawful conduct.
Regarding the FTC's ability to obtain restitution using Section 13(b), the Commission testified, "Section 13(b) of the FTC Act has been the agency's primary and most effective way of returning money to consumers that was unlawfully taken from them." And, noting that some lower federal courts have questioned the FTC's ability to obtain injunctive relief when the unlawful conduct is not ongoing, the Commission said that, "These decisions hamper the Commission's longstanding ability to protect consumers by enjoining defendants from resuming their unlawful activities when the conduct has stopped but there is a reasonable likelihood that the defendants will resume their unlawful activities in the future."
In response to the Supreme Court's decision, Congressman Tony Cardenas, the Vice Chair of the Consumer Protection and Commerce Subcommittee, who is also the sponsor of the new legislation, said (in a joint statement with Subcommittee Chair Jan Schakowsky), "Today’s Supreme Court decision guts that authority to the benefit of scammers and criminals everywhere. That is why it is vital to pass the Consumer Protection and Relief Act, which will restore the agency’s authority and provide relief for victims of fraud and scams. We look forward to working with all our colleagues on this critical legislation to get money back in the pockets of hard-working Americans."