Supreme Court Rule Limits FTC Power to Seek Restitution from Businesses in Federal Enforcement Proceedings

On April 22, the U.S. Supreme Court rolled back the Federal Trade Commission's (FTC) power to seek federal court orders forcing alleged bad actors to pay restitution or disgorgement, thus eliminating an important FTC tool for recovering money from alleged consumer rights violators. In a unanimous opinion, Justice Stephen G. Breyer wrote that the high court believed Congress did not intend for the FTC to seek federal court injunctions as a primary means to collect restitution or eliminate dishonest gains as equitable relief power under Section 13(b), but instead intended for the FTC to first seek restitution and other monetary awards through the use of its traditional administrative proceedings.

The ruling ended the split among federal circuit courts and reversed a Ninth Circuit decision upholding the claimed FTC power in AMG Capital v. FTC, a case that involved racecar driver Scott Tucker's payday lending business and accusations of borrower deceit. Justice Breyer advised that “[i]f the commission believes that authority [to seek restitution and other monetary relief through its administrative process] too burdensome or otherwise inadequate, it is… free to ask Congress to grant it further remedial authority.”

Why it Matters

The decision is a major legal setback for the FTC, as it has stripped the agency of its primary tool for obtaining restitution and disgorgement from companies. For the time being, the FTC will have to seek restitution and other forms of monetary relief through its own administrative proceedings under Section 5 of the FTC Act, which sets out a process to adjudicate its claims before an in-house administrative law judge.

The verdict is also significant because state AGs will likely step up their consumer protection enforcement efforts to fill this perceived consumer protection void created by the ruling.  The FTC routinely partners with one or multiple state attorneys general when pursuing enforcement actions against companies (i.e., recent investigations of Google and Facebook for alleged consumer privacy and antitrust violations serving as recent examples of this federal and state cooperation), so companies should expect more federal and state cooperation, in the wake of the Supreme Court’s ruling.