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FTC Asks Congress to Pass Legislation Reviving Section 13(b)

FTC Asks Congress to Pass Legislation Reviving Section 13(b)

In April 2021, the Federal Trade Commission asked Congress to pass legislation reviving the agency’s authority to return money to consumers harmed by law violations and keep illegal conduct from reoccurring.

Testifying on behalf of the Commission, Acting FTC Chairwoman Rebecca Kelly Slaughter told a subcommittee that recently introduced legislation (H.R. 2668) is urgently needed in light of an April 22 ruling by the U.S. Supreme Court that eliminated the FTC’s longstanding authority under Section 13(b) of the FTC Act to recover money for harmed consumers, as well as other recent court rulings that have jeopardized the FTC’s ability to enjoin illegal conduct in federal court.

 “These recent decisions have significantly limited the Commission’s primary and most effective tool for providing refunds to harmed consumers, and, if Congress does not act promptly, the FTC will be far less effective in its ability to protect consumers and execute its law enforcement mission,” the testimony states.

Over the past four decades, the Commission has relied on Section 13(b) to secure billions of dollars in relief for consumers in a wide variety of cases, including telemarketing fraud, anticompetitive pharmaceutical practices, data security and privacy, scams that target seniors and veterans, and deceptive business practices, among many others, according to the testimony.

More recently, in the wake of the pandemic, the FTC has used Section 13(b) to take action against entities operating COVID-related scams, the testimony notes. Section 13(b) enforcement cases have resulted in the return of billions of dollars to consumers targeted by a wide variety of illegal scams and anticompetitive practices, including $11.2 billion in refunds to consumers during just the past five years.

Beginning in the 1980s, seven of the twelve courts of appeals, relying on longstanding Supreme Court precedent, interpreted the language in Section 13(b) to authorize district courts to award the full panoply of equitable remedies necessary to provide complete relief for consumers, including disgorgement and restitution of money, according to the testimony.  For decades, no court held to the contrary.

Nevertheless, a drastic shift in judicial decisions over recent years culminated in a recent Supreme Court ruling that section 13(b) does not authorize returning money to harmed consumers.

The testimony also notes two other recent decisions in Third Circuit that have hampered 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 one case, the Third Circuit held that the FTC can bring enforcement actions under Section 13(b) only when a violation is either ongoing or “impending” at the time the suit is filed. In another ruling, the court held that the FTC cannot sue under Section 13(b) unless conduct is imminent or ongoing.

These decisions also limit the FTC’s ability to settle cases efficiently, the testimony states.  Targets of FTC investigations now routinely argue that they are immune from suit in federal court because they are no longer violating the law, despite a likelihood of re-occurrence, and they make these arguments even when they stopped violating the law only after learning that the FTC was investigating them.

Contact the author if you are interested in discussing the FTC’s current remedial approaches and policy shifts = including, but not limited to, administrative actions and matters seeking monetary civil penalties – or if you have been served with a civil investigative demand or enforcement action.

Informational purposes only. Not legal advice. May be considered attorney advertising.

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Richard Newman

Richard B. Newman is an advertising law attorney at Hinch Newman LLP focusing on digital media, marketing compliance and regulatory defense. His law firm website is www.hinchnewman.com. Follow him on Twitter @FTCLawDefense.

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