Supreme Court Hands Down Unanimous Decision Limiting FTC’s Ability to Seek Monetary Relief

On April 22, 2021, the Supreme Court issued a unanimous decision curbing the Federal Trade Commission’s (the “FTC’s”) ability to seek monetary equitable relief to remedy past violations of the FTC Act. Specifically, the Supreme Court decision will prevent the FTC from utilizing Section 13(b) of the FTC Act as one of its most common mechanisms for obtaining equitable monetary relief for consumers who have been misled by deceptive marketing practices. The FTC has also utilized Section 13(b) to seek disgorgement in antitrust cases.

Generally, following an investigation, the FTC may initiate an enforcement action using either an administrative or judicial process if it has “reason to believe” that the FTC Act is being or has been violated. However, the FTC must seek the aid of a court to obtain civil penalties or consumer redress for violations of its orders to cease and desist or trade regulation rules. Section 13(b) of the FTC Act authorizes the FTC to proceed directly to district court to seek a temporary restraining order, preliminary injunction, or, “in proper cases,” a permanent injunction. Since its enactment in 1973, the FTC has made widespread use of Section 13(b) in courts, seeking not only permanent injunctions to bar unfair or deceptive practices, but also the imposition of various kinds of monetary equitable relief to remedy past violations.

The Supreme Court’s recent unanimous opinion held that Section 13(b) of the FTC Act does not authorize federal courts to award equitable monetary relief, putting an end to the FTC’s widespread use of this particular enforcement tool. According to the acting FTC chair, the FTC is now “deprived . . . of the strongest tool [it] had to help consumers when they need it most.”

In making its decision, the Supreme Court looked to the plain language and structure of Section 13(b), which refers only to injunctions. In response to the Court’s decision, the FTC is looking for a legislative fix, “We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”

While the Supreme Court’s decision significantly cabins the FTC’s power to seek monetary relief under Section 13(b), it does not preclude the FTC from seeking monetary relief under other sections of the FTC Act—namely Sections 5 and 19—that provide an avenue for monetary relief. However, the FTC rarely proceeds under these sections due to their extensive and burdensome processes.

Despite the FTC Act’s new limitations under the Supreme Court’s rulings, the FTC has statutory authority under the COVID-19 Consumer Protection Act to seek monetary relief and civil penalties for deceptive marketing acts or practices that claim to treat, cure, prevent, mitigate, or diagnose COVID-19 or are associated with any government benefit related to COVID-19.

If you have any questions regarding compliance with the FTC Act or the COVID-19 Consumer Protection Act, please contact one of our Advertising, Promotions & Social Media attorneys.

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