The Supreme Court issued a ruling that will limit the Federal Trade Commission’s ability to collect restitution when companies are found to have violated the FTC Act by engaging in false advertising.
In its Opinion, the Court stated, “The question presented is whether th[e] statutory language authorizes the Commission to seek, and a court to award, equitable monetary relief such as restitution or disgorgement. We conclude that it does not.”
In AMG Capital Management v. FTC, the FTC brought a lawsuit against entities involved in short-term or payday loans. The district court granted the FTC’s request for those entities to pay more than a billion dollars in restitution. The entities challenged the restitution award.
In the unanimous opinion delivered by Justice Breyer, the Court said that Section 13(b) of the FTC Act does not authorize the agency to seek monetary relief, or restitution, for violations of the law. The Court noted that 13(b) doesn’t explicitly authorize the agency to obtain such a remedy, but instead only allows the FTC to seek “a permanent injunction” pending administrative proceedings.
The decision is obviously not without controversy, and the FTC is already petitioning Congress for a change in statutory language. In a statement issued on Thursday, acting Chairwoman Rebecca Kelly Slaughter said, “With this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”
Not all monetary remedies have been stripped from the FTC, though. Justice Breyer noted in the Court’s Opinion that the FTC still has the authority to obtain financial restitution on behalf of consumers under other sections of the FTC Act. In addition, state regulatory agencies have the authority to seek restitution based on individual state statutes. When contemplating advertising strategies, companies should always strive to disseminate truthful and accurate messaging so as to avoid injunctions or any sort of permitted monetary penalties.
A Senior Attorney at M&S, Erica draws on her previous experience as in-house counsel to advise clients on federal and state consumer protection laws and defend them in litigation and government enforcement actions.