FTC Remedial Power Under Scrutiny at U.S. Supreme Court

On Wednesday, January 13, the Supreme Court heard arguments in AMG Capital Management LLC v. Federal Trade Commission. This case raises the question whether the Federal Trade Commission (FTC) has been properly using Section 13(b) of the FTC Act, the provision authorizing requests for preliminary and permanent injunctions where the FTC believes the defendant “is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission,” to obtain monetary relief such as disgorgement or restitution. Covington submitted an amicus brief supporting AMG’s challenge to the FTC’s use of Section 13(b).

Although predicting the outcome of any case from the oral argument is notoriously tricky, a majority of Justices appear to have serious questions about the FTC’s interpretation of the statute. In particular, a number of Justices observed that the FTC’s readiness to resort to the relatively quick Section 13(b) route to a broad remedy award renders “irrelevant” or “superfluous” the specific limitations built into other sections of the statute that expressly deal with monetary recovery, in particular Sections 5(l) and 19. Justices also raised concerns about the use of Section 13(b) in cases in which the theory of liability may not have been clearly articulated in advance by the agency, and whether the FTC’s interpretation of the statute raises separation of powers issues for independent agencies.

A decision will be issued by June of this year. In the meantime, efforts have already been launched in Congress to amend the statute to address the issues raised in this litigation.

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