Cardenas to File Bill Protecting FTC 13(b) Authority

Rep. Tony Cardenas, D-Calif., said Thursday he plans to introduce legislation to protect FTC Section 13(b) authority, which experts say the Supreme Court is threatening to weaken. It's the only provision that lets the agency seek an injunction against FTC Act violations and restitution for consumers simultaneously, ex-FTC Consumer Protection Bureau Director Jessica Rich, now at Georgetown Law Center, told a House Consumer Protection Subcommittee hearing Thursday.

The expectation is the agency will lose in AMG Capital Management v. FTC because oral argument wasn’t favorable, said ex-FTC Chairman William Kovacic, a professor at George Washington University Law School. Appellate courts already undermined FTC authority, and SCOTUS ruling against the agency would be “devastating,” said Rich. If the court rules against the agency, consumers will “pay the price,” said Cardenas, noting Sen. Roger Wicker, R-Miss., introduced legislation last Congress to address such authority.

Congress must recognize that Tuesday’s settlement with Amazon (see 2102020039) wouldn’t have been possible without the threat of this authority, said subcommittee Chair Jan Schakowsky, D-Ill. The FTC recently announced that consumers have lost more than $300 million due to pandemic-related fraud, said House Commerce Committee Chairman Frank Pallone, D-N.J., noting the high court’s threat.

There’s potential for the agency to abuse the authority, said committee ranking member Cathy McMorris Rodgers, R-Wash., noting the FTC asked Congress to amend the FTC Act to clarify the authority. “There is certainly a need to get financial restitution to victims,” she said. “However, I’m concerned about the potential for the FTC to abuse that authority and use it primarily to leverage defendants into settlements. If the argument in favor of increased FTC authority is that defendants are defending themselves too often without, it is simply not persuasive.” She noted the 3rd and 7th circuits ruled the FTC can’t obtain monetary relief under 13(b), and the 3rd Circuit decided the FTC misused the authority to address past illegal conduct.

The threat of deceptive marketing will get only worse for consumers if 13(b) authority is weakened, said TruthInAdvertising.org Executive Director Bonnie Patten. AMG argues it should be able to keep the $1.3 billion it “stole,” asserting Congress never intended for the FTC to return money to victims of fraud, she said. Deceptive practices will multiply if the justices side with AMG, she said.

Kovacic suggested Congress “repair what is likely to be a hole in 13(b) authority.” The deterrent effect of FTC enforcement power will be “considerably weakened,” he said. He recommended Congress fund the FTC at $1 billion yearly. He said Congress is paying for a “Chevy” but asking for “Mercedes-level” performance. The agency requested about $330 million for fiscal 2021.

Big Tech platforms must help users to remain “vigilant against scams and fraud,” said subcommittee ranking member Gus Bilirakis, R-Fla., who succeeded McMorris Rodgers as top Republican on the panel. The FTC can’t do it alone, he said, urging cooperation with state and local law enforcement about best practices to avoid scams.

The agency “received more than 2.1 million fraud reports from consumers in 2020,” the FTC announced Thursday. Imposter scams remain the “most common type of fraud reported to the agency,” and consumers “reported losing more than $3.3 billion to fraud in 2020, up from $1.8 billion in 2019,” the commission noted.