Cantwell Seeks to Protect FTC 13(b), Pending SCOTUS Decision

Senate Commerce Committee Chair Maria Cantwell, D-Wash., is exploring legislation to protect FTC Section 13(b) authority if the agency gets an adverse decision from the Supreme Court in AMG Capital Management v. FTC (see 2102040049), she told us last week. Cantwell wants to discuss the agency’s authority Tuesday when the commission testifies before her committee (see 2104140046). Section 13(b) authority allows the agency to seek an injunction against FTC Act violations and obtain restitution for consumers simultaneously.

The authority “might very well be looked at,” ranking member Roger Wicker, R-Miss., told us, though he hasn’t explored the issue deeply. Wicker expects to ask questions about data privacy and the names, images and likenesses of college athletes. He doesn’t expect a “lot of fireworks” at the hearing and said legislators need to use “every opportunity available” to bring privacy back into focus. Privacy discussions are “dormant,” Sen. Brian Schatz, D-Hawaii, told us.

Rep. Tony Cardenas, D-Calif., plans to introduce legislation. An aide said his bill would amend the FTC Act to “explicitly reaffirm” the commission’s “longstanding authority to obtain injunctive and equitable relief, including monetary redress for consumers in court for all violations of the laws it enforces.” It says the FTC can pursue equitable relief, including “restitution for losses, contract reformation and rescission, monetary refunds, and the refund of property, as well as forcing bad actors to return their ill-gotten gains.” Cardenas in a statement noted bad actors preying on consumers: “This authority must be protected so that the agency can stop COVID-19 fraud and scams and, importantly, make consumers whole.”

In 2020, all FTC commissioners wrote the Senate and House Commerce committees, calling 13(b) a “critical” enforcement tool. The National Consumer Law Center, Public Citizen, Open Markets Institute, American Antitrust Institute, a group of ex-FTC officials and some 30 states sided with the agency in the Supreme Court case. The New Civil Liberties Alliance, U.S. Chamber of Commerce, TechFreedom, Washington Legal Foundation and Americans for Prosperity filed in support of AMG. The expectation is that the agency will lose, because oral argument wasn’t favorable, ex-FTC Chairman William Kovacic, a professor at George Washington University Law School, told the House Commerce Committee in February.

People are “fearing” an unfavorable decision for the commission, but there are strong arguments for the agency, ex-FTC Consumer Protection Bureau Director Jessica Rich, now at Georgetown Law Center, told us. Virtually the entire FTC approach to protecting consumers against fraud is based on this authority, she said. Without it, the FTC wouldn’t have been able to obtain the $11 billion it did in the deception case against Volkswagen, she said. Others noted the FTC’s $62 million settlement with Amazon over alleged deception of Amazon Flex drivers wouldn’t have been possible, either (see 2102020039).

Congress can rewrite whatever portions of the law SCOTUS interprets adversely and make clear the FTC can obtain injunctive and equitable relief in the same action when exercising its authority, Rich said. The decision is expected by late June or early July, when the high court typically wraps up decisions for the term, said National Consumer Law Center Litigation Director Stuart Rossman.

The New Civil Liberties Alliance opposes the FTC’s case because the current legal process allows the agency to freeze assets without proper due process, said Senior Litigation Counsel John Vecchione. It prevents defendants from being able to hire proper legal counsel, he said. The agency now can seek injunctive relief from a court, without giving notice to the defendant and without proving a victim was deceived, and can freeze all assets, he said: “They basically make up an imaginary person they say would be deceived, and that’s enough. That’s a crazy standard. No private lawyer gets to do that, only the government.” The FTC should have to go through administrative law judges before the courts, he said, arguing for a legislative fix.

The FTC’s full range of equitable authority is necessary because it’s the only thing properly deterring bad actors from cheating or defrauding consumers, said NCLC's Rossman. If the FTC finds someone defrauding consumers and the only remedy is to tell the fraudster to stop, there’s no downside to continuing the illegal activity, he said: “You’ve got to return the illegal money. That is the deterrent.”