US Supreme Court rules Federal Trade Commission cannot seek monetary relief for unfair or deceptive business practices
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US Supreme Court rules Federal Trade Commission cannot seek monetary relief for unfair or deceptive business practices

In a unanimous decision, the US Supreme Court held Thursday that the Federal Trade Commission (FTC) cannot demand equitable monetary relief under section 13(b) of the Federal Trade Commission Act (FTCA). The case involved Scott Tucker, payday loan businessman and convicted racketeer, and his AMG Capital Management company. The FTC initially levied a $1.27 billion fine against AMG Capital, which was overturned as a result of this decision.

The controversy centered around section 13(b) of the Federal Trade Commission Act. This section allows the FTC to seek a “permanent injunction” for deceptive or unfair business practices, and both the district court and the Court of Appeals for the Ninth Circuit held that such an injunction can include equitable monetary relief, such as restitution or disgorgement.

Disgorgement is a remedy requiring the wrongdoer to give back any profits earned, whereas restitution focuses on victims’ damages, regardless of the profit (or lack thereof) left to the wrongdoer. Both methods have long been utilized by the FTC, but this decision may call into question previous FTC remedies involving equitable monetary relief.

Penning the opinion for the court, Justice Stephen Breyer stated that an injunction is not the same as monetary relief, and prospective injunctions cannot cover retrospective monetary remedies. He noted also that legislative history and intent is ambiguous on the point. Notably, the court used the rule against surplusage to suggest the FTC’s reading of 13(b) would render sections 5 and 19 of the FTCA moot. Both sections 5 and 19 allow the FTC to award monetary relief for other, different violations.

Critics of the decision suggest it will be a blow to consumer rights. Acting Chairwoman of the FTC Rebecca Kelly Slaughter said in a statement: “[T]he Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior.”

As Justice Stephen Breyer noted in the opinion, nothing in the court’s decision prevents the FTC from going to Congress and requesting a broadening of its remedial authority.