April 26, 2021

Supreme Court Rules That the FTC Cannot Use Section 13(b) to Secure Monetary Relief

Since the 1970s, the Federal Trade Commission has used its authority under Section 13(b) of the FTC Act to secure consumer redress for frauds and scams perpetrated on consumers.1 On April 22, 2021, the U.S. Supreme Court, in AMG Capital Management, LLC v. FTC, struck down that oft-used authority, ruling that the statutory ability to seek “permanent injunctions” in § 13(b) did not grant the FTC the power to obtain monetary relief.

Prior to the Supreme Court’s ruling, the FTC has used its § 13(b) power in both consumer protection and antitrust litigations to secure federal court orders requiring wrongdoers to return billions of dollars in ill-gotten gains to consumers, without venturing through an administrative process. With the Supreme Court’s order, the FTC will likely adjust its consumer protection strategy to file more administrative claims. The FTC also will likely partner with state attorneys general more often to secure restitution under their baby FTC Acts prohibiting unfair methods of competition and unfair or deceptive business practices, and will likely pursue rulemaking — and penalties for rule-breaking — to fill the new void in its enforcement powers while Congress considers reinstating the Commission’s consumer redress authority. How this strategy unfolds also will be impacted by President Biden’s choice of a full-time FTC chair to replace the current acting leader and re-install a 3–2 majority.

Case Overview

Between 2008 and 2012, internet businesses operated by Scott Tucker originated more than 5 million high-interest, short-term payday loans. Those loans included deceptive fine print requiring a borrower to perform a series of affirmative steps to opt out of a renewal plan, which, through fees and interest, could nearly triple the total amount of the loan paid. In 2012, the FTC sued Tucker and his companies for deceptive practices in violation of the FTC Act. The Commission asked for a “permanent injunction” barring Tucker from the consumer lending business and ordering him to disgorge “ill-gotten” gains. A Nevada federal court granted the request, compelling Tucker to pay approximately $1.3 billion in equitable monetary relief, the largest litigated judgment ever obtained by the FTC.

On appeal to the Ninth Circuit, that court rejected Tucker’s position that the FTC did not have statutory authority to seek equitable monetary relief under § 13(b) of the FTC Act. While acknowledging his argument had “some force” because injunctions are not the same as monetary penalties, the court concluded Tucker’s contention was precluded by prior Ninth Circuit decisions, which had held that the FTC’s § 13(b) authority did include the power to grant restitution. After Tucker’s unsuccessful appeal in 2018, the FTC announced that consumers deceived by Tucker (who was convicted and imprisoned for fraud) would receive $505 million, the largest FTC redress program in the agency’s history.2

Tucker and his companies appealed further, and after a circuit split developed, the Supreme Court granted certiorari.3 On appeal, the FTC explained to the Court that every year it brings dozens of federal cases seeking “the return of illegally obtained funds” through its “permanent injunction” power. The Court noted that in 2019 the Commission filed 49 federal complaints and secured $723 million in consumer redress or disgorgement, compared with 21 administrative complaints.

Unswayed by past consumer redress success, the Supreme Court reversed, undoing the basis for decades of FTC’s federal litigation. Justice Breyer authored the unanimous opinion that the FTC did not possess the authority to secure court orders awarding monetary restitution or disgorgement as a function of § 13(b)’s authority to grant permanent injunctions. The Court held that the language of § 13(b) only permits the FTC to proceed directly to federal court — and bypass the administrative process — to obtain a “permanent injunction,” not monetary relief, because injunctive and monetary relief are not the same thing.

The Court noted that Sections 5 and 19 of the FTC Act — also enacted in the 1970s — authorize district courts to grant civil penalties and equitable relief to redress injury to consumers, including the “refund of money or return of property,” but only through the enforcement of FTC administrative orders. The Court opined that a limited reading of § 13(b)’s permanent injunction language created a consistent and coherent enforcement scheme. Adopting the FTC’s “broad reading” of “permanent injunction” would allow it to use § 13(b) as a substitute for § 5 and § 19, which the Court concluded “could not have been Congress’ intent.”

The Court distinguished between the forward-looking, prospective relief of an injunction compared to the retrospective relief that restitution provides; the former was clearly authorized in § 13(b), not the latter. The Court reasoned that reading the words of § 13(b) to allow “what they do not say” — namely, imposing monetary relief while dispensing with administrative process — “would allow a small statutory tail to wag a very large dog.”

The Court dismissed several other FTC arguments, including its statutory interpretation claim that prior Supreme Court cases interpreted different statutes’ injunctive relief provisions to also allow for monetary relief. The Court reasoned that “a provision’s grant of an ‘injunction’ or other equitable powers does not automatically authorize a court to provide monetary relief.” In addition, the Court pointed out that the FTC can still use its powers under § 5 and § 19 “to obtain restitution on behalf of consumers” through administrative proceedings, and the FTC was “free to ask Congress to grant it further remedial authority.”


Absent a legislative remedy, the Supreme Court’s ruling will cause a fundamental shift in how the FTC enforces its statutory authority to prohibit unfair methods of competition and unfair or deceptive business practices. The FTC will no longer be able to secure federal court orders to force bad actors to pay restitution unless the agency has first held an administrative proceeding before an FTC administrative law judge. We cannot overstate how large an impact this will have on the functioning of the FTC. As acting Chairwomen Rebecca Slaughter stated on April 22, 2021, “[w]ith this ruling, the Court has deprived the FTC of the strongest tool [the FTC] had to help consumers when they need it most.”

The FTC has used disgorgement of illegal gains to return money to consumers harmed by, among other harmful practices, telemarketing fraud, anticompetitive pharmaceutical practices, data security and privacy breaches, multilevel marketing schemes, scams aimed at vulnerable citizens and deceptive advertisements.4 Consumer redress also has been used to punish recidivists. In the past five years alone, the FTC has returned $11.2 billion to consumers through § 13(b) actions. The Supreme Court’s ruling that the FTC overstepped its authority will limit the FTC’s ability to aggressively extract fines from companies in the agency’s cross-hairs.

By having to pursue a more cumbersome administrative process before going to court, the FTC loses some of its leverage to quickly press fraud and antitrust lawsuits. We expect to see more collaborative actions with state attorneys general who can use state law to obtain consumer redress. This a relatively painless solution since it is already common for states and the FTC to work collaboratively on investigations and pursue lawsuits jointly. In addition, we note that the agency has authority to issue and enforce trade regulations. We believe the FTC will evaluate whether the agency can effectively use its rulemaking authority to issue new regulations, and utilize civil penalties for violation of trade regulation rules to rein in bad actors. Such an effort may be more useful in enforcing activities violative of consumer protection laws than antitrust laws.

We also are watching the FTC and its allies’ efforts to have Congress quickly pass new legislation that decisively gives the FTC authority to seek restitution and disgorgement in federal court. Indeed, two days before the AMG decision, all four FTC members testified before the Senate and advocated that “[l]egislation is needed to ensure equitable monetary relief under Section 13(b) of the FTC Act.”5 A similar hearing before the House of Representatives is scheduled for April 27, 2021, to discuss H.R. 2688, the “Consumer Protection and Recovery Act,” which would amend the FTC Act to restore the FTC’s authority under § 13(b) to seek “other equitable relief,” including “restitution for losses, rescission or reformation of contracts, refund of money, … return of property [and] disgorgement of any unjust enrichment.”6 Acting Chair Slaughter expressed her gratitude for the introduction of the bill and action by Congress “to clarify one of the FTC’s most essential tools.”7

At present, there is a significant concern in Congress that antitrust enforcement is weak and the government enforcement agencies need stronger laws, more funding and more staff. This is an ideal time for the FTC’s request to Congress to expand its authority.

The FTC Act is nuanced and complex, and its application to particular business situations is a fact-specific inquiry. Businesses concerned about how recent developments will impact their risk of violating Section 5 of the FTC Act are strongly advised to consult with legal counsel.

  1. 15 U.S.C. § 53(b) (enacted in 1973).
  2. FTC Press Release, FTC and DOJ Return a Record $505 Million to Consumers Harmed by Massive Payday Lending Scheme (Sept. 27, 2018), https://www.ftc.gov/news-events/press-releases/2018/09/ftc-doj-return-record-505-million-consumers-harmed-massive-payday.
  3. The Ninth Circuit’s decision that Section 13(b) allows disgorgement conflicted with contrary conclusions from the Third and Seventh Circuits. FTC v. Credit Bureau Center LLC, 937 F.3d 764 (7th Cir. 2019); FTC v. AbbVie Inc., 976 F.3d 327 (3d Cir. 2020).
  4. See, e.g., FTC v. Western Union Co., No. 1:17-CV-001110-CCC (M.D. Pa. Jan. 19, 2017) (anti–money laundering violations redress of $586 million).
  5. Prepared Statement of the FTC (Apr. 20, 2021), https://www.commerce.senate.gov/services/files/C08E5761-8058-423B-9876-40F17B56A58B.
  6. H.R. 2668, 117 Cong. (2021), https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/BILLS-117hr2668ih%20Hearing%204.27.%20CPC.pdf.
  7. Prepared Statement of the FTC (Apr. 27. 2021), https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Witness%20Testimony_Slaughter_CPC_2021.04.27.pdf.

Related Industries

The Faegre Baker Daniels website uses cookies to make your browsing experience as useful as possible. In order to have the full site experience, keep cookies enabled on your web browser. By browsing our site with cookies enabled, you are agreeing to their use. Review Faegre Baker Daniels' cookies information for more details.