Supreme Court Limits FTC Power In Obtaining Consumer Restitution

The U.S. Supreme Court issued a unanimous ruling that significantly limits the ability of the Federal Trade Commission (FTC) to enable monetary relief for consumers from companies that are charged with using deceptive practices.

What Happened: The ruling involved the case of AMG Capital Management v. FTC, in which the federal agency secured the largest court-ordered settlement in its history with a $1.27-billion verdict against a payday lender accused of ripping off lower-income borrowers.

The FTC argued that Section 13(b) of the Federal Trade Commission Act has historically been used to cover “restorative monetary relief” actions by the agency. But in an opinion authored by Justice Stephen Breyer, the court determined Section 13(b) did not give the FTC the authority to extract “equitable monetary relief such as restitution or disgorgement,” nor did it give courts the power to award such monetary verdicts.

“Taken as a whole, the provision focuses upon relief that is prospective, not retrospective,” Breyer wrote. “To read those words as allowing what they do not say, namely, as allowing the Commission to dispense with administrative proceedings to obtain monetary relief as well, is to read the words as going well beyond the provision’s subject matter.

“In light of the historical importance of administrative proceedings,” Breyer added, “that reading would allow a small statutory tail to wag a very large dog.”

Related Link: Biden Nominates Tech Critic Lina Khan As FTC Commissioner

What's Next: Breyer noted the agency has the authority to secure financial restitution for consumers under other sections of the FTC Act, stating that if the FTC “believes that authority too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority.”

Acting FTC Chairwoman Rebecca Kelly Slaughter angrily condemned the ruling.

"The Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior,” she said. "We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”

The House Energy and Commerce Committee is scheduled to hold a hearing next week that will address if the FTC requires expanded authority for seeking consumer redress.

(Photo by Glenn Beltz / Flickr Creative Commons.)