AAI Asks U.S. Supreme Court to Preserve FTC’s Disgorgement Powers (AMG Capital v. FTC)

AAI filed an amicus brief urging the U.S. Supreme Court to preserve decades of unanimous circuit precedent recognizing the authority of the Federal Trade Commission (FTC) to seek equitable monetary remedies in federal court.

The FTC’s enabling statute, the FTC Act, gives the FTC the power to prosecute antitrust and consumer protection violations in both administrative proceedings and in federal court.  Its remedial powers in administrative proceedings are governed by Section 19 of the Act, and its remedial powers in federal court are governed by Section 13(b).  Since the 1970s, every federal circuit court to consider the question has held that the powers granted by Section 13(b) include the ability to seek equitable monetary relief in federal court.  By its literal terms, however, Section 13(b) authorizes the FTC to seek preliminary and permanent injunctions.

Since recent changes in the makeup of the Supreme Court, businesses prosecuted by the FTC and forced to disgorge ill-gotten gains have pressed textualist arguments claiming the FTC cannot seek equitable disgorgement under the literal terms of the statute.  And in 2019, a defendant persuaded a Seventh Circuit panel to create a circuit split.  The FTC petitioned for certiorari, and the case was consolidated with a petition by a 9th circuit defendant who had lost a similar appeal.  Both petitions were granted, but the Seventh Circuit grant was subsequently vacated.

The remaining 9th Circuit case, AMG Capital v. FTC, is a consumer protection case.  The defendants were convicted of running a fraudulent payday lending scheme that misrepresented loan terms and caused borrowers to pay seven times their expected amount of interest.  After the FTC successfully disgorged $1.3 billion and returned it to victims, the 9th Circuit affirmed.  In their Supreme Court merits brief, the defendants argue that “Restitution is not an injunction,” and that Congress would have said so expressly if it intended to authorize the FTC to seek equitable monetary relief.

AAI’s brief argues that Congress should not be understood to have intended defendants to keep their ill-gotten gains when they violate the FTC Act.  First, when Congress grants the power to issue injunctions, the grant has long been understood not to disturb a court’s inherent authority to fashion equitable relief necessary to make a remedy effective.  Second, Congress has been made well aware of how Section 13(b) has been interpreted, and it has ratified that interpretation by leaving it intact through multiple subsequent amendments to the statute. Third, AMG’s interpretation would prevent the Federal Trade Commission Act from serving its fundamental purpose of preventing unfair methods of competition and unfair and deceptive acts or practices.  Illegal business practices are not preventable if they are profitable.

AAI’s brief also emphasizes that the defendants’ extreme position would prevent the FTC from implementing other essential equitable remedies, to the detriment not only of the Commission and consumers but even of defendants.  For example, without the power to seek equitable hold-separate orders in merger cases, which prevent divestiture assets from being co-mingled prior to the issuance of a merger remedy, the Commission would be required to block entire mergers even when it believes a competitive problem is otherwise curable.  And because, on AMG’s extreme reading, the Commission would be unable to prevent comingling of assets even during the preliminary injunction litigation, it would often be left without any effective relief even if it wins.  AAI argues that Congress need not and should not be presumed to have intended such absurd results.

The brief was written by Gupta Wessler Partner Jennifer Bennett, with assistance from Gupta Wessler Partner Matt Wessler and AAI Vice President of Legal Advocacy Randy Stutz, as well as several AAI Advisory Board members.  AAI thanks the Gupta Wessler firm for serving as pro bono counsel and handling all aspects of the filing.