AMG Capital Management v. FTC: Supreme Court Holds FTC Cannot Obtain Monetary Relief in Section 13(b) Suits

AMG Capital Management v. FTC: Supreme Court Holds FTC Cannot Obtain Monetary Relief in Section 13(b) Suits

Legal Sidebari

AMG Capital Management v. FTC:
Supreme Court Holds FTC Cannot Obtain
Monetary Relief in Section 13(b) Suits
April 30, 2021
On April 22, 2021, the U.S. Supreme Court held in AMG Capital Management, LLC v. Federal Trade
Commission that Section 13(b) of the Federal Trade Commission Act (FTCA) (15 U.S.C. § 53(b)) does
not allow the Federal Trade Commission (FTC or Commission) to seek equitable monetary relief, such as
restitution or disgorgement. This decision has significant implications for the FTC’s enforcement
authority because Section 13(b) had been the FTC’s primary mechanism for obtaining monetary relief for
first-time violations of the FTCA. While the FTC will still be able to obtain monetary remedies for FTCA
violations in some situations, its ability to do so will now be more limited.
This Sidebar briefly discusses the Supreme Court’s decision and considerations for Congress. For a more
detailed background on Section 13(b), see the earlier Legal Sidebars Will the FTC Need to Rethink its
Enforcement Playbook? and Will the FTC Need to Rethink Its Enforcement Playbook (Part II)?.
Background
The FTCA gives the FTC the dual mission of protecting consumers and promoting competition in the
marketplace. Section 5 of the FTCA (15 U.S.C. § 45) prohibits “unfair or deceptive acts or practices in or
affecting commerce” and “unfair methods of competition.” The FTCA provides several mechanisms for
enforcing these prohibitions, as discussed in a previous Sidebar. One enforcement avenue is an
administrative proceeding before an administrative law judge. Relief in these proceedings is limited to
cease-and-desist orders. To obtain monetary relief against the subject of such a proceeding, the
Commission must, within three years of the violation, bring a separate follow-on action against the
defendant in federal court under Section 19 of the FTCA (15 U.S.C. § 57b). To prevail in the follow-on
proceeding, the Commission must show that a “reasonable man” would have known that the conduct
leading to the cease-and-desist order was “dishonest or fraudulent.” The Commission may also bring a
court action for civil penalties and further equitable relief if the defendant later violates the cease-and-
desist order.
Congressional Research Service
https://crsreports.congress.gov
LSB10596
CRS Legal Sidebar
Prepared for Members and
Committees of Congress

Congressional Research Service
2
Given the limited relief available in administrative cease-and-desist proceedings, the FTC has often used
Section 13(b) to go directly to court and obtain equitable monetary relief. Section 13(b), which Congress
added to the FTCA in 1974, states that the FTC may bring an action in federal district court for a
“temporary restraining order or preliminary injunction” whenever the Commission “has a reason to
believe” that a person “is violating, or is about to violate” any law enforced by the FTC. Section 13(b)
further states that “in proper cases the Commission may seek, and after proper proof, the court may issue,
a permanent injunction.” In the years following Section 13(b)’s enactment, many federal courts of appeals
held that the provision allowed district courts to award broad equitable relief, such as restitution and
disgorgement of profits. These courts relied on earlier Supreme Court decisions, such as Porter v. Warner
Holding Co. and Mitchell v. Robert DeMario Jewelry, Inc., to conclude that courts adjudicating Section
13(b) claims may use their inherent equitable powers to award many types of relief, since Section 13(b)
doesn’t expressly limit such powers. This consensus dissolved, however, in 2019 when the Seventh
Circuit overturned its own precedent to hold that Section 13(b) does not authorize restitution, creating a
circuit split that the Supreme Court would resolve in AMG Capital Management.
AMG Capital Management, LLC v. Federal Trade
Commission
In AMG Capital Management, the Supreme Court unanimously held that Section 13(b) does not authorize
the FTC to seek equitable monetary relief, such as restitution or disgorgement. Writing for the Court,
Justice Stephen Breyer explained that the Court based this conclusion on (1) the fact that Section 13(b)
only refers to injunctive relief; (2) the language and structure of Section 13(b) as a whole; and (3) the
broader structure of the FTCA.
On the first point, the Court stated that an injunction is distinct from equitable monetary relief. While
there has been some dispute on whether a court order requiring restitution is a type of injunction (see, e.g.,
Judge Wood’s dissent in Federal Trade Commission v. Credit Bureau Center, LLC), the Court provided
little elaboration on this conclusion. On the second point, the Court reasoned that the language and
structure of Section 13(b) as a whole shows that the provision focuses on prospective rather than
retrospective relief. As analyzed in a previous Legal Sidebar, Section 13(b) contains the threshold
requirement that the FTC has a “reason to believe” that a person is “violating, or is about to violate” the
law. The Court said this language shows that Section 13(b) addresses situations in which the FTC needs to
halt ongoing conduct while it determines (presumably through an administrative proceeding) whether the
conduct is unlawful. The Court recognized that Section 13(b) does provide for permanent injunctions in
“proper cases.” Even so, the Court said that reading this language to allow for other unnamed types of
equitable relief would allow a “small statutory tail to wag a very large dog.” Lastly, the Court looked to
the broader structure of the FTCA. It pointed, in particular, to other provisions, such as Section 19, which
expressly allow for broader types of monetary relief. The Court noted that Congress enacted Section 19 a
few years after Section 13(b) and reasoned that it is “highly unlikely that Congress would have enacted
provisions expressly authorizing conditioned and limited monetary relief” if Section 13(b) had already
provided for expansive equitable monetary relief.
The Court rejected the various arguments the FTC proffered for a broader reading of Section 13(b). For
instance, the Commission argued that Porter and Mitchell support its interpretation of Section 13(b)
because the Court held in those cases that statutory provisions authorizing injunctive relief also allowed
equitable monetary relief. The Court explained, however, that both cases also recognized that the text and
structure of a statute can, “by a necessary or inescapable inference,” restrict a court’s equity jurisdiction.
The Court noted that it drew such an inference in Meghrig v. KFC Western, Inc., when it held that the
relevant statutory scheme as a whole showed that a particular provision did not authorize restitution. Such
an inference similarly applies, the Court explained, to Section 13(b). The Court also rejected, among other

Congressional Research Service
3
arguments, the FTC’s contention that Congress had acquiesced to circuit courts’ broad interpretation of
Section 13(b) because it had twice amended the provision without overturning these decisions. The Court
recognized that congressional acquiescence to a settled judicial interpretation can suggest Congress’s
adoption of that interpretation. Nonetheless, it explained that this principle did not apply to Congress’s
amendments of Section 13(b), since those were isolated and unrelated changes dealing with the
provision’s venue, joinder, and service rules, rather than its remedial provisions.
Considerations for Congress
The Court’s decision in AMG Capital Management curtails one of the FTC’s most commonly used
enforcement tools. As the Court noted in its opinion, the FTC brings dozens of cases a year under Section
13(b). After the Court’s decision, the FTC will still be able to use Section 13(b) to obtain injunctive relief
to halt ongoing or impending conduct that violates any law enforced by the FTC. But the FTC will no
longer be able to obtain monetary relief in such actions. If the FTC wants to obtain monetary relief for
first-time violations of Section 5 of the FTCA, it will now first have to complete an administrative case-
and-desist proceeding; once the case-and-desist order is final, the FTC will then have to commence a
second follow-on action in federal court under Section 19, in which it must show a reasonable person
would have known defendant’s conduct was dishonest or fraudulent. This development affects many
cases, since Section 5 encompasses much of the Commission’s competition and consumer protection
authority. The Court’s decision will not, however, inhibit the FTC’s authority to seek monetary penalties
when companies violate cease-and-desist orders, consent orders, or rules issued under Section 18(a)(1)(B)
of the FTCA that define particular types of acts or practices as unfair or deceptive. The FTC will also still
be able to obtain monetary relief when enforcing other statutes, such as the Children’s Online Privacy
Protection Act or the COVID-19 Consumer Protection Act, which provide that violations of those laws be
treated as violations of Section 18(a)(1)(B) rules.
In light of AMG Capital Management, Congress may be interested in addressing the FTC’s remedial
authority under the FTCA. One approach could be to amend Section 13(b) to allow for equitable
monetary relief. For example, the recently introduced bill H.R. 2668 would amend Section 13(b) to
authorize many kinds of equitable relief, such as restitution, disgorgement of ill-gotten gains, and
rescission of contracts. This bill would also address Section 13(b)’s limitation on suing for past conduct
by amending it to allow for enforcement actions based on past violations, subject to a 10-year statute of
limitations. On the other hand, some commentators have maintained that any additional monetary
authority should be accompanied by safeguards ensuring that only clear violations are subject to monetary
relief. For instance, the U.S. Chamber of Commerce has suggested that any amendments to Section 13(b)
allowing monetary relief should also incorporate Section 19’s requirement that the FTC show that a
reasonable person would have known the conduct was dishonest or fraudulent. During a recent
congressional hearing, however, several witnesses maintained that keeping the dishonest or fraudulent
standard out of Section 13(b) would provide the FTC with necessary flexibility in recouping money for
consumers.
Another issue is whether any revisions to Section 13(b) would apply retroactively to cases pending at the
time of the statutory amendment. H.R. 2668 provides that its amendments shall apply to any actions
pending on the date of enactment. Some commentators, however, have said that there may be
constitutional due process concerns with applying monetary remedies retroactively. For a further
discussion of retroactive legislation, see CRS In Focus IF11293, Retroactive Legislation: A Primer for
Congress, by Joanna R. Lampe.

Congressional Research Service
4
Author Information

Chris D. Linebaugh

Legislative Attorney

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

LSB10596 · VERSION 1 · NEW