Senate Commerce Committee Chair Pushes One-Sided 13(b) Fix

The one-year anniversary of the Supreme Court’s decision in AMG Capital Management, LLC v. FTC has renewed calls for Congressional action to expand and codify the Federal Trade Commission’s enforcement authority under Section 13(b) of the FTC Act. Last Thursday, we wrote here about the agency’s most recent open meeting, during which Commissioners heard from a key Senate staffer that Senate Commerce Committee Chair Maria Cantwell (D-WA) intended to introduce what she hoped would be a bipartisan fix. Yesterday, Chair Cantwell’s bill was made public, and its terms render any hope of bipartisan support a long-shot, at best, with little likelihood of garnering the Republican support needed to clear the chamber.

The bill’s release followed the May 2 release of a Senate Commerce Committee report entitled Restoring the Federal Trade Commission’s Authority to Protect Consumers and the Marketplace – an 80-page report, more than 50 pages of which purported to list dollar amounts received in each state due to “FTC cases resulting in significant refunds” (many of which were settlements never actually litigated under Section 13(b)). The report echoed much of what we heard from Commissioners last week – that AMG has created an enforcement void for the agency and no alternative enforcement approaches come close to 13(b)’s ability to protect consumers and provide monetary redress. The report couched the court’s decision as particularly damaging to the agency’s efforts to curtail “Big Tech and Pharma’s ability to harm consumers and fledgling businesses.”

In unveiling the report, Chair Cantwell said, “Congress can act to stop this from happening in the future and restore this vital authority to the FTC so it can help return money back to consumers’ pockets.”

As an initial matter, it’s important to emphasize that the Supreme Court did not take any authority away from the FTC that needs to be “restored”; it concluded 9-0 that the FTC did not have the authority in the first place. A remarkable result given the fractiousness of this Court, fully on display in recent days.

More importantly, not mentioned anywhere in the report is the Commission’s highly creative, year-long response to the AMG decision. Chair Cantwell should expect Republicans to ask why a Section 13(b) fix is even necessary, given the muscularity shown by this Commission in seeking other ways to pursue monetary remedies by relying on (and stretching) existing statutes, coordinating with State AGs, and loudly proclaiming its Penalty Offense Authority through the issuance of 1,870+ notices to U.S. businesses. And, of course, as Justice Breyer put it, reliance on Section 19’s “coherent enforcement scheme,” which allows the Commission to obtain monetary relief by first invoking its administrative procedures and then Section 19’s redress provisions.

Much like the House-passed Consumer Protection and Recovery Act (which we wrote about here), Senator Cantwell’s bill would explicitly authorize the FTC to seek permanent injunctions and other equitable relief, including restitution and disgorgement, to redress perceived consumer injury, when it is in the public interest. And, much like the House bill, it would vastly expand the FTC’s enforcement authority, far surpassing what the agency thought it had pre-AMG.

Notably, Senator Cantwell’s bill would broaden Section 5 of the FTC Act by inviting the Commission to cast off the constraints of its unfairness, deception, and substantiation policy statements and turn the courts into instruments of its agenda to rewrite the law:

“(3) Limitation.—For a violation of Section 45(a)(1) of this Title, the Commission may seek, and the court may order, equitable relief under paragraphs (1) or (2) only if the violation involved the type of conduct that a reasonable person would have fair notice, consistent with due process requirements, could constitute an unfair or deceptive act or practice or an unfair method of competition (within the meaning of Section 45(a)(1) of this Title)."

It will take years of court decisions to flesh out what “fair notice” and “public interest” mean, but the answer probably won’t matter since “could constitute” is a license to substitute possibilities for probabilities in the elements of all violations. The central achievement of the unfairness policy statement was to commit the Commission to applying a cost-benefit analysis before condemning an act or practice. The deception policy statement stopped the Commission from finding fault with any statement that had a “tendency or capacity” to mislead. Now the Commission has to prove a likelihood. The new 13(b) would be easier to prove than the old Section 5.

Another consequence of this language would be to consign Section 19’s “coherent enforcement scheme,” to history. And the new 13(b) would be easier to invoke than most of the specific statutes the FTC enforces. Truth in Lending Act? COPPA? Who needs them?

Fanciful? Hardly. The Commission showed the way with its antitrust authority. Last year it rescinded its competition policy statement and said the antitrust laws no longer defined unfair methods of competition. From now on, competition at the Commission means equity for employees and marginalized constituencies. We’ve already heard Chair Khan complain that predatory pricing is too hard to prove. If local stores can’t compete with a national retailer, enjoin the chain. This bill would give the agency a license to enjoin competition itself.

The FTC Act already has a standard that is well understood for granting redress. Section 19(b) authorizes compensation to consumers for conduct that a reasonable person should know is dishonest or fraudulent. There is no lobby for scammers, and Republicans would likely support a 13(b) fix that targeted dishonest or fraudulent conduct, and included other guardrails (e.g., Senator Lee’s (R-UT) S. 3410, the Consumer Protection and Due Process Act). Apparently, however, the Commission’s allies aren’t ready to settle for sensible solutions, as evidenced by the Cantwell bill, which seeks power without limits.