Earlier today, the United States Supreme Court issued a unanimous opinion in AMG Capital Management v. Federal Trade Commission, holding that Congress, by enacting Section 13(b) of the Federal Trade Commission Act, did not grant the Commission authority to obtain equitable monetary relief when it proceeds in federal district courts under that section.

Specifically, Section 13(b) of the Federal Trade Commission Act gives the Commission authority to bring suit in federal district court against those it believes are “violating” or “about to violate” the FTC Act, in order to “enjoin any such act or practice.” In such cases, Section 13(b) further provides courts with the authority to issue a “permanent injunction.” Since the late 1970s, the FTC has taken the position, accepted by courts, that this grant of authority included the ability to obtain equitable monetary relief. The Supreme Court today said not so.

In reaching its conclusion, the Court first looked to the plain language of 13(b). It recognized that the statute only allows for injunctions. The Court stated, plainly, that “an injunction is not the same as an award of equitable monetary relief.”

Next, the Court analyzed the purpose of Section 13(b). Relying on the words “is violating” and “is about to violate,” the Court found that Section 13(b) focuses on prospective rather than retrospective harm the FTC seeks to remedy. The Court concluded that the prospective nature of Section 13(b) suggests that only an injunction (and not monetary relief) addresses the specific problem of halting unfair practices.

The Court then conducted a structural analysis of the FTC Act, comparing Section 13(b) with Sections 5(l) and 19. It reasoned that Congress, in enacting Sections 5(l) and 19, authorized district courts to impose monetary penalties and award monetary relief in cases where the FTC has already engaged in administrative proceedings. The Court opined that, since Congress explicitly provided for equitable monetary relief through these other provisions, Congress did not intend for Section 13(b) – with its narrower “permanent injunction” language – to have a similarly broad scope.

Last, the Court concluded that interpreting Section 13(b) as authorizing only injunctive relief illuminates the “coherent enforcement scheme” of the FTC Act. Simply put, the FTC Act allows the Commission to obtain limited monetary relief first through its administrative procedures and then through Section 19’s redress provisions. The purpose of Section 13(b) is for the Commission to obtain injunctive relief while administrative proceedings are foreseen or in progress, or when it seeks only injunctive relief. The Court determined that a broad reading of Section 13(b), allowing it to be used as a substitute for Sections 5 and 19, “would allow a small statutory tail to wag a very large dog.”

What happens next? We have written about options available to the FTC if it lost this case. As the Supreme Court noted, the Commission is free to ask Congress for further authority to seek equitable monetary relief. Indeed, as we have previously written, congressional hearings on the scope of the Commission’s authority under Section 13(b) are already under way. Following this Supreme Court decision, if Congress wants to authorize the FTC to pursue equitable monetary relief (without first using administrative procedures or more limiting provisions of the Act like Section 19), it will have to pass legislation amending the Federal Trade Commission Act to provide such authority.

As always, Venable continues to monitor this regulatory and legislative landscape, to meet its clients’ needs.