Senator Joe Manchin’s decision to torpedo the Build Back Better Act has wide-ranging consequences, including one that hits close to home, so to speak. Tucked in the bill was a provision to provide the FTC with authority to seek civil penalties for all violations of Section 5 of the FTC Act (something the FTC Act currently does not allow). This provision, which was vehemently opposed by a broad range of business groups, essentially has died on the vine. Although proposals to arm the FTC with such authority may be resurrected in future spending bills or standalone legislation, as of today, Congress’s focus appears to have narrowed on regulation of Big Tech, including the creation of a data privacy bureau within the FTC.
In the meantime, Senator Mike Lee, Republican of Utah, has introduced a new bill, the Consumer Protection and Due Process Act, which would provide the FTC with the authority to seek equitable remedies (including consumer restitution) under Section 13(b) of the FTC Act. This bill is a direct response to the April 2021 Supreme Court’s decision in AMG Capital Mgmt. finding the FTC did not have the authority to seek equitable remedies under current law (for more on that watershed case, click here and here). Notably, the bill has built-in guardrails to ensure the FTC does not “engage in substantial overreach.” Those guardrails include:
- Equitable relief only would be available if a “reasonable individual would have known, under the circumstances be, [the act or practice] was unfair or deceptive”.
- The consumer must have materially relied on the unfair or deceptive practice and that practice must be the proximate cause of harm to the consumer. Mere exposure to the practice would not be sufficient to show consumer reliance.
- Any disgorgement must be offset by any amounts refunded to consumers and would not be allowed to exceed net profits directly related to the violation.
- The ability to seek such remedies would be subject to a three-year statute of limitations.
- The authority would not be retroactive, meaning it would not apply to pending FTC lawsuits.
- Actions for damages from unfair methods of competition would have to be referred to the Attorney General to pursue.
Finally, as a result of a backlog of nominations that have not yet cleared the Congress, Alvero Bedoya, President Biden’s pick to fill the fifth and last seat on the Commission, will need to be renominated in the new year. Although essentially a technicality, this will add further delay to his nomination, potentially for several months, leaving the FTC split with two Democrats and two Republicans who mostly have been voting along party lines.
All of us here wish you a safe, healthy, and joyous new year.