If you had asked us last week, we would have predicted that the Supreme Court’s momentous AMG Capital Management, LLC v. FTC decision last year, in which the Court struck down the Federal Trade Commission’s nearly 50-year practice of seeking equitable monetary relief under Section 13b of the FTC Act, would be the most significant decision about FTC jurisprudence we would see from the Supreme Court for a while.

However, in a surprising move, the Supreme Court recently granted certiorari in Axon Enterprises Inc. v. FTC to address whether Congress intended to strip federal district courts of jurisdiction to hear challenges to the constitutionality of the FTC’s structure, procedures, and very existence. Importantly, however, the Court declined to directly address the petitioner’s challenge to the constitutionality of the FTC. Still, the Court’s decision could significantly impact how future targets of FTC enforcement investigations and actions will challenge the FTC’s constitutional limits.Continue Reading Federal Trade Commission Goes to the Supreme Court Again, This Time in a Constitutional Challenge

Last week, the Federal Trade Commission (FTC) announced that it agreed to settle claims against Dun & Bradstreet (D&B), a business credit reporting agency engaged in deceptive and unfair practices with small and mid-sized business customers.

The FTC’s complaint primarily stemmed from businesses’ claims that error-ridden reports negatively affected business opportunities and that D&B’s offered credit-monitoring products did not easily improve credits scores and ratings as suggested. According to the order, D&B will have to adjust its operational practices in favor of its business customers.

Under FTC Chair Lina M. Kahn, the agency has been utilizing tools to affect broad swaths of the economy and certain industries. The FTC is using a traditional administrative cease and desist order to resolve small businesses’ credit reporting concerns – a continuation of the agency’s broad definition of “consumer” to challenge conduct directed at small businesses. The same concerns at issue in this case involving small business mirror those in many consumer cases, including credit reporting, deceptive telemarketing, and inadequately disclosed renewal terms.Continue Reading FTC to Dun & Bradstreet: Change Credit Reporting Operations to Benefit Business Customers

On July 21, 2021, and in response to President Biden’s Executive Order calling on the FTC to address repair restrictions, the FTC unanimously adopted the Right to Repair Policy Statement related to manufacturer and seller restrictions to product repairs. In the policy statement, the FTC announced its plans to prioritize enforcement against unlawful repair restrictions, including promoting possible updates to state and federal legislation. Manufacturers and sellers should ensure compliance with current consumer protection and antitrust laws and monitor potential rulemaking, a path the FTC is careening toward.

The FTC expressed concern that repair restrictions make it more difficult for competitors, local businesses, and consumers to repair products. In a May 2021 report to Congress, Nixing the Fix: An FTC Report to Congress on Repair Restrictions, the FTC detailed manufacturer-created restrictions, including limiting the availability of parts, software, and telematics information and access to authorized repair networks; designing products to make self-repairs less safe; asserting trademark and patent rights in an overbroad manner; and implementing restrictive end-user license agreements and software locks. The FTC also warned that repair restrictions drive up repair costs, repair wait times, and electronic waste; reduce competition; and have an especially large impact on communities of color and lower-income Americans.Continue Reading FTC Turns Focus to Repair Restrictions in New Policy Statement

With a new leader at the Federal Trade Commission comes new rules of practice. Chair Lina Kahn convened a first-of-its-kind open Commission meeting, allowing for live public comments following the meeting. In addition to issuing the Made in the USA Final Rule at the meeting, the FTC revised the procedures for issuing Magnuson-Moss Rules. This carries out Commissioner Chopra and now-Chair Khan’s call for more rulemaking, and the next step to former Chair Slaughter’s creation of a rulemaking group within the Commission. The changes concentrate the rulemaking process in the Chair’s office and strip away many of the procedures that helped lead to rules based on bipartisan consensus among the commissioners and support from FTC staff.

By way of background, to pass a rule under the Magnuson-Moss Warranty Federal Trade Commission Improvements Act (“Mag-Moss”), the FTC must: (1)  make a finding that the conduct at issue is “prevalent” and (2) conduct informal hearings allowing interested parties to cross-examine those making oral presentations. The FTC appears interested in applying Mag-Moss rulemaking in both the competition and consumer protection contexts.  Though Mag-Moss has statutory requirements that the FTC must follow, such as publishing a notice of proposed rulemaking, allowing public comment from interested persons, providing the opportunity for informal hearings, and promulgating rules based on the final record, the FTC has enacted procedural rules to carry out these statutory requirements.Continue Reading New Changes at the FTC: Return of the Rulemaking

Following the Supreme Court’s April ruling in AMG Capital Management that the FTC is not entitled to monetary relief under Section 13(b) of the FTC Act, the FTC has pivoted to other weapons in its enforcement arsenal to obtain monetary relief from those subject to enforcement actions.  The latest example is the FTC’s pursuit of civil penalties against a merchant cash advance provider.

The FTC initially sued RCG Advances, LLC and other defendants who provided merchant cash advances to small businesses in June 2020 for allegedly taking out withdrawals that exceeded the agreed-upon repayment amount.  Lacking the ability to obtain monetary relief after the AMG decision, the FTC got creative and amended its complaint, adding new statutory claims under the Gramm-Leach-Bliley Act (the GLB Act).  Under the GLB Act, the FTC alleges that the defendants obtained customers’ financial information by making “false, fictitious, or fraudulent statement[s] or representation[s.]”  The FTC is empowered with enforcing the GLB Act—and dozens of other statutes, such the Fair Debt Collection Practices Act and the Fair Credit Reporting Act—as rule violations, meaning the FTC can seek consumer redress under Section 19 of the FTC Act and civil penalties.
Continue Reading Rolling with the Punches: The FTC Goes with Civil Penalties after AMG Capital Management Takes Away Section 13(b) Authority

On May 26, 2021, the U.S. Court of Appeals for the Fifth Circuit issued an opinion in Cranor v. 5 Star Nutrition, LLC, holding that the receipt of a single text message is a sufficient injury to convey standing under the Telephone Consumer Protection Act (“TCPA”). This creates a circuit split with the Eleventh Circuit’s 2019 opinion entered in Salcedo v. Hanna, which we previously blogged about.

Cranor made its way to the Fifth Circuit after the district court dismissed the case on grounds that a single text message doesn’t “involve [the same] intrusion into the privacy of the home” as a call to a residential landline. In its opinion, the Fifth Circuit looked to the (1) congressional purpose of the TCPA, and (2) traditional basis for actionable, intangible harm in holding that the receipt of a single text message constitutes an injury under the TCPA.Continue Reading Singled Out: One Text Message Conveys TCPA Standing in the Fifth Circuit

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.”Continue Reading Disgorgement [Supremely] Denied: Supreme Court Unanimously Curtails the FTC’s Authority in AMG Capital Management v. FTC

Yesterday, the Supreme Court issued a 9-0 unanimous decision authored by Justice Sotomayor (with Justice Alito writing a concurring opinion) in Facebook, Inc. v. Duguid, resolving the circuit split on what constitutes a prohibited “automatic telephone dialing system” (more often referred to as an “autodialer” or “ATDS”) and adopting a narrow definition of ATDS. Yesterday’s ruling likely provides welcome relief to those subject to the TCPA—at least for the time being. More on that below.

Specifically, the Court favored the Third, Seventh, and Eleventh Circuits’ autodialer definitions and held that, in order to be an ATDS, “a device must have the capacity either to store a telephone number using a random or sequential generator or to produce a telephone number using a random or sequential number generator.” In other words, a telephone number must essentially be pulled out of thin air and then called or texted; that is what “random or sequential” number generation means. That type of technology was commonly used in the early 1990s when the TCPA was enacted, but virtually no one uses it anymore. Now, companies typically dial from stored lists of specific telephone numbers. The Supreme Court’s concern was that, if it accepted the alternative ATDS definition—that dialing from a cultivated list of telephone numbers constitutes autodialing—such interpretation “would capture virtually all modern cell phones . . . The TCPA’s liability provisions, then, could affect ordinary cell phone owners in the course of commonplace usage, such as speed dialing or sending automated text message responses.” Notably, during oral argument last December, Justice Sotomayor foreshadowed her and the other justices’ doubts in questioning to Bryan Garner, Duguid’s counsel:Continue Reading Message Received: Supreme Court Narrowly Construes Autodialer Definition

For those who follow the Federal Trade Commission and are anxiously awaiting the Supreme Court’s decision in AMG Capital Management v. FTC, several recent developments at the Commission may foreshadow the enforcement road that lies ahead. In many ways, the future may look a lot like the past, especially the 1960s and 1970s, when the FTC pumped out rules regulating many aspects of economic activity, including frosted cocktail glasses.

First, earlier this month, President Biden nominated Lina Khan, an associate professor of law at Columbia Law School, to replace departing Commissioner Rohit Chopra, who has been nominated to lead the CFPB. At 32 years of age, Khan would be the youngest FTC commissioner in the agency’s history.Continue Reading Setting Some Ground Rules: Commissioner Nominee and a New Working Group May Steer the FTC Down a New (Actually an Old) Road