Pushing Back Against FTC Overreach

It’s always a bad day when you lose, but it’s a really bad day when you lose 9-0. Especially, if it’s before the highest court in the land.

That’s exactly what happened when the Federal Trade Commission (FTC) lost a 9-0 vote before the Supreme Court recently. The agency lost a case over its attempts to seek monetary relief under the obscure-sounding section 13b of the FTC Act. Since this stinging rebuke, the FTC has shown little humility in its subsequent public statements. Instead, it has brazenly continued to urge Congress to “restore” authority it never, in fact, has had.

The U.S. Chamber does not say this lightly, but the FTC has engaged in its own unfair and deceptive practices as it lobbies Congress to pass legislation that would give the agency sweeping authority it was never supposed to have.

As we explained in a piece published in Roll Call, Congress originally intended sections 13b and 19 of the FTC Act to work collaboratively. The FTC, however, has found Section 19 to be too cumbersome. Instead of adjudicating fraud cases on its own, the FTC wants to go straight to the courts to resolve disputes. The U.S. Chamber would support streamlining the process and letting the FTC go straight to court. However, the FTC’s own favored legislative solution, not only does this, but it goes several steps further voiding all of the Congressional safeguards originally placed in the law to avoid abuse of power by the agency.

Under this proposed legislation (H.R. 2668) the FTC would get to:

• Pretend it has unlimited authority to go after past conduct that is no longer occurring in the market, erasing the current clear statute of limitations.
• Ignore the fact that the FTC Act only allows monetary compensation for fraudulent and dishonest conduct. Instead, the proposed legislation would grant the legal authority to seek monetary relief for anything that might qualify as an unfair and deceptive practice.
• Forget the fact that the law requires the court to only award such compensation where a reasonable person would have known they were violating the law.
• Pretend that the FTC has legal authority to disgorge ill-gotten gains in competition cases when, in reality, it has only successfully reached monetary relief as part of voluntary settlements.

While the U.S. Chamber would like to see the FTC get out from under its own burdensome, administrative processes, we also think the issues raised above are worthy of a debate. However, the U.S. Chamber does not support giving the FTC open-ended authority. We are instead interested in working with Congress on finding a bipartisan path to protect consumers and safeguard against agency overreach – overreach that the Supreme Court just called out in a unanimous vote.

The U.S. Chamber believes this bipartisan solution could combine new FTC enforcement powers with sufficient agency oversight. These fundamental changes would include: a clearer statute of limitations, appropriate monetary relief mechanisms, and creating appropriate corresponding guardrails.

A clear statute of limitations and appropriate monetary relief

FTC’s favored legislative approach adds the words “has violated” to the FTC Act. However, there is no clear statute of limitations attached to its ability to go after past conduct that is no longer occurring in the market. If the FTC were operating under Section 19 it would be able to go after past conduct, but the agency is bound by a statute of limitation of three years.

Some confuse the 10-year reference in H.R. 2668 as a statute of limitations. We don’t read it that way. Instead, we read it as instruction to the court on how to calculate any monetary reward. In other words, under the legislation a court can go back and award up to 10 years of ill-gotten gains. With this interpretation, H.R. 2668 arguably has no statute of limitations around how far back the FTC can go in bringing cases over past conduct. This should be a simple fix.

Further, 10 years is an excessively long period of time for the court to calculate monetary relief. It’s hard to imagine conduct worthy of disgorgement occurring for a decade before the FTC steps in to stop it. It makes better sense that the FTC should only be able to go after conduct that occurred in the past three years and the courts should only be able to disgorge up to five years’ worth of ill-gotten gains.

Putting in place appropriate guardrails

FTC’s favorite proposed legislation would also allow the agency to circumvent important guardrails created by Congress to appropriately limit the agency’s power.

For example, H.R. 2668 would give the FTC the authority to seek monetary relief for a much wider range of violations. H.R. 2668 would also allow monetary relief in a wider range of cases as it abandons the “reasonable person” standard. Finally, H.R. 2668 would bring monetary relief into competition cases, which are already subject to private rights of action and treble damage claims.

There is a reason why Congress originally put in place guardrails like these. Yet, the FTC has not explained, why these guardrails should be made obsolete, nor have any of the Congressional hearings on 13b really focused on these issues.

Now is the time for a policy conversation on what the law should look like going forward. The U.S. Chamber welcomes this conversation and points to Commissioner Wilson’s recent testimony to the Senate Finance Committee as a possible bipartisan path forward:

In the coming weeks, the U.S. Chamber stands ready to have an honest debate and looks forward to working with both sides of the aisle in Congress to produce effective, bipartisan legislation.

About the authors

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

Read more