US Supreme Court: FTC Cannot Seek Equitable Monetary Relief in Section 13(b) Cases

April 22, 2021

In a unanimous 9-0 decision authored by Justice Breyer, the US Supreme Court has held that the Federal Trade Commission (FTC) lacks the authority to seek equitable monetary relief in cases brought in federal court under FTC Act Section 13(b). The Court’s April 22, 2021, decision in AMG Capital Management, LLC v. Federal Trade Commission has significant implications for the FTC and for the companies and industries whose practices the FTC challenges.

FTC Act Section 13(b) expressly empowers the FTC to seek injunctive relief in federal district court for violations of FTC Act Section 5. For decades, however, the FTC has pursued—and often recovered—monetary relief in addition to injunctive relief. This recovery of monetary relief has been a cornerstone of the FTC’s enforcement agenda. The Court’s April 22 decision eliminates the FTC’s ability to recover monetary relief in Section 13(b) cases, drastically altering the scope of the FTC’s enforcement authority.

Background on the FTC’s Enforcement Powers

To appreciate the significance of the Supreme Court’s decision in AMG Capital Management, it is helpful to begin with an overview of the three primary means by which the FTC carries out its enforcement agenda. First, the FTC is authorized to bring an internal enforcement action before an administrative law judge, who can issue a cease and desist order.[1] These internal enforcement actions can be brought with respect to either competition or consumer protection matters. If the defendant violates the cease and desist order, the FTC may bring suit in federal court to enforce the order and pursue statutorily prescribed civil penalties for an order violation.[2] In addition, in consumer protection cases the FTC can seek monetary relief “to redress consumer injury” in federal court under FTC Act Section 19, including orders compelling “refund of money or return of property,” but only if “a reasonable man would have known under the circumstances [that the defendant’s conduct] was dishonest or fraudulent,”[3] and only after the FTC has issued a cease and desist order that has become final. Thus, the FTC must complete the administrative enforcement process before initiating a lawsuit in federal court seeking monetary relief.

Second, under the FTC’s general rulemaking authority, the FTC may promulgate trade regulation rules making specific “unfair or deceptive acts or practices” unlawful.[4] In most circumstances, to issue a trade regulation rule prohibiting an unfair or deceptive practice, the FTC must follow time-consuming formal rulemaking processes.[5] If a defendant violates one of these rules and the FTC can establish that the violation was committed with actual or imputed knowledge, the FTC may file suit in federal court seeking civil penalties.[6]

These first two means of enforcement provide the FTC with a narrow right to recover monetary relief in federal court. In the case of administrative proceedings, the FTC may seek to enforce a cease and desist order in federal court, but only after the FTC has completed the administrative enforcement process and a cease and desist order has been issued. In the rulemaking context, the conduct at issue must violate a specific FTC-prescribed rule, and the FTC must prove that the rule violation was committed knowingly.

Given these limitations, the FTC has historically relied heavily on the third element of its enforcement powers, FTC Act Section 13(b), which provides in relevant part:

Whenever the Commission has reason to believe . . . that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission, and . . . that the enjoining thereof . . . would be in the interest of the public—the Commission . . . may bring suit in a district court of the United States to enjoin any such act or practice.[7]

Section 13(b) provides the FTC authority to file suit in federal court in both competition and consumer protection cases, but only where the defendant “is violating, or is about to violate” the law, and enforcement would be in the public interest.

The FTC’s Judicially Implied Right to Equitable Monetary Relief Before AMG Capital Management

Unlike the provisions of the FTC Act that permit the FTC to seek monetary relief for violations of a cease and desist order, dishonest or fraudulent acts or practices, or knowing violations of promulgated rules, the plain text of Section 13(b) permits only the issuance of injunctive relief. On its face, Section 13(b) does not permit the FTC to recover restitution, disgorgement, or other forms of monetary relief.

Nevertheless, lower courts have long read into Section 13(b) an implied right of the FTC to recover equitable monetary relief in addition to injunctive relief. To the extent that these courts offered a rationale, they often cited the FTC Act’s remedial intent to justify an award of monetary relief, even though the only form of relief expressly contemplated under the statute is an injunction.[8] For example, in a 1989 case, Federal Trade Commission v. Amy Travel Service, Inc., the US Court of Appeals for the Seventh Circuit held that the “statutory grant of authority to the district court to issue permanent injunctions includes the power to order any ancillary equitable relief.”[9] At least seven other circuits reached the same conclusion, and the FTC has generally sought equitable monetary relief in Section 13(b) cases as a matter of course.[10]

AMG Capital Management and the Changed Landscape of FTC Enforcement

As we covered in an earlier LawFlash, in July 2020, the Supreme Court granted certiorari in the AMG Capital Management case.[11] In AMG Capital Management, the FTC sued a payday lender under Section 13(b) for unfair and deceptive trade practices involving allegedly insufficient consumer disclosures.[12] The district court entered summary judgment in the FTC’s favor, enjoined the defendant from engaging in similar misconduct in the future, and awarded the FTC more than a billion dollars in equitable monetary relief.[13] The defendant appealed to the US Court of Appeals for the Ninth Circuit, which affirmed the judgment. Although the defendant argued that Section 13(b) did not permit an award of equitable monetary relief, the Ninth Circuit concluded that the defendant’s argument was foreclosed by binding precedent, holding that Section 13(b) carries with it the right to grant “ancillary” relief, including restitution and other forms of equitable monetary relief.[14]

Notwithstanding the holding, Judge Diarmuid O’Scannlain (who also wrote the panel decision) authored a special concurrence in which he argued that the Ninth Circuit precedent interpreting Section 13(b) to permit the award of “ancillary” equitable monetary relief was “no longer tenable.”[15] In his concurrence (which was joined by Judge Carlos Bea), Judge O’Scannlain carefully parsed Section 13(b)’s text and legislative history, as well as intervening Supreme Court precedent assessing the ability of the US Securities and Exchange Commission (SEC) to seek equitable monetary relief. He lamented the Ninth Circuit’s “continued disregard of the statute’s text and the Supreme Court’s related precedent,” and urged the Court to take the case en banc to revisit the issue.[16] Although the defendant moved for en banc reconsideration, the full court declined to take the case and the defendant filed a petition for certiorari with the Supreme Court.[17]

In the Supreme Court’s unanimous April 22, 2021 opinion, Justice Breyer began by parsing the plain language of Section 13(b), observing that Section 13(b)’s express reference to injunctive relief is “not the same as an award of equitable monetary relief.”[18] The Court noted further that Section 13(b) is framed to provide the FTC with the ability to obtain prospective, rather than retrospective, relief. Justice Breyer focused in particular on the language in Section 13(b) limiting the FTC’s right to sue in federal court to only cases in which the defendant is currently “violating” or “about to violate” the law. He thus concluded that Congress intended to confer to the FTC only the ability to obtain injunctive relief to stop ongoing misconduct.[19]

The Court’s opinion also noted that the conclusion that Section 13(b) empowers the FTC to seek only injunctive relief is consistent with the broader structure of the FTC Act. In particular, Justice Breyer’s opinion observed that the FTC is expressly empowered to seek monetary relief through the internal administrative and rulemaking processes, but that the power to recover monetary relief is conspicuously absent from Section 13(b).[20]

Justice Breyer’s opinion considered, but rejected, the FTC’s insistence that the right to recover equitable monetary relief is essential to its enforcement agenda.[21] Rather, concluding that the statute as presently drafted permits the FTC to recover equitable relief, Justice Breyer noted that “[i]f the Commission believes [its] authority too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority.”[22]

Our Thinking

Given the practical limits on the FTC’s authority to seek monetary relief in federal court in the context of cease and desist orders and rulemaking enforcement, it is unsurprising that the FTC has long relied on Section 13(b) as a cornerstone of its enforcement agenda. The FTC’s merits brief in AMG Capital Management acknowledged that the FTC “brings dozens of [Section 13(b)] cases every year seeking . . . the return of illegally obtained funds,” and noted that “Section 13(b) enforcement cases have resulted in the return of billions of dollars to consumers who have fallen victim to a wide variety of illegal scams and anticompetitive practices.”[23]

The loss of the ability to seek equitable monetary relief in Section 13(b) cases will likely force the FTC to rethink its enforcement agenda. In consumer protection cases, the FTC may look to existing trade regulation rules, such as the Telemarketing Sales Rule,[24] or statutory designations of “deemed” trade regulation rules such as those in the Fair Debt Collection Practices Act,[25] for an alternative basis for monetary relief in what would previously have been standalone Section 13(b) cases. In fact, the FTC recently announced the creation of a new “rulemaking group” within the Office of the General Counsel that is intended to “strengthen existing rules and to undertake new rulemakings to prohibit unfair or deceptive practices and unfair methods of competition.”[26] In addition, it may try to make greater use of Section 19 in cease and desist order cases, despite the daunting “dishonest or fraudulent” standard. In competition cases, the FTC is now confined to seeking injunctive relief in federal court, and only in those cases where the FTC can satisfy the “is violating, or about to violate,” standard.

Given this new landscape, the FTC will likely press Congress to amend Section 13(b). In fact, in a letter sent to Congress last year, all five of the then-current FTC commissioners called for a congressional overhaul of Section 13(b) to provide an express right to recover equitable monetary remedies, as well as to legislate around the recent Third Circuit decision in FTC v. Shire ViroPharma, Inc.[27] The Shire ViroPharma decision held that, by virtue of the provision in Section 13(b) limiting the FTC’s authority to file suit in federal court to only those cases where the defendant “is violating” or “is about to violate” the law, the FTC could not invoke Section 13(b) to bring an action in federal court to challenge conduct that occurred solely in the past.[28] Justice Breyer’s opinion in AMG Capital Management confirms the Third Circuit’s articulation of the temporal limits of Section 13(b): “Taken as a whole, the provision focuses upon relief that is prospective, not retrospective.”[29]

If the FTC were to urge Congress to amend Section 13(b) to provide an express right to equitable monetary relief, one potential point of comparison is the Securities Exchange Act of 1934 (Exchange Act). A provision of the Exchange Act provides that “[i]n any action or proceeding brought or instituted by the [Securities and Exchange] Commission under any provision of the securities laws, the Commission may seek, and any Federal court may grant, any equitable relief that may be appropriate or necessary for the benefit of investors.”[30] In its recent decision in Liu v. Securities & Exchange Commission, the Supreme Court held that this provision allows the SEC to seek equitable monetary relief, including disgorgement.[31]

It is likely that the FTC will press Congress to enact similar language in Section 13(b)—a push the agency began in earnest in anticipation of this decision at an oversight hearing before the Senate Commerce Committee on April 20. Congress may act as it did in response to the Liu and Kokesh v. Securities & Exchange Commission decisions narrowing the SEC’s civil enforcement powers: there Congress responded by amending the Exchange Act with language embedded in the 2021 National Defense Authorization Act, Pub. L. 116-283, which we detailed in an earlier LawFlash.


If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Daniel S. Savrin
Noah J. Kaufman

Kenneth M. Kliebard

David I. Monteiro

New York
Linda Cenedella
Stacey Anne Mahoney
Richard S. Taffet

R. Brendan Fee
Steven A. Reed

San Francisco
Geoffrey T. Holtz
Brian C. Rocca
Sujal J. Shah

Washington, DC
J. Clayton Everett, Jr.
Jon R. Roellke

[1] 15 U.S.C. § 45(b).

[2] 15 U.S.C. § 45(l).

[3] 15 U.S.C. § 57b(a)(2).

[4] 15 U.S.C. § 57a(a)(1).

[5] See generally 15 U.S.C. § 57a(b)–(e).

[6] 15 U.S.C. § 45(m)(1)(A). The FTC can also seek consumer redress under Section 19 for rule violations, including consumer refunds or actual damages. 15 U.S.C. §§ 57b(a)(1), (b).

[7] 15 U.S.C. § 53(b).

[8] Many of these cases premised their broad construction of Section 13(b) remedies on two earlier Supreme Court cases, Porter v. Warner Holding Co., 328 U.S. 395 (1946), and Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288 (1960). Those cases interpreted the Emergency Price Control Act of 1942 and the Fair Labor Standards Act, respectively. Citing the remedial intent of those statutes, in both cases the Supreme Court found a right to recover restitution, even though the statutes made no mention of that remedy.

[9] FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 572 (7th Cir. 1989).

[10] See, e.g., FTC v. Ross, 743 F.3d 886, 890-92 (4th Cir. 2014); FTC v. Bronson Partners, LLC, 654 F.3d 359, 365 (2d Cir. 2011); FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1, 15 (1st Cir. 2010); FTC v. Freecom Commc’ns, Inc., 401 F.3d 1192, 1202 n.6 (10th Cir. 2005); FTC v. Gem Merch. Corp., 87 F.3d 466, 470 (11th Cir. 1996); FTC v. Pantron I Corp., 33 F.3d 1088, 1102 (9th Cir. 1994); FTC v. Sec. Rare Coin & Bullion Corp., 931 F.2d 1312, 1314-15 (8th Cir. 1991).

[11] At the same time, the Court granted certiorari in a separate case, FTC v. Credit Bureau Center, LLC, 937 F.3d 764 (7th Cir. 2019), which raised the same issue of the FTC’s right to recover equitable monetary relief under Section 13(b), and consolidated the cases. Later, however, the Court vacated the grant of certiorari in Credit Bureau Center. Although no explanation was given, there was some speculation that the Court did so in order to permit newly appointed Justice Amy Coney Barrett to participate in the resolution of AMG Capital Management. Because Justice Barrett sat on the Seventh Circuit when that court denied en banc rehearing in AMG Capital Management, she would likely have had to recuse herself from the Supreme Court proceedings in the same matter.

[12] FTC v. AMG Capital Mgmt., LLC, 910 F.3d 417, 421-22 (9th Cir. 2018).

[13] Id. at 422.

[14] Id. at 426 (citing Pantron I Corp., 33 F.3d at 1102).

[15] Id. at 429 (O’Scannlain, J., concurring).

[16] Id. at 436 (O’Scannlain, J., concurring).

[17] AMG Capital Mgmt., LLC v. FTC, petition for cert. filed (U.S. Oct. 18, 2019) (No. 19-508).

[18] AMG Capital Mgmt. v. FTC, No, 19-508, slip op. at 6 (U.S. Apr. 22, 2021).

[19] Id. at 8-9.

[20] Id. at 9-10 (observing that because FTC Act Section 5 and Section 19 provide the FTC with broader redress, Congress “likely did not intend for § 13(b)’s more cabined ‘permanent injunction’ language to have similarly broad scope”).

[21] Id. at 6 (“Our task here is not to decide whether [the FTC’s right to recover equitable monetary relief in Section 13(b) cases] is desirable. Rather, it is to answer a more purely legal question: Did Congress, by enacting §13(b)’s words, ‘permanent injunction,’ grant the Commission authority to obtain monetary relief directly from courts?”).

[22] Id. at 14.

[23] Br. for the FTC at 8-9, AMG Capital Mgmt., LLC v. FTC, No. 19-508 (U.S. Nov. 30, 2020).

[24] 16 C.F.R. Part 310.

[25] See 15 U.S.C. § 1692l(a) (“All of the functions and powers of the Federal Trade Commission under the Federal Trade Commission Act are available to the Federal Trade Commission to enforce compliance by any person with this subchapter, irrespective of whether that person is engaged in commerce or meets any other jurisdictional tests under the Federal Trade Commission Act, including the power to enforce the provisions of this subchapter, in the same manner as if the violation had been a violation of a Federal Trade Commission trade regulation rule.”).

[26] FTC Acting Chairwoman Slaughter Announces New Rulemaking Group, FTC Press Release (Mar. 25, 2021).

[27] FTC Commissioners Urge Congress to Pass Legislation to Restore Section 13(b) of the FTC Act, Nat’l L. Rev. (Nov. 3, 2020).

[28] FTC v. Shire ViroPharma, Inc., 917 F.3d 147, 161 (3d Cir. 2019).

[29] AMG Capital Mgmt. v. FTC, No, 19-508, slip op. at 8.

[30] 15 U.S.C. § 78u(d)(5) (emphasis added).

[31] Liu v. Sec. & Exch. Comm’n, 140 S. Ct. 1936, 1940 (2020).