FTC Pleads with Congress to Save Its Monetary Authority

With its judge-made authority to obtain money from defendants under mortal assault in the federal circuits and facing the distinct possibility of burial by the Supreme Court this term, the Federal Trade Commission is asking Congress to preemptively save that authority by legislative means. 

As I’ve written in several posts this year (Yet Another Appeals Court Rejects FTC’s Monetary Authority, Oct. 2020; Post-Liu, The Whittling Away of the FTC’s Monetary Authority Begins, Sept. 2020; Did the Supreme Court Just Save the FTC’s Disgorgement Authority?, June 2020; Will the Supreme Court Save the FTC’s Disgorgement Authority?, March 2020), appellate courts have begun to repudiate long-standing judicial precedent allowing the FTC to seek monetary relief despite the fact that its statute only permits injunctions in federal court. The validity of this precedent is now before the Supreme Court in a case that will be heard in January and decided by June. Given that a majority of the conservative court is made up of “textualists” who look only at the words and structure of a statute to find its meaning, and that the FTC statute speaks only of injunctions and is silent on monetary relief, there is a very good chance the Court will strike down the FTC’s ability to obtain money judgments.

This prospect terrifies the FTC because it views its ability to obtain redress for consumers as central to its enforcement mission.  That ability also serves as an effective tool of deterrence as well as preservation of assets for consumer recovery through the ancillary authority to freeze assets pending trial. This power strikes fear of financial devastation in defendants, giving the FTC an immense strategic advantage in settlement negotiations and litigation. An FTC without the power to hit defendants where it hurts the most- in their bank accounts – is a defanged FTC.

The FTC has admitted as much in its appeal to Congress to save its monetary authority. In a letter to its congressional committees in late October, it describes the deleterious effect that the court decisions stripping it of its monetary remedies, and the possibility that the Supreme Court could put the final nail in the coffin, is having on its enforcement program. Noting that it has secured billions of dollars in relief for consumers in a wide variety of cases, including almost $11 billion in the past 5 years alone, and that its monetary power is a “critical tool in our enforcement mission,” the letter warns Congress that the uncertainty surrounding the continued existence of this power is “hurting our current enforcement efforts.”  It explains that not only do the adverse court decisions:

already prevent us from obtaining redress for consumers in the circuits where they issued, prospective defendants are routinely invoking them in refusing to settle cases with agreed-upon redress payments. Moreover, defendants in our law enforcement actions pending in other circuits are seeking to expand the rulings to those circuits and taking steps to delay litigation in anticipation of a potential Supreme Court ruling that would allow them to escape liability for any monetary relief caused by their unlawful conduct….Defendants are also refusing to engage in settlement discussions unless the Commission agrees to abandon all claims for monetary relief.

Describing the judicial threats to its monetary authority and viability of its enforcement mission as “grave,” the FTC is urging Congress to “take quick action” to amend its statute to make clear that it can obtain monetary relief in federal court actions.     

With its loss of enforcement leverage and the handwriting on the wall, the FTC clearly decided it could not wait for a Supreme Court ruling to rush to Congress for help.  Its letter was signed by all five FTC commissioners.  While there will be a change in the chairmanship of the agency from Republican to Democratic with the inauguration of President-Elect Biden, it can be expected that the FTC’s request to Congress for a legislative fix will continue to be unanimous and that it will be lobbying fast and hard for its passage in the new year.  One question is whether Congress will feel compelled to respond before the Court rules, which may not be until this coming June.  A reason for it to wait is the chance, if not likelihood, that the Court will affirm the FTC’s monetary authority, or only limit but not eviscerate it, as the Court did this year in the Liu decision involving the Securities and Exchange Commission’s monetary authority. 

Whether it chooses to wait or not, it seems unlikely to this long-time FTC observer that the Congress – regardless of which party ends up controlling the Senate – will stand idly by and allow the FTC to become a paper tiger.  With rare exceptions in its history, the FTC’s consumer protection mission has always enjoyed strong bipartisan support.  The betting in this corner is that Congress will come to its rescue and preserve the main source of its enforcement clout – its monetary authority.  Meanwhile, FTC defense counsel should continue to take every advantage of the uncertainty surrounding the legal status of that authority. 

Talking about Direct Response, FTC

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