U.S. Supreme Court Significantly Restricts FTC Civil Enforcement Powers in AMG Capital Decision

The U.S. Supreme Court dealt a blow to the U.S. Federal Trade Commission (“FTC”) in a recent decision that eliminated the agency’s ability to seek monetary remedies in enforcement actions in federal court. This new ruling has significant implications for the FTC’s enforcement efforts, particularly in pharmaceutical antitrust cases involving “pay for delay” and similar practices. Following this sudden halt to an enforcement tool used for decades, Congress is considering legislation explicitly granting the FTC power to obtain equitable monetary remedies in federal court.

Section 13(b) of the FTC Act

Since its passage in 1914, the FTC Act has given the FTC the power to enforce the Act’s prohibitions through the FTC’s administrative proceedings.^[1] In 1973, Congress amended the Act to give the FTC new authorization to obtain remedies in federal court. Included in that amendment was Section 13(b), which gives the FTC the power to seek, and a district court the power to grant, “a temporary restraining order or a permanent injunction” against a defendant in federal court.^[2]

Several years after the addition of Section 13(b), the FTC began using it in federal court to obtain monetary relief (including restitution and disgorgement) in addition to injunctions. For about two decades the FTC did so only in consumer protection cases. But, in 1998, the FTC sought monetary relief under Section 13(b) in its suit against Mylan and three other companies, alleging a plan to allow Mylan to raise the price of a drug by denying other competitors access to necessary ingredients. The FTC’s 2001 settlement with Mylan included $100 million in disgorged profits.

Shortly after the Mylan case, the FTC issued a policy statement in 2003 explaining that it would only use Section 13(b) to seek monetary relief in “exceptional cases” involving “clear violations” of the antitrust laws.^[3] Over the course of the following decade, the Commission sought disgorgement in only two cases: FTC v. Perrigo Co., in which the FTC alleged that the defendant pharmaceutical companies agreement not to compete drove up prices on children’s ibuprofen, and FTC v. Lundbeck, in which the FTC challenged the defendant pharmaceutical company’s acquisition of what the FTC alleged was the only substitute drug for one of its products. 

In the middle of the Obama administration the FTC changed course yet again, announcing in 2012 that it had rescinded its 2003 policy statement. Subsequently, the FTC sought monetary relief under Section 13(b) in antitrust cases much more frequently, including in high profile pay-for-delay cases such as Endo and Abbvie. In addition to obtaining large court ordered judgments, the FTC often leveraged its disgorgement power during this time to extract sizeable settlements from defendants, such as the $1.2 billion settlement it obtained in FTC v. Cephalon, Inc.

AMG Capital Management, LLC vs. FTC

The Supreme Court ended this practice last week with its unanimous decision in AMG Capital Management, LLC vs. FTC, in which the Court held that Section 13(b) does not give the FTC the authority to seek, or federal courts the authority to award, monetary relief.^[4]

In AMG Capital, the Court considered a challenge to the district court’s order that Scott Tucker and his payday loan company pay the Federal Trade Commission $1.27 billion in restitution and disgorgement for deceptive practices. The U.S. Court of Appeals for the Ninth Circuit had upheld the district court’s decision, relying on precedent that “interpreted §13(b) as ‘empower[ing] district courts to grant any ancillary relief necessary to accomplish complete justice, including restitution.”^[5]

In a unanimous decision authored by Justice Breyer, the Court reversed, holding that “§13(b)’s ‘permanent injunction’ language does not authorize the Commission directly to obtain court-ordered monetary relief.” The Court recognized first that the language of the statute refers only to injunctions, and second, that other provisions of the FTC Act clearly granted the FTC authority to seek monetary relief — but which require the FTC to pursue such remedies through its much slower administrative process. Because Congress explicitly provided the FTC with the ability to obtain monetary equitable relief in other provisions of the Act, the Court determined that Congress did not intend monetary equitable relief to be a remedy under 13(b).

Effects of the AMG Capital Ruling

Although the FTC is not likely to stop pursuing injunctive relief, this new ruling removes an important tool from the FTC’s enforcement kit and, arguably, a significant deterrent to anticompetitive conduct, particularly in the pharmaceutical industry where the FTC has been most active in seeking monetary remedies. The impact of AMG Capital may be short lived, however. Immediately following the decision, members of Congress announced plans for legislation to hand back to the FTC the power it had been exercising under Section 13(b) prior to the Court’s ruling. Senate Commerce Committee Chair Maria Cantwell quickly announced that “[w]e are working to move legislation immediately to make sure this authority is properly protected.”^[6] Meanwhile, the House of Representatives Energy and Commerce Committee held a hearing on the issue on April 27, which included testimony from FTC Acting Chairwoman Rebecca Slaughter.^[7] At present, it is unclear whether any new monetary remedy enacted by Congress would apply to past conduct, though retroactive application could face significant constitutional hurdles.

Brady Cummins and Whitney Williams were contributing authors to this alert.

^[1] 15 U.S.C. 41 et seq.
^[2] 15 U. S. C. §53(b).
^[3] Policy Statement on Monetary Equitable Remedies in Competition Cases, 68 Fed. Reg. 45821.
^[4] AMG Capital Management, LLC v. FTC, No. 19-508, slip op. (Apr. 22, 2021), https://www.supremecourt.gov/opinions/20pdf/19-508_l6gn.pdf.
^[5] Id. at 3.
^[6] Cantwell Statement on Supreme Court Ruling Regarding Section 13 (b) of the Federal Trade Commission Act, available at https://www.commerce.senate.gov/2021/4/cantwell-statement-on-supreme-court-ruling-regarding-section-13-b-of-the-federal-trade-commission-act.
^[7] See Hearing on “The Consumer Protection and Recovery Act: Returning Money To Defrauded Consumers,” available at https://energycommerce.house.gov/events/the-consumer-protection-and-recovery-act-returning-money-to-defrauded-consumers.