Deep Dive Episode 176 – Courthouse Steps Decision: AMG Capital Management v. FTC
On April 22, 2021, the Supreme Court decided AMG Capital Management, LLC v. Federal Trade Commission. Writing for the unanimous Court, Justice Breyer explained how Section 13(b) of the Federal Trade Commission Act does not authorize the FTC to seek, or a court to award, monetary relief such as restitution or disgorgement.
A panel of experts will discuss the ruling and its implications.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
Nick Marr: Welcome, everyone, to this Federalist Society virtual event. As today, April 23, 2021, we’re having a Courthouse Steps Decision Webinar on yesterday’s Supreme Court ruling in AMG Capital Management v. the Federal Trade Commission. I’m Nick Marr, Assistant Director of Practice Groups here at The Federalist Society.
As always, please note that expressions of opinion during our event today are those of our experts, and we have a great panel, very quickly assembled, so my thanks to them for their work here.
I’m just going to introduce our moderator, and he’ll take it from there. But before I do that, a quick note for the audience: as we go along, please submit your questions via chat. We’ll take as many of them as we can towards the end, so just submit those through the chat function.
All right. We’re very pleased to be joined this afternoon, to moderate this discussion, by Mr. Asheesh Agarwal. He’s Deputy General Counsel at TechFreedom, and himself an alumnus of the FTC. His longer bio’s available on our FedSoc website. So with that, I’ll hand it over to Asheesh. Thanks for being with us.
Asheesh Agarwal: Well, thank you, Nick, and thank you to The Federalist Society for hosting this. As Nick mentioned yesterday, the Supreme Court issued its decision in AMG Capital Management v. FTC. And this decision limited the scope of the FTC’s remedial authority. Writing for a unanimous Court, Justice Breyer held that the FTC may not seek equitable monetary relief for past misconduct without going through certain internal administrative procedures, a process that takes much more time than going straight in the federal Court.
In response to the decision, the FTC’s acting chairwoman, Rebecca Kelly Slaughter, said that the Court “ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior. With this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most.”
At the same time, Congress is looking at this issue too. During a sudden Congress committee hearing earlier this week, Chairwoman Maria Cantwell called the FTC’s remedial authority the bread and butter of the FTC’s consumer protection mission. You also asserted that we have to do everything we can to protect this authority, and if necessary, pass new legislation to do so.
With that backdrop, we are joined by three distinguished panelists to discuss the Court’s decision and next steps. First is Corbin Barthold, who is the Director of Appellate Litigation for TechFreedom, a think tank that advocates for free market principles in the tech sector. Next, we have Alden Abbott, who is a Senior Research Fellow at the Mercatus Center. Alden served as the FTC’s general counsel during the briefing and argument of AMG. Finally, we have Maureen Ohlhausen, who chairs the antitrust and competition practice of Baker & Botts and previously served as the FTC’s acting chairwoman.
As Nick mentioned, I’m your moderator, Asheesh Agarwal, and I should mention in full disclosure that Corbin and I authored an amicus brief in this very case where we argued that the FTC currently lacked remedial authority to go straight to Court, but we encourage Congress to give the FTC that authority expressly.
So Corbin, since you were on the winning side, let’s start with you. Justice Breyer took a very textualist approach of the statute and, in so doing, rejected policy arguments. In earlier case law that interpreted terms like injunction, more broadly, what are your key takeaways from the decision?
Corbin Barthold: Thank you, Asheesh. It’s great to be here. During the oral argument podcast, Alden and I had a nice freewheeling discussion in which we talked about quite a number of topics. Some of them actually pretty philosophical about jurisprudence because this case, in ways, touched on a lot of them.
The Supreme Court in its decision, bypassed pretty much all of that stuff and took the absolute straightest, simplest approach to answering this question. They followed the merits brief of AMG pretty closely. They said, to begin with, Section 13(b) discusses an injunction. Injunction means perspective relief. It does not generally mean monetary relief. They then turn the context of Section 13(b). They pointed out that it says that it is meant for situations in which someone is violating or is about to violate the FTC Act. So it’s forward-looking. So they looked at that context.
They then looked to the wider context of the statute, noticing that the FTC has other routes to get money, and that that seems to be purposeful. They can get a cease-and-desist order and then go into court and show that conduct was not just unfair and deceptive, which is the baseline Section 5 language. They have to show that it is in fact dishonest or fraudulent, which is a higher bar.
They then brushed aside some of the counterarguments that were made by the FTC. The FTC had pointed at some older cases, as you alluded to, that say that language, like injunction, maybe unlocks a wider panoply of equitable remedies. They cast a skeptical eye on those decisions, and they didn’t overturn them, but they basically said that “You need to look at each individual statute. Those were different statutes.” This statute, it’s clear that Congress wanted injunction to mean injunction.
I think as far as takeaways go, if we’re looking just at the decision—we’re going to get to much more, I know—the key takeaway is what the Court didn’t do. There were some issues raised at oral argument about ways that the FTC maybe could’ve kept this authority, that we’d argued it had stretched the statute to get, and had those arguments been adopted, I think they could’ve caused wider mischief in the law. I, for one, think it’s a good thing that they took no interest in trying to widen the meaning of the word injunction itself. They took very seriously that an injunction is traditionally perspective relief, and they stuck with that as the conventional definition of it.
I think it’s a good thing that they didn’t go down the route of the water-under-the-bridge approach that had been mentioned by a couple of the justices, that if the lower courts go down a wrong path and interpret something incorrectly for long enough, maybe, we should just stick with that. It would’ve caused great confusion if they’d followed that road because it would’ve run counter to their decision in Bostock, not long before, in which they stick to trying to interpret statutes correctly pretty much whenever they can.
And I’m glad that they didn’t go down the route of saying, “Well, statutory interpretation was looser, maybe, in the late ‘70s, so maybe we should respect how decisions were decided then.” They stuck to their guns, that we are all textualists now, as Justice Kagan has said, and they applied the text of the statute in a disciplined fashion, and they basically said they’re going to do their best to do that going forward.
And because they avoided some of those snags, I don’t think this is going to be some landmark decision that has application in lots of other ways. It’s a very important decision for what it does, but they avoided any kind of wider mischief, and that’s actually my key take-home, looking at the decision in isolation.
Asheesh Agarwal: Interesting. Well, Alden, condolences on your loss, but I thought you did as good a job as possible with your briefing, so do you take any issue with any aspect of the Court’s reasoning or did anything surprise you?
Alden Abbott: Well, no, Asheesh, thanks for that. I agree with Corbin that I thought it was a straightforward analysis. I do think it’s interesting, the FTC did seek and indeed did raise a question about the understanding of the meaning of the term permanent injunction because one can be a textualist and still say, “Well, we understand the meaning of this term at the time it was adopted, and implicit in that meaning is under general public understanding on lawyers.”
And there was a line of argument, dating back to Justice Story and earlier, that the term permanent injunction includes remedies within it, implicitly, some additional complementary remedies, including potential voluntary remedies. And the argument was then that, yes, it was an attempt by the FTC anyway, unsuccessful to argue, “Yes, Justices, we understand textualism, but we think under a textualist approach, you can find that the term permanent injunction does allow for voluntary relief, and obviously, that was rejected.
But it’s interesting that Justice Breyer did not – and he did rebuke some different arguments FTC made, but he didn’t take that on explicitly, and Breyer, for example, saying, “No, we don’t think this history is instructive” or “This history doesn’t really – it’s not really textualist history.” So that’s the only thing, but I personally, I must admit, after the argument, I’m not terribly surprised. Perhaps, slightly surprised it was unanimous, but not terribly surprised at the outcome.
Asheesh Agarwal: Well, Maureen, what’s your take on this? Do you agree with the Court’s decision and do you think it has any broader implications for how the Court will evaluate the enforcement authority of other administrative agencies?
Hon. Maureen Ohlhausen: Well, thanks, Asheesh. Thanks to The Federalist Society for having me. I do agree with the Court’s decision. I think when you take the careful reading of the language and look at it in context of the full statute, the Section 13(b) versus Section 19 paths and this idea that Congress set out this careful path for the FTC to obtain a monetary relief, the FTC could, at its discretion, decide to completely forego that and just jump right into getting the same thing in federal court much more quickly. I think the Court’s decision was correct.
Now, I will point out, that when I was at the Commission, I did support the FTC using this equitable power to get money in certain cases—fraud, for example. But I did express a lot of concerns about how the FTC was continuing to push further and further away from those more limiting cases, which lined up more closely with the authority the FTC had been given under Section 19 to get money in cases where the reasonable person would know that this was dishonest or fraudulent conduct.
My first dissent, actually as a commissioner, was when the FTC discarded the disgorgement policy statement and said, “Well, we don’t need particular guardrails.” So I think that, ultimately, the Court is right in its decision. A 9-0 decision speaks volumes, I think, there. As per broader implications, you can see that the Court has been – I think as Corbin said as the statutes come before them, trying to re-anchor the analysis of them in, I think, a more textual and structural what-the-statute-looked-like approach.
We’ve seen this with SEC, right? SEC v. Liu and this walking away from the – at the oral argument, when someone said, “Oh, well, it was in the ‘70s, and we interpreted things more broadly,” that made me internally laugh. I thought it sounded to me like the Austin Powers argument, like, “It was the ‘60s, baby.”
So I do think this has wider implications for – and really lays it at the feet of Congress, I think, to more carefully delineate the powers that it wants to give agencies and not just toss a very broad thing over to the agency and say, “Run with it and see what you can do.” I think it’s a good decision in that it brings that responsibility back to Congress.
Now, I don’t blame the FTC for, “Look, it had those circuit court decisions.” It was using it, but I do think it’s continuingly to push the envelope and push beyond what was clearly a fraudulent case. It created this environment in which then there was a very hard look given to the foundation of this power.
Asheesh Agarwal: Well, really good comments, Maureen. We’re going to come back to a couple of things you talked about, including your dissent, which you mentioned. But for now, I did want to ask one more question about the decision, touching upon something that all have mentioned, which is were you surprised the decision was unanimous? We have Justice Breyer writing a strong textualist opinion that garnered the votes of Justices Sotomayor and Kagan. Alden, why did that surprise you? And I’d be curious for the thoughts of Corbin and Maureen on that.
Alden Abbott: Why did that surprise me? Well, I guess the mere fact that even though they’ve rejected the – there are couple of arguments. Congressional acquiescence after a long history of court of appeals decisions of holding this authority. And I might’ve thought that, for instance, that Justice Sotomayor—I don’t know about Justice Kagan—but certainly Justice Sotomayor might’ve said, “Look, are the courts doing their traditional job of using equitable remedies to do justice? They’ve got statutory authority. They’ve done it. This has benefitted consumers, little guy.
Now, the Court takes a strained view of – a very narrow view of a term and to eliminate that form of regress. I would’ve thought some argument of that sort, Justice Sotomayor might’ve come out with, so I don’t know. Obviously, she was convinced by Justice Breyer’s argument, and to be honest, I think we at the FTC, we’re aware of the structural argument. And we saw, and certainly after the oral argument, it was a pretty powerful argument. So I think the FTC people did their best. We did our best, but went in eyes wide open and let the chips fall where they may, and they did.
Asheesh Agarwal: Corbin, Maureen, anything else on the unanimity point?
Hon. Maureen Ohlhausen: I was a little surprised that it was unanimous. I felt pretty confident, after listening to the oral argument, that the Court was going to rule against the FTC having this broad authority, but I wasn’t sure it was going to be so decisive. But I do think once you accept that that’s the mode of analysis, that it wasn’t very difficult to reach that decision.
Asheesh Agarwal: Corbin.
Corbin Barthold: At the end of the oral argument podcast, both Alden and I agreed that it’s foolhardy to make predictions about outcomes, and if you’re not going to make predictions, then you can hardly say that you’re surprised by any outcome. But I will make a bit of a plug for, decisions like this don’t get as much attention as some of the hot button 5-4 decisions, and there are a lot of these decisions where we can all be heartened that the Supreme Court is still a group of judges who are doing their best to apply the law.
They are not looking in cases at, how do I help small businesses or how do I nail scam artists, and then working from that assumption, they are trying to apply the law. And so I would point at this decision as a salutary thing, that all of us should remember that these cases exist and that the Supreme Court is still a very sound institution.
Asheesh Agarwal: Very uplifting comments, Corbin. I appreciate that. I’d like to turn next to how the decision is going to affect the FTC’s consumer protection mission, and Maureen, let’s start with you. The Court cited a speech that you gave as Acting Commissioner in which you noted that the FTC frequently used: its remedial authority under 13(b). Do you agree with Acting Chairwoman Slaughter that the Court has deprived the FTC of its strongest tool?
Hon. Maureen Ohlhausen: Well, I would say I think this is strong tool that the FTC was using to drive actually, mainly, a lot of very high-dollar settlements. Obviously, the AMG case itself was a litigated case, but for the most part, the FTC has used this in settlements and tried to say, “Otherwise, we’re going into federal court, and we’re going to seek all this money, so let’s come to the table, and we’ll settle at a lower amount.”
I do think the FTC will continue to press in settlements—I know it will—to continue to get money, right? It’s going to say, “Well, Congress is going to five us this authority, or we could still go through the Section 19 route. It’ll be longer. It’ll be longer for you. It’ll be longer for us, but we’re not going to turn away from that.”
So it is a powerful tool. But just because it’s a powerful tool, it doesn’t mean you can wield it when Congress hasn’t actually given you the authority to wield it and, again, without particular guideposts or guidelines on how to use it because they had exceeded the ones that were in Section 19 of the statute.
Now, the FTC also has authority under rules—certain rules like the Children’s Online Privacy Protection Act and some telemarketing sales rule to get civil penalties. So it will still have that ability. Now, interestingly, to get civil penalties, the FTC needs – actually, DOJ gets the penalties for them, and usually, those things are also settled. But I do think that it’s going to make it a longer road and a less powerful bargaining chip for the FTC in reaching settlements because it can’t say, “Well, we’re immediately going to federal court, and we’re going to ask for all this money.”
But despite what the Commission said and indicated, I know they have continued, even under the threat of this case and even after the oral argument, where it’s authority definitely seemed threatened, to continue to extract or reach settlements with very high-dollar thresholds. It didn’t stop them then, and I don’t think it’s going to really stop them going forward. But it now means that they would have to undertake a longer road, and, of course, they’re seeking in Congress—we’ll talk more about that later—a quick fix for this, and so there is the question of how long it will be deprived of this tool.
Asheesh Agarwal: So, Alden, your brief focused heavily on how the FTC relies on this authority to protect consumers, and Maureen touched upon this in her comments, but if Congress doesn’t act – let’s put that aside for now. If Congress doesn’t act, how will the FTC approach consumer protection cases now in your view?
Alden Abbott: Well, if Congress didn’t act, it’s a real problem. Because a lot of usefulness of 13(b) had been involving scam artists would move assets very quickly, but if you wanted temporary assets freeze, you get temporary freezes. Permanent injunction, very frankly, 19, the ability to get a regress under 19, you have to have a final cease-and-desist order, and the language is the Commission has to satisfy the Court, but the act or practice of which a cease-and-desist order relates is one in which a reasonable person—it says man, but I’ll say person—would have known under the circumstances was dishonest or fraudulent.
And that’s fine, but by the time you’ve gone through the complaint process, and the ALJ, and the Commission, in many of these cases, the assets are long gone. The name, the parties of corporate names, if they have any, have changed, so I think the FTC is going to argue before Congress, “Look, this is really opening a door for scam artists, who we were able to nail, and we’re able to get money.”
That money is going to be dissipated. It takes way too long to act under Section 19. That’s going to be their practical argument. I think there are different considerations with regard to the less clear non-fraudulent consumer protection cases, and certainly competition cases, but maybe, we’ll have a chance to get to that later.
Asheesh Agarwal: Corbin, we welcome your thoughts on this, and maybe, you can address it from a little different perspective of the private sector, and do you think the decision has salutary benefits in terms of the notice and due process that the FTC is going to have to afford to people who is accusing of misconduct?
Corbin Barthold: Sure. So at the oral argument, Justice Breyer noted that the FTC Act strikes a balance, and that the way things drifted with the FTC’s use of its 13(b) authority, that balance had been thrown off. The FTC can move in quickly when it sees that there’s conduct that it wants to stop, and that’s the original meaning of 13(b). It can go into court, and it can get asset freezes. It can try to nail things down, get injunctions, hence the “is violating” or “is about to violate” language.
And as Breyer pointed out, to get the statutory scheme to look the way it does, it was a compromise for the business community that in order to get money clawed back, there’d then be this higher standard, where you have to put real meat on the bones of what does unfair or deceptive mean, really get to that dishonest or fraudulent standard. And this re-establishes that original intent, that to stop conduct, you can go in with 13(b), go straight into court and get your asset freeze. But then to claw the money back, you have to prove more.
And Justice Breyer cited some cases in the oral argument of the drift, the mission creep, that it occurred, so he mentioned the Skecher’s case, in which Skecher’s advertises shoes, and they make odd puffery claims these shoes help you tone or whatever. But it’s not fraud; they’re not coming in – it doesn’t seem like they have a guilty mind. It’s not like one of these payday loan scams, and yet, the FTC comes down on them. They end up putting in a complaint and settlement under 13(b) in court.
And Justice Breyer, he seemed quite unhappy about that kind of approach in the oral argument, and it seems to have really swayed his view, and he mentioned some other cases, including ones in which Maureen participated. And this gets us back to that original design, and then the next question, which I assume we will touch on next is, “Well, was that design flawed in some ways?” And Alden points out the very legitimate question of, under the original scheme, can the FTC act fast enough? And so where do we go from here? But this is good to get us back to the original way the statute was supposed to work.
Asheesh Agarwal: Oh, Maureen and Alden, what do you think about that? We’ve certainly focused—and the Acting Chairwoman has focused—on the ways in which the FTC uses authority, in good ways, to help consumers, but do you think that the FTC was maybe too aggressive in using its authority and more on any of those cases?
Hon. Maureen Ohlhausen: So I do have a concern about that, and I articulated in some of the dissents, Cardinal Health, and some of the other areas. But going back also to the idea of what was the FTC’s – what is its core statute and what was it created to do? And so this is very vague, incredibly broad authority, unfair and deceptive acts or practices, and it was given that with the idea that it would use its administrative litigation to give content to that.
Over time, as business practices and conditions change, it could continue to update what the understanding was, and then the remedies that it was given, the idea was paired with that. Because as conditions change, entities are undertaking these new practices. Is it a violation or not? Nobody really knows, and so the idea – and Commissioner Philips has made this point, that there’s this big focus on using this for deterrence reasons, and punishment, and things like that. And it wasn’t really created for that.
I understand, and I think for fraud – look, you see that in the statute. People know what fraud is. You’re basically giving people a worthless product, right, or not even a product. You’re just taking their money and things like that. So there’s no real nuance there, but as the FTC has applied on current deceptive practices in these new areas, there I think is this question of, “If an entity can’t know it’s a violation, when it’s undertaking it, is it appropriate to then sock them with some big penalty disgorgement or something later?” It doesn’t really serve a deterrence purpose because they don’t know that it’s illegal.
So I think that that is again one of these underlying issues you can’t just say, “Oh, well, 13(b).” It’s like, “Well, how much notice, how much detail is the statute even giving the FTC and business?” And it was set up to give content and then enforce to that standard as it became clear what it was.
Asheesh Agarwal: Fair point. Alden, what are your thoughts?
Alden Abbott: I basically agree with Maureen. By the way, I published a short commentary in Truth on the Market today on the case and suggested that in error-cost framework they use in looking at possible legislative fixes. And, to me, there’s type-I, type-II error.
But false positives are particularly a serious problem in trying to measure harm outside the clear – even in the case of clear fraud and many difficulties, but outside of clear fraud, when there are questions about advertising substantiation or how it affected consumer behavior, were faired some very complex antitrust cases, which are questions about would a party have entered or not; some as a new patent, a new product. How do you measure changes in quality? Frankly, some of those measurement questions are almost intractable.
And I think you would introduce a huge amount of error, and huge disincentive, and chilling effect on the private sector, if outside the clear fraud context you reinstituted Section 13(b) allowing disgorgement and restitution for all cases brought by the FTC. And I think so what cases should you focus on? And implicit in what Maureen said, but also former Chair Tim Muris and Howard Beales, basically have argued for an interpretation of 13(b), which, of course, has been superseded by the Supreme Court’s decision.
But basically, as Section 19 concern, and you should look or perhaps allow restitution in cases where you had a practice which a reasonable person would have known was clearly dishonest or fraudulent. So in effect, say, “Okay, get restitution or, if you can, disgorgement in the case of fraud, a clear fraud. The error is almost zero. And, generally, if people at zero are not given something, or given something entirely what they didn’t want, it’s as clear fraud. You can measure it, and you can be able to determine who was harmed, and there’s no uncertainty about the bad acts, similar to hardcore cartel price-fixing.
The FTC doesn’t do hardcore cartel price-fixing. The Justice Department does. Indeed, it gets civil and criminal penalties, so penalties are used there. But the FTC does very complex competition cases. They should continue to do them to move the law, but again, I don’t think in many cases, parties don’t have a very good idea what they’re expected to do before the fact, and then to come up with very strained measures of consumer harm with a huge error cost, which very frankly may differ, depending upon how you manipulate data. That is totally inappropriate, I think. So if I were Congress, I would try to restrain myself and say, “Let’s allow restitution, disgorgement for clearer consumer fraud cases.”
Asheesh Agarwal: Well, Alden, I read your piece in Truth on the Market, and by the way, kudos for getting that out in less than a day. You win the race for thoughtful analysis on the Court’s decision in record time. So just let me understand you, so as Congress is now considering fixes—we’re hearing that from the senate commerce chairwoman—so would you just limit the FTC’s remedial authority under 13(b) as it has been using it to cases of fraud and exclude it entirely from the competition context?
Alden Abbott: I would.
Asheesh Agarwal: Well, Corbin, what are your thoughts on this? Your brief argued that the FTC should have this remedial authority and that Congress should weigh on it expressly, and Justice Breyer in his opinion, he basically invited the FTC to go to Congress. So what sort of legislation would like to see, and what sorts of limits, if any, would you put on the FTC’s authority?
Corbin Barthold: Yes. I think an amendment absolutely is warranted, and I think that’s common bipartisan view, and, of course, the devil’s in the details. So let’s start with, well, what are our goals in an amendment? I think Commissioner Philips put it very well in a recent hearing when he said, “It makes sense to fine you for going over a 65-mile-per-hour speed limit. It makes far less sense to have a speed limit that says don’t go an unreasonable speed, and then fine you for going 65 under that rule.”
And that’s a good little, handy shorthand for the difference, in my mind, at least, between the baseline Section 5 standard and the higher dishonest or fraudulent standard. So we want to key money into that higher standard, and ideally, we’d like to keep the FTC focused, in most cases, on looking at the marginal consumer harm of conduct. Meanwhile, we want to make sure that the FTC can move quickly, which is the countervailing interest in amending the thing in the first place and not forcing the FTC to go down to Section 19.
There are already proposals out there. Senator Wicker in the Safe Data Act worked a 13(b) fix into his privacy bill. Representative Cárdenas down in the House has just introduced a bill that has similar language, and obviously, it would be nice to start at first principles and sit outside and think about how to do this just right. I’m going to skip that for the moment and just look at those proposed amendments and think about them. They’re actually pretty good starts anyway.
And what do they do? Well, first of all, you’ve got to get a “has violated” clause into 13(b) so there can be retrospectives, so now you amended, so it says, “has violated, is violating, or is about to violate.” But one of the reasons for the ruling that we just had is that 13(b) has no statute of limitations. That’s a key sign that it was never meant for anything more than injunctive relief.
So now we need to put in a statute of limitations. I’ve seen 10 years thrown around. That seems awfully long, but they’re going to have to hash that out. It needs one; that’s clear. You then clean up the top of the statute so that it’s no longer injunctive relief alone. You add in something about equitable relief, and then what you do is you add a new subsection that lays out, “Well, what is this equitable relief?” It’s going to be subsection (e), if they put it in. And that is a pretty clean way to do it.
The one thing that is missing, the huge flaw here, is there’s no where do we reintroduce the dishonest or fraudulent standard. But again, there’s a very straightforward fix here. Because you can just put the dishonest or fraudulent language down in that section with the equitable relief. You make it clear that in these equitable relief cases, you can get money in cases of dishonest or fraudulent conduct.
And by putting it there, you get the virtue of having it both ways. You can still use 13(b), go in and get your injunction, and stop bad behavior without having to meet that higher standard by just doing the basic Section 5 standard. To get the money back, you now have to get to that next level and show the 65-mile-per-hour limit was breached, and dishonest, fraudulent, this-person-really-should’ve-known-better kind of stuff—the real scam artists.
The marginal consumer harm issue is a lot thornier in terms of how to do that, to a degree. All I can do is just plead and say that I personally think, and I’ve heard from practitioners, that the FTC coming in and basically starting their point at the full revenue, every dime you made off of something, has caused a lot of trouble, and you can see that when you – just to make a completely hypothetical example, you’ve got a pair of jeans, and it says, “Made in U.S.A.,” and maybe, parts of it came from foreign countries. It’s pretty hard to argue that consumers have been harmed in the full value of the jeans by that deception.
And so there is a degree to which the FTC, at the end of the day, is just going to have to use its judgement, and I will personally hope, in most cases, really look at that marginal harm to consumers. But it is true there are harder fraud cases. And as it currently is set up in the equitable, in these bills, you have refund of money, and these other words, disgorgement and restitution, we may trip into issues.
Maureen mentioned a Supreme Court case in which the Supreme Court tackled disgorgement, but left a lot of open questions, “Does that allow joint and several liability? Does that mean the money has to go to consumers?” So I don’t have firm answers on that, but people need to be careful about how they word that equitable relief section, both in terms of what it allows, what it doesn’t allow, and are we really clear on what the technical equitable terms mean that we put in there. And I personally hope that we’ll angle it toward—I’ll say it one more time—marginal consumer harm, but we’ll have to see how that plays out.
Asheesh Agarwal: Well, thanks, Corbin. And a reminder to our audience, if you do have any questions, feel free to drop it in the chat. Maureen, well, let’s turn to you and welcome your thoughts and recommendations on what Congress should do, particularly, in the competition context. You touched on this already, but I’ll provide some background for people who aren’t familiar.
In 2003, the FTC issued a policy statement, stating that it would seek monetary relief in antitrust cases only in exceptional cases that involve a clear violation of law. In 2012, the FTC withdrew that policy statement, but you dissented from the withdrawal. So what would you like to see Congress do now, and should it limit the FTC’s remedial authority in the competition context?
Hon. Maureen Ohlhausen: Yeah. So the way I think this opinion is that – so Section 19 only applies to unfair or deceptive acts or practices. My quick interpretation is that it means that for unfair methods of competition, there is not an ability to get a monetary remedy, unless Congress were to change it.
Now, it’s interesting, DOJ has gotten some disgorgement in a few cases, and so I haven’t quite figured out how that would line up, but I do think that the antitrust area is a particularly challenging one, right? So I think Corbin already mentioned, or Alden – so someone already mentioned that if it is a clear violation, like a per se violation, DOJ, it has a fuller panoply of things that – remedies that it can bring—criminal enforcement, things like that.
But in the antitrust area, and the speech that the Supreme Court cited of mine, actually focused on the idea that the FTC was not using its administrative litigations to develop antitrust law in the way that it should. And that actually was a missed opportunity in the pursuit of disgorgement. By going directly to federal court was really a missed opportunity for the FTC, which was created to be an expert body and to—as I discussed already in the consumer protection area, but also in the antitrust area—to develop the law.
And now you see, over the years, the FTC has actually had a very good track record moving antitrust law forward, incrementally, through its administrative litigation process. A whole lot on the state action doctrine initiation—I know you were part of that—and in other areas as well, and it was turning away from that and letting some of the administrative litigation atrophy, I think.
So I would be concerned that if we put a full, like, “Okay, you go to federal court and get money for antitrust violations,” it wouldn’t fix that problem, that that same issue would continue to happen. And, again, it’s an area where the law, it’s very skeletal, right? What’s an unfair method of competition? And so, again, a similar kind of concern.
And one other thing that I do want to mention is this also implicates nondelegation issues, right? So the FTC is an independent agency. And as an independent agency, it shouldn’t have all the authorities of the punishment authority, the ability to penalize, that an agency where the head is directly removable by the president can authorize. That is why DOJ can bring criminal cases, and FTC can’t.
So one of the things I think we need to keep an eye on, and I think – there was the Gundy case. There’s starting to be this ground swell to revisit the nondelegation, as you could jump from the 13(b)-frying pan into the nondelegation fire if you give the FTC, I think, too powerful tools to enforce this very vague statute, first of all, that Congress hasn’t given much content to, and also give it tools that essentially put it into more of a way from equitable powers—which would be restorative, put everything back to square one—to powers that are much more punitive. So I think there’s a lot of interesting questions that whatever the fix will look like, what does that mean for developing antitrust law and also for these wider separation-of-powers issues.
Asheesh Agarwal: Great point. Alden, let me come back to you, and then really all panelists, and there’s a pretty reasonable chance that some congressional staffers, somebody who might be watching this, and people who are going to be actually working on actual legislative language. Is there anything else that you would like our congressional drafters to know or think about as they are—they and the members—are considering legislation? Any other guardrails via prohibitions, limits, or express things that you think would be [inaudible 42:32]? Alden, let me start with you.
Alden Abbott: Okay. Well, thanks, Asheesh. I think just again to be clear; I’m not suggesting in any way – and I want to make clear that certainly permanent injunctive authority should not be loosened in any way in regard to competition cases. That remains. But the question really is when you’re just talking about monetary relief – I think someone mentioned the statute of limitations.
I think Howard Beales and Tim Muris have an article that discusses statute of limitation, discusses a few other provisions which could actually be folded into legislation, and I think that actually that if you wanted to have a special section saying that monetary relief may be obtained in cases, and you don’t need a final order, but basically, borrow language from Section 19. Again, reasonable person, known under the circumstances, was dishonest or fraudulent, and say in those cases, if the FTC might be able to, directly under 13(b) get a recovery.
So this would protect, I think, and strengthen because even getting temporary asset freezes, that’s okay, but it may not really solve the problem of dissipation of assets. That solves that problem. But beyond that, this is a matter of compromise I frankly just jumped into it again yesterday, and I haven’t had a chance to think fully about all of the ramifications, so I should instead of speaking precipitously about this, wait and give it some more thought.
Asheesh Agarwal: Fair enough. Corbin, Maureen, any other thoughts on what Congress should make sure it thinks about?
Hon. Maureen Ohlhausen: Well, I would point to the separate statements that Commissioners Philips and Wilson submitted at the hearing earlier this week. I think they raised some very important issues. Commissioner Wilson raised these issues, that Corbin had touched on, where you have a legitimate product; people are getting things of value, and the problem with saying “Well, no, all money should go back” because maybe there was a lack of what the FTC thought was sufficient substantiation for one claim, or something. And the product may still even perform, but the substantiation, they just didn’t think was sufficient.
So I think that’s an important area. I do have concerns about the 10-year statute of limitations. I think the garden-variety federal statute of limitations is 5 years, so 10 seems kind of long. There’s terrorism crimes that get the 10-year statute of limitations. I’m not sure this justifies that. And there is also the question of retroactivity, right? The Supreme Court has decided that Congress didn’t grant the FTC this authority to seek this kind of redress.
So the idea that, well, now they’re going to come in and say, “We’re granting it to you now, but it’s now also retroactive. I think that raises some interesting issues. I’m not an expert in this field of ex post facto laws, and things like that, but I don’t think it’s that simple to just say, “Oh, and let’s pretend this case never happened,” right?
Asheesh Agarwal: Yeah. That seems right. But, Corbin, any final thoughts on this point?
Corbin Barthold: Yeah. Attention Congress people, congressional staffers, and legislative writers, put the dishonest or fraudulent standard into your new subsection (e). I’ll skywrite it outside of Congress if that’s what it takes. So that’s my main thing. And then to everybody, not just people who see it my way, but to both sides of the aisle, be careful about how you put those words. And I mean it’s just we’ve left our equitable jurisprudence very unclean.
Restitution: does that mean there are tracing requirements? Some courts have said that there are. Disgorgement: that terms is very open-ended. It’s unclear what it means, based on the way the Supreme Court has treated it. So put thought into those words. They have distinct meanings traditionally, and they have blurred meanings now, so those words need attention.
Asheesh Agarwal: All right. Well, we have a question from the audience—another distinguished antitrust scholar. The questions is, absent a legislative fix, won’t the Supreme Court’s decision result in a windfall for class action attorneys? After the FTC establishes liability, won’t class action attorneys be able to bring a follow-on action for money damages armed with an FTC liability rule that gives them, if not a slam dunk, at least, a substantial helping handout? Who’d like to take that first?
Corbin Barthold: Well, my initial reaction is, maybe, it’s time for just a moment of some devil’s advocate. Commissioner Chopra’s not here to tell us what he thinks, and there is a – we’ve covered a lot of ground, but there is a far side of this debate. Commissioner Chopra and Commissioner Chairwoman Slaughter, at the hearing, were pushing for “Broaden the civil penalty power.” They want to go completely in the other direction.
So I guess to give the devil its due, I can’t believe I’m about the say a word in favor of plaintiffs’ class action attorneys, but, at least, then that’s private enforcement equitable remedies originally were meant for private parties. They aren’t really a government tool, and at the end of the day, that is the system we currently have.
If it benefits private parties to say that the FTC has said something, that’s going to get litigated out in court, there is a degree to which that is a whole other elephant that you can only tackle one problem at a time. So litigation reform with the plaintiffs is just a whole separate issue.
Asheesh Agarwal: Maureen and Alden, any thoughts on that?
Alden Abbott: There is a private right of action provided under the Clayton Act for consumers harmed for violations of the Sherman Act. There is none for the FTC Act. There is no private line of action. So I guess what John is getting to is, he said that there’s a finding that a cease-and-desist order finding that something was unfair or deceptive. There are analogs under little FTC Act cases, and I know there’s some state law decisions that say that precedence under the FTC Act are useful for them.
So I don’t know if you’d get a state attorney’s general or a class based on private citizens bringing out little FTC Act cases, saying and pointing to the federal FTC decision and saying this justifies the class action. I’d have to think more about the particular legal basis or even the issue of class certification, which is as we know can be a muddle, but for the particular legal basis for bringing the class action.
Asheesh Agarwal: Alden, I just read an article—
Corbin Barthold: Yeah. I think the important point is it’s just something they can point at. It’s not res judicata.
Alden Abbott: Right.
Asheesh Agarwal: Alden, I just read an article this morning, talking about how state attorney generals are going to play a more prominent role given the Court’s decision. But, Maureen, any thoughts on this?
Hon. Maureen Ohlhausen: No. I agree. There is not a private right of action under the FTC Act, right? And I actually don’t see how whether it’s an administrative decision or a federal court decision would play differently for class actions going forward. They would have to find another basis, and they could point to it as some form of evidence, or something, that this violation occurred, but I’m not sure it makes the situation any worse. Now, we do know that despite the fact that the FTC Act doesn’t have a private right of action, that it is already widely used as a jumping-off point for private class action suits.
Asheesh Agarwal: So a final question for the panel, Corbin. We’ll start with you, and I’m going to channel my inner John McLaughlin. Corbin, on a scale of 1 to 10, how likely that Congress enacts legislation about this topic this year and why?
Corbin Barthold: So now if I give an answer, you’re going to go “wrong.”
Asheesh Agarwal: Almost certainly, yes.
Corbin Barthold: A certain generation, you’ve seen that show. I don’t want to look in a crystal ball. I will say that there are a lot of issues before Congress, right now, that are very – there are bitter parts and divides about. And as a result, the ball doesn’t move, and then people get cynical about Congress, not that a degree of cynicism about Congress isn’t warranted. And this is an area where, at least, we are starting with a very broad baseline agreement that 13(b) warrants amendment.
So I can’t say I make any predictions, but I’m hopeful that we can have this one technical issue where hopefully, maybe, we can focus the debate, and not let it spin out, and have the different sides each trying to get – putting candy in that blows up the deal, and that’s the best I can do. I’m hopeful that because there’s so much broad agreement to begin with, maybe, we’ll get somewhere.
Asheesh Agarwal: Hopes brings eternal with Corbin. Maureen, what are your thoughts?
Hon. Maureen Ohlhausen: Well, I agree. I do think that there is wide support for some type of 13(b) fix, and I personally think that it’s a good idea, particularly, in the fraud areas and deception areas we discussed. I think it needs careful attention though for the reasons that we’ve been discussing because some of the bills and some of the debates seem to want to give the FTC authorities and powers beyond what it’s already tried to assert, right? So I think to the extent we have something broader, that could slow down the process and maybe derail the process.
So a true fix to give – look, just going back to Acting Chairwoman Slaughter’s words, she’s, I think, justly concerned about scam artists and things like that, and let’s give the FTC the authority to do two of those things, to go into court, to get the money, to stop things quickly in that fraudulent type of behavior context. So if it’s limited to that, I would hope that we could get something through Congress reasonably. Maybe, this year. I don’t know what – as Corbin mentioned, they have a lot of other things on their plates these days.
Asheesh Agarwal: Alden, you get the last word.
Alden Abbott: Well, seven or eight, maybe. The problem is I think if you could limit – if everyone agreed, “Oh, yes, let’s put in the fraud or reasonable person language,” it might be close to a 10, but as we know, legislate process and sure fixes sometimes fall apart because of wrangling and disagreements. I know there are different groups out there, that I know of, are coming up with alternative versions of what a fix could look like.
There will be hearings on lots of other antitrust actions. It’s possible this might get melded into a – tempted to get melded into a major bill, which there might be opposition. So the sense is I think the chances are better than not that you’ll get some fix, but certainly far from certain.
Asheesh Agarwal: Well, Alden, I actually think you’re right. I would put it at about seven or eight too. Listen, with that, I want to thank our panelists. I want to thank our audience, and I especially want to thank The Federalist Society for hosting this, and Nick, I’ll kick it back to you.
Nick Marr: Thanks very much, Asheesh. And, yes, on behalf of [crosstalk 55:01]—
Alden Abbott: Thank you, Asheesh. Thanks.
Asheesh Agarwal: Thank you, guys.
Nick Marr: Yeah. I just want to offer a quick thanks on behalf of FedSoc to our panelists and to our moderator. Asheesh, thanks for your great work in preparing this panel. Thanks for getting this together so quickly, everyone. And thanks for our audience for tuning in and your good questions. As a reminder, and just before we hit the weekend, be checking your emails and our website for announcements about upcoming teleforum calls, Zoom events like this one, and coverage of Supreme Court decisions. We’ll be expecting more of those in the next couple of weeks. So thanks again, all. Have a great weekend, and until next time, we are adjourned.
Senior Research Fellow
Mercatus Center, George Mason University
Director of Appellate Litigation and Internet Policy Counsel
Baker Botts LLP
Deputy General Counsel
Federalist Society’s Corporations, Securities, & Antitrust Practice Group