The Supreme Court unanimously held Thursday that the Federal Trade Commission overstepped its authority by going to court to force individuals and companies engaged in deceptive business practices to turn over billions of dollars in profits.
Justice Stephen Breyer wrote for a united court that federal law did not authorize the aggressive practices the commission had employed on consumers’ behalf for the past decade or so. The commission said it had obtained $11.2 billion in refunds to consumers in just the past five years.
The commission said Congress will need to step in because of the decision.
“The Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior,” acting FTC Chairwoman Rebecca Kelly Slaughter said in a statement. “With this ruling, the court has deprived the FTC of the strongest tool we had to help consumers when they need it most.”
Slaughter said the commission would ask Congress to act quickly, and Breyer said in the decision that that was the proper course.
The court’s job was not to discern whether the commission’s actions were “desirable,” Breyer said, but to “answer a more purely legal question”: Did Congress, in granting the commission the ability ask courts to stop a dishonest practice, also grant authority to obtain “monetary relief directly from courts?”
Not in the way the commission went about it, Breyer said, although the law gives the commission other ways to seek relief for consumers.
The section of the law at issue was amended in 1973 to allow the FTC to seek a court-ordered “permanent injunction” against unscrupulous practices.
But Breyer wrote that the “words ‘permanent injunction’ have a limited purpose – a purpose that does not extend to the grant of monetary relief.”
The FTC still has a few ways it can seek restitution, but none are as straightforward as the authority it had been using and would almost certainly mean the process would take longer.
One can be undertaken only if the company or individual in question has already violated an existing order, said Kathleen Benway, a former chief of staff at the FTC’s Bureau of Consumer Protection and a partner at law firm Alston & Bird. Another avenue would be to seek civil penalties in some cases, but those damages would go to the government, rather than individual consumers.
Breyer added that if the commission thinks its current authority to seek money is “too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority.”
Breyer wrote: “Indeed, the commission has recently asked Congress for that very authority . . . and Congress has considered at least one bill that would do so.”
Sen. Maria Cantwell, D-Wash., chair of the Senate Commerce Committee, said she is working to move legislation “immediately” to make sure the FTC can still seek money for consumers.
“Protecting consumers and compensating them for harm is a paramount duty of the FTC,” she said in a statement.
The court’s decision is a huge blow to the agency’s powers, former officials said Thursday. “It’s a real punch in the face, no doubt about it,” said William Kovacic, the former chairman of the Federal Trade Commission, who is now a professor of law at George Washington University.
The ruling was a victory for business groups that said that the FTC had turned a limited grant of authority into a weapon that extracted billions of dollars.
It was also a win for businessman and racecar driver Scott Tucker, who is in prison after being convicted on racketeering, wire fraud and money laundering charges, the same behavior at issue in the civil case at the court.
Tucker controlled several payday loan operations that Breyer said collected more than $1.3 billion in deceptive charges from 2008 to 2012.
The case is AMG Capital Management v. FTC.