By Peter Reap, J.D., LL.M.
At a Senate hearing today, all of the FTC’s four commissioners spoke on COVID-19 consumer protection efforts and equitable monetary relief legislation.
Acting FTC Chairwoman Rebecca Kelly Slaughter and Commissioners Noah Joshua Phillips, Rohit Chopra, and Christine S. Wilson testified before the Senate Committee on Commerce, Science, and Transportation today at a hearing titled, "Strengthening the Federal Trade Commission’s Authority to Protect Consumers." The Commissioners unanimously supported federal legislation that would affirm and strengthen the agency’s ability to seek equitable relief for consumers, an issue that is currently pending before the U.S. Supreme Court and, in their view, should be addressed even while the Supreme Court case is pending. The commissioners also detailed the FTC’s efforts to protect consumers from harms stemming, directly and indirectly, from the COVID-19 pandemic.
Senator opening statements. Senator Cantwell (D., Wash.), opened the hearing, the first one by the committee for the 117th Congress, by addressing the pending Supreme Court case challenging the FTC’s remedial powers to seek consumer redress from defendants (AMG Capital Management, LLC v. FTC, Dkt. 19-508). The AMG Capital case was argued before the High Court this January, and at issue is a decision of the Ninth Circuit, affirming a federal district court order requiring payday lenders to pay $1.27 billion in equitable monetary relief. The petition for review of the Ninth Circuit ruling followed a Seventh Circuit decision creating a circuit split on whether Section 13(b) authorizes an award of restitution. Cantwell stated that the pandemic has only heightened the need for the FTC to have this authority to protect consumers and that legislation must be passed to ensure that it is not lost, if necessary. Ranking Senator Wicker (R., Miss.), in his opening statement, expressed a need for new legislation in the areas of data privacy and for college athletes to be reasonably compensated for the use of their name, image, and likenesses.
FTC prepared statement. In its prepared statement to the committee, the FTC summarized the FTC’s efforts to combat COVID-related harms to consumers and "the pressing need, in light of legal challenges, for Congress to affirm the FTC’s authority to return money to consumers using Section 13(b) of the Federal Trade Commission Act."
As for COVID-19 relief measures taken, the statement detailed the agency’s: (1) first use of its new authority provided it by the COVID-19 Consumer Protection Act; (2) many challenges brought against deceptive COVID-19 schemes; (3) efforts to protect renters from unlawful practices during the pandemic; (4) consumer education and outreach activities; and (5) its use of the FTC’s Consumer Sentinel Network to make millions of reports from the public about fraud, identity theft, and other consumer problems, available to thousands of law enforcement users across the country.
The statement also stressed the FTC’s view that legislation is needed to ensure that equitable monetary relief under Section 13(b) of the FTC Act is retained, because "its effectiveness is currently imperiled, and this uncertainty is hurting our ongoing enforcement efforts." Recent judicial rulings have indicated a dramatic shift in how courts are interpreting Section 13(b) in FTC cases and these judicial trends trouble the agency as the issue is now before the Supreme Court, according to the statement. Although a favorable ruling is hoped for at the Supreme Court, the current uncertainty "is taxing the Commission’s law enforcement resources. Defendants now routinely attempt to delay ongoing litigation for as long as possible in the hope that the Supreme Court will allow them to escape liability for any monetary relief, and several matters have been stayed pending the forthcoming Supreme Court decision."
Besides purely monetary relief, two other two other recent Third Circuit decisions reinterpreting Section 13(b) jeopardize the FTC’s ability to enjoin illegal conduct in federal court, the statement continued. In FTC v. Shire ViroPharma, the court held that the FTC can bring enforcement actions under Section 13(b) only when a violation is either ongoing or "impending" at the time the suit is filed. Further, the Third Circuit in FTC v. AbbVie cited Shire ViroPharma in agreeing, incorrectly, that the FTC cannot sue under Section 13(b) unless conduct is imminent or ongoing. "Notably, in its motion to dismiss the Commission’s antitrust complaint, Facebook has cited these decisions and argued that Section 13(b) bars the federal court suit."
In sum, the FTC views these judicial threats to its authority as "grave" and "if Congress does not act promptly, the FTC’s ability to protect consumers and execute its law enforcement mission will be significantly impaired."
Commissioner statements. In her opening statement, Acting Chairwoman Slaughter observed that "Americans are struggling" as a result of the pandemic. She highlighted how the agency recently used its new civil penalty authority granted by the COVID-19 Consumer Protection Act and stressed that judicial attack upon how the agency is able to seek consumer relief under 13(b) was one of the agency’s most urgent challenges. She testified that the agency’s second most pressing problem was a lack of resources, mentioning that the FTC had 50 percent more employees at the beginning of the Reagan administration than it does today and that the agency is currently experiencing a large increase in merger filings that it must deal with.
In his prepared opening remarks, Commissioner Phillips did not mince any words but said "[s]hould the court rule against us in AMG, we will need a fix." He expressed his concern that the focus on any legislative fix should be on the ability to return money to consumers, not in penalizing companies.
Although in agreement that a "fix" is needed from Congress to address the uncertainty over the FTC’s 13(b) authority, Commissioner Chopra in his opening statement and remarks noted that "a Section 13(b) ‘fix’ will not fix the FTC’s fundamental problems." These he identified as (1) making clear that FTC orders are not mere suggestions, using as an example an FTC case against Google to illustrate a problem with repeat offenders; (2) the FTC is too quick to agree to no-money no-fault settlements with offenders, and noting that Congress could empower the FTC to seek civil penalties for a broad range of cases; and (3) the abuse of Section 230 of the Communications Decency Act.
Finally, in her prepared statement and opening remarks, Commissioner Wilson said Congress could do three things to help the FTC protect consumers and promote competition: (1) clarify the FTC’s 13(b) authority; (2) enact federal privacy legislation; and (3) approach the issue of antitrust reform "judiciously," expressing her view that the current antitrust laws as written are broad and flexible enough to address the rapid evolution of big tech companies. She mentioned the currently pending cases against Google and Facebook as examples of how the antitrust laws were "working," and said we should let these cases play themselves out before rushing to enact sweeping antitrust reforms.
Senator questions. In response to a couple of questions directed at all four of the FTC commissioners, Slaughter answered that they all agreed on the need for Congress to act quickly on the uncertainty over the agency’s 13(b) authority, even while the Supreme Court case was still pending. Next, all four replied that they were in agreement the agency should move forward with data security rulemaking in the absence of federal privacy legislation.
In her question time, Senator Klobuchar (D. Minn.) brought up the issue of the FTC’s resources problem. She said the FTC cannot take on big companies like Facebook with only "duct tape and band aids." To her point, Slaughter said that the agency was currently experiencing an "extraordinarily high" wave of merger filings. Klobuchar asked Chopra if the FTC needs privacy rulemaking authority and he replied, that yes, the FTC’s no-money no-authority settlements have not been able to make a big enough of a difference.
Senator Cruz (R., Tex.) expressed his view that the FTC has not done enough to reign in big tech companies with market power and monopoly power and in asking what more could be done, Chopra acknowledged there had been missed opportunities but was glad the agency had filed its complaint against Google. On the topic of content moderation Cruz said that the FTC has the power to, and should, force the big tech companies to say how many political candidates they acted against on each side of the political aisle.
MainStory: TopStory ConsumerProtection FederalTradeCommissionNews Covid19
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