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Congressional Commerce Subcommittee Democrats Seek to Advance FTC Act 13(b) Reform Legislation

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Richard B. Newmanhttp://www.hinchnewman.com
Richard B. Newman is an Internet Lawyer at Hinch Newman LLP focusing on advertising law, Internet marketing compliance, regulatory defense and digital media matters. His practice involves conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing clients in high-profile investigative proceedings and enforcement actions brought by the Federal Trade Commission and state attorneys general throughout the country, advertising and marketing litigation, advising on email and telemarketing best practice protocol implementation, counseling on eCommerce guidelines and promotional marketing programs, and negotiating and drafting legal agreements.

On May 27, 2021, the House Energy and Commerce Committee’s Subcommittee on Consumer Protection and Commerce sought to advance H.R. 2668, a bill intended to clarify the Federal Trade Commission’s authority under Section 13(b) of the Federal Trade Act.  Just weeks earlier, the U.S. Supreme Court dealt a serious blow to the FTC’s authority to seek and obtain monetary relief in federal court pursuant to Section 13(b) in the matter of AMG Capital Management, LLC v. FTC.

Dubbed the Consumer Protection and Recovery Act, the proposed legislation explicitly authorize the FTC lawyers to seek permanent injunctions and other equitable relief, such as restitution and disgorgement, to remedy consumer injury.

Two Republican amendments to the proposed legislation were rejected by Democrats, one of which was an effort by Republicans to preclude the FTC from obtaining disgorgement unless and until it conducted an economic analysis.  Importantly, Republicans also offered and withdrew an amendment to reduce the bill’s proposed statute of limitations from ten to five years.

Various Republicans also expressed an intend to address the FTC’s Section 13(b) authority as part of a more comprehensive FTC enforcement policy overhaul, one that includes the establishment of national privacy framework.

The proposed legislation must be approved by the full Energy and Commerce Committee before being voted upon by the House of Representatives.  FTC lawyer and Acting Chair Rebecca Slaughter continues to stress the urgency of reinstating Section 13(b) monetary enforcement authority.  In fact, Chairwoman Slaughter recently re-affirmed the agency’s position regarding the restoration of the FTC’s ability to return money unlawfully taken from consumers in a letter responding to arguments made by the U.S. Chamber of Commerce relating to the Commission’s ability to use Section 13(b) of the FTC Act to seek consumer compensation in antitrust and consumer protection cases.

Until matters regarding the restoration of the FTC’s Section 13(b) authority are resolved, the FTC generally may obtain monetary relief only after first invoking its administrative procedures under FTC Act section 5 and, then, under section 19’s qualified redress provisions.  In such a suit, which lies under Section 19 of the FTC Act, the FTC must demonstrate that a “reasonable man” would have known under the circumstances that the conduct was “dishonest or fraudulent.”  It is anticipated that the FTC will seek to use its current 13(b) authority to freeze assets indefinitely while a Section 19 action is pending.

It is also anticipated that the FTC may partner more frequently with state attorneys general when seeking information during investigations, as well as consumer redress for unfair and deceptive trade practices.  Additionally, state attorneys general can freeze assets without the assistance of the FTC.

This article should be of interest to digital marketers.  Contact an experienced FTC defense lawyer if you have received a CID from the Federal Trade Commission or have been named as a defendant in an enforcement or administrative action. 

Richard B. Newman is one of the leading FTC defense attorneys in the digital marketing industry and defends digital marketers in regulatory claim substantiation proceedings.  Follow FTC defense attorneys on Twitter.

Informational purposes only. Not legal advice. May be considered attorney advertising.

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