FTC Members 4-0 Ask Congress to ‘Revive’ Consumer Redress Authority

Democrats said Congress needs to act quickly to restore the agency’s authority, after a unanimous Supreme Court weakened its Section 13(b) authority in AMG Capital Management v. FTC (see 2104260065). Nothing in the FTC Act is adequate to replace what was lost, said House Commerce Committee Chairman Frank Pallone, D-N.J.

Republicans said they’re willing to work in good faith on a bipartisan solution that reflects the views of all commissioners. Consumer Protection ranking member Gus Bilirakis, R-Fla., voiced disappointment that Democrats didn’t allow the three commissioners to testify alongside Slaughter Tuesday.

Having an agency chair testify was common practice when Republicans were in the majority, a Democratic committee aide said, citing five recent examples of Republicans asking the head of an agency to testify before the subcommittee. Slaughter’s “testimony was approved by a unanimous vote of all the current FTC commissioners, which is consistent with FTC precedent,” the aide said.

The FTC has 24 cases pending that rely entirely on 13(b) for monetary relief, Slaughter told the panel. The money in those cases is no longer on the table, and defendants now have far less incentive to settle, she said. About $2.4 billion is at stake in those 24 cases, she said, noting the agency returned about $11.2 billion over the past five years using the authority.

It’s important to engage in bipartisan conversations in good faith about potential additional authorities that may be needed to act quickly against fraudsters, said Bilirakis: But the committee must consider the FTC’s history of regulatory overreach and abuse of power. He urged guardrails in the legislation to ensure due process remains a foundational principle. All committee Democrats support legislation from Rep. Tony Cardenas, D-Calif., that would restore the authorities weakened in the Supreme Court decision.

Bilirakis asked if Slaughter would be willing to provide technical assistance on the legislative process with the review and support of all four FTC members. Slaughter said that was handled by technical staff when she was in the minority, and it wouldn’t be timely to have every commissioner's office review the material. She noted support is unanimous and bipartisan for a legislative fix following the decision.

By saying SCOTUS sided with scammers in AMG, Slaughter engaged in “unnecessary political rhetoric,” said Rep. Kelly Armstrong, R-N.D., who gave opening remarks in place of Commerce ranking member Cathy McMorris Rodgers, R-Wash., who had a conflict. Armstrong urged bipartisan legislation to “reform” the FTC Act.

Rep. Fred Upton, R-Mich., asked if the FTC has adequate restitution and disgorgement means under sections 5 and 19, which the high court highlighted as additional options. Slaughter said she disagreed with the court’s policy view. Section 19 wouldn’t cover the same breadth of consumer protection cases and nor would it cover competition cases, she said. The alternative process to Section 13(b) could take seven to 12 years in some cases, and there’s a three-year statute of limitation, she said.

Fraudsters are watching proceedings and will capitalize on the agency’s lack of authority, said Rep. Kathy Castor, D-Fla. She called the bill a targeted effort that restores restitution and disgorgement authorities, which should be of bipartisan appeal.

Senate Hearing

Senate Consumer Protection Subcommittee Chairman Richard Blumenthal, D-Conn., and other Commerce Committee members also emphasized their interest in restoring the FTC’s 13(b) authority, during a subpanel hearing on COVID-19 scams. Committee Chair Maria Cantwell, D-Wash., plans to mark up legislation “shortly” in response to the court ruling.

“Unless Congress acts, the FTC will in effect have both hands tied behind its back,” Blumenthal said. The top court caved here to a “shadowy campaign to disarm the FTC,” which resulted in an “existential threat” to the commission. “If we do nothing else in” Senate Consumer Protection, “we need to reauthorize the FTC’s authority to protect consumers and put money back into their pockets,” he said. Congress also needs to “reexamine and revise” Communications Decency Act Section 230 to allow fraud victims to act against social media platforms.

Sen. Ed Markey, D-Mass., also noted his interest in “quickly” enacting legislation to restore the FTC’s “rightful authority.” AMG “was nothing short of a gut punch to the FTC and to the consumers which it serves,” he said. Until a law is enacted, it’s “imperative” the FTC employs “its full authority,” using other parts of the statute, “to deter bad actors,” including its “penalty offense authority” under Section 5(m)(1)(B). That lets the agency seek civil penalties if it issues a final cease-and-desist order saying a practice is unfair or deceptive and if a party subsequently knowingly engages in that practice. Communications Subcommittee Chairman Ben Ray Lujan, D-N.M., suggested Congress explore extending FTC civil penalty authority to penalize first-time offenders in some instances.

“Congress can fix the situation and at a minimum restore the FTC to the authority that it has used for almost four decades to protect American consumers,” said Consumer Protection Bureau acting Director Daniel Kaufman. “The longer it takes to implement the fix, the longer the FTC will be greatly weakened in our ability to protect consumers.” The agency is “very closely looking” at its ability to use its penalty offense authority as an alternative, he said. Washington state Assistant Attorney General Cynthia Alexander, George Washington University Competition Law Center Director William Kovacic and Truth in Advertising Executive Director Bonnie Patten also backed a legislative fix.

Blumenthal criticized the FTC for not seeking criminal indictments more frequently and taking other actions against entities found to be engaging in fraud. “More than baring its teeth, this agency needs to use those teeth,” he said. The “time for warnings is over,” Blumenthal said. “The FTC must go to court against wrongdoing. It needs to create deterrence through hefty legal penalties and strict court orders, and it needs to refer" appropriate violations for criminal prosecution "more often and more effectively.”