The Story Behind The FTC’s Recent Shift In Power

February 13, 2023
Andrew Cove

Imagine the following scenario:

You’ve been in business for ten years. You have a thriving company, a family, a busy life, and significant savings and hard-earned assets. Out of the blue, law enforcement agents and attorneys from the Federal Trade Commission (FTC) show up at your door and you are served with a federal lawsuit because they have determined that you have violated the law. 

To add insult to injury, you are told that you and your staff must leave your office because a Receiver has been appointed to take possession of your company and hold its assets. 

Although you are adamant that you have done nothing wrong, you learn that even your personal assets have been frozen and you will have no access to your bank or investment accounts until further notice. Put simply, you cannot use or access your own money for bills, to support your family or even to pay the significant attorney’s fees you now need to effectively defend yourself.  

Has This Ever Actually Happened?

Indeed, situations like these have happened many times. The FTC is the primary federal agency which works to both prevent unfair competition in the marketplace (antitrust) as well as to protect consumers by preventing businesses from engaging in unfair and deceptive trade practices. Its powers were – and remain – significant.

However, over the past 50 years or so, the FTC has incrementally expanded its authority and expanded its remedies, albeit through court rulings rather than through new federal laws. 

In effect, by building on favorable rulings over time and successfully arguing that the FTC Act gave them the implied power to do so, the FTC claimed “monetary relief” for consumers and claimed the right to secure that relief in some of the extraordinary ways we’ve described above. In fact, from 2016 to 2020 alone, the FTC collected $11.2 billion through those efforts. 

In the legal world, laws are interpreted and given effect by the courts. And once a judge settles an argument about the law with a ruling, it creates a precedent. 

In this way, the FTC obtained more authority by successfully obtaining favorable rulings on its powers, and then using those decisions to leverage ever more favorable expansions of its powers. As those rulings and decisions became more established, defendants – often without access to the financial resources needed to fight them – were usually forced to concede, which only cemented these rulings even further. 

A similar dynamic applied to these cases more generally. Without access to money for fees, the business owner would usually be forced to forfeit most business and personal assets, agree to business bans and other injunctive relief, and settle the matter altogether – whether they had valid defenses or not. 

A Power Shift

The status quo finally changed with a major Supreme Court ruling in 2021. In AMG Capital Management LLC v. FTC, the Supreme Court reviewed Section 13(b) of the FTC Act and the many rulings which had interpreted it over many years of litigation. 

The FTC argued that Section 13(b) allowed them to seek monetary relief and that the courts had long ago agreed with them. The defendants argued that it clearly did not, and that the various court rulings that had supported the FTC’s interpretation were misplaced as well.

In its decision, the US Supreme Court unanimously ruled that “[Section] 13(b) as currently written does not grant the Commission authority to obtain equitable monetary relief.” 

The man behind AMG was a race car driver, Scott Tucker. AMG issued payday loans with high interest, and in the course of his FTC case, a federal district judge had ordered his company to pay back $1.266 billion to consumers who AMG had allegedly deceived. Tucker was also charged and incarcerated in a related criminal matter. However, what made Tucker different from most defendants was that since he apparently had access to unfrozen assets, he was able to do what others before him could not – fight the FTC and file the Supreme Court appeal on the civil case. And this ultimately led to the unanimous decision in AMG. 

Protect Your Business with Cove Law

The FTC’s dual purpose is to encourage competition and consumer protection. Cove Law has been helping telemarketing companies defend matters by the FTC and state Attorneys General for almost 30 years. Although the FTC’s powers are not as broad as they were before AMG, they retain similar other routes to prosecute marketers deemed in violation. 

At Cove Law, we are committed to protecting telemarketing companies and other businesses and individuals accused of violating the law or the FTC’s rules. Contact our office to schedule your free initial consultation.

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