WASHINGTON, April 22 (Reuters) - The U.S. Supreme Court, by a 9-0 vote, on Thursday gutted the Federal Trade Commission’s ability to force scam artists and companies that acted deceptively to return ill-gotten gains, ruling in favor of a criminally convicted payday lender who challenged the agency.
The court, essentially, tossed out a practice that the FTC has used since the 1980s.
THE BIG NUMBER:
The FTC, which enforces antitrust law and investigates deceptive practices, returned $11.2 billion to consumers over the past five years.
Among companies that paid restitution are Volkswagen Group of America, which agreed in 2017 to pay $5 billion for cheating on diesel-emissions tests, to Yellowstone Capital which agreed this month to pay more than $9.8 million to settle allegations that it continued withdrawing money from businesses’ bank accounts after they were repaid.
Those penalties imposed in the past will stand, but the agency’s ability to take similar action in the future is now severely constrained.
THE LONG AND RESOURCE-INTENSIVE ROAD:
With this ruling, the FTC can still go after such companies but the process is elaborate and resource-intensive, said former FTC chairman William Kovacic. “There is another way but it’s just not very damn good. As a result, it’s (the decision) a horrible blow to the anti-fraud program.”
For many other cases, the FTC could combine 5(b) and 19(a)(2) of the FTC Act to win monetary relief. To do this, the agency would first have to win in an administrative process and then go after monetary relief in a district court proceeding. One such case, in which Figgie International sold heat detectors that it said were more effective than smoke detectors, took 12 years to resolve under this longer process.
The bar for the government to win is higher under 19(a)(2), and it has a three-year statute of limitations. The 13(b) standard, which the Supreme Court ruled on on Thursday, has no statute of limitations.
CONGRESS CAN FIX:
Last fall, the FTC commissioners -- then three Republicans and two Democrats -- urged Congress to pass a law to specifically give it the power to demand restitution. Acting Chairwoman Rebecca Slaughter repeated that plea on Thursday.
Representative Tony Cardenas, a Democrat, introduced legislation this week to allow the FTC to seek “equitable relief” for violations of law that it enforces.
Senator Maria Cantwell, chair of the Senate Commerce Committee, also indicated interest in passing a bill to allow the FTC to seek restitution. (Reporting by Diane Bartz; Editing by Cynthia Osterman)