The ability of the Federal Trade Commission ("FTC") to obtain monetary restitution for consumers just took a major loss from the Seventh Circuit Court of Appeals. This federal appellate court ruled that Section 13(b) of the FTC Act only provides that the FTC can obtain restraining orders and injunctions but it does not state that the FTC can obtain equitable monetary relief for consumers, including but not limited to ex parte asset freezes to e-commerce merchants' banking accounts. Prior to this decision, it was implied that the FTC could obtain monetary restitution relief for consumers from Section 13(b) of the FTC Act.
In this case (FTC vs Credit Bureau Center), the FTC showed the court that an e-commerce credit bureau retailer deceived consumers into enrolling in its service by posting misleading statements about receiving a "free" credit report (when in fact in was not free), and thereby deceptively leading consumers into purchasing recurring monthly credit monitoring service. The federal district court held that this e-commerce retailer had violated the FTC Act and other consumer protection laws, entered summary judgment in favor of the FTC, and ordered the e-commerce retailer to pay equitable monetary relief to consumers. This decision was appealed to the Seventh Circuit Court of Appeals who affirmed the FTC's power to obtain restraining order and injunctions, but specifically ruled that since Section 13(b) of the FTC Act does not state that the FTC can obtain monetary restitution for consumers, the FTC cannot do so under Section 13(b).
This is a huge decision because under its current practices, the FTC may no longer be able to rely on Section 13(b) of the FTC Act to obtain monetary restitution for consumers arising from false and misleading statements, and deceptive acts or practices, e.g., ROSCA violations and data breaches. This decision by the Seventh Circuit (jurisdiction over the federal district courts in Illinois, Indiana and Wisconsin) is the first federal court of appeals decision to limit the FTC's ability to obtain monetary restitution for consumers under Section 13(b) of the FTC Act, creating a circuit split among the federal appellate courts.
Given the huge impact that this federal appellate opinion has on the FTC's monetary restitution powers, it is foreseeable that this decision will be appealed to the US Supreme Court, who will ultimately determine the FTC's powers under Section 13(b) of the FTC Act. If the Supreme Court agrees with the Seventh Circuit, then the FTC's ability to obtain monetary restitution under Section 13(b) will be impacted severely.
In the interim, expect the FTC to seek monetary restitution for consumers under other provisions of the FTC Act (e.g., Sections 5(m)(1)(B) and 19) and other statutes that the FTC administers and enforces.
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