Supreme Court rules that FTC cannot seek disgorgement under Section 13(b) of the FTC Act

By: Ifrah Law

Last October, we reported on the Third Circuit Court of Appeals’ decision in Federal Trade Commission v. AbbVie, Inc., in which the appeals court overturned a trial court’s decision ordering $448 million in disgorgement pursuant to Section 13(b) of the Federal Trade Commission (“FTC”) Act against a group of businesses accused of trying to monopolize and restrain trade over a patented drug called AndroGel.  At the time, the FTC’s ability to seek disgorgement under that section of the FTC Act was a hotly contested issue, with the Seventh Circuit Court of Appeals having previously sided with the Third Circuit’s interpretation that the FTC was not authorized to seek disgorgement, but several other appeals courts having found that the FTC did possess such disgorgement authority.

At the time of the AbbVie ruling, the so-called “circuit split” was on a collision course with the Supreme Court set to rule this spring on the issue.  And on April 22, 2021, the Court issued its ruling and overturned a Ninth Circuit Court of Appeals decision which previously upheld a $1.27 billion disgorgement award against a payday lender found to be issuing payday and other high interest loans and enforcing loan terms that differed from the loan terms that were disclosed.  In its unanimous 9-0 decision setting aside the massive Ninth Circuit judgment, the Supreme Court found that disgorgement was not a remedy available to the FTC pursuant to Section 13(b) of the FTC Act.

In the decision, the Court found that the language of Section 13(b) “does not authorize the Commission directly to obtain court-ordered monetary relief,” such as disgorgement.  Rather, in order to seek monetary relief, the Court found that the FTC was required to first engage in more time-consuming administrative proceedings under Section 5 of the FTC Act, and it could only seek monetary remedies pursuant to Section 19 of the FTC Act after it entered a cease-and-desist order pursuant to such administrative proceedings.  The Court ruled that “to read § 13(b) to mean what it says, as authorizing injunctive but not monetary relief, produces a coherent enforcement scheme: The Commission may obtain monetary relief by first invoking its administrative procedures and then § 19’s redress provisions (which include limitations),” and that Section 13(b) limited the FTC to non-monetary injunctive relief.

Having clarified the legal landscape with respect to disgorgement, the Supreme Court unsurprisingly issued a brief order on June 21, 2021, refusing to hear the FTC’s appeal of the Third Circuit’s decision in favor of AbbVie, meaning that the decision in that case is finalized.  The Supreme Court’s decision provides clarity that going forward, unless Congress amends the FTC Act, the FTC cannot seek disgorgement as a remedy under Section 13(b).