The Fraud Examiner

After a Gut Punch to the FTC, How Will Scammers See Justice?
 

Jacob Parks, J.D., CFE
Associate General Counsel, Association of Certified Fraud Examiners                                 


In 2012, when the district court granted the U.S. Federal Trade Commission (FTC) its motion for summary judgment against AMG Capital Management (AMG) and its founder Scott Tucker, it ordered the defendants to pay an eyepopping $1.3 billion in disgorgement and restitution. The court found that Tucker’s payday loan business had engaged in deceptive and unfair practices by telling customers that they would be charged a low fee, but instead used contradictory fine print to charge a much higher fee.

The large judgment aside, it was business as usual for the FTC. For decades, the agency has been using Section 13(b) of the Federal Trade Commission Act as a basis for obtaining monetary relief for victims of dishonest trade practices. Little did the FTC know that after nine years in the appeals process, the Supreme Court would not only reverse this judgment in April 2021, but also strip the FTC of its perceived power to use Section 13(b) to obtain equitable monetary relief.

The Supreme Court's 9-0 decision in AMG Capital Management v. FTC should not be viewed as a statement on whether the FTC should, as a matter of sound policy, be allowed to seek restitution and disgorgement from shady businesses. Rather, the Court saw the FTC as overstepping the power granted to it by Congress. In fact, the Court acknowledged that the FTC’s past use of such power had restored billions of dollars to victims. The problem, the Court reasoned, was that Section 13(b) gives the FTC the option to pursue injunctive relief (i.e., ordering a party to take or refrain from an action, such as cessation of a business practice), but the rule does not list disgorgement or restitution as available penalties. 


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