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Buffalo Law Review

First Page

1481

Document Type

Article

Abstract

Recent cases have called the Federal Trade Commission’s (“FTC”) enforcement methods into question. After a circuit split developed in the wake of the Seventh Circuit’s decision in Federal Trade Commission v. Credit Bureau Center, L.L.C., the Supreme Court responded by granting certiorari and consolidating the case with AMG Capital Management, L.L.C. v. Federal Trade Commission. The issue in these cases is whether Section 13(b) of the FTC Act authorizes the FTC to bypass the due process safeguards mandated by Congress in Sections 5 and 19 of the FTC Act and, in doing so, to conduct warrantless searches and seizures, unilaterally freeze assets, and impose punitive “disgorgement” monetary damages. In light of the Supreme Court’s recent decision in Securities & Exchange Commission v. Liu, it seems likely that the Court will limit the FTC’s abusive use of Section 13(b) and find in favor of the defendants in these cases.

The FTC’s mission is to protect consumers from unfair or deceptive acts or practices, and for many years, one of its main enforcement methods has been disgorgement under Section 13(b) of the FTC Act. Section 13(b) gives the FTC the authority to seek preliminary and permanent injunctions when it believes that the law is being violated or is about to be violated. It does not mention disgorgement or any other restitution methods, but the FTC has spent considerable time and energy building a foundation of favorable case law to support its ability to use disgorgement. Its strategy consisted of building a body of precedent, based on old and inapplicable cases, and it has aggressively pursued this strategy with the intention of expanding its enforcement abilities. The way it has used its self-created power has caused untold damage to business owners, employees, and consumers.

This Article argues that the Supreme Court should rule against the FTC in Credit Bureau Center/AMG Capital Management. The FTC used shaky and extraneous case law to expand its power to include the ability to seek disgorgement, and it has caused irreparable harm to businesses and individuals across the country. Indeed, following the FTC’s use of disgorgement as an improper remedy to seek damages, several business owners who were subjected to that improper treatment committed suicide, making the FTC a de facto judge, jury, and executioner. Part I details the methods that the FTC has used over the past few decades to expand its power to its current level. Part II argues that disgorgement is not authorized by Congress under Section 13(b). Indeed, nothing other than a preliminary or permanent injunction is authorized by Congress under Section 13(b). And Part III addresses the numerous constitutional issues that arise when a federal agency expands its power far beyond its statutory grant of power.

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