FTC Has No Authority to Fine or Shut Down Companies Anymore….Right?

That was a recent question posed to us by a potential client – the deafening silence which ensued was broken moments later with Linda’s quiet response – “No – In fact there is every indication that the Federal Trade Commission is preparing large enforcement actions. They intend to use the formal notices sent out to hundreds of companies last year – and possibly before that.” The client’s confusion arises from the celebrated US Supreme Court ruling in AMG Capital Management which held that Section 13(b) of the Federal Trade Commission Act does not permit the Federal Trade Commission to seek “equitable monetary relief”. Meaning they can no longer go to court without notice and obtain an injunction freezing a business’s assets and then negotiate a release of those assets. This equitable and injunctive relief was not present in the statute. In response, the FTC first sought out congress to codify authority they had claimed was in the statute and when that didn’t work out, they enlisted attorney generals in friendly states to utilize their state authority. Now with money running short in state budgets, the Federal Trade Commission has focused its claims for monetary relief on its Penalty Offense Authority under Section 5 of the Act. To do so, they must first send a targeted company a "Notice of Penalty Offenses" listing conduct determined to violate the Act in prior administrative orders. If a company engages in such conduct after receiving the Notice, then the Federal Trade Commission may seek civil penalties of up to $43,792 per violation. To date, the Federal Trade Commission sent out Notices of Penalty Offenses to over 2,000 companies. They targeted verticals including relating to use of endorsements and testimonials, influencers; money making opportunities that lack potential earnings and risks disclosures; and for profit (generally online) schools to address claims regarding graduate’s job prospects and earnings. Have they moved forward with enforcement actions? Not yet…