FTC Successfully Uses Section 19 of the FTC Act to Obtain Restitution as an Alternative to Section 13 (b) | Ballard Spahr srl


An Illinois Federal District Court ruled that Section 19 of the FTC Act provided an alternative avenue for the FTC to obtain restitution after its previous restitution award under Section 13 (b) of the FTC Act was rescinded by the Fifth Circuit, because he concluded that monetary relief was not available under Article 13 (b).

In FTC c. Credit Bureau Center, LLC, the FTC brought an action against Credit Bureau Center (CBC) for operating a website that offered a free credit report and credit score, but which automatically enrolled consumers who requested the free information in a service. credit monitoring for a monthly fee. The FTC alleged that the website’s marketing and negative option functionality violated the FTC’s UDAP ban and ROSCA (Restoring Online Shopper Confidence). The district court ruled in favor of the FTC, issued a permanent injunction, and ordered CBC to pay more than $ 5 million in restitution.

On appeal, the Seventh Circuit upheld the permanent injunction, but overturned the award of restitution after ruling that Article 13 (b) did not allow monetary relief. (The United States Supreme Court granted the FTC’s motion for a writ of certiorari and the case was supposed to be consolidated with AMG Capital Management v. FTC but the Supreme Court overturned the granting of certiorari. Subsequently, in AMG, the Supreme Court ruled that Section 13 (b) does not allow the FTC to seek monetary relief such as restitution or surrender.) AMG and the issuance of its warrant by the Seventh Circuit, the FTC filed a petition with the district court in its action against CBC to vary the judgment to reimpose the same restitution under Section 19 and ROSCA.

Section 18 of the FTC Act authorizes the FTC to issue rules defining unfair or deceptive acts or practices. If a rule promulgated under Section 18 is violated, the FTC may seek “legal and equitable remedies, including restitution, from violators” under Section 19 of the FTC Act. ROSCA Section 5 (a) allows the FTC to enforce ROSCA by treating ROSCA violations as violations of a rule promulgated under Section 18.

The FTC filed its motion to vary the judgment under Rule 59 (e) of the Federal Rules of Civil Procedure, which requires the claimant to “clearly establish a manifest error of law or a change in applicable or present law. newly discovered evidence. . “The FTC has asserted that it can seek monetary redress for ROSCA violations under Section 19, a provision it did not cite in its complaint. It also argued that, given that Section 5 (a) of ROSCA incorporates all of its enforcement powers under the FTC Act, the FTC not only informed the CBC of the factual basis for its ROSCA claim and the relief sought (it (i.e. restitution), but also involved an alternate route to obtain this remedy. than Article 13 (b).

In response to the FTC’s petition, CBC made a number of counterarguments, including that the court could not change its earlier judgment because the Seventh Circuit mandate did not allow further proceedings, the law of the FTC on the doctrine of the case prevented the FTC from seeking relief under alternative law, the FTC had waived a pecuniary relief under section 19 by pursuing such relief under section 13 ( (b), and unfair prejudice because the FTC did not specifically invoke Section 19 in its complaint.

The district court agreed with the FTC that the Seventh Circuit warrant did not prevent it from granting the same Section 19 relief it had previously granted under Section 13 (b) because that the Seventh Circuit did not consider whether the FTC could seek monetary relief under Section 19. It also rejected all of CBC’s other arguments and concluded that “because the complaint sufficiently linked the factual allegations and demands of the FTC’s remedy for the ROSCA violation, the invocation of Section 5 (a) of ROSCA was sufficient to warn CBC about “the methods of enforcement and the nature of the remedies available under Section 19” . The district court said it was “satisfied that it had the power to vary the earlier judgment under rule 59 (e) because of the change in law” and varied its earlier judgment to grant the same remedy to consumers under ROSCA and section 19. “

For cases involving violations of FTC rules, such as the Telemarketing Selling Rule and the rules implementing the Children’s Online Privacy Protection Act, or laws such as ROSCA that include language Treating a violation of the law as a violation of a consumer protection rule under the FTC Act, the FTC can be expected to continue to bring actions in a federal district court to request consumer remedy under section 19 or civil penalties under section 5 (m) (1) (A) of the FTC Act. For cases that do not involve rule violations (i.e. cases alleging only UDAP violations), in order to obtain monetary redress, the FTC will need to establish UDAP liability first. of the defendant in the administrative action (and any appeal), before being able to seek pecuniary compensation. appeal to a federal district court in accordance with Article 19.


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