Earlier this year, the U.S. Supreme Court ruled unanimously that the FTC could no longer use Section 13(b) of the FTC Act to invoke monetary penalties against companies. This ruling was a reversal of a four-decade pattern by the FTC and in its wake, the Commission voted 3-2 to approve amendments to its rulemaking procedure.
This new change will allow informal hearing procedures and eliminate the current rules that are not articulated in the FTC Act—like the publication of a staff report that contains a rulemaking and recommendations record for public comment—but maintain that these updated procedures will offer extensive opportunities for public comment.
“These changes show the FTC is turning the page on decades of self-imposed red-tape and returning to the participatory and dynamic process for issuing Section 18 rules that Congress envisioned,” said Commissioner Rebecca Kelly Slaughter.
The FTC’s routine procedures have been in flux since the Supreme Court’s ruling that the FTC had been incorrectly wielding Section 13(b). In a statement last month, the FTC announced it would be looking for other methods to seek restitution or disgorgement from companies and that “Section 13(b) is not the FTC’s only tool.” Since then, the FTC has been turning to new ways to invoke financial penalties, like unusual implementations of the ROSCA Act and a review of the Business Opportunity Rule.
This month, the FTC attempted to use ROSCA to pursue monetary relief in FTC v. Cardiff, but the court found that the Commission was continuing to calculate damages under Section 13(b), rather than ROSCA, and had only disclosed its ROSCA expert after discovery. In a blow to the FTC’s use of ROSCA, the court ruled that in FTC v. Cardiff, the FTC had forfeited its right to seek monetary relief under an alternative statute and confirmed that the FTC was not entitled to monetary relief or exempt from the standards and rules of litigation.