UPDATING THE FEDERAL AGENCY ENFORCEMENT PLAYBOOK.

• Author: Zalepuga, Aiste

INTRODUCTION

Multinational technology companies--including Amazon, Apple, Facebook, and Google--are leading news headlines for potentially anticompetitive behavior. (1) If anticompetitive behavior is found, then agencies may seek and courts will craft an appropriate remedy for the harm. (2) Remedies can be legal or equitable. While legal remedies tend to be formulaic, equitable remedies allow for significantly more discretion and creativity--providing the wielder of equity with a powerful tool against defendants. (3) The proposed remedies for "Big Tech" are far ranging and include equitable monetary relief, such as disgorgement and restitution. (4) Selecting one remedy over another could reshape industries and tangibly impact our daily lives. (5)

The relationship between courts and agencies plays an important role in the assignment of remedies. The "classic vision of lawmaking" focuses on a bill that becomes a law; however, the interpretation and implementation of statutes by courts and agencies provide most of the detail in federal law. (6) Recent federal court cases suggest a new trend in the relationship between courts and agencies when interpreting statutes. Federal courts appear to be sharpening the distinction between law and equity when interpreting statutes, in order to limit agency enforcement powers.

Recent federal court cases concerning the Securities and Exchange Commission (SEC) and Federal Trade Commission (FTC) demonstrate this new relationship between the courts' insistence on equitable principles and the agencies' enforcement powers. For instance, in Liu v. SEC, (7) the Supreme Court limited SEC enforcement powers by holding the agency accountable to traditional principles of equity, (8) and similar implications arose for the FTC. In this respect, the FTC provides an interesting case study: the FTC's use of equitable remedies grew into a powerful tool to secure some of the agency's most significant settlements, (9) until federal courts stepped in to limit the FTC's arsenal of equitable remedies. For example, the Court unanimously curtailed section 13(b) of the FTC Act (10) in AMG Capital Management, LLC v. FTC, (11) returning the remedy in question to a traditional equitable category.

Section 13(b) expressly authorizes the FTC to seek permanent injunctions, but other equitable remedies--namely disgorgement and restitution--are not mentioned. (12) Nevertheless, the FTC has read section 13(b) in an increasingly expansive manner over the past four decades to secure large monetary remedies. (13) While the FTC's expansive use of section 13(b) has long been in debate, (14) a circuit split recently occurred: the Ninth Circuit affirmed a broad reading of section 13(b), while the Third and Seventh Circuits overruled longstanding precedent by holding that the FTC cannot obtain monetary relief under section 13(b). Against the backdrop of this circuit split, the Supreme Court decided the future of section 13(b) in AMG Capital, holding that the express right to obtain an injunction does not provide the FTC with the authority to obtain monetary relief. (15) The Court's interpretation of the FTC Act is instructive to the interpretation of other statutes, as the Court generally is applying an increasingly textualist approach to statutory interpretation. (16)

This Note explores the relationship between equitable remedies and agency enforcement powers, arguing that federal courts are increasingly distinguishing between law and equity in remedies to impose limits on agency enforcement powers. Part I tracks factors driving the FTC's broad reading of section 13(b) until AMG Capital. (17) Part II analyzes developments in the SEC with a focus on Liu and suggest that federal courts are returning to traditional categories of equitable remedies. Part III concludes with two trends in determining the scope of agency enforcement powers. First, federal courts are requiring agencies to show that their use of equitable remedies conforms with traditional principles of equity. And second, the reading of statutes in light of traditional equitable principles restrains agency overreach while preserving the administrative state, reflecting a "neoclassical" (18) approach to administrative law.

1. EVOLUTION OF FTC ENFORCEMENT POWERS

   Part I provides an overview of FTC enforcement powers and tracks the evolution of section 13(b) of the FTC Act. Section LA looks at the introduction of section 13(b) and the use of disgorgement in consumer protection and competition cases. Section LB traces the FTC's growing reliance on section 13(b) in the past forty years, with an inflection point in 2012 when the FTC started reading section 13(b) even more broadly and began seeking equitable monetary remedies in more antitrust cases. (19) Section I.C assesses recent federal court cases that created circuit splits and overturned longstanding precedent to cabin the FTC's discretion in pursuing equitable monetary relief.

   1. Introduction to Equitable Remedies

      The distinction between equitable and legal remedies carries important consequences. (20) This distinction originated from the different courts that emerged in England, which set the stage for the modern remedies toolkit. (21) Equity courts developed to provide adequate relief in the cases where courts of law failed to do so. (22) Equitable relief was more difficult to obtain than a legal remedy because equitable relief required a showing of no adequate remedy at law. (23) Although the courts of law and equity have largely merged, this division still pervades the modern system of remedies. (24) Among other functions, the law-equity distinction in remedies acts as a safeguard against opportunism and an overbroad reading of what constitutes an equitable remedy. (25) Equitable remedies are relevant to determining the scope of agency enforcement powers because classifying a remedy as equitable triggers "special doctrines" that agencies must conform to. (26)

      The FTC Act lays the foundation for the agency's enforcement powers. For brief background, the FTC's law enforcement authority (27) covers consumer protection and antitrust laws. (28) After the FTC completes an investigation, the agency can seek an enforcement action using an administrative or judicial process. (29) Section 13(b) of the FTC Act authorizes the FTC to seek preliminary and permanent injunctions--subcategories of equitable remedies--injudicial proceedings. The FTC broadly construes its equitable powers under section 13(b). In consumer protection cases, the FTC can seek a permanent injunction to block unfair or deceptive practices, impose monetary equitable relief to address past violations, and obtain preliminary injunctions or temporary restraining orders to freeze assets so that monetary equitable relief can be obtained at a later date. (30) In antitrust cases, the FTC typically seeks preliminary injunctions to halt mergers or acquisitions while FTC administrative proceedings are pending. (31) The FTC also has used section 13(b) to obtain other equitable remedies that are not explicitly mentioned in the statute, including disgorgement and restitution. (32)

      Section 13(b) of the FTC Act increased agency enforcement powers by authorizing the FTC to seek and obtain permanent injunctions. (33) Congress introduced section 13(b) in 1973 as a response to the perception of the FTC's limited authority to go after anticompetitive mergers. (34) Although section 13(b) was added in the context of competition cases, the FTC began using section 13(b) for consumer protection cases as a hook to obtain monetary equitable remedies. (35) In 1975, Congress amended the FTC Act, adding monetary relief to the FTC's enforcement toolkit to help the agency combat fraud in consumer protection cases. (36) In addition, Congress allowed the FTC to obtain monetary relief but limited this power to two specific conditions, provided in section 19 (37) and section 5(m) (1) (B). (38) However, both sections failed to combat fraud, due to the inability of courts to order redress before the money was out of reach. (39) The FTC needed a workaround to freeze the assets in time, so the agency returned to section 13(b).

   2. Growing Reliance on Equitable Remedies

      The use of section 13(b) to obtain equitable remedies (including disgorgement and restitution) has turned into a powerful tool to secure some of the FTC's most significant settlements. In particular, FTC v. H.N. Singer, Inc. (40) and the withdrawal of the agency's internal policy guidance contributed to section 13(b)'s development into such a powerful tool. Singer broadened FTC enforcement powers, greatly expanding the scope of equitable relief. In Singer, the Ninth Circuit accepted the FTC's argument that because section 13(b) permits permanent injunctions, the statute also "by implication gives the court authority to afford all necessary ancillary relief," including restitution. (41) Indeed, the Singer court held that section 13(b) provides the authority "to grant any ancillary relief necessary to accomplish complete justice." (42) Such authority is not expressly provided in section 13(b), but the Ninth Circuit allowed the FTC to successfully argue that the statute provides this authority by implication.

      The withdrawal of the FTC's internal policy guidance--the 2003 Policy Statement on Monetary Equitable Remedies in Competition Cases ("MER Policy Statement")--in 2012 marked another expansion of the agency's enforcement powers through section 13(b). (43) While the MER Policy Statement was in effect, disgorgement was not a "routine" remedy for antitrust cases. (44) The agency only sought disgorgement and restitution in "exceptional" competition cases. (45) And when the FTC did deem a case "exceptional," the agency followed three guiding factors: "(1) whether 'the underlying violation is clear'; (2) whether there is a 'reasonable basis for calculating the amount of the remedial payment'; and (3) 'the value of...