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For decades, the Federal Trade Commission (FTC) had relied upon Section 13(b) of the FTC Act as its authority for gaining monetary remedies for violations of Section 5 of the Act—especially for unfair or deceptive practices. In the Spring of 2021, the US Supreme Court rejected the FTC’s interpretation of this authority, essentially closing off this avenue for obtaining monetary remedies. Various stakeholders have been proposing legislation to provide the Commission authority for monetary remedies in de novo Section 5 cases. Several of those proposals included broad authority to impose civil penalties unrelated to consumer injury or ill-gotten gain.

In response to these proposals, the US Chamber of Commerce retained NERA Associate Director Dr. Andrew Stivers to author a paper examining monetary remedies in the context of the FTC’s Section 5 authority. In the paper, Dr. Stivers applies his expertise on consumer market regulation and injury to analyze the Commission’s existing monetary remedy authorities and provide a recommendation for what should replace the disallowed monetary remedy under Section 13(b).

Given the uncertainty about whether particular practices may be found to be deceptive or unfair under Section 5 and the negative spillover costs inherent in punitive penalties against legitimate market actors in the presence of that uncertainty, Dr. Stivers recommended monetary remedies that continue to balance the ex-ante clarity of what is violative with the severity of the available monetary remedy. This means not authorizing civil penalty authority for first-time violations of Section 5 and instead tying these remedies to realized consumer injury.