The Limits of Antitrust Remedies: Brunswick v. Pueblo Bowl-O-Mat for the FTC

For over four decades, the FTC successfully obtained equitable monetary remedies in federal courts using Section 13b of the Federal Trade Commission (FTC) Act, until it didn’t.¹ In AMG Capital Management v. FTC, the U.S. Supreme Court unanimously held that Section 13b of the FTC Act did not allow the FTC to obtain equitable monetary remedies–such as disgorgement or restitution–in federal court.² While AMG Capital was a consumer protection case, the Court’s decision also affected the FTC’s ability to use Section 13b to obtain equitable monetary remedies in antitrust cases.³ Viewed through the lens of optimal deterrence, AMG Capital could be seen as Brunswick v. Pueblo Bowl-O-Mat⁴ for the FTC, placing substantive limits on remedies that alter firms’ incentives to engage in conduct that might be subject to an FTC challenge, as well as the FTC’s incentives to transform antitrust law through litigation.⁵

Thus, after AMG Capital, if the FTC chooses to challenge conduct it believes is anticompetitive in federal court under Section 13(b), its remedies are limited to a preliminary injunction and, in “proper cases,” a permanent injunction.⁶ Alternatively, the Commission can challenge anticompetitive conduct through administrative litigation and, if successful, obtain a cease-and-desist order.⁷ In either case, direct monetary remedies would not be available to the FTC for first-time violations.⁸ FTC leadership quickly condemned AMG Capital and called for Congress to pass legislation to restore the status quo.⁹ Despite these pleas, Congress has not moved, and the FTC remains unable to obtain equitable monetary remedies in federal court for first-time violations of the FTC Act.¹⁰ In this short article, we examine the implications of limiting the FTC’s ability to obtain equitable monetary relief in Federal Court to address conduct that the FTC believes is anti-competitive and suggest potential legislative approaches to restoring the Commission’s ability to obtain equitable monetary remedies in proper antitrust cases.

To do so, we must first distinguish between two types of cases brought by the FTC under Section 13b. The first set of cases are those that also would violate the Sherman Act. The Supreme Court has held that all violations of the Sherman Act also violate the FTC Act.¹¹ While the FTC does not directly enforce the Sherman Act,¹² it uses the FTC Act’s prohibition of “unfair methods of competition” (UMC) to address those activities that would also violate the Sherman Act.¹³ AMG Capital, perhaps accidentally, could be seen as a way to harmonize FTC and DOJ remedial powers for conduct that would violate the Sherman Act. Prior to AMG Capital, the FTC could—and on some occasions did—seek equitable monetary relief for conduct that would violate the Sherman Act, contrary to the Antitrust Division’s practice.¹⁴ Now, the FTC is limited to obtaining permanent injunctions in “proper cases”, which brings it in line with the DOJ as long as federal courts adopt a definition of “proper cases” that is coincident with the courts’ remedial decisions under the Sherman Act.¹⁵

Although AMG Capital could bring FTC and DOJ antitrust remedies into harmony, there could nonetheless be a gap when one considers private antitrust remedies. In particular, Section 4(a) of the Clayton Act creates a private right of action with treble damages and attorney fee shifting for prevailing plaintiffs alleging violations of the Sherman Act.¹⁶ In addition to these incentives for private parties to file antitrust suits, Section 5(a) of the Clayton Act attempts to further increase the effect of these incentives¹⁷ by allowing private plaintiffs to benefit from collateral estoppel when bringing follow-on suits to successful DOJ enforcement actions.¹⁸ The availability of such actions arguably explains the DOJ’s decision not to pursue equitable monetary relief in Sherman Act cases, as the enhanced potential for the recovery of treble damages by private plaintiffs can serve to deter businesses from engaging in anticompetitive conduct.¹⁹

While there is no private right of action under Section 5 of the FTC Act, a private plaintiff can still challenge conduct that would violate the Sherman Act, even though the FTC brought it under Section 5. The crucial difference comes from the fact that private plaintiffs in Sherman Act cases challenging the same conduct challenged by the FTC under Section 5 of the FTCA are not able to invoke collateral estoppel when the FTC obtains a judgment.²⁰ To the extent that the additional cost of proving a case deters private litigation, one could argue that the use of equitable monetary remedies by the FTC may have served to fill the void generated by the reduction in the relative number of private cases that follow successful FTC actions. Thus, a desire to offset this loss of deterrence may explain the FTC’s use of equitable monetary relief in some cases.²¹ Under these circumstances, the Court’s AMG decision may make overall remedies and deterrence in FTC cases weaker than in similar DOJ cases,²² although there is no a priori way to know whether this facet moves the FTC closer to or further away from optimal deterrence.²³

The second set of competition cases that AMG Capital impacts are those where the FTC Act reaches other practices that harm competition but that may not fit neatly into the categories of conduct formally prohibited by the Sherman Act.²⁴ In cases that would also violate the Sherman Act, those subject to the antitrust laws can rely on extensive Sherman Act precedents and judicial experience, as well as extensive government and private litigation experience as a guide to complying with the antitrust laws. As many have pointed out, no similar body of law and experience exists for either past or potential future FTC Act Section 5 stand-alone cases.²⁵ Robust enforcement of stand-alone FTC Section 5 cases that are untethered from the Sherman Act and accompanied by the potential for equitable monetary remedies, such as disgorgement, would generate substantial legal uncertainty and plausibly lead to overdeterrence.²⁶

In the past, the FTC has mitigated the potential for such overdeterrence effects through written policy statements limiting both the scope of stand-alone FTC Act cases²⁷ and the use of equitable monetary remedies in Section 5 UMC cases.²⁸ The FTC’s 2015 Statement on Enforcement Principles sought to align Section 5 with the Sherman and Clayton Acts by seeking to promote consumer welfare, challenging conduct that is likely to cause harm to competition, and evaluating conduct under the rule of reason.²⁹ The 2003 Statement on Monetary Equitable Remedies in Competition Cases set out a policy where the FTC would seek disgorgement or restitution in a competition case only when the underlying violation was clear and where there was a reasonable basis for calculating the amount of a remedial payment. The policy also would have the FTC also consider the marginal value of seeking such remedies taking into account other remedies available in the matter.

But in recent years, the FTC has taken steps to remove these limits. The FTC withdrew the 2015 statement in 2021³⁰ and replaced it in 2022 with a policy that announced an expansive and unbounded approach to Section 5 UMC cases.³¹ The Commission withdrew the Statement on Monetary Equitable Remedies in Competition Cases in 2012³² and it has not been replaced.³³

In a broad sense, the Court’s AMG Capital decision can be viewed as a substitute for the latter withdrawn statement, leaving the current FTC with broad powers but weak remedies. The structure is consistent with recent economic theory on the design of legal rules, which suggests efficiency in bundling weak remedies with uncertain legal norms.³⁴ Indeed, Kovacic & Winerman argue that this was part of the original design of the FTC, noting that “the FTC’s administrative powers under Section 5 incorporated a significant trade-off. The Commission’s power to shape doctrine would be relatively broad and would include the authority to arrest conduct not previously condemned by prevailing interpretations of the Sherman Act. Its remedial authority would be relatively light-handed and include the capacity to impose only equitable remedies.”³⁵ The light-handed remedial structure, where the FTC only has the power to issue an injunction or cease-and-desist order, is designed to ameliorate the social costs of uncertainty over what conduct might violate Section 5. Not only are firms not over-deterred from engaging in conduct that might violate Section 5, but the ability to have a relatively free bite-at-the-apple also encourages companies to engage in conduct, including litigation, that will elucidate the true legal standard.³⁶ Once the standard is clarified, violations of cease-and-desist orders face civil penalties if the order clearly defines the line between legal and illegal conduct.³⁷

The Court’s decision in AMG Capital is similar in this respect to its earlier announcement of the antitrust injury doctrine in Brunswick Corp v Pueblo Bowl-O-Mat Inc.³⁸ Antitrust injury is as often described as a standing doctrine, but the holding in Brunswick is a limitation on remedies under Section 4 of the Clayton Act.³⁹ These limits, in turn, promoted the transformation of antitrust rules by altering the incentives of plaintiffs to bring cases in a way that is more consistent with optimal deterrence.⁴⁰ More generally, both cases highlight the numerous important and understudied effects of the incentive function provided by remedies.⁴¹

Finally, the analysis above suggests the following path for restoring the FTC’s ability to obtain equitable monetary relief. Unlike the proposed statutes that were introduced after the Court’s decision in AMG Capital,⁴² the ability for the FTC to obtain equitable monetary relief in competition cases in federal court would be limited to clear violations and subject to the other limitations contained in the FTC withdrawn 2003 Policy Statement,⁴³ including relief that would mimic the deterrent effect of follow-on Sherman Act cases. Such relief would not be available for stand-alone Section 5 violations that have not been clarified through administrative litigation.⁴⁴