On June 24, 2020, Gerry Sachs was quoted in Bloomberg Law on challenges to the Federal Trade Commission’s (FTC) disgorgement powers. According to the article, the Supreme Court’s decision in Liu v. SEC placed limits on the Securities and Exchange Commission’s (SEC) ability to use disgorgement without considering and deducting legitimate business expenses.
That ruling could help define the FTC’s disgorgement authority against companies engaged in fraud or anti-competitive conduct, which has come under attack in recent years as corporations facing multimillion-dollar penalties have argued that the commission doesn’t have the explicit power to obtain monetary relief as a form of restitution in cases.
The Supreme Court may take up the debate as there are currently three cases challenging the FTC’s disgorgement powers, Sachs said. “How the Liu case impacts the Court’s treatment of the pending petitions related to the FTC remains to be seen, but it is sure to play some role should the Court take the petitions,” Sachs said.
Provided that the FTC can obtain disgorgement, “the Court is likely to find the disgorgement determination should be based on no greater than net profits,” Sachs added. “Defendants are likely to argue that they had legitimate expenses that should be deducted from a disgorgement determination and the FTC will have to counter that argument, which imposes additional litigation.”
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