Federal Trade Commission: Civil Enforcement - An Overview

FTC White Collar Civil Enforcement Overview: Agency Powers & Process

The Federal Trade Commission (FTC) is a federal agency that enforces consumer protection and antitrust laws, primarily through civil actions.

When the FTC believes a violation of laws within their jurisdiction has occurred (generally consumer protection or antitrust laws), it can initiate an enforcement action either through its own administrative process or by filing a lawsuit in federal court.

On the consumer protection side, most cases involve alleged violations of Section 5 of the FTC Act, which prohibits “unfair or deceptive acts or practices”. This covers a wide range of alleged misconduct—from false advertising and online scams to privacy violations. The FTC also enforces specific statutes and trade regulations (like the Telemarketing Sales Rule, COPPA, etc.), which carry civil penalties for violations. The FTC does not have criminal jurisdiction, but, like with the SEC, it can work in parallel with the Department of Justice to refer cases for criminal prosecution.

FTC Enforcement Process: How Investigations Begin

An FTC enforcement action typically begins with a non-public investigation. FTC staff use investigative tools such as subpoenas and Civil Investigative Demands (CIDs) to gather documents, data, and testimony. If the evidence indicates some type of violation within its jurisdiction the FTC will decide on an enforcement route.

FTC Administrative Judges

In some cases, the FTC commences an administrative proceeding by issuing an administrative complaint. An Administrative Law Judge then hears the case and, if the FTC prevails, the Commission may issue a cease-and-desist order against the defendant.

An FTC administrative action is an in-house proceeding. The FTC issues an administrative complaint, the case is tried before an ALJ under the FTC’s Rules of Practice, and the ALJ’s decision can be appealed to the full Commission and then to a federal appellate court. If the FTC ultimately wins, the outcome is typically a cease-and-desist order prohibiting the unlawful practices.

While administrative orders themselves don’t impose monetary relief, the FTC can later go to federal court under Section 19 of the FTC Act to obtain consumer redress for conduct that has been found unlawful in the administrative case (provided the FTC shows the violative conduct was widely dishonest or fraudulent). Additionally, if a company violates an FTC administrative order or certain trade regulations, the FTC can seek civil penalties for those violations.

FTC Federal Court Complaint

In other instances—especially where immediate consumer harm is alleged—the FTC goes directly to federal court to sue the defendants.

Under Section 13(b) of the FTC Act, the FTC has authority to seek injunctive relief in court to stop ongoing or imminent illegal conduct, which can prompt urgent action from a white-collar defense attorney. This often involves asking the court for a temporary restraining order (TRO) and preliminary injunction to halt the conduct during the case, sometimes done ex parte (meaning without prior notice to the defendants) to prevent asset dissipation. In alleged fraud cases, the FTC will frequently seek an asset freeze and appointment of a receiver at the outset to preserve assets for potential consumer redress.

Federal court is often used when quick intervention is needed – for example, shutting down an alleged scam and freezing assets through a TRO. These cases can lead to preliminary and permanent injunctions ordered by the court, and if laws with penalty provisions are involved, the FTC may obtain monetary judgments or civil penalties by the end of the case.

Historically, the FTC commonly obtained restitution or disgorgement in these court cases as equitable relief; however, the Supreme Court’s AMG Capital Management decision in 2021 confirmed that Section 13(b) does not authorize monetary relief. As a result, the FTC now often pairs its Section 13(b) cases with other legal strategies to get money (such as alleging rule violations that carry penalties, or using Section 19 or other statutes for restitution).

Court v. Administrative Judges

The FTC’s choice between administrative and judicial forums generally depends on the situation: administrative cases let the FTC develop the law and can lead to later consumer redress or penalties if orders are violated, while court cases can provide faster relief (but, after the AMG 2021 Supreme Court decision, the FTC can no longer obtain monetary restitution directly under Section 13(b), so it now relies more on other legal pathways for monetary remedies), such as by alleging violations of their “rules.”

In summary, administrative actions are typically used to set legal precedent or handle complex issues (with a slower process), whereas federal court actions are used to swiftly stop harmful conduct and protect consumers in real time.

Both paths are civil, and both play important roles in FTC enforcement.

Common Legal Theories used in FTC Civil Enforcement Cases

In civil enforcement, the FTC typically alleges that the defendant’s practices were deceptive or unfair under Section 5.

A deceptive act generally involves a material misrepresentation or omission likely to mislead reasonable consumers, while an unfair practice is one that causes substantial consumer injury not outweighed by benefits.

In cases targeting specific industries or practices, the FTC may also allege violations of specialized rules or statutes (for example, the Telemarketing Sales Rule in telemarketing scams, the Restore Online Shoppers’ Confidence Act in negative option subscription cases, or the Children’s Online Privacy Protection Act in cases involving online child privacy).

These violations are often treated as unfair or deceptive practices as well, and many allow the FTC to seek civil penalties as well as asset freezes. The FTC’s burden of proof in its civil cases is typically to show by a preponderance of evidence that the law was violated; if so, remedies can include injunctive relief (to stop the illegal conduct, freeze assets, appoint receivers, etc.), equitable monetary relief (such as restitution to consumers or disgorgement of ill-gotten gains, though this is now pursued under specific statutes or after administrative proceedings, rather than under Section 13(b)), and civil penalties where authorized.

Most FTC civil cases are settled before full trial, resulting in consent orders or stipulated judgments. As noted, FTC civil enforcement (which is civil/regulatory in nature) is different from criminal enforcement: the FTC cannot bring criminal charges, but it can refer fraud cases to the Department of Justice for criminal prosecution when appropriate—frequently leading to parallel criminal investigations that require sophisticated white collar criminal counsel, such as those at Dynamis LLP.

The most difficult part about an FTC case is the ex parte asset freezes that the FTC typically obtain. Read about these asset freezes here.

Contact Dynamis LLP today to learn how we can help you navigate the complexities of Federal Trade Commission investigations and “prosecutions.” If you are an organization or individual facing a situation requiring an aggressive, robust response to a Federal Trade Commission inquiry, civil demand, or even an active case, contact attorneys at Dynamis LLP or email whitecollar@dynamisllp.com today.