Hearing: The Consumer Protection and Recovery Act: Returning Money to Defrauded Consumers (House)

Summary

A virtual hearing titled The Consumer Protection and Recovery Act: Returning Money to Defrauded Consumers, before the Subcommittee on Consumer Protection and Commerce of the Committee on Energy and Commerce, House of Representatives. Hon. Jan Schakowsky presided as chair of the subcommittee, which met via Cisco Webex online video conferencing. The listed witnesses are Rebecca Slaughter, Acting Chairwoman, Federal Trade Commission; Anna Laitin of Consumer Reports; J. Howard Beales III, Ph.D., of the George Washington School of Business; and Ted Mermin of the University of California, Berkeley School of Law. Submitted material includes H.R. 2668, the Consumer Protection and Recovery Act, submitted by Ms. Schakowsky, and news articles on vaccine cards submitted by Mr. Bilirakis.

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Issuer: Congressional materials
Document type: Congressional Hearing
Case: Chrg Chrg 117Hhrg47220 Chrg 117Hhrg47220

Cite this document

“Hearing: The Consumer Protection and Recovery Act: Returning Money to Defrauded Consumers (House).” Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-chrg-117hhrg47220-chrg-117hhrg47220/, SHA-256 cf441d1700afc8b8e27125d7013a62e54ecf182c7e40ce7b33ebd22829b926e9.

Full text

THE CONSUMER PROTECTION AND RECOVERY
ACT: RETURNING MONEY TO DEFRAUDED CON-
SUMERS

VIRTUAL HEARING
BEFORE THE

SUBCOMMITTEE ON CONSUMER PROTECTION AND
COMMERCE
OF THE

COMMITTEE ON ENERGY AND
COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION

APRIL 27, 2021

Serial No. 117–24

(
Published for the use of the Committee on Energy and Commerce
govinfo.gov/committee/house-energy
energycommerce.house.gov

U.S. GOVERNMENT PUBLISHING OFFICE
47–220 PDF WASHINGTON : 2022

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COMMITTEE ON ENERGY AND COMMERCE
FRANK PALLONE, JR., New Jersey
Chairman
BOBBY L. RUSH, Illinois CATHY MCMORRIS RODGERS, Washington
ANNA G. ESHOO, California Ranking Member
DIANA DEGETTE, Colorado FRED UPTON, Michigan
MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California BRETT GUTHRIE, Kentucky
KATHY CASTOR, Florida DAVID B. MCKINLEY, West Virginia
JOHN P. SARBANES, Maryland ADAM KINZINGER, Illinois
JERRY MCNERNEY, California H. MORGAN GRIFFITH, Virginia
PETER WELCH, Vermont GUS M. BILIRAKIS, Florida
PAUL TONKO, New York BILL JOHNSON, Ohio
YVETTE D. CLARKE, New York BILLY LONG, Missouri
KURT SCHRADER, Oregon LARRY BUCSHON, Indiana
TONY CÁRDENAS, California MARKWAYNE MULLIN, Oklahoma
RAUL RUIZ, California RICHARD HUDSON, North Carolina
SCOTT H. PETERS, California TIM WALBERG, Michigan
DEBBIE DINGELL, Michigan EARL L. ‘‘BUDDY’’ CARTER, Georgia
MARC A. VEASEY, Texas JEFF DUNCAN, South Carolina
ANN M. KUSTER, New Hampshire GARY J. PALMER, Alabama
ROBIN L. KELLY, Illinois, Vice Chair NEAL P. DUNN, Florida
NANETTE DIAZ BARRAGÁN, California JOHN R. CURTIS, Utah
A. DONALD MCEACHIN, Virginia DEBBBIE LESKO, Arizona
LISA BLUNT ROCHESTER, Delaware GREG PENCE, Indiana
DARREN SOTO, Florida DAN CRENSHAW, Texas
TOM O’HALLERAN, Arizona JOHN JOYCE, Pennsylvania
KATHLEEN M. RICE, New York KELLY ARMSTRONG, North Dakota
ANGIE CRAIG, Minnesota
KIM SCHRIER, Washington
LORI TRAHAN, Massachusetts
LIZZIE FLETCHER, Texas

PROFESSIONAL STAFF
JEFFREY C. CARROLL, Staff Director
TIFFANY GUARASCIO, Deputy Staff Director
NATE HODSON, Minority Staff Director

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SUBCOMMITTEE ON CONSUMER PROTECTION AND COMMERCE
JAN SCHAKOWSKY, Illinois
Chair
BOBBY L. RUSH, Illinois GUS M. BILIRAKIS, Florida
KATHY CASTOR, Florida Ranking Member
LORI TRAHAN, Massachusetts FRED UPTON, Michigan
JERRY MCNERNEY, California ROBERT E. LATTA, Ohio
YVETTE D. CLARKE, New York BRETT GUTHRIE, Kentucky
TONY CÁRDENAS, California, Vice Chair LARRY BUCSHON, Indiana
DEBBIE DINGELL, Michigan NEAL P. DUNN, Florida
ROBIN L. KELLY, Illinois GREG PENCE, Indiana
DARREN SOTO, Florida DEBBIE LESKO, Arizona
KATHLEEN M. RICE, New York KELLY ARMSTRONG, North Dakota
ANGIE CRAIG, Minnesota CATHY MCMORRIS RODGERS, Washington
LIZZIE FLETCHER, Texas (ex officio)
FRANK PALLONE, JR., New Jersey (ex
officio)

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C O N T E N T S

Page
Hon. Frank Pallone, Jr., a Representative in Congress from the State of
New Jersey, opening statement .......................................................................... 2
Prepared statement .......................................................................................... 3
Hon. Gus M. Bilirakis, a Representative in Congress from the State of Flor-
ida, opening statement ........................................................................................ 4
Prepared statement .......................................................................................... 6
Hon. Jan Schakowsky, a Representative in Congress from the State of Illi-
nois, opening statement ....................................................................................... 7
Prepared statement .......................................................................................... 8
Hon. Kelly Armstrong, a Representative in Congress from the State of North
Dakota, opening statement ................................................................................. 9
Prepared statement .......................................................................................... 10

WITNESSES
Rebecca Slaughter, Acting Chairwoman, Federal Trade Commission ................ 12
Prepared statement .......................................................................................... 14
Answers to submitted questions ...................................................................... 138
Anna Laitin, Director, Financial Fairness and Legislative Strategy, Consumer
Reports .................................................................................................................. 46
Prepared statement .......................................................................................... 49
Answers to submitted questions ...................................................................... 142
J. Howard Beales III, Ph.D., Emeritus Professor of Strategic Management
and Public Policy, George Washington School of Business .............................. 58
Prepared statement .......................................................................................... 60
Answers to submitted questions ...................................................................... 145
Ted Mermin, Executive Director, Center for Consumer Law and Economic
Justice, University of California, Berkeley School of Law ................................ 67
Prepared statement .......................................................................................... 69
Answers to submitted questions ...................................................................... 151

SUBMITTED MATERIAL
H.R. 2668, the Consumer Protection and Recovery Act, submitted by Ms.
Schakowsky .......................................................................................................... 95
Letter of April 26, 2021, from Access Now to Senator Maria Cantwell, et
al., submitted by Ms. Schakowsky ...................................................................... 100
Letter of April 27, 2021, from Veterans Education Success to Senator Maria
Cantwell, et al., submitted by Ms. Schakowsky ................................................ 103
Article of April 8, 2021, ‘‘Online Scammers Have a New Offer for You:
Vaccine Cards,’’ by Sheera Frenkel, New York Times, submitted by Mr.
Bilirakis ................................................................................................................ 106
Article of April 18, 2021, ‘‘‘Ripe for fraud’: Coronavirus vaccination cards
support burgeoning scams,’’ by Dan Diamond, Washington Post, submitted
by Mr. Bilirakis .................................................................................................... 109
Letter of April 26, 2021, from Neil L. Bradley, Executive Vice President
and Chief Policy Officer, Chamber of Commerce of the United States of
America, to Ms. Schakowsky and Mr. Bilirakis, submitted by Mr. Bilirakis . 115

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Page
Report of the George Mason University School of Law, ‘‘Striking the Proper
Balance: Redress Under Section 13(b) of the FTC Act,’’ by J. Howard
Beales III and Timothy J. Muris, submitted by Mr. Bilirakis1
Report, ‘‘Choice or Consequences: Protecting Privacy in Commercial Informa-
tion,’’ by J. Howard Beales III and Timothy J. Muris, University of Chicago
Law Review, submitted by Mr. Bilirakis1
Report of the George Mason University Antonin Scalia Law School, ‘‘Privacy
and Consumer Control,’’ by J. Howard Beales III and Timothy J. Muris,
submitted by Mr. Bilirakis1
Report, ‘‘Section 13(b) of the Federal Trade Commission at the Supreme
Court: The Middle Ground,’’ by J. Howard Beales III, Benjamin M. Mundel,
and Timothy J. Muris, The Antitrust Source, December 2020, submitted
by Mr. Bilirakis1
Opinion of the Supreme Court, AMG Capital Management, LLC, Et Al.,
v. Federal Trade Commission, October Term, 2020, submitted by Mr. Bili-
rakis ...................................................................................................................... 118
Transcript, Hearing on ‘‘Strengthening the Federal Trade Commission’s Au-
thority to Protect Consumers,’’ Senate Commerce, Science, and
Trannsportation Committee, April 20, 2021, submitted by Mr. Bilirakis1
Letter of July 30, 2020, from Joseph J. Simons, Chairman, Federal Trade
Commission, to Mr. Latta, submitted by Mr. Latta .......................................... 136

1 The information has been retained in committee files and is available at https://

docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=112501.

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THE CONSUMER PROTECTION AND RECOV-
ERY ACT: RETURNING MONEY TO DE-
FRAUDED CONSUMERS

TUESDAY, APRIL 28, 2021

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON CONSUMER PROTECTION AND
COMMERCE,
COMMITTEE ON ENERGY AND COMMERCE,
Washington, DC.
The subcommittee met, pursuant to call, at 1:03 p.m., via Cisco
Webex online video conferencing, Hon. Jan Schakowsky (chair of
the subcommittee) presiding.
Members present: Representatives Schakowsky, Rush, Castor,
Trahan, McNerney, Clarke, Cárdenas, Dingell, Kelly, Soto, Rice,
Craig, Fletcher, Pallone (ex officio), Bilirakis (subcommittee rank-
ing member), Upton, Latta, Guthrie, Bucshon, Dunn, Pence, Lesko,
and Armstrong.
Staff present: Jeffrey C. Carroll, Staff Director; Lisa Goldman,
Senior Counsel; Waverly Gordon, General Counsel; Daniel Greene,
Professional Staff Member; Tiffany Guarascio, Deputy Staff Direc-
tor; Perry Hamilton, Clerk; Alex Hoehn-Saric, Chief Counsel, Com-
munications and Consumer Protection; Ed Kaczmarski, Policy Ana-
lyst; Zach Kahan, Deputy Director, Outreach and Member Service;
Mackenzie Kuhl, Digital Assistant; David Miller, Counsel; Kaitlyn
Peel, Digital Director; Tim Robinson, Chief Counsel; Chloe
Rodriquez, Clerk; Andrew Souvall, Director of Communications,
Outreach and Member Services; Sydney Terry, Policy Coordinator;
C.J. Young, Deputy Communications Director; Anna Yu, Profes-
sional Staff Member; Sarah Burke, Minority Deputy Staff Director;
Nate Hodson, Minority Staff Director; Peter Kielty, Minority Gen-
eral Counsel; Bijan Koohmaraie, Minority Chief Counsel, Minority
Oversight and Investigations Chief Counsel; Tim Kurth, Minority
Chief Counsel, Consumer Protection and Commerce; and Michael
Taggart, Minority Policy Director.
Ms. SCHAKOWSKY. The Subcommittee on Consumer Protection
and Commerce will now come to order.
Did you hear that? OK.
Today, we will be holding a hearing entitled ‘‘The Consumer Pro-
tection and Recovery Act: Returning Money to Defrauded Con-
sumers.’’ Due to the COVID 0919 public health emergency, today’s
hearing is being held remotely.
All Members and witnesses will be participating via video con-
ference. As part of our hearing, microphones will be on mute for
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the purpose of eliminating inadvertent background noise, like my
dogs and maybe yours. And, Members and witnesses, you will need
to unmute your microphone each time you wish to speak.
Additionally, Members will need to be visible on the screen in
order to be recognized.
Documents for the record can be sent to Ed Kaczmarski at the
email address that we have provided to your staff. All documents
will be entered into the record at the conclusion of the hearing.
Now, normally I would begin with an opening statement of 5
minutes, but because the chairman of the full committee has a con-
flict and in deference to him, I am going to recognize Frank Pal-
lone, the chairman of the full committee, for 5 minutes to give his
opening statement.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REP-
RESENTATIVE IN CONGRESS FROM THE STATE OF NEW JER-
SEY
Mr. PALLONE. Well, thank you, Madam Chairwoman, and I
apologize for going before you, but I have to speak to one of our
caucuses any minute, so thank you.
Ms. SCHAKOWSKY. Of course.
Mr. PALLONE. Let me say that last Thursday, as you all know,
the Supreme Court ruled that the Federal Trade Commission may
no longer use its primary tool to get Americans their money back
from fraudsters and scammers. And this strikes at the very heart
of the FTC’s mission to protect and provide relief to consumers.
The FTC, we know, lost the case, but it is the American people
that will suffer. And what my colleagues and I have been saying
for over a year was a problem is now unfortunately an emergency.
And certainly Chairwoman Schakowsky has been on the forefront
of telling us that we need to do something.
The FTC used section 13(b) for over 40 years to sue in court to
get consumers the money stolen from them and to force fraudsters
to give up illegal profits, and for over 40 years it was effective in
providing relief. In my home State of New Jersey, the FTC has
sent $37.5 million to over 167,000 residents since July of 2018.
And New Jersey is not unique. The FTC has helped return stolen
money and provided other equitable relief to millions of constitu-
ents every year. Hardworking Americans can feed their families,
pay for rent, buy clothes for their kids because the FTC used this
section 13(b) to return money that was defrauded. And over
200,000 consumers, including many veterans and servicemembers,
scammed by University of Phoenix and DeVry were relieved from
undeserved and burdensome student debt because of the FTC when
it used 13(b).
But if we don’t take any action, the FTC’s ability to provide that
kind of help to our constituents is no longer possible because of the
Supreme Court’s decision. So that is why the FTC unanimously re-
quested Congress to ensure to continue to seek the mandatory re-
lief for consumers under 13(b) as soon as circuit courts first ques-
tioned this authority in 2019, and that is when Chair Schakowsky
and every Democratic Member joined with Vice Chair Cárdenas to
support the Consumer Protection and Recovery Act that we are
considering today.

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And there are no adequate substitutes in the current law that
can simply replace what the FTC lost. The remaining authority of
the FTC is too weak and, where available, will take too long for
meaningful relief for our constituents. Vice Chair Cárdenas’ bill re-
stores the minimum authorities necessary for an effective enforce-
ment regime.
Now, some have argued that we need to take this opportunity to
reconsider the scope of the FTC’s authority and even weaken it, but
I don’t agree with that. I think they should have greater authority
to go after scammers, and simply getting stolen money returned or
a court order preventing further illegal activity is insufficient, in
my opinion.
I want to basically stress how important it is that we do this
quickly, and Tony’s Consumer Protection Recovery Act, you know,
does what I think needs to be done. And I hope our colleagues on
both sides of the aisle will work with us to pass this bill quickly.
I mean, obviously, there is always opportunity for input. I am not
saying that we have to report out the bill exactly the way it is, but
I do think it sets a really good example for what we need to do be-
cause it puts consumers first.
[The prepared statement of Mr. Pallone follows:]
PREPARED STATEMENT OF HON. FRANK PALLONE, JR.
Last Thursday, the Supreme Court ruled that the Federal Trade Commission
(FTC) may no longer use its primary tool to get Americans their money back from
fraudsters and scammers. This strikes at the very heart of the FTC’s mission to pro-
tect and provide relief to consumers. The FTC lost the case, but it’s the American
people that will suffer. What my colleagues and I have been saying for over a year
was a problem is now an emergency.
The FTC used section 13(b) for over 40 years to sue in court to get consumers
the money stolen from them and to force fraudsters to give up illegal profits. And
for over 40 years, it was effective in providing relief. In my home State of New Jer-
sey alone, the FTC has sent $37.5 million to over 167,000 residents since July 2018.
And New Jersey is not unique.
The FTC has helped return stolen money and provided other equitable relief to
millions of constituents across every one of our States. Hard-working Americans can
feed their families, pay for rent, and buy clothes for their kids because the FTC used
section 13(b) to return money that was defrauded. Over two hundred thousand con-
sumers, including many veterans and service members, scammed by the University
of Phoenix and DeVry were relieved from undeserved and burdensome student debt
because the FTC used section 13(b).
Unless we take action, the FTC’s ability to provide that kind of help to our con-
stituents is no longer possible as of last week, thanks to the Supreme Court’s deci-
sion.
That is why the FTC unanimously requested Congress ensure it could continue
to seek monetary relief for consumers under 13(b) as soon as circuit courts first
questioned this authority in 2019. That is why I, Chair Schakowsky, and every
Democratic member of this subcommittee joined with Vice Chair Cárdenas to sup-
port the Consumer Protection and Recovery Act we are considering today.
There are no adequate substitutes in the current law that can simply replace
what the FTC has lost. The remaining authority of the FTC is too weak and, where
available, will take too long for meaningful relief for our constituents. Vice Chair
Cárdenas’ bill restores the minimum authorities necessary for an effective enforce-
ment regime.
Some argue that we need to take this opportunity to reconsider the scope of the
FTC’s authority and even weaken it in some ways. To the contrary, I believe that
the FTC should have greater authority to go after scammers. Simply getting stolen
money returned or a court order preventing further illegal activity is an insufficient
deterrent for companies and individuals intent on scamming consumers, including
veterans, the elderly, and vulnerable communities.

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While I am willing to discuss larger reforms, I am not willing to leave Americans
out in the cold and leave the door open for scammers while we debate. The Supreme
Court’s decision put a neon welcome sign out for fraudsters to target consumers and
made clear Congress alone has the power to come together and fix this.
That is what the Consumer Protection and Recovery Act does, and I hope my col-
leagues on both sides of the aisle will work with us to pass this bill quickly. Putting
consumers first is something we should all be able to agree on.

Mr. PALLONE. So, with that, I would like to yield the remaining
of my time to the vice chair and the sponsor of the bill, Mr.
Cárdenas.
Mr. CÁRDENAS. Thank you very much, Chairman Pallone.
And thank you so much, Chairwoman Schakowsky, for having
this important hearing.
And I also want to thank all of my colleagues for your amazing
questions that are going to come forth so that we can deliberate,
as legislatures do, so we can set the record straight, and create
laws that, in this case, protect the American consumer.
And I think it is important that the Federal Trade Commission’s,
FTC, authority be returned so that they can help return money to
defrauded individuals across this country.
In many of our districts we have seen our constituents inundated
with COVID 0919 scammers attempting to prey on their fears and
financial insecurities. If the scams were successful, the FTC would
have been able to step in, use its 13(b) authority to stop these bad
actors, and put money back into the pockets of hard-working Amer-
icans.
Since July of 2018, almost a million people in my State of Cali-
fornia have received nearly $172 million in redress under 13(b).
For 40 years, the courts uniformly held that the FTC could ob-
tain equitable monetary relief under section 13(b). Last Thursday,
the Supreme Court held it could not.
It is hard to imagine a more pressing issue for Congress to fix
than the leading Federal consumer protection agency losing its
most effective weapon to help people during an unprecedented pub-
lic health crisis.
The Consumer Protection and Recovery Act seeks to reaffirm this
authority so the agency can continue to make consumers whole
again.
And, with that, I yield back. Thank you, Madam Chair.
Ms. SCHAKOWSKY. I thank the gentleman for yielding back, and
now I recognize Mr. Bilirakis, the ranking member of the sub-
committee, for 5 minutes for an opening statement.
OPENING STATEMENT OF HON. GUS M. BILIRAKIS, A REP-
RESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
Mr. BILIRAKIS. Thank you very much, Madam Chair. I appreciate
it.
Good afternoon. Welcome to today’s subcommittee legislative
hearing. I want to thank the witnesses for being here today.
Acting Chair Slaughter, I appreciate you and the entire Commis-
sion’s tireless efforts of fighting against scams and fraud during the
COVID 0919 pandemic, especially those targeting our most vulner-
able constituents.
As you know, this committee worked in a bipartisan success, as
you know, last year, to provide your agency first-offense-penalty

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authorities on COVID 0919 scams and fraud. So I can assure you,
we all take a hard line when it comes to bad actors.
Despite this, Madam Chair, again, Madam Chair, I know your
side is aware of several irregularities on how this hearing has been
approached and how the minority rights have been disregarded.
This contrasts with a unanimous Supreme Court decision last
year—excuse me—last week, where we saw all nine Justices,
across the philosophical spectrum, unambiguously communicate
that this is not about siding with fraudsters but actually about re-
specting the law.
If we are to find a balanced solution to addressing FTC authori-
ties, we must work in good faith and in a bipartisan manner to do
so.
In the Court’s decision, the nine Justices all agreed the FTC
clearly exceeded its 13(b) authority to seek monetary relief. The
Court also detailed the other avenues, apart from 13(b), the FTC
can currently use for restitution and disgorgement. In light of this,
it is important to engage in a thoughtful conversation about the ad-
ditional authorities that may be required to act quickly against
fraudsters.
We also have a responsibility to consider how powers are tar-
geted, transparent, and focus on getting redress for, again, for our
victims. However, we won’t get to hear all those options, unfortu-
nately, today.
The other FTC Commissioners can review and approve the writ-
ten testimony prepared for the hearing, but the oral statement by
the Acting Chair and answers to our questions will reflect her own
opinions. While I certainly value her insight—and I certainly do—
again, we will not have the benefit of counterpoints for how we
focus on legislation, on this particular legislation which we vote, all
of us want to work together on.
We all understand the urgency, but we need to get this right.
And excluding the views of experts in this field is a disservice to
the consumers we are trying to protect.
In addition, I and several of my colleagues introduced legislation
to factor into this review, such as H.R. 2672, the FTC REPORTS
Act, that I introduced last week. This commonsense legislation
would require FTC to submit a report to Congress that includes all
FTC enforcement actions involving allegations of fraud against our
senior citizens.
My bill moved through committee unanimously previously, and I
am disappointed it and the other reform bills are not included on
the docket today.
Republicans all agree seeking financial restitution for victims is
essential. I want to repeat that: Republicans all agree seeking fi-
nancial restitution for victims is essential. But there is a history
of regulatory overreach we must consider and how that impacts our
business sectors as we rebound from the COVID 0919 pandemic.
I am pleased that we can hear from Professor Howard Beales on
how to avoid the FTC’s abuses of power we saw in previous dec-
ades. If this legislation moves forward, in my opinion, I am hopeful
my Democratic—as it moves forward—I am hopeful my Democratic
friends work with us to establish guardrails to ensure due process

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remains a foundational principle for the protection of America’s
and, again, Americans’ legal rights.
Today is also an opportunity to highlight the need to act on a na-
tional privacy standard, and I know most of you agree with this.
Acting Chair Slaughter, I understand you announced a central-
ized rulemaking process, and you and other Commissioners ex-
pressed support to establish privacy rulemakings through this proc-
ess.
While I appreciate the nudge to get us to act, I do worry that
privacy rulemaking will still conflict with State laws that may lead
to even more confusion on this topic. This committee must work to-
gether to establish a preemptive national privacy standard that
protects all Americans.
Madam Chair, I am hopeful you and the majority will engage
with us on FTC updates and to work in a bipartisan fashion to
pass FTC reform language, including 13(b) clarity and a national
privacy standard that allows for greater transparency, economic
analysis, due process, and equitable restitution for victims.
And I know you will, Madam Chair. So thank you very much for
giving us the opportunity, and I yield back the balance of my time.
I don’t have any time.
[The prepared statement of Mr. Bilirakis follows:]
PREPARED STATEMENT OF HON. GUS M. BILIRAKIS
Good afternoon and welcome to today’s subcommittee legislative hearing.
I want to thank the witnesses for being here today. Acting Chair Slaughter, I ap-
preciate you and the entire Commission’s tireless efforts fighting against scams and
fraud during the COVID 0919 pandemic—especially those targeting our most vul-
nerable constituents. As you know, this committee worked with bipartisan success
last year to provide your agency first offense penalty authorities on COVID 0919
scams and fraud, so I can assure you we all take a hard line when it comes to bad
actors.
Despite this, Madam Chair Schakowsky, I know your side is aware of several
irregularities on how this hearing has been approached, and how the minority rights
have been disregarded. This contrasts with a unanimous Supreme Court decision
last week where we saw all nine Justices across the philosophical spectrum unam-
biguously communicate that this is not about siding with fraudsters, but actually
about respecting the law. If we are to find a balanced solution to addressing FTC
authorities, we must work in good faith and in a bipartisan manner to do so.
In the Court’s decision, the nine Justices all agreed the FTC clearly exceeded its
13(b) authority to seek monetary relief. The Court also detailed the other avenues
apart from 13(b) the FTC can currently use for restitution and disgorgement. In
light of this, it is important to engage in a thoughtful conversation about additional
authorities that may be required to act quickly against fraudsters. We also have a
responsibility to consider how powers are targeted, transparent, and focused on get-
ting redress for victims.
However, we won’t get to hear all those options today. The other FTC Commis-
sioners can review and approve the written testimony prepared for the hearing, but
the oral statement by the Acting Chair and answers to our questions will reflect her
own opinions. While I certainly value her insight, we will not have the benefit of
counterpoints or how we focus this legislation. We all understand the urgency, but
we need to get this right and excluding the views of experts in this field is a dis-
service to the consumers we are trying to protect.
In addition, I and several of my colleagues introduced legislation to factor into
this review, such as H.R. 2672, the FTC REPORTS Act that I introduced last week.
This commonsense legislation would require FTC to submit a report to Congress
that includes all FTC enforcement actions involving allegations of fraud against our
senior citizens. My bill moved through the committee unanimously previously, and
I am disappointed it and the other reform bills are not included on the docket today.
Republicans all agree seeking financial restitution for victims is essential, but
there is a history of regulatory overreach we must consider, and how that impacts

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all business sectors as we rebound from the COVID 0919 pandemic. I am pleased
that we can hear from Professor Howard Beales on how to avoid the FTC’s abuses
of power we saw in previous decades. If this legislation moves forward, I am hopeful
my Democratic friends work with us to establish guardrails to ensure due process
remains a foundational principal for the protection of Americans’ legal rights.
Today is also an opportunity to highlight the need to act on a national privacy
standard. Acting Chair Slaughter, I understand you announced a centralized rule-
making process and you and other Commissioners expressed support to establish
privacy rulemakings through this process. While I appreciate the nudge to get us
to act, I do worry that a privacy rulemaking will still conflict with State laws that
may lead to even more confusion on this topic. This committee must work together
to establish a preemptive national privacy standard that protects all Americans.
Madam Chair, I am hopeful you and the majority will engage with us on FTC
updates and work in a bipartisan fashion to pass FTC reform language, including
13(b) clarity and a national privacy standard, that allows for greater transparency,
economic analysis, due process, and equitable restitution for victims. Thank you, I
yield back.

Ms. SCHAKOWSKY. I thank the gentleman. That is OK. I thank
the gentleman for yielding back, and I do want to assure you that
legislation that you have proposed and ideas that you have will be
completely considered as well.
But today is a special day of urgency, and I now—inadvertent—
OK. And now I yield myself 5 minutes for an opening statement.
OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REP-
RESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
So today the subcommittee acts urgently to ensure that the Fed-
eral Trade Commission can put money back into the pockets of con-
sumers who have been victims of fraud or scams. And this author-
ity, as has already been mentioned, was stripped away from the
FTC last week by a decision of the United States Supreme Court.
Really only criminals and scammers benefit from this decision,
while consumers are the losers.
However, the Supreme Court has essentially invited us to fix
this, so we are here today to right this wrong. Only we can restore
the FTC’s most important consumer protection tool. For decades, as
you have heard—more than four decades—the FTC has used sec-
tion 13(b) of the Federal Trade Commission Act to get money back
for consumers harmed by unfair and deceptive practices.
Companies that commit violations of the FTC Act could be made
to not only stop committing bad acts but to pay back the money
that they use to dupe—the money that they actually duped or stole
from their customers.
Since just 2018, the Federal Trade Commission has recovered
over $1 billion for 6.8 million American consumers. One of their
largest recent cases was against the multilevel marketing scheme
Herbalife. That resulted in a total relief, the amount of money that
was returned, of nearly $200 million for more than 260,000 people
who had been lured into running Herbalife businesses by deceptive
earning claims.
Since 2018, the Commission has put more than $49 million back
into the pockets of over 255,000 Illinois residents, my State. None
of this relief would have happened without the use of section 13(b).
While some will argue that the FTC has other tools, like section
19, for example, those require years of process, and by the time the
cases are concluded the money is long gone, leaving consumers out
in the cold.

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We must make consumers whole when they have been victim-
ized. That is why we are moving forward today with legislation to
restore the FTC’s authority.
The Consumer Protection and Recovery Act, introduced by our
vice chair, Tony Cárdenas, with the support of every member—
Democratic member—of this subcommittee confirms the authority
that the FTC has to seek equitable relief, including monetary relief
for consumers in Federal court.
Now, let me be clear: This is not the only reform that I would
like to see, but it is the most important one right now. Under-
standing what the loss of security of 13(b) means for consumers is
really inestimable, and we want to work with our colleagues—we
absolutely do—to act quickly, to address the immediate need.
Vice Chairman Cárdenas’ legislation is necessary and urgent,
and it is an important step that Congress must take to protect
American consumers. It is in our court.
As the stress of the pandemic makes consumers even more vul-
nerable right now to new scammers and fraudsters, we shall not
allow criminals to victimize the American public with impunity.
They must pay, literally, what they owe.
So I am hoping that my colleagues will work with us to put con-
sumers first. I want to thank the witnesses that are here today
joining us,
[The prepared statement of Ms. Schakowsky follows:]
PREPARED STATEMENT OF HON. JAN SCHAKOWSKY
Today, this subcommittee acts urgently to ensure the Federal Trade Commission
can put money back in the pockets of consumers who have been the victims of fraud
or scams. This authority was stripped from the FTC last week by a decision of the
United States Supreme Court. Only criminals and scammers benefit from this deci-
sion, while consumers lose. The Supreme Court has mandated that we fix this, so
we are here today to right this wrong.
For decades, the FTC used section 13(b) of the Federal Trade Commission Act to
get money back for consumers harmed by unfair and deceptive practices. Companies
that committed violations of the FTC Act could be made to not only stop committing
bad acts, but to pay back the money they duped from their customers. Since just
2018, the FTC has recovered over $1 billion for 6.8 million American consumers.
One of their largest recent cases, against the multilevel marketing scheme
Herbalife, resulted in total relief of nearly $200 million for more than 260,000 peo-
ple who had been lured into running Herbalife businesses by deceptive earnings
claims.
Deceptive business schemes can ensnare unwitting Americans across the country.
In my own home State of Illinois, the FTC recovered $9.6 million for more than
10,000 residents who were defrauded by Herbalife. Since 2018, the Commission has
put more than $49 million back in the pockets of over 255,000 Illinois residents.
None of this relief would have happened without the use of section 13(b). The Su-
preme Court’s decision deprives the FTC of a critical tool. While some will argue
that the FTC has other tools, like section 19, those are hardly a replacement. They
require years of process and by the time the cases are concluded, the money is long
gone, leaving consumers out in the cold. The Supreme Court has made it clear that
Congress needs to act.
Scammers and fraudsters must be held accountable. We must make consumers
whole when they’ve been victimized. That is why we are moving forward today with
legislation to give the FTC back its authority. The Consumer Protection and Recov-
ery Act, introduced by Vice Chair Cárdenas, with the support of all the Democratic
members of this subcommittee, confirms the authority of the Federal Trade Com-
mission to seek equitable relief, including monetary relief, for consumers in Federal
Court.
Let me be clear, this is not the only reform that I would like to do to the FTC’s
authority. I think that the agency should have civil penalty authority, rulemaking

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authority that works, as well as other tools to better protect consumers. But I un-
derstand what the loss of section 13(b) authority means for consumers and am will-
ing to work with my colleagues to move quickly to address the immediate need. Vice
Chair Cárdenas’ legislation is a necessary and urgent step that Congress must take
to protect American consumers. As the stresses of the pandemic make consumers
vulnerable to new scams and fraud, we should not allow criminals to victimize the
American public with impunity. They must pay, literally, what they owe.
I hope my colleagues will work with us to put consumers first.
Thank you to the witnesses for joining us today. I now recognize Ranking Member
Bilirakis for 5 minutes.

Ms. SCHAKOWSKY. and now, I guess I was going to introduce the
next speakers. But now, actually, I am going to—oh, I know what
it was. Here it is.
The ranking member of the full committee has a conflict as well,
and so the Chair now recognizes Mr. Armstrong for 5 minutes for
an opening statement. Mr. Armstrong, it is yours.
OPENING STATEMENT OF HON. KELLY ARMSTRONG, A REP-
RESENTATIVE IN CONGRESS FROM THE STATE OF NORTH
DAKOTA
Mr. ARMSTRONG. Thank you, Madam Chair. As has been men-
tioned, the Supreme Court ruled last week on the Federal Trade
Commission’s use of 13(b) authorities. The Court’s unanimous deci-
sion delivered by Justice Breyer was clear: Section 13(b), as writ-
ten, does not authorize the FTC to seek monetary relief.
Today we are going to hear from Acting—and welcome—Acting
FTC Chair Rebecca Slaughter, and I have no doubt she will advo-
cate for her position on how to amend 13(b). Acting Chair Slaugh-
ter has been quoted in an April 22 statement that says, ‘‘In AMG,
the Supreme Court ruled in favor of scam artists and dishonest cor-
porations.’’
Americans are losing faith and trust in our institutions, and a
big part of the reason is due to unnecessary political rhetoric that
villainizes a person or that institution. Perhaps no institution has
been subject to such unnecessary rhetoric as the Supreme Court.
Reasonable legal scholars across the spectrum can agree that
this unanimous Supreme Court decision was actually the right
legal decision. It may not be the policy outcome you or I want, but
that is not the Supreme Court’s job.
The Court’s role, as stated in Marbury v. Madison, is simply to
say what the law is. And I would suggest there are more produc-
tive ways to advocate for policy preferences.
And I am troubled that the other FTC Commissioners are not
here today. Just last week, Senator Cantwell allowed for all four
current Commissioners to testify before the Senate Commerce
Committee. Surely this committee would benefit from the testi-
mony of all of the Commissioners.
This committee will also be denied the opportunity to hear other
FTC reform proposals. Six bills by our Members were ready and
shared with the majority in time to be noticed as part of this hear-
ing. These bills have passed out of this committee in previous fo-
rums.
However, all were rejected for consideration today, and this is
part of a pattern. The minority is told that we do not have enough
legislation ready for floor consideration. Yet our bills are never con-

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sidered during the committee process. It is a catch-22 that seems
convenient for partisan ends.
Similar concerns extend to other parts of the committee process.
Despite two panels for this hearing, the minority was allowed only
one witness. The good news is that that minority-invited witness
is Professor Howard Beales, who previously led the FTC’s Bureau
of Consumer Protection.
He is widely regarded as an FTC expert. The Supreme Court has
cited his work by him and former FTC Chairman Tim Muris in its
decision last week. And he also has a history lesson for us. His
work, cited by the Court, states that ‘‘In the 1970s, the Commission
embarked on a vast enterprise to transform entire industries’’ and
continues with ‘‘the Commission issued a rule a month’’ over a 15-
month period.
This should sound familiar. Advance a few decades, and we have
a recent announcement on a centralizing FTC rulemaking author-
ity within the Office of General Counsel. This will move authority
away from the issuance experts and the economic analysis that are
central to FTC actions.
Interestingly, the statement on the new rulemaking effort tied its
purpose to the Supreme Court challenge to 13(b).
Beyond the multiple process fouls, we are also bypassing the op-
portunity for substantive reforms. Senator Wicker rightly identified
last Congress that privacy reform and a 13(b) amendment could be
a part of the same legislative fix. I was pleased to hear Mr.
Cárdenas, the sponsor of the bill before us, cite the worker proposal
at our COVID scams hearing earlier this year.
I was also pleased with the bipartisan efforts to move privacy
legislation forward during the first half of last Congress. Those ef-
forts were obviously sidelined by COVID. Yet while we delayed,
State legislatures are continuing to enact privacy legislation.
And I know that we are not that far apart, and I ask that the
committee, that we can finish that job.
And in all due respect to the Acting Chair, it is neither her duty
nor our request regarding the proper strategy and outcome. That
is our job. This committee must work together to solve these issues.
Let’s enact real FTC reform that reflects a bipartisan legislative
accomplishment for this committee. The American people deserve
a landmark consumer protection bill that meets the needs of the
21st century. Thank you, and I yield back.
[The prepared statement of Mr. Armstrong follows:]
PREPARED STATEMENT OF HON. KELLY ARMSTRONG
Thank you, Madam Chair. As you mentioned, the Supreme Court ruled last week
on the Federal Trade Commission’s use of Section 13(b) authorities.
The Court’s unanimous decision, delivered by Justice Stephen Breyer, was clear.
Section 13(b) does not authorize the FTC to seek monetary relief. Today, we wel-
come FTC Acting Chair Rebecca Slaughter. She will advocate her position on how
to amend Section 13(b).
Acting Chair Slaughter, in an April 22 statement you stated that quote: ‘‘In AMG,
the Supreme Court ruled in favor of scam artists and dishonest corporations.’’ Amer-
icans are losing trust in our institutions. Part of the reason is due to unnecessary
political rhetoric that villainizes a person or institution.
Perhaps no institution has been subject to such unnecessary rhetoric as the Su-
preme Court. Reasonable legal scholars across the ideological spectrum could agree

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that this unanimous Supreme Court decision was the right legal conclusion. It may
not be the policy outcome you want. But that is not the Supreme Court’s job.
The Court’s role, as stated in Marbury v. Madison, is to say what the law is. I
would suggest there are more productive ways to advocate for your policy pref-
erences.
The minority is also concerned about the committee’s process to review Section
13(b). I am troubled that the other FTC Commissioners are not here today. Just last
week, Senator Cantwell allowed all four current Commissioners to testify before the
Senate Commerce Committee.
Surely this committee would benefit from the testimony of all the Commissioners.
This committee will also be denied the opportunity to hear other FTC reform pro-
posals. Six bills by our Members were ready and shared with the majority in time
to be noticed as part of this hearing. These bills have passed out of this committee
in previous forms.
However, all were rejected for consideration today. This is part of a pattern. The
minority is told we do not have enough legislation ready for floor consideration. Yet,
our bills are never considered during committee process. It is a catch-22 that seems
convenient for partisan ends. Similar concerns extend to other parts of the com-
mittee process. Despite two panels for this hearing, the minority was allowed only
one witness.
The good news is that the minority-invited witness is Professor Howard Beales,
who previously led the FTC’s Bureau of Consumer Protection. He is a widely re-
garded as an FTC expert. The Supreme Court cited work by him and former FTC
Chairman Tim Muris in its decision last week.He also has a history lesson for us.
His work cited by the Court states, ‘‘in the 1970s the Commission embarked on a
vast enterprise to transform entire industries.’’ It continues with ‘‘the Commission
issued a rule a month’’ over a 15-month period.
This should sound familiar. Advance a few decades and we have a recent an-
nouncement on centralizing FTC rulemaking authority within the office of the Gen-
eral Counsel. This would move authority away from the issue experts and the eco-
nomic analysis that are central to FTC actions.
Interestingly, the statement on the new rulemaking effort tied its purpose to the
Supreme Court challenge to 13(b). Beyond the multiple process fouls, we are also
bypassing the opportunity for substantive reforms. Senator Wicker rightfully identi-
fied last Congress that privacy reform and a 13(b) amendment could be a part of
the same legislative fix.
I was pleased to hear Mr. Cárdenas, the sponsor of the bill before us, cite the
Wicker proposal at our COVID sScams hearing earlier this year. I was also pleased
with the bipartisan efforts to move privacy legislation forward during the first half
of last Congress. Those efforts were sidelined by COVID. Yet, while we delay, State
legislatures are enacting privacy bills.
I know we are not that far apart, and I ask the committee that we finish the job.
And in all due respect to the Acting Chair, it is neither her duty, nor our request,
regarding the proper strategy and outcome. This committee must work together to
solve this issue.
Let’s enact real FTC reform that reflects a bipartisan legislative accomplishment
for this committee. The American people deserve a landmark consumer protection
bill thatmeets the needs of the 21st Century. I yield back. Thank you.

Ms. SCHAKOWSKY. I thank the gentleman, and I just want to
make the comment that having a Chair or a sole Commissioner to
speak on a panel, to testify before Congress alone, is not unusual.
When Republicans were in charge of Congress, it was normal pro-
cedure. I don’t want to get into a fight about it, that is for sure,
but I just want to say that we have done this many times before
on both sides of the aisle.
And at this point, I now would like to introduce our witness for
our first panel of today’s hearing, Honorable Rebecca Slaughter,
who is the Acting Chair of the Federal Trade Commission. We
want to thank you so much for being our witness, and now I would
like to yield to you for 5 minutes of your opening statement.

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STATEMENT OF REBECCA SLAUGHTER, ACTING
CHAIRWOMAN, FEDERAL TRADE COMMISSION
Ms. SLAUGHTER. Thank you very much, Chair Schakowsky,
Ranking Member Bilirakis, and members of the subcommittee for
inviting me here today. Late last week, as you know, the Supreme
Court ruled in AMG that the Federal Trade Commission cannot go
to Federal court to return money to those from whom it was ille-
gally taken.
The Federal court path, now foreclosed, had been used for 40
years to make your injured constituents whole. This path was uti-
lized and supported on a bipartisan basis, throughout Republican
and Democratic administrations, and upheld by eight different Cir-
cuit Courts of Appeals. Having it cut off is a devastating outcome
for consumers and honest businesses.
As reflected in the joint written testimony submitted for this
hearing, there is unanimous, bipartisan support at the Commission
for a fix to 13(b).
Just days before the AMG decision came down, Mr. Cárdenas in-
troduced clear and straightforward legislation that would affirm
Congress’ intent that the FTC be able to go to Federal court to stop
bad conduct, disgorge ill-gotten gains, and provide restitution.
I cannot emphasize enough the importance of quick congressional
action on this legislation. I will focus my remarks today on the con-
sequences for the public and the markets absent the swift passage
of this bill.
The Supreme Court’s ruling eliminates the Commission’s pri-
mary and best tool to seek monetary remedies when a company
violates the FTC Act. This tool, referred to by its statutory provi-
sion, section 13(b), enabled the FTC to provide billions of dollars
of relief—$11.2 billion in the last 5 years alone—in a broad range
of matters.
Let me just give you a few examples of cases in which we were
able to provide refunds to consumers solely through our now
defunct 13(b) authority.
In addition to the Herbalife case which Chair Schakowsky men-
tioned, there is Amazon Flex. In January of this year, Amazon
agreed to return $61.7 million in tips to drivers in its Flex program
from whom it illegally withheld that compensation.
In the University of Phoenix case, we returned $49 million to
over 146 consumers nationwide, including $1.3 million to Illinois
consumers and $3 million to Florida consumers, to resolve allega-
tions of deceptive claims regarding job placement.
And in Volkswagen, $9.5 billion was returned to consumers na-
tionwide to resolve the company’s deceptive marketing of 550,000
clean diesel Volkswagens and Audis.
Right now, the Commission has 24 active Federal court cases
that rely exclusively on 13(b) for a monetary remedy, representing
$2.4 billion that should be returned to injured consumers.
On the consumer protection side, these matters include cases ad-
dressing false or unsubstantiated COVID 0919 cures, a pyramid
scheme, and a scam that used fake apartment listings to trick peo-
ple into buying credit monitoring services with recurring charges.
On the competition side, affected cases include the Martin
Shkreli matter in which defendants raised the price of a lifesaving

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drug from $17.50 to $750 and the sham patent litigation case,
AbbVie, in which the district court awarded $493 million in restitu-
tion to consumers harmed by inflated drug prices.
The significant direct harm to consumers from congressional in-
action is obvious enough, but there are additional indirect harms
to consumers and to law-abiding businesses. The loss of 13(b) will
result in emboldened defendants with little incentive to agree to re-
turn money to consumers or even to provisions requiring them to
change their behavior in meaningful ways.
This will mean more litigation at higher cost for taxpayers, re-
sulting in less protection for consumers and more profit for
lawbreakers, all at the expense of honest businesses trying to com-
pete against companies that engage in unfair, deceptive, and anti-
competitive conduct.
The Supreme Court’s opinion left the policy questions about the
FTC’s authority to provide more effective and efficient monetary re-
lief up to Congress. The policy goals that animated our 13(b) pro-
gram are: incentivize companies to comply with the law and return
money to harmed consumers when they don’t.
I respectfully request that Congress act quickly to provide clear
authority to the Commission to achieve these goals.
Finally, a word about the FTC’s other authorities. We will use
them all to pursue law violations where we can, but without con-
gressional action none of these options will come close to protecting
consumers and incentivizing compliance as much as our lost 13(b)
authority. I hope you will move swiftly to restore it. Thank you,
and I look forward to answering your questions.
[The prepared statement of Ms. Slaughter follows:]

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Ms. SCHAKOWSKY. Thank you very, very much, and thank you for
sticking to the 5 minutes for a very concise and, I thought, very
effective presentation.
So we have concluded our witness’ opening statement for our
first panel, and at this time I will move to Member questions. Each
Member will have 5 minutes to ask the questions of our witness.
And I know you have done this before, but the 5 minutes in-
cludes your answer.
I will start by recognizing myself for 5 minutes.
So, even before the Supreme Court decided on Thursday, the un-
certainty in the law surrounding section 13(b) was already hurting
the Commission’s enforcement efforts and draining the Commis-
sion’s limited resources.
On October 20th, all five FTC Commissioners—Republicans and
Democrats—sent a letter urging Congress to act quickly to reaffirm
section 13(b). I repeat that. All of you had sent us a message to
reinstate 13(b) to recover ill-gotten gains for consumers.
The letter warned that the defendants were using delay tactics
in ongoing litigation, hoping that another Circuit would reverse its
precedent, et cetera.
So I wanted to ask you now, what is happening to the cases the
FTC was pursuing under its 13(b) authority?
Ms. SLAUGHTER. Thank you for the question. Honestly, it is a big
problem. I mean, our ability to get monetary relief in those cases—
and I mentioned that we have 24 cases pending in Federal courts
right now that rely entirely on 13(b) for monetary relief—the
money in question in those cases will not be on the table through
the Federal court path. And that is a huge problem that not only
jeopardizes our ability to provide relief for consumers in those
cases, it disincentivizes the parties, and parties in other cases, from
entering into settlements with us in any case.
Ms. SCHAKOWSKY. So can you estimate how much money con-
sumers will lose out of just these cases that you have pending right
now and that are under investigation?
Ms. SLAUGHTER. Yes. In the cases that we have already filed—
there are, as I said, 24 cases, with about $2.4 billion at stake.
Ms. SCHAKOWSKY. Based on past experience, can you estimate
how much money will not be able to be returned to defrauded
Americans over, let’s say, the next 5 years, if the FTC authority is
not reinstated?
Ms. SLAUGHTER. Well, I think the best evidence for the next 5
years is the last 5 years, and over the last 5 years, we were able
to return $11.2 billion to consumers, and we won’t be able to do
that going forward.
Ms. SCHAKOWSKY. And will the legislation that has been intro-
duced by Vice Chairman Cárdenas, does it effectively restore the
FTC’s 13(b) authority?
Ms. SLAUGHTER. Yes. I think it is clear, commonsense, reason-
able legislation that puts us right back where we, on a bipartisan
basis, understood ourselves to be until the Seventh Circuit reversed
its own precedent 2 years ago in the CBC case.
Ms. SCHAKOWSKY. And let me just ask you kind of open-ended,
how will such a restoration of authority benefit consumers and
businesses as well?

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Ms. SLAUGHTER. Thanks. I think that is a really important ques-
tion. So restoring the authority not only allows us to make con-
sumers whole if they have been injured, it also protects honest
businesses who need to compete against companies that may be en-
gaging in unfair, deceptive, and anticompetitive practices to give
themselves a leg up. So we want honest businesses to be there on
a level playing field.
The other way it affects small businesses in particular is that
small victims are often—small businesses are often the victims of
scams and illegal conduct, and so we use 13(b) to return money to
them, not just to individual consumers.
Ms. SCHAKOWSKY. Can you give us an example, a specific exam-
ple, or perhaps the type of enforcement matter that the Commis-
sion may not be able to pursue because of this Court decision? I
have 20 seconds.
Ms. SLAUGHTER. Sure. Sorry. So I think I mentioned some of the
matters that are really important like the University of Phoenix
case, which targeted veterans and Spanish-speaking consumers.
When I mentioned small businesses, just this week we filed a po-
tential settlement against a company that preyed on small busi-
nesses. So I think the examples are endless, and I am happy to
provide a long list for you for the record.
Ms. SCHAKOWSKY. Thank you so much. I appreciate that.
And now I will recognize the ranking member of the sub-
committee, Mr. Bilirakis, for 5 minutes to ask his questions.
Mr. BILIRAKIS. Thank you, Madam Chair, I appreciate it very
much.
Given we did not have the other Commissioners here today, I
would like to ask that the transcript—it is really an unofficial tran-
script from Senator Cantwell’s hearing—be entered to the record,
Madam Chair, please.
Ms. SCHAKOWSKY. Without objection, it will be entered at the end
of the hearing.
[The information appears at the conclusion of the hearing.]
Mr. BILIRAKIS. Thank you, Madam Chair.
Acting Chair Slaughter, the Commission is an entity we rely on
for objective technical assistance when it comes to legislation we
are considering. You have identified the unanimous Supreme Court
decision as needing an immediate congressional response.
This means both parties need to work together just as they did
last year—and we did a great job last year under your leadership,
Madam Chair—to provide FTC first offense civil penalty authority
on COVID 0919 scams and fraud. Will you promise that you will
provide us technical assistance on the legislation before us that re-
flects the support of all the other Commissioners?
Ms. SLAUGHTER. Well, we are always happy to provide technical
assistance, and that technical assistance is provided by our tech-
nical experts within the agency. It is, I think, never by practice of
the Commission, technical assistance, it is reviewed by all of the
Commission. And I don’t think it would be practical for you for it
to be reviewed that way.
Mr. BILIRAKIS. Representing all technical assistance representing
all Commissioners, correct?

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Ms. SLAUGHTER. Well, again, I think the technical assistance pro-
gram that the Commission has, to which we are very committed,
is to make sure that we give you the technical input of the folks
who are going to be implementing whatever law Congress passes.
And we will absolutely continue to do that.
We don’t, and never have, run all of our technical assistance by
all the Commissioners. We didn’t when I was in the minority. It
is just not something the Commission has done, and I don’t think
it would be practical to do so because I don’t think we will be able
to get you that feedback on a timely basis. But I know all of my
colleagues are always happy to share their own views if they are
asked.
Mr. BILIRAKIS. So I would love to hear from your colleagues on
that. On the topic of privacy, are you aware that Republicans in
Congress have supported increasing FTC rulemaking authority, as
well as agency funding, and continue coordination with State attor-
neys general so that we have strong national privacy protections?
While we have national privacy protections, we need them to pro-
tect all Americans. If you could answer that briefly, I would appre-
ciate it.
Ms. SLAUGHTER. Yes. I am aware there is a robust debate around
privacy legislation.
Mr. BILIRAKIS. Thank you. I want to make it clear that I support
going after bad actors—and all Republicans on the committee and
I know Democrats as well—bad actors that seek to harm Ameri-
cans.
However, I am concerned that, if we expand your current author-
ity to allow the FTC to retroactively go after past behavior up to
10 years—so we are expanding it by at least 5 years—then the
Commission will not pursue those currently committing harm.
If Congress expands the FTC’s authority, how will you prioritize
going after those who are actively committing harm versus those
who committed harm in the past? And this is a very important
question, so if you could answer that for me, I would really appre-
ciate it.
Ms. SLAUGHTER. Thank you. Well, I think our priority always is,
and necessarily must be, current bad acts and preventing future
bad acts. So that is the first way I would answer.
The second way is, under the 13(b) authority that we had under-
stood for the last 40 years, I don’t think there was any statute of
limitations. The legislation Mr. Cárdenas has offered introduces
one for the first time, and I think that that is a fair compromise,
but it is always in the interest of the Commission and the con-
sumers that we protect to prioritize ongoing bad conduct in order
to best protect your constituents.
Mr. BILIRAKIS. What is the current practice? How far back do you
all go currently, the FTC, even though you said there is nothing
in legislation currently?
Ms. SLAUGHTER. I am trying to—I don’t think I have a great an-
swer to that off the top of my head. I am happy to get you more
for the record, but certainly we investigate conduct when we hear
complaints and try to bring cases as quickly as possible. That is in
our interest and in consumers’ interest too.

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The longer time elapses between bad conduct and our ability to
bring a case, the harder it is to hold bad actors responsible, the
harder it is to find consumers to provide redress. So I think we
have a shared interest in moving as quickly as possible. The only
people who don’t have an interest in us moving quickly are the bad
actors themselves who tend to drag out investigations and delay.
Mr. BILIRAKIS. OK. We need to prioritize the current ones be-
cause they are going after our constituents. Well, thank you very
much. I appreciate it.
I yield back, Madam Chair.
Ms. SCHAKOWSKY. The gentleman yields back, and the Chair rec-
ognizes, if he is here, Mr. Pallone, chairman of the full committee,
for 5 minutes of questions.
Are you here, Frank?
OK. Then I am going to call on Representative Kathy Castor for
her 5 minutes of questions.
Ms. CASTOR. Well, thank you very much, Chair Schakowsky, for
calling this very important hearing.
And to Acting Chair Slaughter, thank you for testifying today.
It is important to move Congressman Cárdenas’ Consumer Pro-
tection and Recovery Act right away, and I am proud to be a co-
sponsor of the bill.
Acting Chair Slaughter, the Federal Trade Commission has re-
lied on section 13(b) of the FTC Act to secure billions of dollars in
relief for consumers all across America. You have testified to that.
You have been at this for many years. Thank you very much for
your service.
In Florida, just over the last 3 years, the FTC has used this au-
thority to recover over $81 million to approximately over 500,000
Florida residents who were defrauded by some fraudster or crimi-
nal.
This specific FTC authority has been especially critical during
the coronavirus pandemic. We have all seen criminals prey on our
vulnerable neighbors, and many have had stolen funds that are in-
tended for different uses under the CARES Act and the American
Rescue Plan. So we have got to make sure that America’s lead con-
sumer protection agency has all of the tools necessary to protect
our neighbors.
And I agree with you that, if Congress does not act expeditiously,
we are going to see a lot more fraudsters, more deception out there.
I guarantee you they have been following this and are going to try
to get away with as much as they can.
And, as Chair Schakowsky mentioned, in October of last year all
of the Commissioners of the FTC—Democrats and Republicans—
wrote us a bipartisan letter asking us to make clear that the Com-
mission can bring actions in Federal court under section 13(b) even
if the conduct is no longer ongoing or impending when the suit is
filed, and then can obtain monetary relief, including restitution and
disgorgement, if successful.
Very quickly, Acting Chair Slaughter, does this bill do that?
Ms. SLAUGHTER. Yes, it does.
Ms. CASTOR. Does this bill do more than that?
Ms. SLAUGHTER. No, it does not.

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Ms. CASTOR. Yes. That is why this bill should be a bipartisan
slam-dunk. It is a targeted approach to do exactly what all of the
Commissioners have suggested the Congress do.
Now, with the Supreme Court decision, time is of the essence to
move it, so I know that we need to move forward on this. I want
to—let’s see if I have a little time.
OK. I want to ask you one other question. Under section 5 of the
FTC Act, the FTC cannot obtain civil penalties for first violations,
correct?
Ms. SLAUGHTER. Yes, that is correct. We have to have a company
under order first.
Ms. CASTOR. And civil penalties are only brought when a com-
pany violates a rule or violates an order, correct?
Ms. SLAUGHTER. Yes, that is correct.
Ms. CASTOR. So, if the FTC were provided first offense civil pen-
alty authority in addition to reaffirming section 13(b) in the Con-
sumer Protection and Recovery Act, what would this allow the
Commission to do?
Ms. SLAUGHTER. Civil penalty authority can be very effective for
us to incentivize companies to comply with the law because they
will have to pay an actual penalty beyond just disgorgement or res-
titution if they violate the law, but it is important, as you note,
that penalties are different from restitution. They don’t go back to
wronged consumers under the current law. They go into the Treas-
ury, and so they are good from an incentive perspective, but they
aren’t helpful to make consumers whole.
Ms. CASTOR. And I saw that in March you announced the cre-
ation of a new rulemaking group within the FTC’s Office of General
Counsel. Under section 18 of the FTC Act, the Commission had
what is known as Magnuson-Moss rulemaking. It is different from
the typical APA rulemaking because it sets up a more burdensome
process.
What barriers does section 18 of the FTC Act have that are not
included in normal APA rulemaking, and what would APA rule-
making authority allow the Commission to do?
Ms. SLAUGHTER. Section 18 sets up more process in terms of
hearings, opportunity for notice, participation. Section 18 rules
tend to take substantially longer to get from the starting point over
the finish line. And so, to the extent that we want to send a clear
message to businesses about what behavior is out of bounds and
a clear message to consumers about the way that they are pro-
tected, APA is definitely a more efficient way to get there than sec-
tion 18.
Ms. CASTOR. I agree. Thank you. I yield back.
Ms. SCHAKOWSKY. OK.
The gentlewoman yields back.
And now, Fred Upton, you are recognized for 5 minutes for ques-
tions.
Mr. UPTON. Well, thank you, Madam Chair.
I appreciate everyone being here, as we are all back in our dis-
tricts in places around the country.
Acting Secretary, I have just a couple of questions. I know that
in the hearing last week in the Senate, the U.S. Chamber sub-

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mitted a letter highlighting their concerns of the current 13(b) pro-
posals.
And, during that hearing, Senator Wicker requested all four
Commissioners to weigh in on the letter. Now, I know it has just
been a couple days, and I would doubt that any response has been
prepared and submitted, but do you know what the status of that
request is?
And as a backup to that, should Congress wait until we have
them respond before pursuing legislation? What are your thoughts?
Ms. SLAUGHTER. Thank you. So, when Senator Wicker asked
about that letter at the time, he had literally just handed it to
me——
Mr. UPTON. Yes, I know.
Ms. SLAUGHTER [continuing]. So I haven’t had a chance to review
it. But I have, in the intervening week, had a chance to take a look
at it, and I can tell you, from my perspective, I take a lot of excep-
tion to a lot of the arguments that are made within the letter and
the policy views that it advances.
I would strongly urge you not to wait for any more formal re-
sponse. Although I am, of course, happy to provide one for the
record for you because the fact is that the cases that we have that
are active now, the money that is at stake and the consumers that
are harmed, are being harmed on an ongoing basis, and we really
need to get them relief sooner and not wait any longer than is ab-
solutely necessary to get that done.
Mr. UPTON. Well, I just know, you know, sometimes the legisla-
tive process is slow—hearings, markups, subcommittee, full com-
mittee, House floor—usually weeks at a time, and it would help us,
as we prepare for this, versus having unanswered questions, know-
ing that in the Senate, where it really is 50/50, they are going to
probably want to wait as well. So any effort that you can do to put
a little gasoline on the fire and get a response back, I know, would
be appreciated by all sides.
The last question I have is, do you believe that the changes
under consideration may contrast with existing means of monetary
recovery under section 5 and 19 of the FTC Act?
Ms. SLAUGHTER. Yes. Thank you. It is a really good question. The
Supreme Court opinion suggested that, because we had section 19,
we didn’t need monetary relief under section 5. And, respectfully,
as a matter of policy, I disagree with that. And I think it is worth
understanding just how much more burdensome the process is to
get money back to consumers under section 19.
So, in order to recovery money for section 19, which is limited to
dishonest and fraudulent activity, which is a pretty high standard
and wouldn’t cover some of our important consumer protection or
any of our competition cases, we would have to first do a full ad-
ministrative litigation in part 3 for the section 5 claim and then go
to a district court to request the money back. And there is a 3-year
statute of limitations on returning that money.
The time it takes to go through that entire process when we have
used it before can be, I think, as little as 7 years, but as much as
12 years or more, and our ability to find consumers after that 12
years is elapsed and get money back to them is really, really lim-
ited and inhibited.

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And, moreover, in the intervening 12 years, the consumers have
lost the benefit of that money that was gone from them. Contrast
with an immediate asset freeze in Federal court as we were getting
under 13(b), that is a much more efficient and effective way to pro-
tect consumers.
Mr. UPTON. OK. Well, thank you, and I yield back.
Ms. SCHAKOWSKY. The gentleman yields back, and now I call on
Lori Trahan for 5 minutes for her questions.
Mrs. TRAHAN. Thank you, Chairwoman Schakowsky, for con-
vening today’s important and timely hearing. You know, one of the
subcommittee’s top priorities recently has been to hold the large so-
cial media platforms accountable for the ways they harm con-
sumers by mistreating user data and amplifying destructive con-
tent.
You know, Facebook has gotten away with far too much because
of its size and market dominance. Fortunately, the FTC brought an
antitrust case against Facebook in December.
But my understanding is that Facebook is now relying on two re-
cent court decisions to argue, and I quote, that ‘‘the FTC lacks stat-
utory authority to maintain this suit. Section 13(b) of the Federal
Trade Commission Act, the sole claimed source of the FTC’s au-
thority here, authorizes the FTC to proceed in Federal district
court only to stop ongoing or imminent violations of the law. It does
not authorize actions to remedy past conduct.‘‘
Well, you know, it is not clear to me where this argument might
end. Could a defendant simply stop violating the law after the FTC
sues them and get the whole case dismissed? This seems problem-
atic, to say the least.
Acting Chair Slaughter, does the Consumer Protection and Re-
covery Act, which I am proud to cosponsor, make clear the FTC can
obtain relief under 13(b) for consumers when defendants have vio-
lated the law and not have to demonstrate that they are still vio-
lating or will be violating the law again?
Ms. SCHAKOWSKY. Great question.
Ms. SLAUGHTER. Yes, it does.
Mrs. TRAHAN. So, you know, many experts believe that Facebook
and Google will likely overcharge advertisers on their platforms
due in part to their dominance in the first-party digital advertising
space.
Unfortunately, digital advertising is an incredibly opaque mar-
ket, and I am planning to introduce a bill that begins to address
this issue. But even if the FTC had the evidence to make a clear
case that Facebook and Google improperly overcharge for digital
advertising, my understanding is that, because of the Supreme
Court ruling last week, an advertiser, including our small busi-
nesses, would not be able to receive monetary relief for being over-
charged.
Is my understanding correct that in this hypothetical situation
the FTC could not prevent Google and Facebook from keeping ill-
gotten earnings obtained through anticompetitive conduct?
Ms. SLAUGHTER. I want to be really careful to not comment on
any specific fact pattern, but, yes, it is absolutely true that, under
the Court decision, the FTC couldn’t recoup ill-gotten gains in Fed-
eral court in a competition case.

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Mrs. TRAHAN. Well, Acting Chair Slaughter, I want to thank you
for your work in protecting small business innovation and con-
sumers.
You know, as our economy begins to recover after a devastating
pandemic, the work of the FTC is of utmost importance, and I hope
we can pass H.R. 2668, so that the FTC can hold companies ac-
countable.
Thank you again, and I yield back.
Ms. SCHAKOWSKY. The gentlewoman yields back.
And next it is Bob Latta’s turn for 5 minutes.
Mr. LATTA. Thank you very much, Madam Chair. Appreciate to-
day’s hearing, and also appreciate the Acting Chair to be with us
today. It is very important as we work on protecting our consumers
and identifying ways to undo the damage caused by fraud and
counterfeiting online.
As we discuss the issues before us, the committee should also be
considering additional overdue reforms. One such issue is looking
for ways that we can work to restore WHOIS access to our law en-
forcement entities, like the FTC and others. WHOIS information or
domain registration information informs us who is behind a
website registration. This information had been publicly available
prior to the implementation of the European Union’s GDPR.
Last year, I reached out to the FTC to ask them about the im-
pact of the loss of the WHOIS information and the data, especially
on their consumer protection efforts. In their response, they said,
before GDPR took effect in May of 2018, the FTC and other con-
sumer protection law enforcement agencies routinely relied on pub-
licly available registration information about domain names in the
WHOIS database to investigate wrongdoing and combat fraud. The
FTC uses this information to help identify wrongdoers and their lo-
cations, alter conduct, and preserve money to return to defrauded
victims.
Restoring WHOIS access is critical, and consumer protection is
a key piece of the intent of today’s discussion. I want to work with
my colleagues on both sides of the aisle to identify ways that we
can restore access to this valuable resource.
Madam Chair, I would also like to submit that letter for the
record today.
Ms. SCHAKOWSKY. Without objection, that will be inserted at the
end of the hearing.
[The information appears at the conclusion of the hearing.]
Mr. LATTA. Well, thank you very much, Madam Chair.
Protecting Americans from becoming the victims of scams and
holding scammers accountable should not be a partisan issue. The
FTC must have the tools available to pursue bad actors and
achieve equitable restitution for victims of scams, but we also must
be careful not to create unintended consequences when expanding
the FTC’s authority.
Acting Chair Slaughter, in February you spoke about the need
for a Federal privacy and exacerbated data risks in light of COVID
0919 public health emergency. How would clear Federal privacy
laws streamline current FTC enforcement actions?
Ms. SLAUGHTER. Thank you.

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I think a Federal privacy law with strong protections for con-
sumers would be enormously helpful because, right now, most of
our Federal privacy program, with the exception of our COPPA
work, is conducted entirely under Section 5 authority to prevent
unfair or deceptive action practices, and that is an imperfect tool
that we are using as best we can to address privacy.
Mr. LATTA. Thank you.
You know, shifting gears, the FTC also has the authority on de-
ceptive practice acts and also those practices at the core of your
mission. This committee is working together to move forward on
legislation that will set a framework for the commercialization of
autonomous vehicles. Given that serious work, I am concerned
when terms are used in this sector that do not accurately represent
a vehicle’s current capabilities.
Are you aware that the terms ‘‘autopilot’’ or ‘‘self-driving’’ capa-
bility are currently being utilized when, in fact, there are no com-
mercially available AVs on the road today?
Ms. SLAUGHTER. That sounds reflective of what I have read
about.
Mr. LATTA. Well, it is really important, as we go forward, that
we make sure that we have this done. Because, when you look
around the world with other countries as they advance on their AV
technology, that we don’t want the United States to be left behind.
And so we really have to make sure that we have the United
States leading on this issue and on the legislation we have to get
out there.
And, with that, Madam Chair, I will yield back my last 45 sec-
onds.
Ms. SCHAKOWSKY. I thank you for those.
And now I call on Jerry McNerney for 5 minutes for his ques-
tions.
Mr. MCNERNEY. Well, I thank the chairwoman.
And I thank Chairwoman Slaughter for your work on the Com-
mission.
Ms. Slaughter, Volkswagen sold vehicles that were rigged to pass
emissions tests. The vehicles were advertised and sold as clean die-
sel, but this was clearly not true. The FTC proved that Volkswagen
tricked consumers into believing the cars were low-emission and
environmentally friendly.
How did the agency use section 13(b) authority in this case to get
redress for consumers, and why the agency wouldn’t have been able
to use other authorities to obtain redress as quickly as it did?
Ms. SLAUGHTER. Thank you.
Volkswagen is a terrific case to illustrate the importance of our
13(b) authority. 13(b) was the tool that allowed us to negotiate a
settlement with Volkswagen that returned $9.5 billion to con-
sumers who were misled in the purchase of 150,000 [inaudible] os-
tensibly clean diesel——
Mr. MCNERNEY. Let me interrupt.
Chairwoman, there is quite a bit of interference here. Could we
see if there is a way to clean up the——
Ms. SCHAKOWSKY. I wanted to see if any of our tech people can
help clear it up. It is the——

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Ms. SLAUGHTER. I can elaborate. I am sorry. I am not sure if you
were also asking about the other tools. If we had to use [inaudi-
ble]——
Mr. MCNERNEY. Ms. Slaughter, you are still breaking up.
Ms. SCHAKOWSKY. Yes, you are still breaking up. You are still
breaking up.
Uh-oh. I think she can’t hear, either.
I don’t know—can you hear us? Commissioner, can you hear us?
Because you are breaking up right now.
I wonder if any of the tech people have a suggestion?
Mr. CÁRDENAS. Madam Chair?
Ms. SCHAKOWSKY. Yes.
Mr. CÁRDENAS. I have a suggestion. On one of the committee
hearings, when I started to speak, my device was using data even
though I had access to data or the internet, and when I switched
off the data and it went strictly internet, immediately the signal
got better.
Ms. SLAUGHTER. Are you having trouble hearing me?
Mr. MCNERNEY. Yes.
Ms. SCHAKOWSKY. It was breaking up. Right. We are.
Mr. CÁRDENAS. Can I make a suggestion, Chairwoman Slaugh-
ter, if you can hear me? This is Congressman Cárdenas.
If your device allows you to use data or the internet and you
have access to both where you are at, try to switch off the data and
force it to only use the internet. It worked for me on one of the
hearings.
Ms. SCHAKOWSKY. And could you hear him? Can you hear us?
Mr. MCNERNEY. She is muted.
Ms. SCHAKOWSKY. Oh, she is muted.
Can you unmute, and let’s hear it?
Acting Chair Slaughter, can you hear us? Can you unmute?
Ms. CLARKE. Madam Chair, I think that her broadband is giving
her difficulty, because she is not moving, which indicates that it is
buffering. So I think it is a broadband issue.
Mr. ARMSTRONG. Maybe she is just holding really still.
Ms. SCHAKOWSKY. So I think what we are going to do right now
is call for a 5-minute recess, and then we will try to resume.
Ms. SLAUGHTER. Now, I can.
Ms. SCHAKOWSKY. Wait. Are you there?
No.
OK. Let’s do that.
Ms. SLAUGHTER. Can you hear me? Can you hear me now?
Ms. SCHAKOWSKY. Say a whole sentence. Try it now.
Ms. SLAUGHTER. I switched devices. Is that better?
Ms. SCHAKOWSKY. Oh, yes, it is fine.
OK. Never mind that 5-minute break. We are going to go on.
Ms. SLAUGHTER. I came into my office so I could be wired to the
ethernet, and it is 2021, so we still just have to pick.
Ms. SCHAKOWSKY. You know, technology. OK. So we were in——
Mr. ARMSTRONG. We have the hearing with the FCC next week.
Ms. SCHAKOWSKY. We were in the middle of Jerry McNerney’s
questions.
And we can return to you, Jerry.
Mr. MCNERNEY. Thank you. Thank you, Chairwoman.

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And, Ms. Slaughter, thank you for holding in here. My question
was about using section 13(b) for the Volkswagen case and how
hard would it have been to do those reliefs without section 13(b).
Ms. SLAUGHTER. Thank you. I gave such a great answer that you
didn’t get to hear because apparently it was all broken up.
What I was saying is that 13(b) was the authority we used in the
Volkswagen case. It is a perfect example of a case where 13(b) was
what allowed us to be able to go to Federal court but also to nego-
tiate the settlement with Volkswagen that returned $9.5 billion to
consumers over the misrepresentations in the sale of 550,000 clean
diesel VWs and Audis.
If we had had to recover money using the section 19 process, I
am just thinking through what that might have looked like. We
would have had to go into our administrative court, first go
through a full litigation there, then the district court to ask them
to provide redress for consumers. We would certainly still be in
that litigation now and might be for another several years, instead
of having been several years beyond returning money to consumers
who were defrauded.
Mr. MCNERNEY. Thank you. That is pretty stark.
My congressional district includes parts of the San Joaquin Val-
ley. Air pollution is a major problem in the valley, and the region
has some of the poorest air quality in the country. Additionally, a
large portion of my constituents are low-income. My district in-
cludes the city of Stockton, which had one of the highest numbers
of foreclosures during the financial crisis of 2010.
So, in districts like mine, where there is poor health quality and
a high percentage of population is low-income, why was the FTC’s
enforced monetary relief so important?
Ms. SLAUGHTER. Thank you. I think you are pointing out exactly
why returning money to consumers matters. It is often taken from
people who most need it, and that is why we really value our abil-
ity to get it back, not just to get civil penalties, which, like I said,
are valuable in incentivizing compliance from companies but, at the
end of the day, what we want to do is make your injured constitu-
ents whole. 13(b) is the way we can do that.
Mr. MCNERNEY. Well, thank you.
Do you think that this case and the nearly $9.5 billion monetary
relief that was awarded to consumers deterred other companies
from engaging in similar practices?
Ms. SLAUGHTER. Yes, I think having money on the line is an in-
credibly important part of the deterrence effect of our enforcement.
We don’t want companies to violate the law to begin with. We don’t
want them to hurt your constituents in the first place. And so, if
our enforcement efforts don’t have meaningful deterrent effect,
then their reach is really, really limited.
Mr. MCNERNEY. Well, in general, why is section 13(b) so impor-
tant then in seeking monetary relief to discourage unfair and de-
ceptive practices?
Ms. SLAUGHTER. Thank you. Because it is a tool that puts money
on the line for companies. That is money that can go back to con-
sumers in the form of redress, but it also, as Mr. Cárdenas’ legisla-
tion makes clear, gets taken from law-breaking companies in the
form of disgorgement of the ill-gotten gains. We do not want com-

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panies to keep the profits of law breaking. We should want them
to have to give up those profits. Otherwise, they just have an in-
centive to violate the law.
Mr. MCNERNEY. So, in general terms, again, returning money to
consumers that were defrauded, why is the FTC’s authority under
section 13(b) so critical in addition to these other paths? And I
know it is a little repetitive, but I just want to hear it again.
Ms. SLAUGHTER. I am happy to say it as many times as I can,
because it is that important.
13(b) is the most efficient and most effective way for us to return
money to consumers who have lost it and to stop companies from
breaking the law to begin with and to disgorge ill-gotten gains.
Those are all really important policy goals, and 13(b) has been the
best and most effective tool for us to achieve them.
Mr. MCNERNEY. Well, great.
Since 2018, almost 1 million consumers in California have re-
ceived monetary relief as a result of the cases that the Commission
brought under section 13(b). I want to make sure that my constitu-
ents are able to get the relief they deserve when they have been
defrauded, and that is why I am a proud cosponsor of this legisla-
tion. And we need to move quickly to pass it.
And I yield back.
Ms. SCHAKOWSKY. The gentleman yields back.
And now I recognize Neal Dunn for 5 minutes for his questions.
Mr. DUNN. Thank you very much, Madam Chair.
Professor Beales, I am going to ask you a question, so you might
warm up your camera there.
I think we can all agree that recovering losses and compensation
for harms from the perpetrators of some of these actions that are
heard before the FTC is entirely appropriate. And I associate my-
self with, you know, the cases that were described by my colleague
from California immediately before this.
There are, however, a number of actions taken based on com-
plaints by the FTC that have no significant harm, or no harm at
all or loss at all, or insignificant ones. Many of these findings by
the FTC are based on very subjective opinions by experts who actu-
ally disagree among themselves.
And I think these opinions, these findings and the CFTC actions
and guidance that gets issued from them cannot reasonably be ex-
pected to be known in advance to even the most legitimate and
proactive companies, especially in the rapidly evolving realm of
cyber activities, artificial intelligence, autonomous vehicles, et
cetera.
The prospect of fines totaling millions or even billions of dollars
would have a chilling effect on innovation. And I would like Pro-
fessor Beales to address that, if you would, sir.
I just saw you on there. Professor Beales?
Dr. BEALES. Chairwoman Schakowsky, I am happy to do that if
that is appropriate, but I am not actually the witness on this panel.
So I am at your pleasure.
Mr. DUNN. So I may have misunderstood that. I had your testi-
mony, so I assumed you were a witness.
Madam Chair——
Ms. SCHAKOWSKY. He is a witness, but——

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Dr. BEALES. I am on the next panel.
Ms. SCHAKOWSKY. He is——
Mr. DUNN. OK.
Ms. SCHAKOWSKY. On the next panel, he is a witness. So we will
get to your question.
Mr. DUNN. Go ahead.
Ms. SCHAKOWSKY. No, he can’t answer now.
Mr. DUNN. He can, yes.
Go ahead. Professor Beales?
Ms. SCHAKOWSKY. No, he cannot.
Mr. DUNN. Oh, he cannot. Oh, OK.
Well, I think I made my point there, you know. I think that—
I am all for the 13(b) being reestablished, but with some guardrails
on it so that we understand who is going to be subject to these, you
know, sometimes very high fines and very chilling things—things
they cannot anticipate in advance.
With that, Madam Chair, I yield back.
Mr. PENCE. Would the gentleman yield to me?
Mr. DUNN. Yes.
I would like to yield to my colleague, Mr. Greg Pence.
Ms. SCHAKOWSKY. Mr. Pence, you are recognized for the remain-
der of the time of Mr. Dunn.
Did you want that time?
OK. Otherwise—yes? No?
Otherwise——
Mr. DUNN. You are still muted, Greg.
Mr. PENCE. All right. Let’s try that.
Ms. SCHAKOWSKY. You have about 2 minutes.
Mr. PENCE. Thank you, Chair Schakowsky and Ranking Member
Bilirakis, for holding this important hearing today.
To date, the FTC has returned more than $25 million to Hoosiers
that have fallen victim to deceptive scams and fraud. While it is
important that we maintain the FTC’s ability to award restitution
to consumers that have been defrauded, I agree with Republican
Leader Bilirakis that this conversation would be better suited for
a broader consumer privacy and FTC reform discussion.
In addition, as we consider this proposal, we should incorporate
sufficient guardrails to protect against unintended consequences. I
hope that we can come together to find common ground on a broad
range of FTC reform policies to best protect consumers in Indiana
and, of course, across the country.
Acting Chairwoman Slaughter, thank you for being here today.
You recently announced a new rulemaking group within the
FTC’s Office of the General Counsel. I am concerned that this new
plan will create a more centralized rulemaking process at the FTC.
In order to best protect consumers, I want to make sure that the
Commission prioritizes input from each of the Commissioners as
well as the Bureau of Economic Analysis.
Two questions. Can you commit to incorporating feedback from
the other Commissioners and bureaus? And, two, will each poten-
tial new rule include an economic analysis to determine if there are
any unintended consequences that could be derived from the rule?
Ms. SLAUGHTER. Thank you for the question.

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First, let me say I think the value of rules is actually reflected
in what you and some of your colleagues have talked about today,
which is providing clear notice to businesses and to consumers
about what is within the bounds of the law and what is not. Rules
cannot change what is illegal. They cannot reach conduct and make
things illegal that wouldn’t be covered by the law. But they can
provide clarity. And I think that that is really important for honest
businesses who want to comply.
So that is the first thing I would say.
The second thing I would say is, absolutely, input from other
Commissioners, input from our bureaus, input from the subject-
matter experts has always been and will always be a very impor-
tant part of the Commission’s work, whether it is on rules, of which
we have many already that we enforce, or on particular cases. So
that has been important and will continue to be important and is,
in fact, baked into Commission process.
Mr. PENCE. OK. Thank you.
Thank you, Madam Chair. I yield.
Ms. SCHAKOWSKY. The gentleman yields back.
Now I call on Congresswoman Yvette Clarke for 5 minutes of
questions.
Ms. CLARKE. Thank you, Chairwoman Schakowsky and Ranking
Member Bilirakis, for holding today’s hearing on this critical piece
of legislation.
This is critical. The FTC’s 13(b) cases are vital to protecting com-
munities of color from not only dishonest business practices but
also abhorrent and illegal racial discrimination.
Last year, the FTC bought a case under 13(b) against a New
York City car dealership, Bronx Honda. The complaint detailed
that Bronx Honda ordered its salespeople to charge higher financ-
ing markups and fees to Black and Latino customers. The com-
pany’s general manager told employees that these groups should be
targeted due to their limited education and that they should avoid
the same practices with their White customers.
Thanks to 13(b), the FTC was able to step in and send $1.5 mil-
lion to the victims of this car dealership’s illegal financing and
sales practices, in addition to putting an end to these abusive
markups for Black and Latino customers.
Acting Chairwoman Slaughter, can you talk about how the deal-
ership, in this instance, might have gotten away with this abhor-
rent conduct had it not been for 13(b)? And can you describe how
difficult or impossible this case would have been without 13(b)?
Ms. SLAUGHTER. Thank you, Congresswoman.
As a native New Yorker, I cared a lot about this case. It was ex-
tremely important to me for exactly the reasons that you point out,
that the population that was targeted by the illegal conduct in this
case were the Black and Latino constituents in New York who were
ending up paying more money for their cars.
In this case, like in many cases, our 13(b) authority is what
incentivizes companies to engage in settlement negotiations with
us, push forward to stop their bad conduct, hopefully will
incentivize other businesses not to engage in that bad conduct to
begin with. And bringing cases like that is enormously important
for the Commission and for the constituents we serve.

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Ms. CLARKE. And if you didn’t have 13(b) authority, how would
that have been difficult or even impossible for you to have brought
this case?
Ms. SLAUGHTER. So my memory in Bronx Honda is that we had
a couple of other counts in addition to 13(b). We had the Truth and
Lending Act and ECOA. But 13(b) does remain our primary author-
ity to get monetary redress for consumers. And so, if we can’t do
that, even if perhaps we could have gotten civil penalties under
some other authority, we wouldn’t be able to return money to the
consumers who were hurt. And, at the end of the day, that is an
extremely important service that we provide.
Ms. CLARKE. Thank you.
I am particularly concerned about the disproportionate impact of
scams on vulnerable communities, communities who have already
been struggling with the combined impacts of COVID 0919 and
economic crisis and the deep, systemic inequities that are pervasive
throughout our civil society.
According to the FTC’s own research, folks who are Black and
Latino are more likely than their White peers to be victims of
fraud. And yet data suggests that there is also a serious under-
reporting of fraud from communities of color. Back in 2014, the
FTC launched its Every Community initiative to address these un-
derlying disparities when it comes to fraud.
Acting Chairwoman Slaughter, when the FTC has secured re-
fund checks for consumers under section 13(b), can you explain
how the FTC makes sure those checks get to the victims in Black
and Latino communities even if they aren’t necessarily the ones re-
porting the fraud?
Ms. SLAUGHTER. Thank you.
I think it is really important to note that we don’t just return
money to people who have reported fraud. In cases where we use
our 13(b) authority, we get information from the defendants about
who their customers were and who suffered losses as a result, and
then we directly send money back to those people in almost all of
our cases, whether that is in the form of electronic payments or
mailed checks. We do the best we can, using all of the information
we have available, to identify who the affected consumers are and
what the best way is to get money directly to them.
Ms. CLARKE. So why is passing the Consumer Protection and Re-
covery Act important to tackling fraud in Black and Latino commu-
nities? And if Congress fails to act on this legislation, what mes-
sage does this send to scammers that target communities of color?
Ms. SLAUGHTER. I think it is critically important to pass this leg-
islation in order to give us the tools to efficiently and effectively
disgorge ill-gotten gains and return money to consumers. And be-
cause we know, exactly as you testified, that an enormous number
of scams prey on communities of color and especially Black and
Latino communities, but also veterans, also military consumers,
also older Americans—these are the consumers who most need our
help, and without 13(b) we are not going to be able to return
money to them in any kind of an efficient or effective way.
Ms. CLARKE. Thank you, Madam Chair. I yield back.
Ms. SCHAKOWSKY. Thank you.
The gentlelady yields back.

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And now I yield to Debbie Lesko for 5 minutes for her questions.
Are you here, Debbie?
Let’s see. Not at the moment. So—Debbie, are you there? OK.
So, Kelly Armstrong, you are recognized for 5 minutes for ques-
tions.
Mr. ARMSTRONG. Thank you, Madam Chair.
Retroactivity is not favored by the law. The ex post facto clause
espouses this principle in criminal contexts, but we have judicial
estoppel, laches, all different, I mean, various degrees on this, and
it is based on fairness. Laws produce expectation and reliance, and
people conform to their conduct accordingly. In any 13(b) reform
bill, I think it is our duty to address the retroactivity question. If
we fail to do so, we can expect continued uncertainty in litigation.
Acting Commissioner Slaughter, you said in your testimony that
there are approximately 24 pending cases in Federal court alleging
section 13(b) violations. And the Supreme Court has repeatedly af-
firmed a presumption against retroactivity unless there is a clear
statutory test. The Landgraf test holds that, if a statute does not
address retroactivity, the court should determine whether retro-
activity would alter vested rights, create new obligations, impose a
new duty, or attach a new disability.
It is possible that if Congress enacts a law to provide the FTC
the ability to seek monetary relief under 13(b) and does not ad-
dress retroactivity, the FTC will argue that retroactivity applies.
The FTC would argue that it had such authority for decades under
case law and that the conduct at issue occurred under the case law
prior to the AMG Capital decision.
The FTC would argue that defendant’s conduct occurred with
their reliance based on the regime where 13(b) carried the threat
of monetary relief. For the record, I think such an argument would
be incorrect. Whatever monetary liability is previously attached
under section 13(b), AMG Capital probably wipes that slate clean.
At this present moment, however brief it may be, section 13(b)
carries no threat of equitable relief. Congressional authorization of
such monetary relief under 13(b) would impose a new reliance that
would reaffirm Landgraf’s presumption against retroactivity.
This new reality creates due-process considerations that cannot
be overcome unless Congress explicitly addresses and authorizes
retroactivity. Mr. Cárdenas’s bill does not explicitly address retro-
activity. The only provision somewhat related is on page 4, starting
at line 9, which seems to provide a 10-year statute of limitations.
I am worried about this ambiguity. And I think it is our respon-
sibility as a committee and as Congress to adequately address the
retroactivity question. I don’t think we should, as a policy reason,
leave it up to the courts.
And then I just—I have one question for Ms. Slaughter, because
I was reading a Law Review article, and in that article it said
there are roughly 75 pending Federal cases addressing 13(b), and
in your testimony you said there are about 24. And I am wondering
if—either my article is just old or we are talking about different
cases. Because I didn’t think it was that old.
Ms. SLAUGHTER. Thank you. I actually heard a similar number
at the Senate Commerce hearing this morning and can get back to
you on the record on what the discrepancy is. The 24 reflects our

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inventory that we have done since the Supreme Court decision
came down about what [inaudible] exclusively on 13(b). So it could
be the discrepancy is either a difference in time because the case-
load varies or because the cases of 13(b) plus other authority [in-
audible].
Mr. ARMSTRONG. Thank you. And we are going to dig into it, too,
in my office, too, because it is a big difference, and, I mean, it could
be for various different reasons.
Thank you. I yield back.
Ms. SCHAKOWSKY. Thank you.
And now the sponsor of the bill under consideration, or under
discussion anyway, today, the vice chair of the subcommittee, Tony
Cárdenas.
You are up for 5 minutes of questions.
Mr. CÁRDENAS. Thank you, Madam Chair, once again, and also
Ranking Member Bilirakis for having this important hearing.
And this is an opportunity for the American people to under-
stand the balance of power and authority in this country, with the
three branches of government. And here we have a law that was
interpreted by the courts, and now we head back to the legislature,
where we make laws. And therefore I think this is a perfect oppor-
tunity for us to exercise our responsibility as the legislative branch.
And also, if you don’t mind, Madam Chair, I think there was a
little bit of noise going on, or misinterpretation, about the next wit-
ness panel, Mr. Beales, which—he is going to have a great oppor-
tunity to answer any questions. I didn’t want any of our viewers
to think that he was thwarted or can’t answer any questions. It
will happen in the next panel.
So, with that, I have a question for our panelist, the Acting
Chairwoman of the FTC.
Consumers who are harmed deserve fast, meaningful redress,
and that means, at the very least, getting their money back. It sim-
ply cannot be profitable to defraud consumers until the FTC notices
it. Right now, the message to wrongdoers is that they are free to
pocket the money they have stolen from consumers ever since last
week. Meaningful consumer recovery cannot be theoretical. It
needs to be firmly established in the law.
I have also heard some in the business community express due-
process concerns if the FTC has the authority to obtain monetary
relief for consumers under section 13(b). I personally have had
some meetings with some of these individuals who have those con-
cerns. No one wants to prevent people from defending themselves,
especially when asset freezes or other court orders really can dev-
astate legitimate small businesses. As a former small-business
owner myself, I appreciate this concern fully.
So, in addition to the fact that all the proceedings under section
13(b) under this legislation happen in Federal court before a neu-
tral Federal judge, can you speak to the checks and balances in the
FTC enforcement process that ensures due process for the accused,
Acting Chair Slaughter?
Ms. SLAUGHTER. Thank you so much for that question, because
I agree with you that due process is enormously important to us.
We take our law enforcement authority very seriously, and we

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want to execute it fairly. And so we have a number of procedures
in place within the FTC to make sure that that is the case.
So investigations happen, companies are given an opportunity to
respond, to engage with the staff. Before any complaint is filed,
companies have an opportunity to meet with the Bureau Director
and, if they want, with the Commission and for each Commissioner
to hear out the arguments that the company makes.
And then the Commission itself has to vote, and the vote has to
carry with a majority on any particular enforcement action and on
any settlement. So, whether we are going to court and asking for
money or we are agreeing with the defendant to settle for money,
that has to be subject to a Commission vote. And that is a really
important protection.
Mr. CÁRDENAS. Thank you.
I have heard some argue that the FTC will be just fine without
section 13(b) authority in this bill because the Commission can
simply use section 19 of the FTC Act to seek consumer redress.
I just want to go through, especially for our consumer viewers,
go a little bit through a question-and-answer with you, if you don’t
mind. I would like to explore the mechanics of section 19 with you.
How long does it take for an administrative order to be entered
under section 19?
Ms. SLAUGHTER. A fully litigated administrative order could take
years—3 to 5, let’s say.
Mr. CÁRDENAS. OK. And under 13(b) process, it is less lengthy?
Ms. SLAUGHTER. Under 13(b), we would go directly to Federal
court. So we wouldn’t have to do the administrative process and
then a Federal court proceeding to get money. We would go right
to Federal court to seek the money.
Mr. CÁRDENAS. So, in layperson’s terms, when you say ‘‘to seek
the money,’’ basically, the court is the one that gives you the
thumbs-up or thumbs-down to continue to proceed in that action,
correct?
Ms. SLAUGHTER. Yes. And that is another really important due-
process protection. The FTC can’t order fines or order restitution
unilaterally. We have to seek it from a judge. And the remedies are
equitable, which means they have to be fair to both sides.
Mr. CÁRDENAS. OK.
Under section 19—well, I am almost out of time, and I just want-
ed to thank you, Acting Chairwoman Slaughter, for testifying
today. And I am sure that we are going to have other opportunities
for us to get written information back and forth from the FTC, not
just from you but from other Commissioners, et cetera. So I am
very glad that we do have a fair and thorough process before us.
With that, my time is up, and I yield back. Thank you, Madam
Chairwoman.
Ms. SCHAKOWSKY. The gentleman yields back.
And now I recognize Debbie Dingell, if she is here, for 5 minutes.
Yes, there you are.
Mrs. DINGELL. Thank you, Madam Chair. And thank you for hav-
ing this hearing. And I really want to thank my colleague from
California, Representative Cárdenas, for leading this. And this sub-
ject is so important, and his leadership is really making a dif-
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And thank you, Chair Slaughter, for being here with us today.
I am going to stay on section 19. There are significant limitations
to the FTC using section 19 of the FTC Act to seek consumer re-
dress. Chief among them is that section 19 of the FTC Act has a
3-year statute of limitations. Oftentimes, we do not even learn
about unlawful conduct until many years later. Consumers who
were the victims of deception should be entitled to refunds even if
the deception isn’t discovered until after it stops.
So my first question, Chair Slaughter: How would a 3-year stat-
ute of limitations impact the FTC’s ability to go after unlawful con-
duct and recover money for victims?
Ms. SLAUGHTER. Thank you for the question.
I think you are absolutely right that a 3-year statute of limita-
tions would be a huge impediment to enforcement for us. It
incentivizes defendants to drag out investigations. It is a problem
where, as you pointed out, we haven’t even discovered harm until
well into that period of time.
And I think the other thing for those who are particularly con-
cerned about due process that I worry about is that a 3-year stat-
ute of limitations forces us to rush to the courthouse door in order
to—or to the administrative courthouse door in order to file an ac-
tion because we are mindful of that clock. And I would rather we
have the opportunity to do a thorough investigation to really un-
derstand the magnitude of the harm, the justifications the company
provides, and the 3-year clock is an impediment to that.
Mrs. DINGELL. Thank you for that.
I am proud to be an original cosponsor of the Consumer Protec-
tion and Recovery Act, which would restore the agency’s authority
to get money back to consumers who have been scammed. This bill
adds a 10-year statute of limitations on a court’s ability to award
monetary relief in section 13(b) cases, which my colleague was talk-
ing about a minute ago. The statute of limitations should allay any
concerns that the FTC will seek monetary relief in cases involving
[inaudible].
But even with the 10-year statute of limitations, this doesn’t
mean Congress can take its time now in fixing 13(b). As you well
know, scammers and fraudsters often disappear, leaving no money
for consumers to recover.
Chair Slaughter, does the inclusion of a 10-year statute of limita-
tions make it any less urgent for Congress to pass this legislation?
Ms. SLAUGHTER. No, absolutely not. I mean, I think, as I re-
flected earlier, Section 5 hasn’t had a statute of limitations. This
would be a new statute of limitations that it imposes.
And I think it is a reasonable imposition compared to what we
have had because of the urgency to pass this legislation right now.
As I mentioned, we have $2.4 billion in consumer redress that is
at stake in our currently pending cases, and that is gone if Con-
gress doesn’t act.
Mrs. DINGELL. So, if we delay, I mean, you have talked about
how you can’t get it back. What does it do to your real ability to
get money back to consumers who have been—excuse my language,
everybody—screwed? But it is really true.
Ms. SLAUGHTER. I think it really hobbles us to not have this au-
thority. I think the thing to think about is, not only will we not

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be able to get that money that is pending back to consumers or in
new cases, it will also disincentivize businesses from entering into
settlements with us to begin with, which means we are going to
have to do more litigation, which is higher cost for taxpayers that
provides less benefit for consumers. It is more profit for
lawbreakers. And all of that is at the expense of the honest busi-
nesses who are trying to compete against companies who engage in
unfair, deceptive, and anticompetitive conduct.
Mrs. DINGELL. Thank you.
I am almost out of time, so thank you, Acting Chairwoman
Slaughter, for being here, to all those that are working it, and I
look forward to working with all my colleagues on this. And I yield
back.
Ms. SCHAKOWSKY. The gentlelady yields back.
And now I recognize Robin Kelly, my colleague from Illinois, for
5 minutes.
Ms. KELLY. Thank you, Madam Chair Schakowsky, for holding
this important and timely hearing.
And thank you, Ranking Member Bilirakis.
Seniors are especially vulnerable to scams and fraud. According
to the most recent report from the FTC, older adults reported more
than $440 million in losses from fraud in 2019. And older con-
sumers who report losing money reported much higher individual
losses than younger consumers.
It is hard to recover these losses, but the FTC’s efforts have
helped many seniors get some compensation. According to the
FTC’s 2020 ‘‘Protecting Older Consumers’’ report, the Commission
filed 10 new actions last year against entities for deceptively pitch-
ing products that would purposely treat or cure medical concerns
that disproportionately affect older adults.
The report also notes the FTC’s success in getting money back
to consumers. This includes $2.7 million in redress for over 8,000
consumers defrauded by a timeshare resale scheme, $441,000 in re-
funds to more than 27,000 consumers who purchased purported
cognitive improvement supplements, and $16 million to more than
27,000 consumers who lost money to a debt relief scheme that took
tens of millions of dollars from financially strapped consumers, in-
cluding the elderly.
These represent just a few examples of the FTC getting money
back for consumers in cases that disproportionately affected older
Americans. Protecting older consumers in the marketplace has al-
ways been one of the FTC’s top priorities. The Supreme Court deci-
sion has now deprived the FTC of its best tool to get money back
quickly to seniors who have been scammed.
We all need to work together to protect senior citizens from
scams before they fall victim and suffer monetary losses.
Acting Chair Slaughter, when seniors are scammed, they tend to
report much higher individual losses. Can you explain why this is
and why it can be especially difficult for seniors to recover when
they have been scammed?
Ms. SLAUGHTER. Thank you. It is a great question. And I think
that looking out for elder populations who are targeted with fraud
is a high priority and has been a high priority for the FTC.

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I think the reason they report higher losses may often be because
they have, you know, maybe more access to income than younger
consumers, and maybe the types of scams that target them. We see
seniors as targets of scams that involve tech support, including
pain treatment scams, and disease and pain claims.
And I just want to take the moment to point out that, when we
talk about the timeframe that it would take for section 19 cases to
be brought, as opposed to the short timeframe for 13(b), if we had
to go through a 10-year process to get money back in a section 19
case, think about what that means for a senior who is suffering a
loss. That 10 years is really significant and really material, and I
don’t want to have to tell them that they are going to have to wait
that long to recover money that they have lost.
Ms. KELLY. Well, I know that is one reason seniors will be espe-
cially hurt by the recent Supreme Court decision. And what are
other reasons?
Ms. SLAUGHTER. Well, I think it is not just the time; it is harder
for us to get money back at all. Section 19 makes it harder to get
asset freezes. The burden of proof is higher. The process is longer.
And without the ability to go to Federal court and stop bad conduct
immediately and recoup money to return to consumers, we are at
a real disadvantage and, more importantly, those seniors are at a
real disadvantage compared to the scammers.
Ms. KELLY. And how will this new legislation help seniors re-
cover from being defrauded?
Ms. SLAUGHTER. This new legislation restores the understanding
of the FTC Act that had been validated by eight circuit courts of
appeals and in place over the last 40 years. And that is the tool
that we have used to return money to seniors, and it is a really
important tool.
Ms. KELLY. And without this act would the FTC be as well-posi-
tioned to help seniors who have been defrauded? If not, why not?
Ms. SLAUGHTER. No. We would be substantially less well-posi-
tioned—we would be substantially worse off in our efforts to help
seniors who have been defrauded because we wouldn’t have that ef-
ficient and effective tool to stop bad conduct in Federal court and
return money to seniors who have suffered losses.
Ms. KELLY. Thank you so much.
And, again, thank you, Madam Chair, for having this hearing. I
yield back.
Ms. SCHAKOWSKY. The gentlewoman yields back.
And now, Kathleen Rice, I recognize you for 5 minutes for ques-
tions.
Miss RICE. Thank you, Madam Chair.
And thank you, Ms. Slaughter, for being here with us today. This
is really very informative.
You know, there are some who would say that the Consumer
Protection and Recovery Act, Mr. Cárdenas’ bill, would expand the
FTC’s authority in a way that would threaten industry. Can you
address that claim? Because I don’t understand where that kind of
claim comes from.
Ms. SLAUGHTER. I could try to address it. I have to tell you, I
don’t really understand it either, because I firmly believe that 13(b)
has been the tool that allows us to go after illegal conduct by dis-

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honest businesses and scam artists, and to me that helps honest
businesses who want to comply with the law and want to be able
to compete on a level playing field.
So I can’t really explain it for you, but I think it is an argument
I don’t find particularly persuasive.
Miss RICE. So I don’t know if this is an obnoxious question, but
do you lose a lot of cases?
Ms. SLAUGHTER. You know, honestly, we do lose some cases, and
I think that that is an important thing to remember, because we
do not have the ability to get monetary redress by fiat. We cannot
issue fines on our own. We have to go to a Federal court, and we
have to convince a judge not only the conduct is illegal but that re-
dress or disgorgement is appropriate and that the remedies that we
are seeking are equitable. Or, at least, this is how it is under 13(b).
So I think it is really important. I think we take seriously the
responsibility to follow the facts and follow the law and bring cases
where we have reason to believe that the law has been violated,
but there are important checks in this system on the FTC, espe-
cially in the form of judicial review. And I think that that would
stay under the bill Mr. Cárdenas has proposed.
Miss RICE. And just to be clear, how are cases—are cases re-
ferred to you? Are you the originator of cases? Do you hear things?
I mean, you are not out there just targeting willy-nilly, you know,
small businesses all over the country to try to put them out of busi-
ness.
Ms. SLAUGHTER. No, absolutely not. And I think we try to
prioritize the worst conduct. We collect complaints through our con-
sumer complaint system. We monitor public reporting. We work
with State attorneys general and local authorities and advocacy
groups to identify violations of the law, to investigate them thor-
oughly and carefully, to propose complaints and potential remedies,
and then to move forward.
Miss RICE. Again, I think it is—the other—very quickly, I have
2 minutes left—I just want to ask you about a very vulnerable
group: veterans.
In 2016 and 2019, the FTC settled cases, as I am sure you are
well aware, against DeVry University and the University of Phoe-
nix, respectively. And, as we now know, these for-profit colleges
were targeting veterans for their Post-9/11 GI Bill benefits and
ending up saddling them with student loan debt without providing
the career opportunities that they promised.
Now, in my home State of New York, 5,283 people who were de-
frauded by DeVry University were able to get back over $2 million,
and 3,784 people who were defrauded by the University of Phoenix
were able to get back over $1.2 million in these settlements, thanks
to the work of the FTC. So that is what it looks like to protect peo-
ple from unfair or deceptive practices, especially vulnerable groups
of people like veterans.
Can you just talk about other cases where veterans have received
redress thanks to the FTC taking action under its 13(b) authority?
Ms. SLAUGHTER. Sure. And I am happy to get you a longer list
of cases for the record, but I know we have seen cases where vet-
erans are targeted with business opportunity schemes and with,
sort of, lead-generation efforts, in part because of the difficulty of

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adjusting from military life to civilian life, because of the ways vet-
erans move around so much, and because they need to get into the
economy. I think that scammers see this.
I heard someone earlier mention that crisis is a moment of op-
portunity for scam artists, and that is true of any challenge. We
have seen it in COVID 0919. We see it in the way scammers target
vulnerable populations. And that is exactly why it is so important
to us to be able to protect those people who most need our help.
Miss RICE. Yes, critical. I mean, your authority under section
13(b) is so critical to helping—you know, we talked about seniors
before. Veterans, the veteran community is particularly vulnerable.
So thank you so much for joining us here today.
And, Madam Chairman, I yield back.
Ms. SCHAKOWSKY. The gentlewoman yields back.
And now I recognize Congresswoman Angie Craig for 5 minutes
of questions.
Ms. CRAIG. Well, thank you so much, Madam Chair, for yielding.
And thanks, in particular, to my colleague Representative
Cárdenas for his work on this bill and for all of our panelists for
being here today.
Acting Chair Slaughter, I want to ask you briefly about a case
that involves the great work of our Minnesota attorney general,
Keith Ellison, and your agency, where you worked together to stip-
ulate an order with Manhattan Beach Ventures to help protect stu-
dent loan borrowers.
As you may recall, this company deceptively promoted payment-
reduction programs to consumers looking for help with their stu-
dent loans. The FTC determined in September 2019 that Manhat-
tan Beach Ventures had been charging borrowers up to $1,400
under the premise that this money went toward their students
loans and falsely promised that their services would permanently
lower or even eliminate consumers’ loan payments or balances.
Our AG took special notice of this case because Manhattan Beach
was directing those borrowers into financing this fee through a
high-interest loan with a third-party financier, Equitable Accept-
ance Corporation, a company based in Minnesota.
The outcome of this case is yet another example of why we need
strong 13(b) authority. The agency imposed a $4.2 million judg-
ment on Manhattan Beach and $28 million on the Equitable Ac-
ceptance Corporation, along with other proconsumer actions
against these two companies.
As I understand it, the agency is currently reviewing the cus-
tomer data now to determine restitution for individual borrowers.
Acting Chair Slaughter, can you give me any sort of status up-
date on this case or commit to ensuring that the agency prioritizes
this customer review to help get this money back to defrauded bor-
rowers as soon as possible?
Ms. SLAUGHTER. Thank you so much for the question. And as you
said that, I realized I should have answered to Congresswoman
Rice that student loans to end payday lending are another example
of areas that really target veterans and military consumers.
I can absolutely commit to you that we will prioritize that work.
And I am happy to get you more details on the status for the
record.

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Ms. CRAIG. Well, I appreciate that. And, obviously, Congress-
woman Rice brought up some incredibly important points about
protecting our Nation’s veterans. And I appreciate all the work that
you are doing.
And, Madam Chair, I yield back.
Ms. SCHAKOWSKY. The gentlewoman yields back.
And now I am recognizing Congresswoman Lizzie Fletcher for 5
minutes for her questions.
Are you here, Lizzie?
Mrs. FLETCHER. Yes. Thank you, Chairwoman Schakowsky. And
thanks to you and Ranking Member Bilirakis for convening today’s
hearing.
Chairwoman Slaughter, thank you for your testimony today. It
has been very helpful, very useful. And as we are getting to the
end of the hearing, we have already covered a lot of ground, but
I want to follow up on a couple of issues.
I agree with Mr. Cárdenas’s point that this is a great opportunity
to see how our government functions, and I want to bring it back
to why we are here. We are here to address the finding of the Su-
preme Court in the AMG Capital case. And that is where Justice
Breyer, writing for a unanimous Court, said the question before the
Court was whether the statutory language authorizes the FTC to
seek and the Court to award equitable monetary relief, like restitu-
tion or disgorgement, and the Court concluded it did not.
And so that has created the problem that we are here to address,
and it forms the basis of, I think, the very simple legislation before
us, H.R. 2668, the Consumer Protection and Recovery Act, which
I was glad to cosponsor and which answers the question the Court
asks by making clear that it is the intent of Congress to provide
these remedies to the FTC.
Some of my colleagues have raised concerns today and mentioned
that they want to address these issues in a bigger bill that covers
other issues. But it appears to me that the issue that was before
the Court is the issue before this committee, and it is narrowly tai-
lored to address what has become now an urgent concern, to effec-
tively maintain the status quo on enforcement actions.
So, you know, I would like to hear, as we have just a few min-
utes left, a response to what Congresswoman Rice touched on as
well, this concern about predictability for businesses that we have
heard from some of the people on this hearing today, that in fact
what we are talking about is maintaining the status quo. It is mak-
ing clear Congress’ intent and really making it clear for businesses
to operate.
And I think you have touched on this a little bit, but just in
framing the question I will say, you know, we heard at a hearing
earlier this year that section 13(b) really is critical to keeping a
level playing field for businesses. And if, you know, we don’t have
the tools to regulate what is happening and to seek disgorgement
of ill-gotten gains, to make sure that there are monetary penalties
brought about after a court case, that that really takes away from
businesses that are playing by the rules and also, you know, causes
consumers to question the legitimacy of the entire market and lose
trust.

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So can you just talk, with the time we have left, about how this
bill, the Consumer Protection and Recovery Act, will ensure, really,
a healthy marketplace and clarity for those businesses by returning
and making clear our intent of the Congress to provide these rem-
edies to the FTC?
Ms. SLAUGHTER. Thank you so much for the question.
I think you are absolutely right. I think 13(b) restoration is real-
ly largely about protecting honest businesses and making sure that
they can compete fairly against a level playing field of companies
who are also behaving honestly. If some business is getting ahead
by lying to its consumers or deceiving them or taking money un-
fairly, that not only hurts those consumers, it disadvantages the
honest businesses who are following the law. So I think that that
part is really important.
The other way I think it protects businesses that is important is
that small businesses can be the victims of scams too. And so 13(b)
has been used and we will continue to use it, if we get the author-
ity restored, to protect small businesses and to return to them
money that was illegally taken from them.
Mrs. FLETCHER. Thanks.
And that is great segue to the last question I have in the time
that I have left. But you mentioned that the section 13(b) enforce-
ment has resulted in more than $11 billion in refunds to consumers
during just the past 5 years. And in my home State of Texas, more
than 670,000 consumers have received more than $100 million in
refunds in just the past few years.
What is the estimated loss to consumers over the next, say, 5
years if Congress doesn’t, in fact, reinstate the FTC section 13(b)
authority?
Ms. SLAUGHTER. Thanks.
Well, it is really hard to predict the next 5 years with any speci-
ficity. I said earlier that I think the best measure of the next 5
years is the last 5 years, which you pointed out is $11.2 billion.
But I would amend that only to say that I don’t think we have
seen evidence that conduct is getting better. I think, to the con-
trary, we have seen evidence that conduct is getting worse. And
particularly in the pandemic, we have seen complaints go way up.
So I would say that 11.2 would be more like the baseline, and it
is probably more than that, given what we know about the mar-
kets.
Mrs. FLETCHER. Well, thank you, Chairwoman Slaughter, for
your testimony today.
And thank you, Chairwoman Schakowsky, for holding the hear-
ing. I yield back.
Ms. SCHAKOWSKY. And the gentlelady yields back.
And last but not least for panel one—I remind you that we have
a second panel coming—I yield 5 minutes to Darren Soto for his
questions.
Mr. SOTO. Thank you, Chair Schakowsky.
We know scams in the modern era are coming in all sorts of
forms—robocalls, fake websites, emails, social media, text scams.
They are focusing on our veterans, our seniors, poor Americans,
communities of color, persons with disabilities, and other vulner-
able communities.

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And we have seen the coronavirus pandemic just exacerbate the
type of fertile ground for these scams to take hold, whether it is
stimulus checks, vaccine claims, people claiming to help with pay-
check protection loans. We have heard about fake testing kits, [in-
audible] treatment scams, unsubstantiated disinfectant claims,
and, even worse than all, cure claims.
In Miami, we saw a scam where a company created a Miracle
Mineral Solution. It contained bleach. And they made over a mil-
lion dollars selling this bleach product to tens of thousands of con-
sumers and promising to cure COVID and other illnesses. Can you
imagine if this Miracle Mineral Solution scam—if this company
could keep that money? That would be outrageous.
And, of course, that is why we are here today. We are appre-
ciative of the FTC for netting over $482 million for 1.6 million sen-
iors and other consumers, for victims of fraud, illegal business
practices, and the like.
We saw that this section 13(b) power was settled law for over 40
years, but then the Seventh Circuit, the Third Circuit came up
with new rulings, and 48 million Americans now are unable to get
monetary redress under 13(b).
I want to thank Tony Cárdenas—Tony Cárdenas, my fellow E&C
brother—for cointroducing this bill along with many of us, includ-
ing myself, the Consumer Protection and Recovery Act. It amends
the 13(b) FTC to explicitly state that the FTC has the ability for
both injunctive and monetary equitable relief so that we can re-
quire bad actors to repay these ill-begotten gains.
And I am encouraged by the bipartisan comments from today.
We can do this in a bipartisan way. We did it with robocalls and
with new violations.
Acting Chairwoman Slaughter, we see these scams run rampant
in Spanish, in Hispanic communities. And as we look to pass this
bill solidifying your 13(b) authority, what is the current monitoring
of scams in Spanish and your ability to use this 13(b) authority to
be able to stop some of these in-Spanish scams?
Ms. SLAUGHTER. Thank you. I think it is a really good point.
Spanish-speaking communities are among those where we have
seen disproportionate numbers of scams and where it is particu-
larly important for us to be able to return money to consumers who
have been harmed. One that comes to mind in the course of the
pandemic was a business opportunity scam that particularly tar-
geted Latino women.
And so it is important not only for us to stop those scams but
to be able to get money back to people who are hurt by those
scams. And if we don’t have the ability to get the money back, it
is harder for us to stop the scams to begin with and there is less
incentive for other potential scam artists to stay out of the scam
business to begin with.
Mr. SOTO. And what about foreign scams? We have a very inter-
national, very diverse community in Florida. And we have
scammings coming from every continent other than Antarctica, and
we certainly want to make sure they are being held accountable.
What is the limits of what FTC can do under 13(b), should we
be able to pass it, to help with some of these foreign scams?

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Ms. SLAUGHTER. So I think it is a fact-specific question, because
it depends on, are the defendants within our jurisdiction or without
our jurisdiction? Do we have cooperation agreements with foreign
jurisdictions where they may be located?
It is certainly harder to deal with foreign scams, but that doesn’t
mean it is not a priority. We work very hard to identify the source
of the scam and work with whatever authorities are available—
local, international, Federal partners, and other levels—to target
the bad behavior and put a stop to it.
Mr. SOTO. Thanks so much.
I yield back.
Ms. SCHAKOWSKY. Well, the gentleman yields back, and that con-
cludes our first panel.
I want to give a hardy thank you, hardy because that was 2 full
hours of being questioned. And we appreciate your availability to
us in answering all the questions from all of our members that
asked them. So thank you very, very much.
I will now introduce our witnesses for the second panel. And I
am hoping to see them click on so we can see their faces. I see——
Mr. CÁRDENAS. Chairwoman Slaughter?
Ms. SCHAKOWSKY. Tony, did you want to say something to——
Mr. CÁRDENAS. Thank you, Chairwoman Slaughter. That is all.
Thank you.
Ms. SCHAKOWSKY. Yes. We appreciate you so very, very much.
So let me introduce the next panel.
We have Anna Laitin—am I saying that right?
Ms. LAITIN. Yes. Thank you.
Ms. SCHAKOWSKY. Director of financial fairness and legislation
strategy at Consumer Reports; Dr. J. Howard Beales, who is pro-
fessor emeritus of strategy management and public policy at
George Washington University; and Ted Mermin, who is executive
director of the Center for Consumer Law and Economic Justice at
the University of California Berkeley School of Law.
We want to thank our witnesses. We look forward to hearing
your testimony.
And why don’t we begin, then, with Ms. Laitin?
You are recognized now for 5 minutes for an opening statement.

STATEMENTS OF ANNA LAITIN, DIRECTOR, FINANCIAL FAIR-
NESS AND LEGISLATIVE STRATEGY, CONSUMER REPORTS; J.
HOWARD BEALES III, PH.D., EMERITUS PROFESSOR OF STRA-
TEGIC MANAGEMENT AND PUBLIC POLICY, GEORGE WASH-
INGTON SCHOOL OF BUSIINESS; AND TED MERMIN, EXECU-
TIVE DIRECTOR, CENTER FOR CONSUMER LAW AND ECO-
NOMIC JUSTICE, UNIVERSITY OF CALIFORNIA BERKELEY
SCHOOL OF LAW

STATEMENT OF ANNA LAITIN
Ms. LAITIN. Thank you, Chair Schakowsky and Ranking Member
Bilirakis and members of the committee, for inviting Consumer Re-
ports to testify on this important legislation and the vital role of
the Federal Trade Commission in protecting consumers in the mar-
ketplace.

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As a former member of the staff of this subcommittee, it is par-
ticularly nice to be back, if only virtually.
The FTC is an essential consumer protection entity. It is charged
with protecting consumers from unfair and deceptive acts and prac-
tices, both online and off. This includes, as we have been dis-
cussing, scammers peddling bogus coronavirus cures, fake online
reviews, deceptive data collection practices, fraudulent lenders ex-
ploiting small businesses, and more—all in a marketplace that is
growing larger, more complicated, and harder for consumers to
navigate each year. And, increasingly, it is having to do it with
both hands tied behind its back, underfunded and underresourced.
Last week, the Supreme Court stripped the FTC of its most effec-
tive means to recover ill-gotten profits from scam artists and
fraudsters and return the money to the victims of those scams. For
more than 40 years, the FTC has relied on section 13(b) of the FTC
Act to stop unfairness and deception in the marketplace, prevent
wrongdoers from benefiting from their behavior, and repay the vic-
tims of the fraud. Unless Congress acts to amend the FTC Act to
ensure that the Commission can appropriately address illegal be-
havior, scam artists and fraudsters will feel empowered to engage
in more wrongdoing.
The facts of the case decided by the Supreme Court last week
highlight the urgent need for a legislative fix to the FTC Act. AMG
Services was a fraudulent payday lending company. It bilked mil-
lions of struggling low-income Americans out of their hard-earned
money by imposing undisclosed charges and hidden fees on small-
dollar loans, sometimes inflating the cost to more than three times
the amount borrowed.
The victims were people in financial need who went to a payday
lender, a borrower of last resort. They were lied to and, due to
those lies, lost more money. More than 5 million people who were
looking for a lifeline instead got fleeced.
As a result of the FTC’s enforcement action, AMG was required
to pay disgorgement in the amount of $1.3 billion to be returned
to the individuals who were defrauded. To date, nearly 1.2 million
people across the country have received checks from the FTC, aver-
aging $235 each.
As this case worked its way through the courts, nobody argued
that AMG Services was a model company or that it did anything
other than scam and defraud its customers. What AMG Services
argued and what the Supreme Court decided last week was that
the FTC can stop the fraud but it does not have authority to take
any further steps. It cannot recover those funds from AMG Services
and return them to the customers who were defrauded.
This is clearly an unjust outcome that Congress cannot let stand.
No company should be able to hold onto money that it obtained ille-
gally. And people who are lied to and defrauded should be able to
get their money back. They should never be left holding the bag.
The FTC’s other options for obtaining restitution are nowhere
near as effective as Section 13 has been or as effective as the FTC
and the Americans that it serves need it to be. This is a problem
that Congress can fix. There is no reason for the FTC to twist itself
in knots and use unwieldy authorities to achieve justice when a

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simple change to the FTC Act can restore the Commission’s author-
ity.
The Consumer Protection and Recovery Act, introduced by Rep-
resentative Cárdenas, would amend the FTC Act to restore the au-
thorities that the Commission has successfully operated under for
more than 40 years. It would enable the Commission to pursue
fraudulent and deceptive actors and to return money to the people
they harmed. And it would end any debate about the proper role
for the FTC in achieving relief for consumers.
Importantly, this bill extends the 13(b) authorities for equitable
remedies to all violations of the FTC Act and does not create artifi-
cial delineations for the types of illegal acts that should qualify.
The FTC has authority to enforce against unfair and deceptive acts
and practices as well as unfair methods of competition. It should
have authority to seek equitable remedies in all cases under its ju-
risdiction—disgorgement of ill-gotten gains and restitution for con-
sumer losses.
It is a simple matter: If a business makes money from violating
the FTC Act, it should not be able to keep that money.
In conclusion, this hearing raises a simple question: Should com-
panies be able to profit from lies and deception in the marketplace?
The answer is as simple as the question: No.
While the Supreme Court decided last week the text of section
13(b) does not allow for that, it in no way ruled on this common-
sense question. This leaves the question in your hands.
In order to continue to effectively monitor the marketplace and
stop fraudulent and illegal activity, the FTC needs this authority
restored. The Consumer Protection and Recovery Act would do just
that, and we urge you to act quickly to enact it into law.
We urge the committee to go further, as well, and to recognize
the FTC is being asked to do far more than it realistically can with
its existing staff and resources. In order to build a marketplace
that works for consumers, for small businesses, and for honest com-
panies that can’t compete against those that are willing to break
the law, we need an FTC with sufficient capacity and penalty au-
thority to provide truly effective deterrence.
We look forward to working with this committee to further
strengthen this important consumer protection authority.
Thank you, and I look forward to your questions.
[The prepared statement of Ms. Laitin follows:]

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Ms. SCHAKOWSKY. Well, thank you.
The gentlewoman yields back, and let me now thank her and rec-
ognize Dr. Beales.
You are now recognized for 5 minutes.

STATEMENT OF J. HOWARD BEALES III, PH.D.
Dr. BEALES. Thank you for the opportunity to testify today. I am
Howard Beales, an emeritus professor at George Washington
School of Business. I spent most of my career either at or writing
about the FTC, most recently as the Director of the Bureau of Con-
sumer Protection early in this century.
Since 1981, attacking fraud in Federal court has been the foun-
dation of the FTC’s consumer protection enforcement. The FTC
files a case under 13(b) seeking an ex parte asset freeze—and that
is really the key to 13(b)—and resolves the matter in the same
forum with a permanent injunction and monetary relief for con-
sumers.
Faced with egregious frauds, eight circuit courts of appeals
blessed the program. Fraud cases saw an expansive measure of in-
jury—total sales of product. Sensible in the context of worthless
products promoted through fraud, that measure is completely un-
reasonable when applied to a new, tangential claim of benefits for
a long-established product. The Commission has yet to develop a
reasonable approach to assessing injury in this situation.
As the Supreme Court has noted, success led to expanded use of
13(b), both in antitrust and consumer protection. Used in complex
cases of advertising substantiation, the potential consequences of a
violation went from an administrative cease-and-desist order to the
total sales of the product. Eight years ago, I coauthored an article
warning that this unwarranted overreach could jeopardize the
fraud program itself. Unfortunately, that is exactly what happened
in the Supreme Court last week.
Congress should answer two key questions in legislation: When
can the Commission get monetary relief? And what procedures
should it use to do so? Congress should provide specific answers to
those questions, not leave them to the Commission’s unlimited dis-
cretion.
Regarding monetary relief, the original vision of the FTC was to
provide guidance for appropriate marketplace conduct. Because the
statutory prohibition was deliberately vague, the only remedy
available was a cease-and-desist order. This choice was wise be-
cause, with uncertain standards, the risk of monetary sanctions
could chill lawful conduct that actually benefits consumers. That
uncertainty remains.
When I was Bureau Director, for example, we took the then-
novel position that lax information security practices could be ille-
gal. Significant monetary penalties for failing to anticipate that
legal innovation would have been inappropriate.
Nevertheless, some areas are clear. Fraud involves business con-
duct about which there is no legal uncertainty. Section 19 also al-
lows monetary relief where a reasonable person would know the
conduct was dishonest or fraudulent. The early 13(b) cases re-
spected this standard, and it remains appropriate.

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Fraudulent or dishonest conduct should be subject to monetary
sanctions. Conduct where reasonable people may disagree about
whether a violation even exists should not. Aggressive penalties ap-
plied to practices of uncertain legality will likely lead to excessive
caution that can harm consumers.
For example, the FTC’s advertising substantiation cases often
turn on disagreements among scientific experts about the evidence
to support a particular claim. The history of claims about the rela-
tionship between diet and health illustrates the problem. Such
claims were illegal under FDA rules in 1984 when Kellogg began
a campaign for All Bran promoting the National Cancer Institute’s
recommendation that diets higher in fiber could reduce the risk of
cancer. If such claims are wrong, consumers may give up a better-
tasting cereal. Mistakenly prohibiting such claims or deterring
them because of the risk of severe penalties would deprive con-
sumers of information that may save lives. If total sales of All Bran
are at risk from the date the claim first appeared, the FTC starting
point for equitable relief, that would be a severe financial penalty
indeed.
Today, claims that masks can help reduce the risk of COVID are
useful to consumers. Typically, however, the FTC wants random-
ized, double-blind, clinical trials to support health-related claims.
Such evidence does not exist for masks, and there was almost no
evidence of any sort a year ago when the claims mattered most. If
total sales revenue is at risk, few are likely to make claims.
In addition, the Commission should seek to complement, not
compete with, monetary remedies available to private plaintiffs.
This is especially relevant in antitrust, where the class-action bar
routinely follows government findings of a violation with lawsuits
seeking monetary relief. The same is increasingly true of consumer
protection cases against legitimate companies. Money is available,
and private class actions can and do pursue financial relief. There
is no reason for the FTC to supplant these cases.
Regarding procedures, with fraud, section 19 process is unwork-
able. It would require three separate proceedings—a preliminary
injunction to obtain an asset freeze, an administrative proceeding
to determine a violation, and a separate district court proceeding
to recover money. A district court judge would have to freeze assets
and supervise the receiver without having any control over the ulti-
mate disposition of the case. Judges will probably decline to do so,
but then there will be no money left for consumers.
The section 19 process is eminently workable when cases involve
legitimate companies, however. Most such cases settle, and wheth-
er the pleadings cite section 13(b) or section 19 does not matter.
The Volkswagen case and the Herbalife case that you heard about
this morning, or earlier today, are examples. Those cases would
have been consent agreements still. They just would have cited a
different section of the statute.
To conclude, Congress should authorize the Commission to pur-
sue equitable relief under 13(b), subject to the substantive stand-
ard set forth in section 19. Congress should set the standards for
when money is appropriate rather than granting the agency unlim-
ited discretion.
Thank you, and I look forward to your questions.

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[The prepared statement of Dr. Beales follows:]

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Ms. SCHAKOWSKY. Thank you, Dr. Beales.
And now I would call on Mr. Mermin for his 5 minutes of presen-
tation.
STATEMENT OF TED MERMIN
Mr. MERMIN. Thank you very much, Chair Schakowsky, Ranking
Member Bilirakis, and members of the subcommittee. My name is
Ted Mermin. I direct the Center for Consumer Law and Economic
Justice at the Berkeley Law School, but the thoughts I share today
are my own.
Today, I am here today as a concerned citizen. We need the FTC.
But the agency that is supposed to be protecting all of us from
scammers and con artists and hackers and tech barons no longer
has the tools and the resources it needs to do its job. Last Thurs-
day’s decision by the Supreme Court means that the FTC is now
unable to perform its most important consumer protection func-
tion—getting money back to the people it has been taken from ille-
gally.
Fortunately, Congress can fix the problem. The Consumer Pro-
tection and Recovery Act represents a significant and now abso-
lutely urgent step towards retooling the FTC. It is one step, be-
cause I hope that this committee will, perhaps later this year, take
on the full task of giving the FTC what it needs to handle not only
the current emergency but also the next one. We need to make sure
that a 21st-century FTC has the tools to take on 21st-century prob-
lems.
Now, I want to emphasize that I look at the FTC from the out-
side—outside the agency and outside the Beltway. Some of my
proudest years were spent as a deputy attorney general in a State
AG’s office. We worked with the FTC. But we also wondered why
the FTC was so underresourced and why it couldn’t do many of the
things that State AGs take for granted.
For example, in consumer protection cases, State AGs rely on
three kinds of relief in almost every case: first, getting people their
money back; second, ensuring that the business that acted unlaw-
fully is under court order not to do it again; third, requiring the
payment of civil penalties to give the business and its competitors
an incentive not to engage in that activity.
It never made sense to us that the FTC mostly couldn’t require
civil money penalties and in some courts couldn’t get an injunctive
order simply because the illegal conduct had ended.
And, last week, well, the AMG v. FTC ruling is going to disrupt,
as we have heard today, every case the FTC has pending. On Fri-
day, for example, a judge in Arizona appointed by President Trump
who had granted an asset freeze against a pure pyramid scheme,
suggested he was going to lift the order because it was aimed at
consumer redress.
The FTC needs new resources. The agency has many fewer em-
ployees than comparable agencies that cover industries responsible
for much smaller segments of the economy. And it has lost almost
40 percent of its positions in the last four decades, while the GDP
of this Nation grew by 750 percent. That makes no sense.
Praise, kudos to this committee for making sure, in bipartisan
fashion, that the Appropriations Act last December included more

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resources and COVID-related civil penalty authority to the FTC.
But that expires with the pandemic. This committee can make it
permanent so that the FTC can handle emergencies when they
arise and not on a one-by-one, after-the-fact basis.
The need for public enforcement capacity is acute. Most Ameri-
cans can’t afford to hire their own lawyers, and mandatory arbitra-
tion and restrictions on class actions have drastically reduced the
availability of private redress. Public enforcement has become the
last line of defense in market protection.
The CPRA is a direct and a modest fix. The alternative cannot
respond to the speed and ingenuity of fraudsters. The requirement
for a complete administrative proceeding before an action can be
brought under section 19 is unworkable.
I think members of this committee, along with the American
public, have come to rely on the FTC to safeguard us during the
pandemic. Perhaps this agency that is dedicated to getting our
money back, to stopping scams, and to ensuring our privacy has
earned our trust.
I have many colleagues who work at the FTC. You could not find
a more dedicated, capable group of people. They don’t cut corners.
They do things the right way. They are public servants in the tru-
est sense.
I believe we can agree today that a currently underequipped FTC
needs to be able to do more to protect American consumers, not
less. State AGs have had the authority proposed in the CPRA, and
more, for decades. The political process and the court system have
apparently managed to keep the AGs in line.
This committee meets at a perilous historical moment. The chief
protector of American consumers has been sent to the sideline just
when we are experiencing a heightened threat.
Members, swift action to restore the FTC’s traditional authority
means that, when constituents contact your office and tell your
staff that they have lost their life savings to a work-at-home scam
or their identity has been stolen and someone has opened accounts
in their name or they spent their stimulus payment on a sham cure
for COVID for their grandmother who is on a respirator, there will
still be an agency to refer them to.
No one wants that staffer to have to add, ‘‘Well, we could have
sent you to the FTC, but they don’t actually have the power to get
you your money back anymore.’’ Inaction or delay will mean no re-
covery for millions of wronged American consumers. The time to
pass the Consumer Protection and Recovery Act is now.
Thank you.
[The prepared statement of Mr. Mermin follows:]

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Mr. CÁRDENAS. Madam Chair.
Ms. SCHAKOWSKY. Sorry, I thought I was——
OK. So we have now concluded witnesses’ opening statements for
the second panel. At this time, we will move to Member questions.
Each Member will have 5 minutes to ask questions for our wit-
nesses, and I will start by recognizing myself for 5 minutes.
I feel like I need to begin by restating something that I had
asked before, a fact I had mentioned before. In October of 2020, all
five FTC Commissioners, Republicans and Democrats, sent a letter
urgently to Congress to act quickly to reaffirm section 13(b) and
preserve the FTC’s ability to recover ill-gotten gains for consumers.
So that was the FTC itself, in a bipartisan way, that was asking
us to act, and I certainly agree that we ought to do that.
Fraudsters and scammers have profited immensely from the fear
and anxiety that we have seen come along with the COVID 0919
pandemic. Since the beginning of the pandemic, consumers have re-
ported losing more than $400 million just on pandemic-related
fraud. As we all struggle with the devastating consequences of the
COVID 0919 pandemic, we shouldn’t also have to worry about
scammers and fraudsters taking advantage of it.
So I am very proud of the bipartisan COVID Consumer Protec-
tion Act that passed. This was a new act which was included in the
2021 omnibus giving the FTC authority to seek civil penalties for
scammers. And I was pleased to see that the Federal Trade Com-
mission brought its first case under this new law against a busi-
ness’ deceptive marketing of a product containing vitamin D and
zinc as scientific proof to treat and/or prevent COVID.
So my question is this: Under the COVID 0919—this is for Mr.
Mermin. Under the COVID 0919 Consumer Protection Act, the
FTC can fine companies who violate the law for up to $43,792 per
violation. When the FTC fines companies using this authority,
where does that money go?
Mr. MERMIN. That money currently returns to the U.S. Treasury.
And that is one way of addressing things.
I would say, perhaps—I don’t think it is a matter for this bill,
but if in a bill later this year this committee were to think of per-
haps setting up a civil penalty fund or a consumer redress fund
that would allow the FTC to get money back to people who were
scammed by a fly-by-night company and there might be a large
judgment that the FTC obtained but none of that money was avail-
able actually to get back to consumers, well, if you set up a fund
that disgorgement or penalties from another case might be able to
be paid into, then those consumers could be made whole.
Ms. SCHAKOWSKY. I think it is important just to note that the
COVID 0919 Consumer Protection Act actually does not right now
provide the authority for monetary reward.
Ms. Laitin, I thank you very much for your testimony. What I
wanted to ask you: Now that the Supreme Court has rejected the
FTC’s ability to get money back into the pocket of consumers under
section 13(b), what are the FTC options for getting money back to
consumers who have been defrauded in the COVID 0919 case like
this one, like the one we were talking about.
Ms. LAITIN. They are extremely limited, if nonexistent, right
now. Thank you, Chair, for the question.

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This is the issue at hand right now, that the FTC had this au-
thority for 40 years. Whether we agree or disagree with the Su-
preme Court doesn’t matter anymore. The question you all have to
deal with is, the Supreme Court decided that the text does not
allow the FTC to get this consumer redress. So it is up to Congress
to be able to restore this authority to the FTC so they can continue
doing the work they have done previously.
And if they can’t get that redress back to consumers, then we are
talking about people who—as in Mr. Mermin’s example, if some-
body spent their stimulus check on a false cure for COVID, they
will not see that money again.
Ms. SCHAKOWSKY. Right.
So would the Consumer Protection and Recovery Act provide the
kind of authority, and the sufficient authority, to the FTC to enable
the FTC to recover the illegal profits and get them back to con-
sumers, in your view?
Let me ask both Mr. Mermin and Ms. Laitin.
Mr. MERMIN. Yes, I believe it would.
Ms. SCHAKOWSKY. OK.
Actually, Dr. Beales as well. I mean, just a ‘‘yes’’ or ‘‘no.’’
Dr. BEALES. It certainly would. It does more than that, but it cer-
tainly does that.
Ms. SCHAKOWSKY. OK.
And Ms. Laitin?
Ms. LAITIN. Yes, it absolutely does that.
Ms. SCHAKOWSKY. And if you could just describe—I talked about
it as the most powerful tool that the FTC really has to redress the
grievances and the losses of consumers. Would you speak to that?
Let’s start with Mr. Mermin.
Mr. MERMIN. It is certainly a powerful tool. I think it is an enor-
mously important tool from the point of view of consumers them-
selves. If you haven’t ever had—I recommend having it—the expe-
rience of seeing someone who got money back that they never ex-
pected to see again, that is what government is supposed to do for
people. And it really, I think, emphasizes why that is the most im-
portant authority that the FTC does have.
Ms. SCHAKOWSKY. You know what? I didn’t realize that I have
gone over my time. And, being the chair, I should really be setting
an example. So I will have to yield back and now turn it over to
the ranking member of the subcommittee, Gus Bilirakis.
Congressman Bilirakis, it is your turn.
Mr. BILIRAKIS. Thank you, Madam Chair. I appreciate it very
much.
And I thank everyone for their patience today, but this is a very
important issue.
Professor Beales, it is not often that we have someone before us
who was cited in a Supreme Court decision just a few days ago.
You have a wealth of knowledge, and I am hopeful that the mem-
bers of this committee can benefit from your insights.
And I know we only have 5 minutes here. Can you give us a very
brief background of the FTC’s past misuse of the rulemaking proc-
ess that we should keep in mind as we move forward on expanding
FTC authority?

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Dr. BEALES. Well, when the FTC launched rulemaking in the
1970s, it proposed a rule a month at one period, and it did so with-
out really thinking through the legal theories of why there was a
violation and without really thinking through what kind of evi-
dence it would need in order to prove or disprove those theories.
The result was enormous rulemaking records that didn’t have
any relevant evidence to address the merits of whether the rule
should be adopted or not, and most of those rules came to nothing.
They were huge amounts of resources. The reason that the FTC is
so much smaller than it was in 1981 is that it is no longer wasting
all those resources on rulemakings.
But that is what happened to a lot of them.
Mr. BILIRAKIS. Thank you very much.
Reclaiming my time, again, for Professor Beales, I am concerned
that this legislation may incentivize the FTC to seek redress with-
out allowing due process to commerce. Do you agree with this con-
cern?
And is there a way we can streamline the efficiency of the FTC
while at same time protecting the right to due process?
Dr. BEALES. I actually think the standard of section 19 does that
fairly well—not the process of section 19, but the standard, that
the FTC should be able to get money when the conduct is some-
thing that a reasonable person would have known was dishonest or
fraudulent.
Other than that, the FTC should resolve whether this practice is
legal or not, and it should make people conform to the legal prac-
tice. But there shouldn’t be financial sanctions for that.
I don’t think there is a due-process problem in fraud. I think the
standards for fraud are well-recognized.
Mr. BILIRAKIS. Thank you, sir.
My next question. You authored a piece last year entitled ‘‘Sec-
tion 13(b) of the FTC Act at the Supreme Court: The Middle
Ground.’’ Can you elaborate on where you think the middle ground
is?
And since we didn’t have Republican Commissioners here today,
is there anything you care to respond to—well, respond to Acting
Chair Slaughter’s testimony? I know you were actually present
during the time she testified. So, if you could give me an answer
to that as well, please.
Dr. BEALES. Sure. As to what Chairman Slaughter had to say,
I think my main point is that a lot of the cases that were signifi-
cant sources of monetary relief, like Volkswagen and Herbalife and
Amazon, those were all consent agreements. And, in a consent
agreement, the section 19 process works fine. You have a settle-
ment that resolves both the administrative matter and the district
court matter. And the only difference is, it is citing different statu-
tory authority. The FTC will still be able to get money in those
cases, and I don’t see any real complication.
The middle ground that we talked about is—and I think the FTC
could have defended its use of Section 13 this way—is to use Sec-
tion 13 against fraud but not against legitimate companies where
the legality of the practices is not well established—or the illegality
of the practices is not well established.

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And that is essentially what we argued for in that article, and
that is essentially what I am recommending today: the Section 13
process, but the section 19 standards for when you can get money.
Mr. BILIRAKIS. Thank you.
Let me ask a question of the full panel, if that is OK, quickly.
If you could amend the current piece of legislation that we are—
well, we are not marking up today, but we are hearing today—how
would you do so?
Why don’t we go through the panel, quickly.
Dr. BEALES. In section 13(b), I would insert language that cites
the standards of section 19. And I think that is pretty much the
only change that would be needed.
Mr. BILIRAKIS. OK.
Anyone else?
Mr. MERMIN. I don’t think that that amendment is necessary.
And I am happy to explain why in response to a later question, be-
cause I see the time is up.
Mr. BILIRAKIS. But you don’t have any other suggestions, sir, as
to how to make the bill better?
Mr. MERMIN. For this particular bill, with respect to restitution
and disgorgement, I think it is well-written as it is. I think there
are other issues that the committee can take up, I hope relatively
soon.
Mr. BILIRAKIS. And the Chair plans to do that, I believe. All
right.
Anyone else? Thank you very much, if not.
Thank you. I yield back.
Ms. LAITIN. Thank you. I just——
Mr. BILIRAKIS. Oh. Please.
Ms. LAITIN. I can answer quickly and just say I agree that I
think the bill works as it is written, and I also have concerns about
the amendment that has been suggested.
If it was open for—if I thought it could fly through, I have lots
of ideas on how to strengthen the FTC, but I think that waits for
another day.
Ms. SCHAKOWSKY. OK.
And the gentleman yields back.
Next we have Congresswoman Kathy Castor for 5 minutes of
questions.
Ms. CASTOR. Yes. Thank you, Madam Chair.
I will go to Professor Mermin to finish his thought there on why
he disagreed with the proposed amendment from Professor Beales.
Mr. MERMIN. Thank you very much, Congresswoman.
I think that there are a few things to keep in mind here. And
I speak, again, from the perspective of State AGs.
There is flexibility that needs to be built into unfair and decep-
tive practices laws, and there also needs to be flexibility built into
the way that money is returned to consumers. We need the FTC
to be prepared for the cases that come up that we can’t even imag-
ine what they would look like now.
If there are situations, as Professor Beales mentioned, where it
would be inappropriate to get the money back, well, then that is
something that the Commission itself can get involved in dis-
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tainly seen, as we saw with the Supreme Court last week, no hesi-
tation on the part of courts to limit the FTC when they believe that
it has stepped over the line.
But flexibility in getting money back to consumers, as is in the
current draft of the bill, is vital.
Ms. CASTOR. Thank you very much for that.
You know, I thought it was so interesting that both you and Ms.
Laitin, in your testimony, also called on Congress and the FTC to
do more to hold Big Tech accountable. I think you referred to them
as the Big Tech barons or something like that. Because it is clear
now that companies like Facebook and Google seem to think that
it is better for their business model to—that they can break the law
and just, if there is a fine, it is the cost of doing business. But that
has to change. That just cannot be the way that we operate.
For example, in 2019 the FTC entered into a settlement with
Facebook, but it fell incredibly short. Even though it sounds like
a lot of money, when it comes to Facebook, it is not. It was a $5
billion penalty.
And you know what happened? Facebook’s stock value went up.
They didn’t have to rein in its user surveillance or make any sig-
nificant changes to its business model. The FTC actually granted
immunity provisions for Facebook’s top executives. And I just think
that is not going to lead to protection of the consumer, and we
know that Congress has to do more, and hopefully we will.
But do you see a role here for the Consumer Protection and Re-
covery Act on first-offense civil penalty authority and rulemaking
authority that would allow the FTC to rein in Big Tech?
Ms. LAITIN. I don’t know who you were pointing that question at,
but I am happy to start.
Ms. CASTOR. I will start—yes, go ahead, Ms. Laitin, and then I
will go to Mr. Mermin.
Ms. LAITIN. I would say two things.
First, section 13(b) has been used by the FTC in some of their
cases against the tech companies, and it is an important tool. And
having the ability to seek disgorgement strengthens their hand and
enables them to do more to go after these companies. As the Acting
Chair noted, not having that ability weakens their negotiation.
But, yes, I think in order to truly have the impact that Congress
and so many on this committee want them to have with respect to
Big Tech, the ability to get civil penalties and to set rules in a
meaningful way is also incredibly important. But the 13(b) fix will
help a great deal.
Ms. CASTOR. Mr. Mermin?
Mr. MERMIN. I certainly agree.
And just to emphasize something that my friend Professor Beales
said. The problem—I mean, yes, the settlements that have been
achieved are impressive in their numbers, but you don’t get a set-
tlement if you don’t have the ability to get the money in the first
place. And as that judge in Arizona has just indicated, he probably
wouldn’t have granted that asset freeze.
So not having 13(b) authority undermines everything that the
FTC is trying to do.
Ms. CASTOR. Well, thank you very much.
I will yield back at this time. Thank you, Madam Chair.

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Ms. SCHAKOWSKY. The gentlewoman yields back.
And now I recognize Fred Upton for 5 minutes.
Are you there, Fred?
OK. It looks like he is not.
Then, Bob Latta, it will be your turn for 5 minutes.
Mr. LATTA. Well, thanks again, Madam Chair, for today’s hear-
ing.
And thanks to our witnesses for being with us today. I greatly
appreciate it.
Dr. Beales, in your testimony you reference a triple hybrid proce-
dure when dealing with illegitimate companies in fraud cases.
Would you elaborate about how 13(b) reforms may differently im-
pact legitimate companies and illegitimate bad actors?
Dr. BEALES. 13(b) is essential to go after the fraudulent actors
because those cases really need to start with an asset freeze. If you
don’t get an asset freeze at the beginning, the fraudsters will either
spend the money or hide it, and there won’t be anything left for
consumers.
The procedure that we are left with as a result of the Supreme
Court decision is the triple hybrid: going for an asset freeze, which,
as Mr. Mermin notes, you may not get; then an administrative pro-
ceeding to resolve liability; and then a separate proceeding to get
money. And when you get to the end of that, there is not going to
be any money.
For legitimate companies, the Volkswagen example, they are
going to be there. You don’t need an asset freeze. You are not going
to get an asset freeze. You have the authority to get money if you
can say that the conduct is fraudulent or dishonest, and that is
pretty easy in the Volkswagen case. You are just citing a different
statutory authority. There is not any difference in the substantive
posture in the negotiation. The Commission is saying, ‘‘We have
the authority to get money, and you are going to have to pay.’’
But that only works for legitimate companies. It doesn’t work for
the fraudsters.
Mr. LATTA. All right. Well, thank you.
Dr. Beales, also, the Bureau of Economics has published a de-
tailed analysis of how it calculates remedies. It also frequently
weighs in on FTC settlements and cases with calculations of what
the likely injury and proper redress would be.
What principles does it apply in such opinions that could guide
Congress in modifying 13(b)?
Dr. BEALES. I think the basic principle of damages is—there are
two ways people get injured by deceptive claims. One is, there may
be a price premium that everybody pays because they think the
product has a feature that it doesn’t, and that price premium is an
injury. And the second source of injury is that some people buy the
product who would not have bought it otherwise.
In the case of fraud, virtually all of the sales are because of the
deceptive claim, and total sales are an appropriate measure of the
injury to consumers.
That is not true if you have an established product that has been
around for years—All Bran, for example, that starts claiming that
diets high in fiber may reduce the risk of cancer. If you decide that
claim is deceptive, well, most of those people were going to buy All

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Bran anyway. All Bran’s total sales are not the right measure of
injury.
The Bureau of Economics recognizes that. The Commission’s
starting point, however, in every negotiation I have seen is, ‘‘We
are entitled to your total revenue, and let’s bargain from there.’’
Mr. LATTA. OK.
Let me follow up with this: Why is it important that the FTC’s
monetary remedies be offset by the value that a consumer receives
from the product or the service at issue?
Dr. BEALES. Because otherwise we risk excessive caution in
places where the law is in dispute, where reasonable scientific ex-
perts disagree—about whether you should or should not take vita-
min D to reduce COVID risks, for example. We ought to recognize
the value of that information to consumers, and we don’t want a
penalty that is so high that it discourages providing important in-
formation.
Mr. LATTA. And not picking on you, just with my last 45 seconds,
what methodologies are appropriate for calculating monetary rem-
edies under the dishonest or fraudulent standard? And should
these be written into the Act?
Dr. BEALES. I think the same approach is conceptually right.
There is a price premium for a feature it doesn’t have, and there
are people who buy the product who wouldn’t have otherwise, and
the question is, what is the mix of those.
I would be reluctant about writing them into the Act, because I
think it is hard to do without creating a recipe for how to avoid
recoverable damages. But I think those are principles that would
develop once there is actually litigation about how to do this.
Mr. LATTA. Well, thank you very much.
Madam Chair, I yield back.
Ms. SCHAKOWSKY. The gentleman yields back.
And now I recognize Congresswoman Lori Trahan for her 5 min-
utes.
Mrs. TRAHAN. Well, thank you, Chairwoman Schakowsky.
I want to discuss a case the FTC brought in 2005 against Direct
Marketing Concepts, a company based in my home State of Massa-
chusetts. DMC ran infomercials for a range of supplements, includ-
ing Supreme Greens. Their ads claimed that the supplement could
treat, cure, and prevent cancer and cause dramatic weight loss, all
while being safe for consumption by pregnant women and even
children.
These claims simply had no evidence behind them, no peer-re-
viewed research, no FDA approval. They misled and they harmed
consumers. And yet DMC had no problem featuring a woman who
claimed to lose 81 pounds after taking Supreme Greens for 8
months—a story that simply wasn’t true.
The cost to consumers for a 1-month supply of Supreme Greens
ranged between $32 and $50, plus shipping and handling. That is
a lot of money for a product that does not work and, more impor-
tantly, that could be harmful to our children and mothers.
Fortunately, the FTC was able to use their 13(b) authority to
order these scammers to cede $70 million of ill-gotten money and
return that money to defrauded consumers.

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Now, if this case were brought today, my understanding is that
the FTC could only ask Direct Marketing Concepts to stop selling
Supreme Greens, a forward-looking behavioral restriction, but
could not seek monetary remedy for consumers that were harmed.
Mr. Mermin, is this correct? And, if so, in a case like this, does
the FTC possess other enforcement tools that could practically pro-
vide actual monetary relief to real people?
Mr. MERMIN. Thank you for the question.
I think that it does not in any realistic way. As Professor Beales
has mentioned, for a fraud case like that, the remedies of section
19 are just going to be inadequate. And I would say that they are
inadequate in any case.
I do want to mention one further thing just about Supreme
Greens. Let’s just say that, instead of whatever the material was,
that they had been sending oatmeal. Could they then say, ‘‘Well,
you can’t recover all the money that was taken from you because
we gave you the benefit of a package of oatmeal, and so please sub-
tract that’’? I don’t think that that is the way that we want to do
business.
Mrs. TRAHAN. Well, I agree.
And this case is just one of many. In fact, over 100,000 Massa-
chusetts residents have received refunds in the last 21⁄2 years total-
ing over $18 million as a result of section 13(b) cases. And it
speaks to the importance of an effective FTC.
Mr. Mermin, in your testimony you explain that the FTC has lost
almost 40 percent of its positions in the past 40 years while the
GDP grew by 750 percent.
You know, given your experience as an enforcer at the State
level, can you speak to the importance of properly funding the
FTC? What would it mean for the American people in today’s econ-
omy?
Mr. MERMIN. I think it would mean a much safer marketplace.
And I think that that is what we ultimately need.
That decline is a decline in the FTC’s budget over time. It is not
just rulemaking, of course; it is across the board. And it has meant
a relative lack of leadership.
This is the Nation’s leading consumer protection agency, and it
should be in that position with respect to the States, with respect
to localities—who have greater enforcement authority right now
and tools available to them than the FTC does. And I think that
making sure that those tools are available and that the FTC is
fully funded, as former Commissioner Kovacic noted in a recent
hearing, is essential.
Mrs. TRAHAN. Well, thank you for that, Mr. Mermin.
And thank you to all the panelists for your time and your testi-
mony today.
I yield back, Madam Chair.
Ms. SCHAKOWSKY. The gentlewoman yields back.
And now I recognize Kelly Armstrong for his 5 minutes for ques-
tions.
Mr. ARMSTRONG. Thank you, Madam Chair.
Mr. Beales, the 2003 policy statement—which I believe you think
should be reinstated, is that correct?

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Dr. BEALES. At this point, it probably needs to be codified, if you
are going to extend 13(b) to antitrust cases. But, yes, at the least,
it should be reinstated.
Mr. ARMSTRONG. And that is what leads me to my question. It
suggests the Commission should only seek monetary equitable rem-
edy when there is a reasonable basis to calculate the amount of
disgorgement or restitution.
And at last month’s Big Tech CEO hearing, I asked about the
consideration of nonprice factors, like privacy and innovation, in
antitrust analysis and actually got several of the members of that
hearing to agree that those should be factored in. But nonprice fac-
tors are obviously less quantifiable than price.
As Congress considers enacting comprehensive data privacy leg-
islation, what would you suggest is the most reasonable basis—or
is there one—to calculate that type of restitution?
Dr. BEALES. I think, in places where calculating damages is very
difficult, if you really want penalties, I think civil penalties is a
more sensible approach.
On the consumer protection side, I think on information security
cases, for example, civil penalties would make a lot of sense for ex-
actly that reason. It is very hard to figure out what the injury is
from a particular data breach.
Mr. ARMSTRONG. And I think this is a question we are going to
look at moving forward with these companies, right, is, I mean—
and particularly in antitrust analysis. The consumers and their
customers aren’t always the same thing. But I also think it is one
of the most significant questions, if not the FTC, but Congress is
going to have to wrestle with moving forward.
Dr. BEALES. No, I agree with that. It is a difficult question.
Mr. ARMSTRONG. Yes. I should have put a question mark after
the end of my statement. I appreciate it.
And, with that, I will yield back, Madam Chair.
Ms. SCHAKOWSKY. The gentleman yields back.
And now I recognize Jerry McNerney, Congressman McNerney,
for 5 minutes.
Mr. MCNERNEY. Well, I thank the chairwoman.
And I thank the witnesses for hanging in there today.
Mr. Mermin, your comparison of the FTC and the AGs was in-
structive, so I want to thank you for that.
My congressional district has a large low-income population—and
it is close to Cal—including parts of Contra Costa, San Joaquin,
and Sacramento counties. The cities of Antioch and Stockton are
the major cities in my district.
Why is it so important for low-income consumers for Congress to
pass quickly the Consumer Protection and Recovery Act?
Mr. MERMIN. Thank you very much, Congressman, and I know
your district well.
Mr. MCNERNEY. Good.
Mr. MERMIN. Low-income communities, communities of color,
seniors, veterans, students—these are folks who, generally speak-
ing, do not have access to attorneys.
I wish that the private sector and the private bar were as robust.
As was mentioned earlier, I am afraid they are not. And I am
afraid that there are structural impediments to that. The manda-

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tory arbitration clauses, the restrictions on class actions, these
have dried up those kinds of cases enormously.
And that means that there is a tremendous reliance right now
on the public sector, on public enforcement agencies, to do that job
and to get money back to consumers, especially low-income con-
sumers, especially communities of color, from whom it has been
taken.
Mr. MCNERNEY. Thank you. Thank you.
Ms. Laitin, in your testimony you noted that not having section
13(b) type of authority poses a big risk for the Commission’s ability
to—and quoting you—rein in Big Tech companies that have taken
advantage of their market power to crowd out small businesses and
exploit consumer data.
So I am following up on Ms. Castor’s questions. Could you please
expand on your meaning and further discuss what that means for
consumers?
Ms. LAITIN. Absolutely. Thank you for the question.
The FTC has brought some cases against large tech companies,
not as many as many, I know, members of this committee and else-
where would like to see. I think there is an interest in them being
more aggressive. But where they have brought cases, they have re-
lied on section 13(b).
And without the ability to get disgorgement and restitution,
those cases are largely meaningless and will be very difficult for
the FTC to use to aggressively enforce against these companies. So
all of that is needed.
And I want to make the point: Mr. Beales has talked about this
fraud distinction, of fraudulent, dishonest behavior. That is a tough
line to draw. And I think if that was put into statute, that could
create problems for things like enforcement against the tech com-
panies. Are they being fraudulent, or are they just lying to their
customers? Where is the line? And should that line be drawn in
statute, or should we let the courts draw that line and work it out
over time?
The FTC has used 13(b) to enforce against unfair and deceptive
acts and practices and unfair methods of competition. Leaving it
like it is now and giving them that opportunity to work it out in
the courts and figure out where restitution is appropriate and
where it is not makes more sense than drawing artificial lines in
statute.
Mr. MCNERNEY. So not having this authority will lead these com-
panies to taking greater advantage of consumers. Would——
Ms. LAITIN. Absolutely.
Mr. MCNERNEY [continuing]. That be true?
Ms. LAITIN. Absolutely.
Mr. MCNERNEY. Thank you. I agree.
Mr. Mermin, in your written testimony you note that it will take
years for our economy to recover from the pandemic and that in the
meantime scams, robocalls, data breaches resulting in identity
theft, and unfair and deceptive practices will proliferate.
How has the pandemic left lower-income consumers even more
vulnerable? And why can’t we afford to delay restoring the FTC’s
authority?

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Mr. MERMIN. These are folks who are more likely to have lost
jobs, less likely to be able to work from home, more likely to have
family members who got sick or who passed away. And you can
imagine, with hospital bills, medical bills, with the various ex-
penses that have arisen, that it is especially low-income folks who
have felt the brunt of the pandemic and of the recession.
And there is going to be a tail for that. We need a robust FTC
to be able to protect those folks and all of us from predators.
Mr. MCNERNEY. Well, as I said at the end of my first-panel ques-
tioning, this is important to my constituents. I want to make sure
we get this legislation passed to protect my constituents as soon as
we can.
Thank you. I yield back.
Ms. SCHAKOWSKY. The gentleman yields back.
And now I recognize Congresswoman Yvette Clarke for 5 min-
utes.
Ms. CLARKE. Thank you once again, Madam Chairwoman.
And let me thank our panelists for your testimony here today.
You know, the company at the center of the Supreme Court case
last week was AMG, and it was a payday lender that preyed on
those living paycheck to paycheck. They charged interest rates as
much as 700 percent and sometimes as high as 1,000 percent and
collected millions of dollars in undisclosed and inflated fees.
They took advantage of at least 5 million consumers from 1997
to 2013, including 250,000 people in my home State of New York.
The record $1.3 billion judgment against AMG speaks to just how
many consumers were victimized in this case.
Ms. Laitin, according to one recent survey, 63 percent of all
Americans have been living paycheck to paycheck since the begin-
ning of the COVID 0919 pandemic. Can you tell me how refund
checks from the FTC to victims of AMG’s unlawful conduct might
make a difference for these people?
Ms. LAITIN. Absolutely. And thank you for the question.
The economy has been absolutely brutal for the past year, and
Americans are hurting and they are looking for assistance. And
what AMG offered their customers was a loan that folks thought
would help them—it would help them get out of trouble and help
them restore themselves back to financial security. And they got
the opposite.
And by the FTC enforcing against AMG and getting these
checks, that means people are able to get their money back and be
back at least where they were when it started, although probably
not as well, because they took a hit from that loan.
But it is so important to get people their money back. Enforcing
against these folks and getting civil penalties is important, but re-
turning money to the people who were harmed is vital to help these
folks get back on their feet and to enable them to participate in the
economy.
Ms. CLARKE. And what message does the Supreme Court’s deci-
sion now send to payday lenders who are thinking about violating
the law?
Ms. LAITIN. It is an interesting question. They are certainly prob-
ably feeling a little more free, which is why this is so important.

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You know, the thing to recall, though, is the Supreme Court said
nothing about whether AMG should be allowed to keep its money
or if restitution should be made. What they said was that the FTC
doesn’t, under the language of the statute, have the authority. So,
on the policy question of whether AMG should be required to give
that money back, they didn’t speak on that. And that is your job,
is to speak on that piece.
Ms. CLARKE. So, Mr. Mermin, to date the FTC has issued almost
1.2 million checks, totaling more than $505 million, to borrowers
defrauded by this massive AMG payday lending scheme. In the
wake of the Supreme Court decision, would you say that victims of
scammers and fraudsters would be more likely or less likely to get
their money back, even if the FTC still goes after the criminals?
Mr. MERMIN. I am afraid they would be much less likely to get
their money back.
Ms. CLARKE. And would passing the Consumer Protection and
Recovery Act help to address this?
Mr. MERMIN. It certainly would.
Ms. CLARKE. So millions of Americans are struggling right now
to make ends meet. They are struggling to provide food for their
families, keep a roof over their heads, and pay medical bills. Put-
ting money back in people’s pockets who have been defrauded or
scammed seems like a no-brainer to me, and I hope we act expedi-
tiously to pass this legislation into law.
So, Madam Chair, I want to thank you for holding this hearing.
My colleague Tony Cárdenas, thank you for your leadership. And
I yield back the balance of my time.
Ms. SCHAKOWSKY. The gentlelady yields back.
And now it is my honor, as we wind down this hearing, to call
on the author of the legislation that, in most people’s view, it
seems, would address the problem of getting money back in peo-
ple’s pockets—the problem of not getting money back in people’s
pockets, and that would be the vice chair of this subcommittee,
Tony Cárdenas.
Mr. CÁRDENAS. Thank you, Madam Chairwoman. And thank you
for carefully and accurately explaining how, Republican and Demo-
crat, we agree that the legislature should act, and then where we
disagree, on many of the details. But I am glad that we are having
this hearing so that we can have an opportunity to hear those de-
tails—but not just us—making sure that our constituents, the
American people, hear this deliberation and hopefully will be pay-
ing attention and understand how important it is that the FTC be
restored its authority under 13(b).
It is no mystery that Latino, Black, and Asian-owned small busi-
nesses have been hit hardest by the COVID 0919 pandemic. The
numbers are real, and they are there. In addition to struggling to
access pandemic relief, they are also vulnerable to predatory lend-
ers and other scammers that are increasingly targeting small busi-
nesses.
In other words, a small business may be victimized by bad ac-
tors, much like individual consumers. So the FTC’s ability to get
monetary relief for victims is just as critical for small businesses
as it is for individuals as well, especially during the strains of this
pandemic.

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That is why I stress that the Consumer Protection and Recovery
Act specifically provides section 13(b) authority for the FTC to re-
cover for small businesses, not just for individuals.
So this question I have for Mr. Mermin or Ms. Laitin: Histori-
cally, how has section 13(b) been used to get money back to small
businesses who have been scammed or defrauded?
Mr. MERMIN. I can give you certainly one example, the A1 Jani-
torial Services case that the FTC decided—or brought in recent
years. These were small businesses that were being falsely invoiced
for services that had never been provided, for supplies that had
never been provided.
And you are exactly right that, in many cases, a small business
looks a lot like a consumer. It could indeed be an individual. And
I think it is entirely appropriate to make sure that the FTC can
effectively recover money for small businesses as well.
Ms. LAITIN. I will jump in as well. Thank you for the question.
Yes, FTC definitely looks out for small businesses as well. And
in fact, last week, I believe the same day that the Supreme Court
made its decision, they announced a settlement with Yellowstone
Capital, a company that provided merchant cash advances, a kind
of financial product for small businesses, that was charged—they
had enormous problems with predatory practices and cost these
small businesses a lot of money. It is a $9.8 million settlement.
Still looking to see what happens with that settlement following
the Supreme Court case. Certainly hopeful that those small busi-
nesses will get their money back, but I don’t know that we know
that for sure.
Mr. CÁRDENAS. Thank you.
And I apologize, I am going to ask you to speculate a little bit,
but I think that the question is pretty clear. Who tends, on any
given day, to have access to more lawyers? Would you assume it
would be the FTC or it would be a big company like Facebook, for
example?
Mr. MERMIN. I think it is—I will judge from my time in the AG’s
office and my knowledge of the FTC. I think that total number of
lawyers available is going to be much larger for industry. It is es-
sentially unlimited.
Mr. CÁRDENAS. Thank you.
And, Ms. Laitin, it is no secret that in many counties across the
country they have statistics on what the average income of a
household is, and in some counties it might be as low as $30,000.
In many counties, like Los Angeles, it is probably closer to $50,000,
$60,000, et cetera.
Now, when it comes to hiring lawyers because you have been de-
frauded, how many families, like, in those categories could honestly
afford to hire a lawyer? Is it a high percentage or a very low per-
centage? Or would many households just kind of throw up their
hands, with tears in their eyes, and possibly say, ‘‘I just can’t do
anything about, I guess I have been defrauded, and I have to walk
away’’?
Ms. LAITIN. Unfortunately, it is probably a small number. And
especially—you know, it is very costly to hire a lawyer, and if they
have already lost money, that may be farther than they want to go.

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Mr. CÁRDENAS. Uh-huh. Especially when it comes to most sen-
iors, right, Ms. Laitin? Seniors tend to, on average, across America,
have less disposable income, right? Correct?
Ms. LAITIN. Correct.
Mr. CÁRDENAS. And the reason why I think 13(b) is so critical
is because we are talking about protecting Americans across the
board. And the most common denominator in America is most
American households, most American seniors, most veterans, et
cetera, after being defrauded, are really not in a position to go after
and protect themselves and get their money back. And that is why
the FTC is there.
In this great country of America, thank God we have a Federal
Trade Commission like the FTC. And 13(b) is a critical part of
making sure that we have an efficient and effective opportunity to
protect the American people and to restore some justice in their
lives.
So, with that, Madam Chair, I yield back.
Ms. SCHAKOWSKY. The gentleman yields back.
And I believe hanging in there to be last but not least, Lizzie
Fletcher, you still here?
Well, she was. OK.
Well, I want to really give a big thank you to our witnesses over
the day.
And by the way, Mr. Bilirakis, if you want to make any kind of
a closing thank you, that would be good too.
I want to thank our Acting FTC Chair, Rebecca Slaughter, for
the time that she gave to us, to Dr. Beales, Mr. Mermin, and Ms.
Laitin for the enlightenment that you provided us and for hanging
in there. I know it has been a long day, and I appreciate it so very,
very much.
Gus, did you want to say anything?
Mr. BILIRAKIS. Well, I just wanted to thank you again, Madam
Chair, for holding this hearing.
And, Tony, well said at the end. And, hopefully, we can find some
middle ground and get this done as soon as possible, because I
know how important section 13(b) is and how important the FTC
is to our constituents. So I appreciate you filing the bill, and let’s
work on this and get it done right and get it through the United
States Senate.
Well, thank you very much, and we will see you next week. I
yield back.
Ms. SCHAKOWSKY. OK. Thank you, Gus.
And thank you, Tony.
Mr. CÁRDENAS. Madam Chair?
Ms. SCHAKOWSKY. Yes.
Mr. CÁRDENAS. If you don’t mind, as the lead author of the bill,
I just want to thank all of my colleagues for the respectful manner
in which we have been debating today and putting out before the
people of America our concerns and our agreements and disagree-
ments on how we can move this legislation forward.
And I just want to give a special thanks to a class act, Gus Bili-
rakis. Thank you so much for being so generous with your under-
standing of our ability to agree and disagree and continue to al-
ways want to work together. So thank you, Gus.

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And, Madam Chair, thank you for this opportunity to legislate
this bill.
Mr. BILIRAKIS. I think, like you said, Tony, you know, we are all
here for the same goal, to protect our constituents. So thank you,
sir.
And thank you, Madam Chair. I yield back.
Mr. CÁRDENAS. And to all the witnesses, thank you so, so much.
Ms. SCHAKOWSKY. Thank you.
Before we close, I request unanimous consent to enter the fol-
lowing documents into the record.
I will excuse our witnesses right now. You don’t have to stay for
this part. But, once again, just a great thank you. And I am sure
we will be in touch with you as we move forward with the Con-
sumer Protection and Recovery Act and other things that deal with
the Federal Trade Commission. And your expertise is really appre-
ciated.
So I am going to begin reading the letters and communications
that we have gotten.
And let me also, though, remind Members that, pursuant to com-
mittee rules, they have 10 business days to submit additional ques-
tions for the record to be answered by the witnesses who have ap-
peared.
So the letters include a letter of support from 32 public interest
groups; a letter from Veterans Education Success endorsing H.R.
2668; an article from The New York Times; an article from The
Washington Post; a letter from the Chamber of Commerce; a re-
search paper from Beales and Muris titled ‘‘Striking the Proper
Balance: Redress Under Section 13(b) of the FTC Act;’’ a research
paper from Beales and Muris entitled ‘‘Choice or Consequences:
Protecting Privacy in Commercial Information;’’ a research paper
from Beales and Muris titled ‘‘Privacy and Consumer Control;’’ a
research paper from Beales and Muris and Mundel—I guess it is
Beales, Muris, Mundel—titled ‘‘Section 13(b) of the Federal Trade
Commission at the Supreme Court: The Middle Ground;’’ a Su-
preme Court opinion; an unofficial transcription of a Senate com-
mittee—that is April 20th, 2021—FTC hearing; and a letter from
the Federal Trade Commission to Representative Latta.
That is it. And so, without objection, so ordered. Those will be
added.
[The information appears at the conclusion of the hearing. 1A1]
Ms. SCHAKOWSKY. At this time, the subcommittee is adjourned.
[Whereupon, at 4:12 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]

1 The four Beales and Muris research papers and the Senate committee hearing transcript

have been retained in House Committee on Energy and Commerce files and are available at
https://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=112501.

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