[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]




 
THE CONSUMER PROTECTION AND RECOVERY ACT: RETURNING MONEY TO DEFRAUDED 
                               CONSUMERS

=======================================================================

                            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
                           
                           
                           
                           
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                          
                           


     Published for the use of the Committee on Energy and Commerce

                   govinfo.gov/committee/house-energy
                        energycommerce.house.gov
                        
                        
                        
                        
                             ______                       


             U.S. GOVERNMENT PUBLISHING OFFICE 
47-220PDF           WASHINGTON : 2022 
                       
                        
                        
                        
                        
                        
                    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 CARDENAS, 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       NEAL P. DUNN, Florida
    Chair                            JOHN R. CURTIS, Utah
NANETTE DIAZ BARRAGAN, California    DEBBBIE LESKO, Arizona
A. DONALD McEACHIN, Virginia         GREG PENCE, Indiana
LISA BLUNT ROCHESTER, Delaware       DAN CRENSHAW, Texas
DARREN SOTO, Florida                 JOHN JOYCE, Pennsylvania
TOM O'HALLERAN, Arizona              KELLY ARMSTRONG, North Dakota
KATHLEEN M. RICE, New York
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
            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 CARDENAS, California, Vice      LARRY BUCSHON, Indiana
    Chair                            NEAL P. DUNN, Florida
DEBBIE DINGELL, Michigan             GREG PENCE, Indiana
ROBIN L. KELLY, Illinois             DEBBIE LESKO, Arizona
DARREN SOTO, Florida                 KELLY ARMSTRONG, North Dakota
KATHLEEN M. RICE, New York           CATHY McMORRIS RODGERS, Washington 
ANGIE CRAIG, Minnesota                   (ex officio)
LIZZIE FLETCHER, Texas
FRANK PALLONE, Jr., New Jersey (ex 
    officio)
                             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 Florida, opening statement............................     4
    Prepared statement...........................................     6
Hon. Jan Schakowsky, a Representative in Congress from the State 
  of Illinois, 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
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. Bilirakis\1\
Report, ``Choice or Consequences: Protecting Privacy in 
  Commercial Information,'' by J. Howard Beales III and Timothy 
  J. Muris, University of Chicago Law Review, submitted by Mr. 
  Bilirakis\1\
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. Bilirakis\1\
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. Bilirakis\1\
Opinion of the Supreme Court, AMG Capital Management, LLC, Et 
  Al., v. Federal Trade Commission, October Term, 2020, submitted 
  by Mr. Bilirakis...............................................   118
Transcript, Hearing on ``Strengthening the Federal Trade 
  Commission's Authority to Protect Consumers,'' Senate Commerce, 
  Science, and Trannsportation Committee, April 20, 2021, 
  submitted by Mr. Bilirakis\1\
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.


THE CONSUMER PROTECTION AND RECOVERY ACT: RETURNING MONEY TO DEFRAUDED 
                               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, Cardenas, Dingell, Kelly, Soto, Rice, 
Craig, Fletcher, Pallone (ex officio), Bilirakis (subcommittee 
ranking 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 Director; Perry Hamilton, Clerk; Alex Hoehn-Saric, 
Chief Counsel, Communications and Consumer Protection; Ed 
Kaczmarski, Policy Analyst; 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, Professional Staff Member; 
Sarah Burke, Minority Deputy Staff Director; Nate Hodson, 
Minority Staff Director; Peter Kielty, Minority General 
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 
Protection and Recovery Act: Returning Money to Defrauded 
Consumers.'' Due to the COVID 0919 public health emergency, 
today's hearing is being held remotely.
    All Members and witnesses will be participating via video 
conference. As part of our hearing, microphones will be on mute 
for 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 
conflict and in deference to him, I am going to recognize Frank 
Pallone, the chairman of the full committee, for 5 minutes to 
give his opening statement.

OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    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 
constituents 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 requested Congress to ensure to 
continue to seek the mandatory relief for consumers under 13(b) 
as soon as circuit courts first questioned this authority in 
2019, and that is when Chair Schakowsky and every Democratic 
Member joined with Vice Chair Cardenas to support the Consumer 
Protection and Recovery Act that we are considering today.
    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 Cardenas' bill restores the minimum authorities necessary 
for an effective enforcement 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 because 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 protect 
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 
Jersey 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 consumers, 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 constituents is no longer possible as of 
last week, thanks to the Supreme Court's decision.
    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 Cardenas to 
support 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 Cardenas' bill restores the minimum authorities necessary 
for an effective enforcement 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.
    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 colleagues 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. Cardenas.
    Mr. Cardenas. 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 Americans.
    Since July of 2018, almost a million people in my State of 
California have received nearly $172 million in redress under 
13(b).
    For 40 years, the courts uniformly held that the FTC could 
obtain 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 public 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 
subcommittee, for 5 minutes for an opening statement.

OPENING STATEMENT OF HON. GUS M. BILIRAKIS, A REPRESENTATIVE 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 
Commission's tireless efforts of fighting against scams and 
fraud during the COVID 0919 pandemic, especially those 
targeting our most vulnerable constituents.
    As you know, this committee worked in a bipartisan success, 
as you know, 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, 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 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 the additional authorities that 
may be required to act quickly against fraudsters.
    We also have a responsibility to consider how powers are 
targeted, transparent, and focus on getting redress for, again, 
for our victims. However, we won't get to hear all those 
options, unfortunately, today.
    The other FTC Commissioners 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--
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 financial 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 
decades. 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 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 national privacy standard, and I know most of you agree 
with this.
    Acting Chair Slaughter, I understand you announced a 
centralized rulemaking 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 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 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 appreciate you and the entire Commission's 
tireless efforts fighting against scams and fraud during the 
COVID 0919 pandemic--especially those targeting our most 
vulnerable 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 unambiguously 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 getting redress for victims.
    However, we won't get to hear all those options today. The 
other FTC Commissioners 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 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 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 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 rulemaking 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 REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    So today the subcommittee acts urgently to ensure that the 
Federal Trade Commission can put money back into the pockets of 
consumers who have been victims of fraud or scams. And this 
authority, 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 section 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.
    We must make consumers whole when they have been 
victimized. 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 Cardenas, 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. 
Understanding 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 Cardenas' 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 
vulnerable 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 
consumers 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 decision, 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 people 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 Supreme 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 Recovery Act, 
introduced by Vice Chair Cardenas, with the support of all the 
Democratic members of this subcommittee, confirms the authority 
of the Federal Trade Commission 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 authority that 
works, as well as other tools to better protect consumers. But 
I understand what the loss of section 13(b) authority means for 
consumers and am willing to work with my colleagues to move 
quickly to address the immediate need. Vice Chair Cardenas' 
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 REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF NORTH DAKOTA

    Mr. Armstrong. Thank you, Madam Chair. As has been 
mentioned, the Supreme Court ruled last week on the Federal 
Trade Commission's use of 13(b) authorities. The Court's 
unanimous decision delivered by Justice Breyer was clear: 
Section 13(b), as written, 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 
advocate for her position on how to amend 13(b). Acting Chair 
Slaughter has been quoted in an April 22 statement that says, 
``In AMG, the Supreme Court ruled in favor of scam artists and 
dishonest corporations.''
    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 productive 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 testimony 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 hearing. These bills have passed out of this committee in 
previous forums.
    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 considered 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 
authority 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 opportunity 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. Cardenas, 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 efforts 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 welcome 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.'' Americans 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 Supreme Court. Reasonable legal scholars across 
the ideological spectrum could agree 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 preferences.
    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 proposals. 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 committee 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 regarded 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 announcement on centralizing FTC rulemaking 
authority within the office of the General Counsel. This would 
move authority away from the issue 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 
opportunity for substantive reforms. Senator Wicker rightfully 
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. Cardenas, 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 procedure. 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.

  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 illegally taken.
    The Federal court path, now foreclosed, had been used for 
40 years to make your injured constituents whole. This path was 
utilized and supported on a bipartisan basis, throughout 
Republican and Democratic administrations, and upheld by eight 
different Circuit 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. Cardenas 
introduced 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 consequences for the public and the 
markets absent the swift passage of this bill.
    The Supreme Court's ruling eliminates the Commission's 
primary and best tool to seek monetary remedies when a company 
violates the FTC Act. This tool, referred to by its statutory 
provision, 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 
mentioned, 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 allegations of deceptive claims regarding job 
placement.
    And in Volkswagen, $9.5 billion was returned to consumers 
nationwide 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 addressing false or unsubstantiated COVID 0919 cures, a 
pyramid scheme, and a scam that used fake apartment listings to 
trick people 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 drug from $17.50 to $750 and the sham patent 
litigation case, AbbVie, in which the district court awarded 
$493 million in restitution to consumers harmed by inflated 
drug prices.
    The significant direct harm to consumers from congressional 
inaction 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 return 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, resulting in less protection for consumers and more 
profit for lawbreakers, all at the expense of honest businesses 
trying to compete against companies that engage in unfair, 
deceptive, and anticompetitive conduct.
    The Supreme Court's opinion left the policy questions about 
the FTC's authority to provide more effective and efficient 
monetary relief up to Congress. The policy goals that animated 
our 13(b) program 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 
congressional 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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]     
    
     
    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 
includes your answer.
    I will start by recognizing myself for 5 minutes.
    So, even before the Supreme Court decided on Thursday, the 
uncertainty in the law surrounding section 13(b) was already 
hurting the Commission's enforcement efforts and draining the 
Commission'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 
consumers 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 
introduced by Vice Chairman Cardenas, does it effectively 
restore the FTC's 13(b) authority?
    Ms. Slaughter. Yes. I think it is clear, commonsense, 
reasonable 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?
    Ms. Slaughter. Thanks. I think that is a really important 
question. So restoring the authority not only allows us to make 
consumers whole if they have been injured, it also protects 
honest businesses who need to compete against companies that 
may be engaging 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 
example, or perhaps the type of enforcement matter that the 
Commission 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 potential settlement against a company that preyed on 
small businesses. 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 
subcommittee, 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 transcript 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 reflects 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 technical 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?
    Ms. Slaughter. Well, again, I think the technical 
assistance program 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 attorneys general so that we have 
strong national privacy protections? While we have national 
privacy protections, we need them to protect all Americans. If 
you could answer that briefly, I would appreciate 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 Americans.
    However, I am concerned that, if we expand your current 
authority 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 appreciate 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 
understood for the last 40 years, I don't think there was any 
statute of limitations. The legislation Mr. Cardenas 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 consumers 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 
answer 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.
    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 
because 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 
recognizes, 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 Cardenas' Consumer 
Protection and Recovery Act right away, and I am proud to be a 
cosponsor of the bill.
    Acting Chair Slaughter, the Federal Trade Commission has 
relied 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 authority to recover over $81 million to approximately 
over 500,000 Florida residents who were defrauded by some 
fraudster or criminal.
    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 intended for different uses under the CARES Act 
and the American Rescue Plan. So we have got to make sure that 
America's lead consumer 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 Commission 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.
    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 
company 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 penalty authority in addition to reaffirming section 
13(b) in the Consumer 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 restitution 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 Treasury, 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 
creation 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 
rulemaking 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 protected, APA is definitely a more 
efficient way to get there than section 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 
questions.
    Mr. Upton. Well, thank you, Madam Chair.
    I appreciate everyone being here, as we are all back in our 
districts 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 
submitted a letter highlighting their concerns of the current 
13(b) proposals.
    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 exception 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 
response. 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 absolutely necessary to get that done.
    Mr. Upton. Well, I just know, you know, sometimes the 
legislative process is slow--hearings, markups, subcommittee, 
full committee, House floor--usually weeks at a time, and it 
would help us, as we prepare for this, versus having unanswered 
questions, knowing 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 administrative 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 limited and inhibited.
    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 protect 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 
convening today's important and timely hearing. You know, one 
of the subcommittee's top priorities recently has been to hold 
the large social media platforms accountable for the ways they 
harm consumers by mistreating user data and amplifying 
destructive content.
    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 
recent court decisions to argue, and I quote, that ``the FTC 
lacks statutory authority to maintain this suit. Section 13(b) 
of the Federal Trade Commission Act, the sole claimed source of 
the FTC's authority 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 problematic, to say the least.
    Acting Chair Slaughter, does the Consumer Protection and 
Recovery Act, which I am proud to cosponsor, make clear the FTC 
can obtain relief under 13(b) for consumers when defendants 
have violated the law and not have to demonstrate that they are 
still violating 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 
market, 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 businesses, would not be able to receive 
monetary relief for being overcharged.
    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 Federal court in a competition case.
    Mrs. Trahan. Well, Acting Chair Slaughter, I want to thank 
you for your work in protecting small business innovation and 
consumers.
    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 accountable.
    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 
today'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 enforcement 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 
impact 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 consumer protection law enforcement agencies 
routinely relied on publicly 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 locations, 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.
    I think a Federal privacy law with strong protections for 
consumers 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 
deceptive 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'' capability are currently being utilized when, in 
fact, there are no commercially 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 
seconds.
    Ms. Schakowsky. I thank you for those.
    And now I call on Jerry McNerney for 5 minutes for his 
questions.
    Mr. McNerney. Well, I thank the chairwoman.
    And I thank Chairwoman Slaughter for your work on the 
Commission.
    Ms. Slaughter, Volkswagen sold vehicles that were rigged to 
pass emissions tests. The vehicles were advertised and sold as 
clean diesel, 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 consumers who were misled in the purchase of 150,000 
[inaudible] ostensibly 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----
    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 
[inaudible]----
    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. Cardenas. Madam Chair?
    Ms. Schakowsky. Yes.
    Mr. Cardenas. 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. Cardenas. Can I make a suggestion, Chairwoman 
Slaughter, if you can hear me? This is Congressman Cardenas.
    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.
    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 negotiate 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 
Valley. 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 includes 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 ability 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 constituents 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 
incredibly 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 
important then in seeking monetary relief to discourage unfair 
and deceptive 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 consumers in the form of redress, but it also, as Mr. 
Cardenas' legislation makes clear, gets taken from law-breaking 
companies in the form of disgorgement of the ill-gotten gains. 
We do not want companies to keep the profits of law breaking. 
We should want them to have to give up those profits. 
Otherwise, they just have an incentive 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 
received monetary relief as a result of the cases that the 
Commission brought under section 13(b). I want to make sure 
that my constituents are able to get the relief they deserve 
when they have been defrauded, and that is why I am a proud 
cosponsor of this legislation. 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 myself 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 
complaints 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 actually disagree among themselves.
    And I think these opinions, these findings and the CFTC 
actions and guidance that gets issued from them cannot 
reasonably be expected 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 Professor 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 
testimony, so I assumed you were a witness.
    Madam Chair----
    Ms. Schakowsky. He is a witness, but----
    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 
remainder 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 
potential 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.
    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 important 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 communities 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 
financing markups and fees to Black and Latino customers. The 
company'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 
million 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 
dealership, in this instance, might have gotten away with this 
abhorrent 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 extremely 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.
    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 
authority 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 
underreporting of fraud from communities of color. Back in 
2014, the FTC launched its Every Community initiative to 
address these underlying disparities when it comes to fraud.
    Acting Chairwoman Slaughter, when the FTC has secured 
refund 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 reporting 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 
Recovery Act important to tackling fraud in Black and Latino 
communities? And if Congress fails to act on this legislation, 
what message does this send to scammers that target communities 
of color?
    Ms. Slaughter. I think it is critically important to pass 
this legislation in order to give us the tools to efficiently 
and effectively disgorge ill-gotten gains and return money to 
consumers. And because 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.
    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 
questions.
    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 affirmed 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 retroactivity 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 address 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. Cardenas's bill does not 
explicitly address retroactivity. 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 
responsibility 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 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 caseload varies or because the cases of 13(b) plus 
other authority [inaudible].
    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 Cardenas.
    You are up for 5 minutes of questions.
    Mr. Cardenas. 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 
understand 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 opportunity 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 witness panel, Mr. Beales, which--he is going to have a 
great opportunity 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 
simply 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 concerns. No one wants to prevent people from defending 
themselves, especially when asset freezes or other court orders 
really can devastate 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 neutral 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 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. Cardenas. 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. Cardenas. 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. Cardenas. 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. Cardenas. OK.
    Under section 19--well, I am almost out of time, and I just 
wanted 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 
having this hearing. And I really want to thank my colleague 
from California, Representative Cardenas, for leading this. And 
this subject is so important, and his leadership is really 
making a difference.
    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 redress. 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 
statute of limitations impact the FTC's ability to go after 
unlawful conduct and recover money for victims?
    Ms. Slaughter. Thank you for the question.
    I think you are absolutely right that a 3-year statute of 
limitations 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 
concerned about due process that I worry about is that a 3-year 
statute of limitations forces us to rush to the courthouse door 
in order to--or to the administrative courthouse door in order 
to file an action because we are mindful of that clock. And I 
would rather we have the opportunity to do a thorough 
investigation to really understand 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 
Protection 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 talking 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 
limitations make it any less urgent for Congress to pass this 
legislation?
    Ms. Slaughter. No, absolutely not. I mean, I think, as I 
reflected 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 Congress 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 authority. I think the thing to think about is, not only 
will we not 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 businesses 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 consumers 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 pitching 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 refunds 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, including 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 always been one of the FTC's top priorities. 
The Supreme Court decision 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.
    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 
especially 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 
recover 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-
positioned to help seniors who have been defrauded? If not, why 
not?
    Ms. Slaughter. No. We would be substantially less well-
positioned--we would be substantially worse off in our efforts 
to help seniors who have been defrauded because we wouldn't 
have that efficient 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 
questions.
    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. Cardenas' 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 dishonest 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 redress 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, especially in the form of judicial review. 
And I think that that would stay under the bill Mr. Cardenas 
has proposed.
    Miss Rice. And just to be clear, how are cases--are cases 
referred 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 business.
    Ms. Slaughter. No, absolutely not. And I think we try to 
prioritize the worst conduct. We collect complaints through our 
consumer 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 
thoroughly 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 
Phoenix, 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 
defrauded 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 people 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 veterans are targeted with business opportunity schemes 
and with, sort of, lead-generation efforts, in part because of 
the difficulty of adjusting from military life to civilian 
life, because of the ways veterans 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 
opportunity 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 Cardenas 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 stipulate an order with Manhattan Beach Ventures to 
help protect student loan borrowers.
    As you may recall, this company deceptively promoted 
payment-reduction programs to consumers looking for help with 
their student loans. The FTC determined in September 2019 that 
Manhattan 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 Acceptance 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 
judgment on Manhattan Beach and $28 million on the Equitable 
Acceptance Corporation, along with other proconsumer actions 
against these two companies.
    As I understand it, the agency is currently reviewing the 
customer data now to determine restitution for individual 
borrowers.
    Acting Chair Slaughter, can you give me any sort of status 
update on this case or commit to ensuring that the agency 
prioritizes this customer review to help get this money back to 
defrauded borrowers 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.
    Ms. Craig. Well, I appreciate that. And, obviously, 
Congresswoman 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. Cardenas'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 Supreme 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 restitution 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 tailored to address what has 
become now an urgent concern, to effectively maintain the 
status quo on enforcement actions.
    So, you know, I would like to hear, as we have just a few 
minutes 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 making 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.
    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 remedies to the FTC?
    Ms. Slaughter. Thank you so much for the question.
    I think you are absolutely right. I think 13(b) restoration 
is really 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 unfairly, 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 authority 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) 
enforcement 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 specificity. 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 contrary, 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 markets.
    Mrs. Fletcher. Well, thank you, Chairwoman Slaughter, for 
your testimony today.
    And thank you, Chairwoman Schakowsky, for holding the 
hearing. 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 vulnerable communities.
    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 paycheck protection loans. We have heard about 
fake testing kits, [inaudible] 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 
million dollars selling this bleach product to tens of 
thousands of consumers 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 
appreciative of the FTC for netting over $482 million for 1.6 
million seniors 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 Cardenas--Tony Cardenas, my fellow E&C 
brother--for cointroducing this bill along with many of us, 
including 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 require 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 
particularly 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 targeted 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 
international, 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?
    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 
concludes 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. Cardenas. Chairwoman Slaughter?
    Ms. Schakowsky. Tony, did you want to say something to----
    Mr. Cardenas. 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 professor 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 FAIRNESS AND 
 LEGISLATIVE STRATEGY, CONSUMER REPORTS; J. HOWARD BEALES III, 
 Ph.D., EMERITUS PROFESSOR OF STRATEGIC MANAGEMENT AND PUBLIC 
POLICY, GEORGE WASHINGTON SCHOOL OF BUSIINESS; AND TED MERMIN, 
   EXECUTIVE DIRECTOR, CENTER FOR CONSUMER LAW AND ECONOMIC 
    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 
Reports to testify on this important legislation and the vital 
role of the Federal Trade Commission in protecting consumers in 
the marketplace.
    As a former member of the staff of this subcommittee, it is 
particularly 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 practices, both online and off. This includes, as we 
have been discussing, scammers peddling bogus coronavirus 
cures, fake online reviews, deceptive data collection 
practices, fraudulent lenders exploiting 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 
effective 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 victims of the fraud. Unless Congress 
acts to amend the FTC Act to ensure that the Commission can 
appropriately address illegal behavior, 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 millions 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, averaging $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 illegally. 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 simple change to the FTC 
Act can restore the Commission's authority.
    The Consumer Protection and Recovery Act, introduced by 
Representative Cardenas, would amend the FTC Act to restore the 
authorities 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 artificial 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 jurisdiction--
disgorgement of ill-gotten gains and restitution for consumer 
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 companies 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 commonsense 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 companies that can't compete 
against those that are willing to break the law, we need an FTC 
with sufficient capacity and penalty authority 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 
recognize 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 Consumer Protection early in this century.
    Since 1981, attacking fraud in Federal court has been the 
foundation 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 consumers.
    Faced with egregious frauds, eight circuit courts of 
appeals blessed the program. Fraud cases saw an expansive 
measure of injury--total sales of product. Sensible in the 
context of worthless products promoted through fraud, that 
measure is completely unreasonable 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 discretion.
    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 because, 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 
illegal. Significant monetary penalties for failing to 
anticipate that legal innovation would have been inappropriate.
    Nevertheless, some areas are clear. Fraud involves business 
conduct about which there is no legal uncertainty. Section 19 
also allows monetary relief where a reasonable person would 
know the conduct was dishonest or fraudulent. The early 13(b) 
cases respected this standard, and it remains appropriate.
    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 applied 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 relationship 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 consumers 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 
randomized, 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 
unworkable. 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 ultimate 
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 whether 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 
pursue equitable relief under 13(b), subject to the substantive 
standard set forth in section 19. Congress should set the 
standards for when money is appropriate rather than granting 
the agency unlimited discretion.
    Thank you, and I look forward to your questions.
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
        Ms. Schakowsky. Thank you, Dr. Beales.
    And now I would call on Mr. Mermin for his 5 minutes of 
presentation.

                    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 Thursday's decision by the Supreme Court means that the 
FTC is now unable to perform its most important consumer 
protection function--getting money back to the people it has 
been taken from illegally.
    Fortunately, Congress can fix the problem. The Consumer 
Protection and Recovery Act represents a significant and now 
absolutely urgent step towards retooling the FTC. It is one 
step, because 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 problems.
    Now, I want to emphasize that I look at the FTC from the 
outside--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 unlawfully 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 Friday, 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 
employees 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 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 
Americans can't afford to hire their own lawyers, and mandatory 
arbitration 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 truest 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 recovery 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:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]     

        Mr. Cardenas. 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 witnesses, 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 reported 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 
Protection 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 Commission brought its first case under this new 
law against a business' 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 perhaps 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 available 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.
    This is the issue at hand right now, that the FTC had this 
authority for 40 years. Whether we agree or disagree with the 
Supreme 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 
somebody 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 consumers, 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 certainly 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 enormously important tool from the point of view of 
consumers themselves. If you haven't ever had--I recommend 
having it--the experience of seeing someone who got money back 
that they never expected to see again, that is what government 
is supposed to do for people. And it really, I think, 
emphasizes why that is the most important 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 members 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 process that we should keep in mind as we move 
forward on expanding FTC authority?
    Dr. Beales. Well, when the FTC launched rulemaking in the 
1970s, it proposed a rule a month at one period, and it did so 
without really thinking through the legal theories of why there 
was a violation and without really thinking through what kind 
of evidence 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 without allowing due process to commerce. Do you agree 
with this concern?
    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 something 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 practice. 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 
``Section 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 
significant 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 settlement that resolves both the administrative matter 
and the district court matter. And the only difference is, it 
is citing different statutory 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 Section 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.
    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, 
because 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 
deceptive 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 imagine 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 discussing and courts can get involved in 
discussing. We have certainly seen, as we saw with the Supreme 
Court last week, no hesitation 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 
significant 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 
Recovery 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 settlement 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.
    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 
hearing.
    And thanks to our witnesses for being with us today. I 
greatly appreciate it.
    Dr. Beales, in your testimony you reference a triple hybrid 
procedure when dealing with illegitimate companies in fraud 
cases. Would you elaborate about how 13(b) reforms may 
differently impact 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 proceeding 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 
detailed 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 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 
experts disagree--about whether you should or should not take 
vitamin 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 information.
    Mr. Latta. And not picking on you, just with my last 45 
seconds, what methodologies are appropriate for calculating 
monetary remedies 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 
minutes.
    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 
Massachusetts. DMC ran infomercials for a range of supplements, 
including 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-
reviewed 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 importantly, 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.
    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 provide 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 subtract 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 
Massachusetts residents have received refunds in the last 2\1/
2\ years totaling 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 
economy?
    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 
testimony today.
    I yield back, Madam Chair.
    Ms. Schakowsky. The gentlewoman yields back.
    And now I recognize Kelly Armstrong for his 5 minutes for 
questions.
    Mr. Armstrong. Thank you, Madam Chair.
    Mr. Beales, the 2003 policy statement--which I believe you 
think should be reinstated, is that correct?
    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 
remedy 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 factors are obviously less quantifiable than price.
    As Congress considers enacting comprehensive data privacy 
legislation, 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 exactly 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 
instructive, 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 
speaking, 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 
mandatory 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 consumers, 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 elsewhere would like to see. I think there is an 
interest in them being more aggressive. But where they have 
brought cases, they have relied 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 companies. 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 
companies 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?
    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 expenses 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 
questioning, 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 
minutes.
    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 
beginning 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 returning 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 
decision now send to payday lenders who are thinking about 
violating the law?
    Ms. Laitin. It is an interesting question. They are 
certainly probably feeling a little more free, which is why 
this is so important.
    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. Putting money back in people's pockets who have been 
defrauded or scammed seems like a no-brainer to me, and I hope 
we act expeditiously to pass this legislation into law.
    So, Madam Chair, I want to thank you for holding this 
hearing. My colleague Tony Cardenas, 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 people's pockets--the problem of not getting money back in 
people's pockets, and that would be the vice chair of this 
subcommittee, Tony Cardenas.
    Mr. Cardenas. Thank you, Madam Chairwoman. And thank you 
for carefully and accurately explaining how, Republican and 
Democrat, 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 details--but not just us--making sure that our 
constituents, the American people, hear this deliberation and 
hopefully will be paying 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 
businesses 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 lenders and other scammers that are increasingly 
targeting small businesses.
    In other words, a small business may be victimized by bad 
actors, 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.
    That is why I stress that the Consumer Protection and 
Recovery Act specifically provides section 13(b) authority for 
the FTC to recover for small businesses, not just for 
individuals.
    So this question I have for Mr. Mermin or Ms. Laitin: 
Historically, 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 
Janitorial 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 businesses will get their money back, but I don't know 
that we know that for sure.
    Mr. Cardenas. 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 essentially unlimited.
    Mr. Cardenas. 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 
defrauded, how many families, like, in those categories could 
honestly afford to hire a lawyer? Is it a high percentage or a 
very low percentage? 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.
    Mr. Cardenas. Uh-huh. Especially when it comes to most 
seniors, right, Ms. Laitin? Seniors tend to, on average, across 
America, have less disposable income, right? Correct?
    Ms. Laitin. Correct.
    Mr. Cardenas. 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. Cardenas. Madam Chair?
    Ms. Schakowsky. Yes.
    Mr. Cardenas. 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 disagreements on how we can move this 
legislation forward.
    And I just want to give a special thanks to a class act, 
Gus Bilirakis. Thank you so much for being so generous with 
your understanding of our ability to agree and disagree and 
continue to always want to work together. So thank you, Gus.
    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. Cardenas. And to all the witnesses, thank you so, so 
much.
    Ms. Schakowsky. Thank you.
    Before we close, I request unanimous consent to enter the 
following 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 Consumer Protection and Recovery Act and other things 
that deal with the Federal Trade Commission. And your expertise 
is really appreciated.
    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 
committee rules, they have 10 business days to submit 
additional questions for the record to be answered by the 
witnesses who have appeared.
    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 research 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 Supreme Court opinion; an 
unofficial transcription of a Senate committee--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. 
1A\1\]
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    \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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    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:]
    
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