Last year, federal agencies, including the FTC, were instructed to adjust the maximum civil penalties for violations of laws they enforce. The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires agencies to adjust penalty amounts using the “catch-up” inflation adjustment methodology contained in the Act.
Today, the Commission announced changes to its Rule 1.98 to reflect the new higher levels for maximum civil penalties under a variety of laws (16 to be exact). The new maximums will apply to civil penalties assessed after August 1, 2016, including civil penalties whose associated violation predated the effective date. The maximums will be adjusted for inflation each January from now on.
Here’s the list of changes to competition-related laws enforced by the FTC:
- Section 5(l) of the FTC Act, 15 U.S.C. 45(l) (violations of cease and desist orders issued under Federal Trade Commission Act section 5(b))— Increase from $16,000 to $40,000
- Section 7A(g)(1) of the Clayton Act, 15 U.S.C. 18a(g)(1) (violations of premerger reporting and waiting requirements under the Hart-Scott-Rodino Improvements Act)—Increase from $16,000 to $40,000
- Section 11(l) of the Clayton Act, 15 U.S.C. 21(l) (violations of cease and desist orders issued under Clayton Act section 11(b))—Increase from $8,500 to $21,250
- Section 5 of the Webb-Pomerene (Export Trade) Act, 15 U.S.C. 65 (failure by associations engaged solely in export trade to file required statements)—Increase from $210 to $525
- Section 1115(a) of the Medicare Prescription Drug Improvement and Modernization Act of 2003, Pub. L. No. 108-173, 21 U.S.C. 355 note (failure to comply with filing requirements)—Increase from $12,100 to $14,142
- Section 814(a) of the Energy Independence and Security Act of 2007, 42 U.S.C. 17304 (violations of prohibitions on market manipulation and provision of false information to federal agencies)—Increase from $1,100,000 to $1,138,330.
Note that for continuing violations, each day is a separate violation. As a result, the maximum civil penalty may be multiplied by the number of days for each violation of the applicable statute or order. But statutory maximums are just that – the maximum civil penalty available under the law. When the Commission seeks any civil penalty (whether in settlement or litigation), it will consider whether the maximum should be mitigated. Past court cases have explained the various factors considered when determining how much of the statutory maximum penalty should be assessed. For example, in imposing a $7 million penalty for violating an FTC order, the district court outlined the factors that bear on this assessment:
Courts traditionally have looked at six factors in determining the appropriate civil penalty under 15 U.S.C. § 45(a)(1): (1) harm to the public; (2) benefit to the violator; (3) good or bad faith of the violator; (4) the violator's ability to pay; (5) deterrence of future violations by this violator and others; (6) vindication of the FTC's authority.
(United States v. Boston Scientific Corp., 253 F. Supp. 2d 85, 98 (D. Mass. 2003))
Under Section 5(l) of the FTC Act, the Commission may seek civil penalties (as well as injunctive relief) for violations of its final orders relating to unfair methods of competition and unfair or deceptive acts or practices. In doing so, it has historically applied the above “civil penalty factors.” The Commission has applied the same rationale when considering what level of penalties to seek for violations of the Hart-Scott-Rodino Act. (The Commission shares HSR enforcement authority with the Department of Justice. Only DOJ may seek civil penalties for HSR violations, but many cases are first investigated by the Commission and then referred to DOJ for filing on the Commission’s behalf – with or without a settlement – for enforcement.)