New Frontiers for the FTC in Healthcare Following the Consolidated Appropriations Act

On December 27, 2020, the Consolidated Appropriations Act (CAA) became law, garnering attention nationwide for the economic stimulus components necessitated by the ongoing pandemic.  Less publicized, however, were the provisions of the over 2,000-page bill that contained a new mission and some new muscle for the Federal Trade Commission (FTC).

Examination of the Healthcare Industry

Congress gave the FTC new homework, i.e., to collaborate with the Attorney General and the Secretary of Health and Human Services in examining the health care industry.  Specifically, regulators are to study the integration of healthcare facilities, healthcare providers, and health insurers; and trends regarding overall costs of and access to healthcare. By January 1, 2023, regulators must report their findings to Congress and make recommendations for how to enforce provisions of ERISA and the tax code in light of those findings. Significantly, the CAA also directs the FTC to consider how to address anti-competitive consolidation of healthcare facilities, providers, or insurers.  The study and report to be completed by January 1, 2023, is just the first in a series of five such studies and corresponding reports, each to be completed annually through 2027.

In light of the FTC’s new directive, healthcare businesses likely can expect increased scrutiny over the next six years—especially as it pertains to mergers and acquisitions.  The FTC is tasked with enforcing antitrust laws such as the Clayton Act and uses that power to challenge, and sometimes stop, proposed corporate mergers. Given the study mandated by the CAA, the FTC may well focus its anti-trust efforts on mergers and acquisitions within the healthcare space.

A New Tool for Fighting COVID-19 Fraud

One of the many unfortunate effects of the pandemic is the proliferation of coronavirus-based scams, promising fake cures, treatments, or personal protective equipment that is somehow never delivered.  For months, the FTC has focused on identifying and stopping these deceptive campaigns. While it isn’t news that the FTC goes after businesses engaged in unfair and deceptive practices, the CAA gives the FTC a clear path to obtaining money damages from COVID-19 fraudsters.

As background, the FTC Act has two key sections used for enforcement actions. One is Section 13(b), which allows the FTC to obtain an injunction (or in lay terms, a “stop it” order from a court) against those violating or about to violate the law. Section 13(b) allows for “equitable” relief in appropriate cases, but equitable relief traditionally excludes money damages. To get traditional monetary relief, the FTC theoretically has to proceed under Section 19, which makes money damages available only if the defendant has violated a prior cease and desist order or a specific rule.

With the enactment of the CAA, the ban on COVID-19 fraud has gained the status of a specific rule that, if violated, automatically entitles the FTC to seek money damages from the violator.

The FTC has a long history of wresting multi-million dollar recoveries even from defendants who had not violated a specific rule or a prior injunction.  Capitalizing on cases with terrible facts, the FTC has routinely persuaded courts to enter monetary awards—sometimes millions of dollars—against defendants who had neither violated a prior order or a specific rule. Recently, federal courts have begun rethinking that regime, with the Seventh and Third Circuits holding that the FTC could not obtain money damages under Section 13(b).  Indeed, the scope of Section 13(b) of the FTC Act will be argued before the United States Supreme Court on January 13, 2021. (See Supreme Court Hears Oral Argument over FTC’s Section 13(b) Authority.)  But no matter how that case is decided, it won’t give COVID-19 scammers an out.  Thanks to the CAA, they are squarely on the hook for money damages.