What are Key Factors the FTC Considers When Calculating Monetary Civil Penalties?

The Federal Trade Commission generally seeks monetary civil penalties when it is alleging violations of rules that the agency enforces, such as the Telemarketing Sales Rule, the Made in USA Labeling Rule, the Restore Online Shoppers’ Confidence Act, the Gramm-Leach-Bliley Act and the Review and Testimonials Rule.

The Federal Trade Commission increases its maximum civil penalty amounts annually for violations of Sections 5(l), 5(m)(1)(A) and 5(m)(1)(B) of the FTC Act.  Effective January 17, 2025, the FTC increased its maximum civil penalty amounts to $53,088, per violation.  This number reflects the maximum amount that the FTC can see during litigation.  However, the reality is that the FTC possesses flexibility during negotiations.

In the case of a violation through continuing failure to comply with a rule, each day of continuance of such failure may be treated as a separate violation.  More often than not, defendants and respondents would be unable to pay if the FTC or a court utilized a strict calculation.

In general, monetary civil penalties are available to the FTC for the violation of a rule respecting unfair or deceptive acts or practices with actual knowledge or “knowledge fairly implied” on the basis of objective circumstances that such act is unfair or deceptive and is prohibited by a rule.  The meaning of “knowledge fairly implied” remains ambiguous as there is not a lot of legal precedent.

In determining the amount of such a civil penalty, the FTC and a court may take into account various mitigating arguments, including the degree of culpability, any history of prior such conduct, the ability to pay, any effect on the ability to continue to do business, and such other matters as justice may require.  An experienced FTC defense lawyer is an asset in that he or she can zealously advocate using relevant facts and applicable law during the course of litigation or in settlement discussions.

Importantly, the FTC does not routinely impose the maximum possible penalties.  Courts and the FTC are required to consider several factors when calculating monetary civil penalties, such as those set forth above.  However, the FTC often initiates settlement negotiations close to the maximum possible amount.  As a result, digital marketers should consult with an experienced FTC defense counsel in order to implement compliance protocols and negotiate optimal resolution in the event an investigation or enforcement action is initiated.

Takeaway: There is no black and white rule when calculating monetary civil penalties.  Courts and the FTC often consider a number of mitigating factors, including those set forth above, as well as others such as the amount of revenue attributable to the alleged unlawful conduct, and remedial action.

Informational purposes only. Not legal advice. This article is not intended to and should not be construed as legal advice. May be considered attorney advertising.