The Federal Trade Commission (FTC) recently announced an adjustment to the maximum civil penalty dollar amounts for violations of 16 provisions of law under the agency’s jurisdiction. The FTC fines hike is noteworthy given the agency’s stepped-up enforcement efforts in a number of key areas, including deceptive advertising, data security, and Clayton Act compliance.
The FTC fines increase is required by the Federal Civil Penalties Inflation Adjustment Act of 2015, which directs agencies to implement a “catch-up” inflation adjustment based on a specific formula. The new maximum civil penalty amounts are scheduled to take effect on August 1, 2016.
Violations that warrant these FTC fines
The maximum civil penalty amount has increased from $16,000 to $40,000 for the following violations, as well as several others listed in the Federal Register Notice:
- Section 5(l) of the FTC Act: violations of cease and desist orders issued under section 5(b) of the FTC Act;
- Section 5(m)(1)(A) of the FTC Act: Trade regulation rules issued by the FTC under section 18 of the FTC Act addressing unfair or deceptive acts or practices, and other laws enforced by the FTC that provide for civil penalties by reference to section 18; and
- Section 7A(g)(1) of the Clayton Act: premerger filing notification requirements under the Hart-Scott-Rodino Improvements Act (HSR Act).
Why is the fee increase in FTC fines important?
The fee hikes are significant for several reasons. First, for businesses contemplating a merger or acquisition, the fee hikes highlight that it is imperative to determine if the transaction will trigger pre-merger notification requirements under the HSR Act. Under the statute, companies proposing a merger or acquisition must notify regulators and satisfy a mandatory waiting period (usually 30 days) if the size of the parties involved and the value of the transaction exceeds certain filing thresholds, absent an applicable exemption.
Second, 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. Third, courts will apply a multi-factor test in assessing whether a maximum fee could be mitigated. These factors include the degree of culpability of the violator, prior history of the violator’s conduct, the violator’s ability to pay, and the effect on the violator’s ability to continue to do business. Small businesses may also benefit from the agency’s civil penalty leniency program, which establishes criteria the FTC will consider when determining the propriety of a penalty waiver or reduction for small businesses that are not in compliance with the law.
The official FTC notice can be viewed here.