Disgorgement

Definition

Disgorgement is a legal remedy that requires a party who has unlawfully obtained a benefit to repay or return that benefit. It is a form of restitution that aims to deprive the wrongdoer of their ill-gotten gains and prevent unjust enrichment. In the context of the Federal Trade Commission (FTC), disgorgement is a key tool used to enforce consumer protection laws and ensure fair business practices.

5 Must Know Facts For Your Next Test

1. The FTC can seek disgorgement as a remedy when a company has engaged in deceptive or unfair practices that result in ill-gotten gains.
2. Disgorgement forces the wrongdoer to give up their profits, denying them the benefit of their unlawful conduct.
3. Disgorgement is considered an equitable remedy, as it aims to prevent unjust enrichment rather than to compensate for specific losses.
4. The FTC must prove that the amount of disgorgement sought reasonably approximates the ill-gotten gains, rather than being punitive in nature.
5. Disgorgement orders can be challenging to enforce, as the FTC must trace the ill-gotten gains and ensure they are properly returned to affected consumers.

Review Questions

• Explain how the FTC uses disgorgement as a remedy to address deceptive or unfair business practices.
  • The FTC can seek disgorgement as a remedy when a company has engaged in deceptive or unfair practices that result in ill-gotten gains. Disgorgement forces the wrongdoer to give up their profits, denying them the benefit of their unlawful conduct. This serves to prevent unjust enrichment and deter future violations of consumer protection laws. The FTC must prove that the amount of disgorgement sought reasonably approximates the ill-gotten gains, rather than being punitive in nature. Disgorgement orders can be challenging to enforce, as the FTC must trace the ill-gotten gains and ensure they are properly returned to affected consumers.
• Analyze the role of disgorgement as an equitable remedy in the context of the FTC's enforcement of consumer protection laws.
  • Disgorgement is considered an equitable remedy, as it aims to prevent unjust enrichment rather than to compensate for specific losses. Unlike monetary damages, which are a legal remedy, disgorgement is a form of restitution that deprives the wrongdoer of their ill-gotten gains. This aligns with the FTC's mission to ensure fair business practices and protect consumers from deceptive or unfair conduct. By seeking disgorgement, the FTC can effectively remove the financial incentive for companies to engage in unlawful behavior, serving as a deterrent and promoting compliance with consumer protection laws. The equitable nature of disgorgement also allows the FTC to tailor the remedy to the specific circumstances of each case, ensuring a more effective and targeted approach to enforcement.
• Evaluate the challenges the FTC faces in successfully implementing disgorgement orders and discuss the importance of this remedy in the agency's overall enforcement strategy.
  • Implementing disgorgement orders can be challenging for the FTC, as the agency must trace the ill-gotten gains and ensure they are properly returned to affected consumers. This process can be complex, especially in cases where the wrongdoer has attempted to conceal or dissipate the ill-gotten profits. Despite these challenges, disgorgement remains a crucial remedy in the FTC's enforcement strategy. By depriving companies of their unlawful gains, disgorgement serves as a powerful deterrent against deceptive or unfair practices, sending a clear message that such behavior will not be tolerated. Moreover, the threat of disgorgement encourages companies to proactively comply with consumer protection laws, as the potential financial consequences of non-compliance can be significant. Ultimately, the FTC's effective use of disgorgement, in conjunction with other enforcement tools, is essential for upholding fair competition, protecting consumers, and maintaining the integrity of the marketplace.

Related terms

Restitution: The act of restoring something to its rightful owner or place, or of making amends for a wrong that has been committed.

Unjust Enrichment: The principle that a person should not be allowed to profit or enrich themselves unjustly at the expense of another.

Equitable Remedies: Remedies granted by a court of equity, such as injunctions or disgorgement, rather than monetary damages.