The Standard for Determining "unfair Acts or Practices" Under State Unfair Trade Practices Acts

JurisdictionConnecticut,United States,Federal
Publication year2021
CitationVol. 80 Pg. 247
Pages247
Connecticut Bar Journal
Volume 80.

80 CBJ 247. THE STANDARD FOR DETERMINING "UNFAIR ACTS OR PRACTICES" UNDER STATE UNFAIR TRADE PRACTICES ACTS

CONNECTICUT BAR JOURNAL
VOLUME 80, NO. 3

THE STANDARD FOR DETERMINING "UNFAIR ACTS OR PRACTICES" UNDER STATE UNFAIR TRADE PRACTICES ACTS

BY DAVID L. BELT*

CONTENTS

INTRODUCTION 249

INTERPRETATION OF "UNFAIR" UNDER THE FEDERAL TRADE COMMISSION ACT 252

Interpretation of "Unfair Competition" Under the FTC Act 253

Interpretation of "Unfair Acts or Practices" Under the FTC Act 255

The Cigarette Rule Standard 256

The Sperry & Hutchinson Decision 259

The Unfairness Policy Statement 263

Statutory Restriction of FTC's Unfairness Jurisdiction 270

5. FTC's Use of Its Unfairness Jurisdiction

After 1980 272

III. INTERPRETATION OF "UNFAIR" UNDER STATE

UNFAIR TRADE PRACTICES ACTS 273

A. The Unfairness Standard in Connecticut 273

1. Adoption of The Cigarette Rule in Connecticut 275

a. Violation of Public Policy 281

Portions of this article have previously appeared in ROBERT M. LANGER, JOHN

T. MORGAN & DAVID L. BELT, 12 CONNECTICUT PRACTICE SERIES: UNFAIR TRADE PRACTICES (Thomson-West 2003 & Supp. 2006). Used with permission. The views expressed in this article are solely those of the author and do not necessarily reflect the views of the co-authors of this book.

* Of the New Haven Bar.

Immoral, Unethical, Oppressive or Unscrupulous Conduct 286

Conduct That Causes Substantial Injury.. 288

d. Violation Based on Only One Cigarette Rule

Criterion

291

Other Unfairness Standards Suggested in Connecticut Decisions

293

Incipient Violations

295

Violation Based on Injury to Nonconsumer ..

..296

Application of Cigarette Rule to Unfair Competition

302

B. The Unfairness Standard in Other States

303

The Cigarette Rule Standard

303

The Unfairness Policy Statement Standard

306

3. Other Standards

308

Violation Based on Only One Cigarette Rule Criterion 309

Violation Based on Injury to Nonconsumer 310

6. Violation Based on Unfair Competition 314

IV. CHOOSING A STANDARD FOR DETERMINING UNFAIRNESS 316

Should Connecticut Abandon the Cigarette Rule? 317

Should a Finding of Unfairness Be Based on Only One Cigarette Rule Criterion? 325

C. Should a Finding of Unfairness Be Based on Injury to a Nonconsumer? 326

V. CONCLUSION 329

I. INTRODUCTION

Section 5(a)(1) of the Federal Trade Commission Act(fn1) and the unfair trade practices acts of Connecticut and twenty-seven other states and Puerto Rico, prohibit "unfair... acts or practices" generally without identifying the specific conduct that violates the act.(fn2) Only two of these acts provide a statutory standard for determining what conduct comes within the proscription(fn3) and one state has adopted a regulation providing a standard.(fn4) As one commentator has noted with respect to section 5(a)(1) of the FTC Act, "given this broad mandate, it is not surprising that vagueness of definition and uncertainty of application have marked the FTC law of unfair trade practices ."(fn5) Despite the fact that the unfair trade practice acts of many states, including Connecticut, provide that their courts shall be "guided by the interpretations given by the Federal Trade Commission and the federal courts to section 5(a)(1) of the Federal Trade Commission Act,"(fn6) that "due consideration," or "due consideration and great weight" should be given

1 15 U.S.C. § 45(a)(1) (2006).

2 ALASKA STAT. § 45.50.471(a) (LexisNexis 2006); CAL. BUS. PROF. CODE § 17200 (2006); CONN. GEN. STAT. § 42-110b(a) (2006); FLA. STAT. ANN. § 501.204(1) (West 2006); GA. CODE ANN. § 10-1-393(a) (LexisNexis 2006); HAW. REV. STAT. ANN. § 480-2(a) (LexisNexis 2006); ILL. COMP. STAT. ANN. CH. 815 § 505/2 (West 2006); IOWA CODE ANN. § 714.16.2.a (West 2006); LA. Rev. Stat. Ann. §1405.A (West 2006); ME. REV. STAT. ANN. tit. 5, § 207 (West 2006); MD. COMM. LAW CODE ANN.§ 13-301(2006); MASS. GEN. LAWS ANN. CH. 93a §2(a) (West 2006); MISS. CODE ANN. § 75-24-5(1) (2006); MO. ANN. STAT. § 407.020.1 (West 2006); MONT. CODE ANN. § 30-14-103 (2006); NEB. REV. STAT. ANN. § 59-1602 (LexisNexis 2006); N.H. REV. STAT. ANN. § 358-a:2 (2006); N.C. GEN. STAT. § 75-1.1 (a) (2006); OHIO REV. CODE ANN. § 1345.02 (a) (West 2006); OKLA. STAT. ANN. § 15-753.20 (West 2006); P.R. LAWS ANN. tit. 10, § 259(a) (2006); R.I. GEN. LAWS § 6-131.1-2 (2006); S.C. CODE ANN. § 39-5-20(a) (2006) (West); TENN. CODE ANN. § 47-18-104(a) (2006); VT. STAT. ANN. tit. 9, § 2453(a) (2006); WASH. REV. CODE ANN. § 19.86.020 (West 2006); W. VA. CODE ANN. § 46a-6-104 (LexisNexis 2006); WIS. STAT. ANN. § 100.20 (West 2006); WYO. STAT. ANN. § 40-12-105 (xv) (LexisNexis 2006).

Although the Maryland statute enumerates a list of practices which are unfair or deceptive, the list has been said to be nonexclusive. Golt v. Phillips, 517 A.2d 328, 331-32 (Md. 1986).

3 IOWA CODE ANN. § 714.16.1.n (West 2006); OKLA. STAT. ANN. § 15-752.14 (West 2006).

4 15 MO. CODE STATE REGS. 60-8.020 (2006).

5 DEE PRIDGEN, CONSUMER PROTECTION AND THE LAW § 9.1 at 663 (2006).

6 CONN. GEN. STAT. § 42-110b(a) (2006); ME. REV. STAT. ANN. tit. 5, § 207 (1) (West 2006); MASS. GEN. LAWS.ANN. CH. 93a § 2(a) (West 2006); MISS. CODEANN. § 75-24-5(1) (2006); N.H. REV. STAT. ANN. § 358a:13 (2006); S.C. CODE ANN. § 39- 5-20(a) (West 2006); VT. STAT. ANN. tit. 9, § 2453(b) (2006); WASH. REV. CODE ANN. § 19.86.920 (West 2006); W. VA. CODE ANN. § 46A-6-104 (LexisNexis 2006).

to the federal interpretations (fn7) or that the state statute shall be interpreted in a way "consistent" with federal interpretations (fn8) it has been observed that, although "courts in most states pay lip service to the statutory directive that they be 'guided by' interpretations of section 5 of the Federal Trade Commission Act, ...they adhere to pre-1980 articulations."(fn9)

The interpretation of what conduct is "unfair" under a state unfair trade practices act is of particular significance for Connecticut, because Connecticut is "[t]he state with the most litigation - by far - concerning unfairness."(fn10) It has recently been argued that the Connecticut courts should abandon their "obsolete" interpretation of what constitutes an "unfair" act or practice and, instead, follow "modern" FTC unfairness policy.(fn11) In three recent decisions,(fn12) the Connecticut Supreme

7 ALASKA STAT. § 45.50.545 (LexisNexis 2006); FLA. STAT. ANN. § 501.204(2) (West 2006); HAW. REV. STAT. § 480-2(b) ((LexisNexis 2006); ILL. COMP. STAT. ANN. Ch. 815 § 505/2 (West 2006); MONT. CODE ANN. § 30-14-104(1) (2006); OHIO REV. CODE ANN. § 1345.02(a) (West 2006); R.I. GEN. LAWS § 6-131.1-2 (2006).

8 GA. CODE ANN. § 10-1-391(b) (LexisNexis 2006); TENN. CODE ANN. § 47-18- 115 (2006).

9 Michael M. Greenfield, Unfairness Under Section 5 of the FTC Act and Its Impact on State Law, 46 WAYNE L. REV. 1869, 1929 (2000). The various state act provisions addressing deference to federal decisions in construing the state act are discussed in the context of state acts prohibiting deceptive acts or practices in Jack E. Karns, State Regulation of Deceptive Practices Under "Little FTC Acts": Should Federal Standards Prevail? 94 DICK. L. REV. 373, 388-429 (1990).

10 Greenfield, supra note 9 at 1915.

11 Paul Sobel, Unfair Acts or Practices Under CUTPA-The Case for Abandoning the Obsolete Cigarette Rule and Following Modern FTC Unfairness Policy, 77 CONN. B.J. 105 (2003). The author of that article unsuccessfully argued on behalf of the defendant-appellee for such a change in interpretation in Johnson Electric Company, Inc. v. Salce Contracting Associates, Inc., 72 Conn. App. 342, 357, 805 A.3d 735,744, cert. denied, 266 Conn. 911,832 A.2d 70(2002); Id. (No. AC 21509) Brief for Defendant-Appellee at 16-27. This article was not the first to note that the Connecticut courts have continued to apply pre-1980 FTC standards that had been

supplanted by later standards. See ROBERT M. LANGER, JOHN T. MORGAN & DAVID L. BELT, 12 CONNECTICUT PRACTICE SERIES: UNFAIR TRADE PRACTICES (Thomson-West 2003 & Supp. 2006) (hereinafter LANGER, MORGAN & BELT, UNFAIR TRADE PRACTICES); ROBERT M. LANGER, JOHN T. MORGAN & DAVID L. BELT, THE CONNECTICUT UNFAIR TRADE PRACTICES ACT § 2.2 at 12-13 (1996); Greenfield,

supra note 9 at 19 15-22. Other articles have discussed the potential applicability of later FTC standards to CUTPA. Matthew J. Lefevre, Understanding the Connecticut Unfair Trade Practices Act: Analysis of Federal Precedent and Connecticut Case Law, 9 U. BRIDGEPORT L. REV. 325,329-35 (1988); John Morgan, The Connecticut Unfair Trade Practices Act: Determining Standards of Conduct, 62

CONN. B.J. 74, 99-101 (1988).

12 Glazer v. Dress Barn, Inc., 274 Conn. 33, 82 n.34, 873 A.2d 929, 959 n.34 (2005) ("Review of those authorities [interpretations of the Federal Trade Act by the

Court has indicated that it may be willing, if the issue is raised, to re-examine the test for unfairness under section 42- 110b(a) of the Connecticut Unfair Trade Practices Act.(fn13)

Answering the question of what standards should apply in determining whether conduct is "unfair" under a state unfair trade practices act should involve more than characterizing one standard as "obsolete" or another "modern" or by uncritically applying a standard developed for use by an expert administrative agency to a statute enforceable in private actions in which determinations are made by a lay jury.(fn14) The legislative intent in enacting the particular statute and its subsequent legislative history should also be taken into account.(fn15) As has been said in connection with the construction of the FTC Act, "[l]egislative history is an integral part of any exercise in statu-

12 (cont.) Federal Trade Commission and the federal courts] indicates that a serious question exists as to...

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