FDUPTA for civil antitrust: additional conduct, party, and geographic coverage; state actions for consumer restitution.

Author:Federbush, David J.
Position:Florida Deceptive and Unfair Trade Practices Act
 
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Florida's Deceptive and Unfair Trade Practices Act (FDUTPA), in addition to prohibiting unfair, deceptive and unconscionable acts and practices, proscribes "unfair methods of competition ... in the conduct of any trade or commerce. (1) It is modeled after and tracks the parallel language of [section] 5(a) of the Federal Trade Commission Act, (2) which addresses interstate commerce and provides causes of action only to the FTC. FDUTPA has as explicit statutory purposes "[t]o simplify, clarify, and modernize the law governing ... unfair methods of competition...." and "[t]o protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition." (3)

However, FDUTPA's antitrust component has been used much less than its deception component. This article explores what FDUTPA adds to civil antitrust enforcement for Florida plaintiffs beyond the coverages of, and remedies available under, the other federal antitrust statutes (Sherman Act, Clayton Act, and amendments) and the Florida Antitrust Act (FAA). In doing so, the article addresses some issues, including state actions for monetary recovery for consumers and extraterritoriality, which apply to all types of FDUTPA claims. The article does not focus per se on Justice Department or FTC, or state criminal, enforcement authority.

FDUTPA, as its language indicates, is fundamentally a consumer statute. Although the private damages section ([section] 501.211(2)) was amended in 2001 to cover actions "brought by a person [formerly consumer] who has suffered a loss," the legislative history expressly indicates that the amendment was designed to clarify that businesses are entitled to the same remedies as individuals. (4) That history does not reflect any intent to modify FDUTPA's consumer protection purpose to create a damages remedy for competitors. This article's position is that despite the language change, damages suits by competitors therefore remain disallowed. See Rush Prudential HMO, Inc. v. Moran et al., 127 S. Ct. 2151, 70 U.S.L.W. 4600 (No. 001021, June 20, 2002).

By meeting the lower standard of "anyone aggrieved," however, competitors as well as consumers can have standing under [section] 501.211(1) to seek declaratory or injunctive relief as to actual or likely violations which are likely to cause consumer injury. (5) FDUTPA's substantive and geographic coverages add to such competitors' antitrust arsenal.

Federal Antitrust Statutes

The Sherman Act prohibits, in general language, contracts, combinations and conspiracies in restraint of interstate commerce (see infra) or commerce with foreign nations ([section] 1), as well as monopolizing, or conspiring or attempting to monopolize, such commerce ([section] 2). (6) The Clayton Act prohibits, inter alia, sales, or setting a price, discount or rebate, on condition that the buyer not deal with competitors of the seller ([section] 3; "tie-in" sales, exclusive dealing arrangements) where the effect may be to substantially lessen competition in interstate commerce. (7) Those types of practices have also been held to violate [section] 1 of the Sherman Act. (8) The Robinson-Patman Act (RPA), (9) an amendment to the Clayton Act, prohibits sellers from engaging in price discrimination as between different buyers when the effect may be to substantially lessen competition.

Under these statutes certain types of practices, such as price fixing between competitors, horizontal market divisions, tying arrangements, and group boycotts, have been deemed so facially anticompetitive that plaintiffs are not required to offer proof of their anticompetitive effects ("per se" violations; although some evidence concerning market conditions and the defendant's market power may be necessary to show that a practice fits one of the per se categories). For other practices, proof of anticompetitive effect in the relevant product or service and geographic market is still required (the "Rule of Reason"). (10)

For these Sherman Act and Clayton Act violations, injured persons and corporations, as well as the attorneys general of the states acting as parens patriae on behalf of injured natural persons residing in their states, have standing to bring actions for treble damages and costs, including reasonable attorneys' fees. (11)

The Supreme Court in 1977 held, in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), that for reasons including judicial efficiency and avoidance of highly complex proof problems, only direct purchasers of goods or services could bring claims for damages for Sherman Act violations. Indirect purchasers (e.g., downstream purchasers in the distribution chain) lack such standing.

Another provision of the Clayton Act ([section] 7) (12) prohibits prospective corporate mergers and other asset acquisitions whose effects may be substantially to lessen competition in any activity affecting interstate commerce. Consummated mergers and acquisitions which actually restrain competition have been held to violate the Sherman Act. (13)

Any (other) person or corporation, including competitors and states, may seek injunctive relief against threatened loss or damage from any such prospective merger or any other violation of these federal antitrust laws. (14)

Claims for violation of the federal antitrust laws may only be brought in federal court. (15)

The Florida Antitrust Act

The FAA (1980) tracks the Sherman Act's prohibitions and applies them to trade or commerce in Florida ("in this state"; see infra) (16) Courts have held that the FAA effectively adopts as the law of Florida the body of antitrust law developed by the federal courts under the Sherman Act. (17) The FAA similarly provides causes of action for treble damages and costs, including reasonable attorneys' fees, to injured persons as well as the Florida attorney general and authorized state attorneys acting as patens patriae on behalf of natural persons residing within the state. (18) Additionally, any person may sue for equitable relief (e.g., an injunction) against threatened loss or damage by a violation. (19)

FAA claims are often brought together with federal antitrust claims in federal court. (20)

FDUTPA's Substantive (Conduct) Coverage

FDUTPA requires that, in construing its prohibition on unfair methods of competition, "due consideration and great weight" shall be given to the FTC's and the federal courts' interpretations of [section] 5(a)(1) of the FTC act. (21) Accordingly, FDUTPA's conduct coverage should be coextensive with the FTC act's coverage in this regard (except as to statutorily exempt business activities under [section] 501.212 such as insurance and banking). (22)

The Sherman Act was enacted in 1890, and the Clayton and FTC acts in 1914 (23) following the Supreme Court's 1911 decision in Standard Oil Co. v. United States, 221 U.S. 1. Perhaps the most cogent explanation of the FTC act's antitrust coverage (except for the apparent decline of the "incipiency" doctrine, infra) appears in the Second Circuit's decision in E.I. Du Pont de Nemours & Co. v. FTC, 729 F. 2d 128, 136 (1984) (24):

The statute's legislative history reveals that in reaction to the relatively narrow terms of the Sherman Act as limited by the Supreme Court's adoption of the Rule of Reason in Standard Oil ... Congress sought to provide broad and flexible authority to the Commission ... [to] preserve business's freedom to compete from restraints.... The specific practices that might be barred were left to be defined by the Commission ... Congress' aim was to protect society against oppressive anti-competitive conduct and thus assure that the conduct prohibited by the Sherman Act would be supplemented as necessary and any interstices filled....

During the period since the enactment of the Federal Trade Commission Act the courts have established certain principles.... Although the Commission may under [section] 5 enforce the antitrust laws, including the Sherman and Clayton Acts, FTC v. Motion Picture Advertising Service Co., 344 U.S. 392, 395; 73 S. Ct. 361,363 ... (1953); FTC v. Cement Institute, 333 U.S. 683,693, 68 S. Ct. 793, 799 ... (1948), it is not confined to their letter. It may bar incipient violations of those statutes, FTC v. Brown Shoe Co., 348 U.S. 316, 321-22.86 S. Ct. 1501, 1504 ...; Fashion Originator's Guild v. FTC, 312 U.S. 457,463, 61 S. Ct. 703, 706 ... (1941), and conduct which, although not a violation of the letter of the antitrust laws, is close to a violation or is contrary to their spirit. FTC v. Sperry & Hutchinson Co., 405 U.S. 233. 239, 92 S. Ct. 898, 903.... (1972)" (emph. added)

As a threshold matter, then, FDUTPA goes beyond the FAA by reaching all substantive Clayton Act violations. Furthermore, FDUTPA reaches to some extent (discussed infra) even beyond substantive Sherman Act and Clayton Act violations.

The federal courts have accepted the filling of interstices in the other antitrust laws to the extent of approving FTC attempts carefully to expand the range of practices held to be illegal without the need for proof of anticompetitive effect. In Grand Union v. FTC, 300 F.2d 92 (2d Cir. 1962), the court held that a grocery chain's inducement of discriminatory promotional allowances from its suppliers violated the FTC Act because it clearly contravened the Robinson-Patman Act's policy proscribing discriminatory promotional allowances even though RPA itself applies only to sellers. Because RPA outlawed those practices per se without requiring proof of anticompetitive effects, the FTC Act was similarly held not to require such proof in that situation. Several years later, the Supreme Court in Atlantic Refining Co. v. FTC, 381 U.S. 357 (1965), upheld the FTC's administrative ruling that an FTC Act violation was made out when Atlantic and Goodyear Tire entered an agreement whereby Atlantic promoted sales of Goodyear products to its wholesalers and retail service stations in return for commissions on...

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