Consumer Protection

The FEDERAL TRADE COMMISSION (FTC), the largest federal agency that handles consumer complaints, regulates unfair or deceptive trade practices. Even local trade practices deemed unfair or deceptive may fall within the jurisdiction of FTC laws and regulations when they have an adverse effect on interstate commerce.

In addition, every state has enacted consumer protection statutes, which are modeled after the Federal Trade Commission Act (15 U.S.C.A. § 45(a)(1)). These acts allow state attorneys, along with general and private consumers, to commence lawsuits over false or deceptive advertisements, or other unfair and injurious consumer practices. Many of the state statutes explicitly provide that courts turn to the federal act and interpretations of the FTC for guidance in construing state laws.

The FTC standard for unfair consumer acts or practices has changed with time. In 1964, the agency instituted criteria for determining unfairness when it enacted its cigarette advertising and labeling rule. A practice was deemed unfair when it (1) offended public policy as defined by statutes, COMMON LAW, or otherwise; (2) was immoral, unethical, oppressive, or unscrupulous; and (3) substantially injured consumers. The FTC changed the standard in 1980. Now, substantial injury of consumers is the most heavily weighed element, and it alone may constitute an unfair practice. Such an unfair practice is illegal pursuant to the Federal Trade Commission Act unless the consumer injury is outweighed by benefits to consumers or competition, or consumers could not reasonably have avoided such injury. The FTC may still consider the public policy criterion, but only in determining whether substantial injury exists. Finally, the FTC no longer considers whether conduct was immoral, unethical, oppressive, or unscrupulous.

The FTC has also developed, over time, its definition of deceptive acts or practices. Historically, an act was deceptive if it had the tendency or capacity to deceive, and the FTC considered the act's effect on the ignorant or credulous consumer. A formal policy statement made by the FTC in 1988 changed this definition: currently, a practice is deceptive if it will likely mislead a consumer, acting reasonably under the circumstances, to that consumer's detriment.

FALSE ADVERTISING is often the cause of consumer complaints. At common law, a consumer had the right to bring an action against a false advertiser for FRAUD, upon proving that the advertiser made false representations about the product, that these representations were made with the advertiser's knowledge of or negligent failure to discover the falsehoods, and that the consumer relied on the false advertisement and was harmed as a result. In 1911, an advertising trade journal called Printer's Ink proposed model legislation criminalizing false advertisements. Forty-four states enacted statutes based on this model statute. However, because of the difficulty in proving BEYOND A REASONABLE DOUBT an advertiser's dishonesty, prosecutors seldom use these criminal laws. More frequently, the state attorneys general or the FTC regulates false advertising. For example, the FTC can issue a cease and desist order, forcing a manufacturer to stop advertising, or compelling the advertiser to make corrections or disclosures informing the public of the misrepresentations.