United States: The FTC's 1980 Definition Of Unfair Trade Practice Applies To FDUTPA Actions

The Third District Court of Appeals recently held, on a matter of first impression, that the Federal Trade Commission's ("FTC") definition of "unfairness" contained in the 1980 Policy Statement on Unfairness applies to actions brought under the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"). In Porsche Cars North America, Inc. v. Diamond, 140 So. 3d 1090 (Fla. 3d DCA 2014), the plaintiffs brought a putative class action alleging the distributor of "high intensity discharge headlights" acted unfairly under the FDUTPA by profiting from distributing a product that was highly susceptible to theft without taking remedial steps and failing to notify owners of the potential risk of theft. The trial court certified the class using the definition of "unfair" from the 1964 FTC Policy Statement which defined an "unfair trade practice" as one that "offends established policy" and "is immoral, unethical, oppressive, unscrupulous or substantially injurious to customers." On appeal, the 3^rd DCA held this was the incorrect definition to apply because the FTC updated its definition of "unfair trade practice" in 1980 to establish a three-pronged test for unfairness which requires that the injury to the consumer: (1) must be substantial; (2) must not be outweighed by any countervailing benefits to consumers or competition that the practice produces; and (3) must be an injury that consumers themselves could not reasonably have avoided. The 3^rd DCA found, based on Florida Statute Section 501.203(3)(b) which stated that violations of the FDUTPA include violations of "[t]he standards of unfairness and deception set forth and interpreted by the Federal Trade Commission or the federal courts" and included the standards of unfairness issued "as of July 1, 2013" and Section 501.204(2) which states: "[i]t is the intent of the Legislature, that, in construing subsection (1), due consideration and great weight shall be given to the interpretations of the Federal Trade Commission and the federal courts relating to s. 5(a)(1) of the Federal Trade Commission Act, 15 U.S.C. s. 45(a)(1) as of July 1, 2013", that the 1980 Policy Statement is clearly the "standard of unfairness" that should apply. The 3^rd DCA ultimately reversed the order granting certification finding, under the 1980 FTC standard, common issues did not predominate.

Importance of the decision: This is the first case in Florida to apply the 1980 FTC Policy Statement on Unfairness to FDUTPA actions. Up until this point, Florida courts have consistently defined, albeit in dicta, an "unfair practice" as one that "offends established public policy" and that is "immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers . . ."¹ This language originated from the FTC v. Sperry & Hutchinson Co., 405 U.S. 233 (1972) decision, which related to the FTC's unfair competition authority in the 1964 Policy Statement. The 3^rd DCA's opinion is in line with the FTC and federal courts which have found the 1980 Policy Statement repudiated the S&H Standard.² In fact, federal courts have found the FTC is bound by those policy statements that have been adopted by the Commission as part of a litigated decision changes to its policy statements.³ The application of the 1980 Policy Statement to FDUPTA actions means more consistency with federal and FTC decisions as well as the application of a higher standard for plaintiffs to meet in order to prove an "unfair practice", as seen in this case where class certification was reversed based on the change in standard.

Footnotes

^{1 See PNR Inc. v. Beacon Prop. Mgmt. Inc., 842 So. 2d 773, 777 (Fla. 2003).} 

^{2 See 1980 Policy Statement on Unfairness; F.T.C. v. IFC Credit Corp., 543 F. Supp. 2d 925, 950-951, n. 17 (N.D. Ill. 2008); see also In re Motions to Certify Classes Against Court Reporting Firms For Charges Relating to Word Indices ("Court reporters"), 715 F. Supp. 2d 1265, 1277-1278, n. 3 (S.D. Fla. 2010) (referring to the FTC Unfairness Policy, but noting PNR court referred to S & H Standard)}

^{3 See Southwest Sunsites, Inc. v. Federal Trade Commission, 785 F.2d 1431, 1435 (9}th Cir. 1986); Amrep Corp. v. FTC, 768 F.2d 1171, 1178 (10^th Cir. 1985)

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