You or your business can be liable for violating state consumer protection laws. All states have laws governing deceptive and fraudulent business practices and most have adopted the Uniform Deceptive Trade Practices Act. The UDTPA is essentially the state level version of the FTC Act. You should pay attention and be concerned with state laws regarding these types of practices since they may allow the consumers themselves to sue your business, along with collecting damages and attorneys’ fees.
If you operate a business with an online presence and it is subject to the jurisdiction of another state’s laws, this is yet another avenue of liability. Many states provide similar remedies for false advertising, along with possible heightened damages and attorneys’ fees under their deceptive practices laws. (For example, Wisconsin’s false advertising statute provides actual damages, along with attorneys’ fees and costs).
Under the UDTPA, unfair competition and unfair or deceptive acts or omissions (i.e. false advertising) are the two main types of violations. False or deceptive advertising or trade practices include making statements in connection with the sale of goods or services known to be untrue or misleading (for example, any type of “guarantee” that is untrue or misleading), or with no intent to sell the goods as advertised, or that disparages the goods, services, or business of another by false or misleading misrepresentation of fact (i.e. false remarks about the harmful nature of another business’s products). Again, like the FTC Act, state law uses a broad standard to determine liability and has adopted many rules that help define this standard.
If your business engages in any of the following specific activities, it is a deceptive trade practice under the Uniform Deceptive Trade Practices Act:
- Passes off the goods or services of another as his own;
- Causes likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of goods or services;
- Causes likelihood of confusion or of misunderstanding as to affiliation, connection, or association with, or certification by, another;
- Uses deceptive representations or designations of geographic origin in connection with goods or services;
- Represents that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or qualities that they do not have or that a person has a sponsor-ship, approval, status, affiliation, or connection that he does not have;
- Represents that goods are original or new if they are deteriorated, altered, reconditioned, reclaimed, used, or second-hand;
- Represents that goods or services are of particular standard, quality, or grade, or that goods are of particular style or model, if they are of another;
- Disparages the goods, services, or business of another by false or misleading misrepresentation of fact;
- Advertises goods or services with intent not to sell them as advertised;
- Advertises goods or services with intent not to supply reasonably expected public demand, unless advertisement discloses a limitation of quantity;
- Makes false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions;
- Engages in any other conduct which similarly creates the likelihood of confusion or of misunderstanding
Other States that have not adopted the UTPA have similar laws in place protecting consumers against internet advertising abuses. For example, there is the Illinois Consumer Fraud Act, the Texas State Deceptive Practices Act and the California Unfair Competition Law. There are considerable procedural differences among the various state consumer protection statutes. The major areas of difference you should be familiar with are: (a) whether the state law permits the consumer to sue privately; (b) whether causation or injury is required in order to bring a lawsuit against the business; (c) whether reliance on the advertising or the deceptive practice itself is a required to bring a suit; (d) whether intent to deceive (and to what degree) is required to bring a suit, and (e) the different remedies available for violations of the law.
Here are some examples of specific activities relating to conducting e-commerce also prohibited under these other state laws:
- Advertising sale items that are not actually available for sale;
- Deceptive guarantees or failing to fully disclose the material terms of a guarantee
- Fictitious testimonials;
- Enrolling a consumer in a “negative option” program without fully disclosing the material terms, such as how to terminate.
Keep in mind, there are also common law actions of unfair competition and fraud separate from codified state statute that your consumers or business competitors can use to sue your business. Of course, that is why it is wise to consult your business attorney to clarify these and other legal issues unique to your separate marketing activities or practices. As the Internet evolves, so will the methods of advertising and you will need to stay on top of rule changes.