Are State Consumer Protection Acts Really Little-FTC Acts?

State Consumer Protection Acts (CPAs) were designed to supplement the Federal Trade Commission’s (FTC) mission of protecting consumers and are often referred to as “Little-FTC Acts.” There is growing concern that enforcement under these acts is not only qualitatively different than FTC enforcement but may also be counterproductive for consumers. This Article examines a sample of CPA claims and compares them to the FTC standard. It identifies qualitative differences between CPA and FTC claims by commissioning a “Shadow Federal Trade Commission” of experts in consumer protection. The study finds that many CPA claims include conduct that would not be illegal under the FTC standards and most of the cases with illegal conduct would not warrant FTC enforcement. Even among CPA cases in which the plaintiff prevailed, nearly half do not include illegal conduct under the FTC standard and most of the cases with illegal conduct would not invoke FTC enforcement. The results clearly suggest private litigation under Little-FTC Acts tends to pursue a different consumer protection mission than the Bureau of Consumer Protection at the Federal Trade Commission. INTRODUCTION 164 I. BACKGROUND AND HISTORY OF CONSUMER PROTECTION ACTS 167 A. Criticism of Former Methods of Consumer Protection and the Call for CPAs 167 B. Consumer Fraud Acts and Early Model Acts 169 * George Mason University Foundation Professor of Law and Executive Director, Law & Economics Center, George Mason University School of Law. An earlier account of the results in this Article was distributed as part of the Searle Civil Justice Institute’s Preliminary Report, State Consumer Protection Acts: An Empirical Investigation of Private Litigation, available at http://www.law.northwestern.edu/searlecenter/issues/index.cfm?ID=86. ** Associate Professor, George Mason University School of Law and Department of Economics, and Chair, Searle Civil Justice Institute State Consumer Protection Acts Task Force. The authors would like to recognize the outstanding research assistance of Samantha Zyontz, Elise Nelson, Judd Stone, and Jeff Jarosch. The authors also thank the Shadow FTC Commissioners (who remain anonymous) and the following reviewers who commented on an earlier version of this Article: C. Lee Peeler, National Advertising Review Council and Advertising Self-Regulation Council of Better Business Bureaus; Craig Garthwaite, Kellogg School of Management at Northwestern University; Eric Helland, Claremont McKenna College; Max Schanzenbach, Northwestern University School of Law; and a reviewer who wished to remain anonymous. 1 Butler and Wright: Are State Consumer Protection Acts Really Little-FTC Acts? Published by UF Law Scholarship Repository, 2011 164 FLORIDA LAW REVIEW [Vol. 63 C. Comparing Federal and State Consumer Protection ....... 173 D. Expanding and Amending CPAs 176 E. Modern Concerns Emerge 177 II. SHADOW FEDERAL TRADE COMMISSION 178 A. Shadow FTC Selection 179 B. Sample Selection of Cases 179 C. Case Summaries and Questionnaires 180 III. EMPIRICAL RESULTS 182 A. Illegality 183 B. Enforcement 185 C. Control Results—FTC Cases 186 IV. CONCLUSIONS 187