Opinion ID: 2081714
Heading Depth: 1
Heading Rank: 1

Heading: consumer fraud count

Text: Count I of plaintiffs' complaint alleges that the defendants' practice of granting rebates to Blue Cross and no other third-party payor constitutes an unfair method of competition in violation of section 2 of the Consumer Fraud Act (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 261 et seq. ). The majority has rejected this claim, holding that count I does not state a cause of action because the reach of the Consumer Fraud Act is limited to either deceptive or fraudulent conduct. (133 Ill.2d at 390.) While I agree that count I does not state a cause of action under the Act, I write because I do not agree that the prohibitions of the Consumer Fraud Act are limited to conduct that is either fraudulent or deceptive. The Consumer Fraud Act was enacted to protect consumers and borrowers and businessmen against fraud, unfair methods of competition and unfair or deceptive acts or practices. (Ill. Rev. Stat. 1987, ch. 121 1/2, par. 261.) Section 2 of the Act provides: Unfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact    are hereby declared unlawful. (Emphasis added.) (Ill. Rev. Stat. 1987, ch. 121 1/2, par. 262.) In interpreting this section consideration is given to the interpretations of the Federal Trade Commission and the Federal courts relating to section 5(a) of the Federal Trade Commission Act (the FTC Act) even though our courts are not bound by such interpretations. Ill. Rev. Stat. 1987, ch. 121 1/2, par. 262; see also Newman-Green, Inc. v. Alfonzo-Larrain R. (N.D. Ill. 1984), 590 F. Supp. 1083, 1085. Section 5(a) of the FTC Act, like the Consumer Fraud Act, prohibits unfair methods of competition and unfair or deceptive acts or practices. (15 U.S.C. § 45(a) (1973).) The unfair methods of competition that are prohibited by section 5 are not confined to those that were illegal at common law or those that are condemned by the antitrust laws. Congress specifically left the concept of unfair flexible to be defined with particularity by the myriad of cases from the field of business. ( FTC v. Motion Picture Advertising Service Co. (1953), 344 U.S. 392, 394-95, 97 L.Ed. 426, 429-30, 73 S.Ct. 361, 363.) Thus, section 5 has been interpreted to prohibit as unfair conduct which is neither deceptive nor violative of Federal antitrust laws. (See, e.g., Spiegel, Inc. v. FTC (7th Cir.1976), 540 F.2d 287 (Spiegel's practice of suing customers for delinquent credit accounts in a court distant from the consumer's residence, although not illegal, was nonetheless unfair within the meaning of section 5 because it violated public policy and was injurious to customers).) Factors that are considered by the FTC in determining whether a practice that is neither in violation of the Federal antitrust laws nor deceptive is nonetheless unfair include: `(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise  whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers (or competitors or other businessmen).' FTC v. Sperry & Hutchinson Co. (1972), 405 U.S. 233, 244 n. 5, 31 L.Ed. 2d 170, 179 n. 5, 92 S.Ct. 898, 905 n. 5, quoting 29 Fed. Reg. 8355 (1964). See also Spiegel, Inc. v. FTC (7th Cir.1976), 540 F.2d 287, 293. As both the Consumer Fraud Act and section 5 prohibit unfair methods of competition and unfair or deceptive acts or practices, I believe that the statutes should be construed in a similar manner. This interpretation has been adopted by Federal courts that have applied the Consumer Fraud Act (see, e.g., Jays Foods, Inc. v. Frito-Lay, Inc. (N.D. Ill. 1987), 664 F. Supp. 364; Evanston Motor Co. v. Mid-Southern Toyota Distributors, Inc. (N.D. Ill. 1977), 436 F. Supp. 1370 (cases in which the court considered whether the defendant's nondeceptive practices were unfair under the Consumer Fraud Act)) and in certain cases by the appellate court (see, e.g., Zinser v. Uptown Federal Savings & Loan, F.A. (1989), 185 Ill. App.3d 979; Perrin v. Pioneer National Title Insurance Co. (1980), 83 Ill. App.3d 664 (cases which consider whether nondeceptive conduct is unfair under the Consumer Fraud Act); but see Kellerman v. Mar-Rue Realty & Builders, Inc. (1985), 132 Ill. App.3d 300 (which holds that fraud or deception must be alleged to state a cause of action under the Consumer Fraud Act).) Consequently, I believe that to state a cause of action under the Consumer Fraud Act, it is sufficient to allege that the complained-of conduct was unfair: the conduct need not be fraudulent or deceptive. In the present case, plaintiffs maintain that the defendants' practices constitute an unfair method of competition. Plaintiffs contend that the practices in question amount to price discrimination which is prohibited by sections 2(a) and (c) of the Clayton Act, and that violations of the Clayton Act are considered unfair practices under section 5(a). Since our courts look to Federal interpretations of section 5(a) in construing the Consumer Fraud Act, plaintiffs maintain that price discrimination should be considered an unfair practice under the Consumer Fraud Act. While it is true that discriminatory pricing is prohibited by sections 2(a) and (c) of the Clayton Act, these provisions are limited to conduct affecting commodities. (15 U.S.C. §§ 13(a), (c) (1988).) The term commodities as used in these sections is restricted to products, merchandise or other tangible goods ( Freeman v. Chicago Title & Trust Co. (7th Cir.1974), 505 F.2d 527; Baum v. Investors Diversified Services, Inc. (7th Cir.1969), 409 F.2d 872, 875); medical services are not commodities ( Ball Memorial Hospital, Inc. v. Mutual Hospital Insurance, Inc. (7th Cir.1986), 784 F.2d 1325, 1340). Thus, the practices involved in the present case do not violate sections 2(a) and 2(c) of the Clayton Act. Even assuming the conduct in question did violate the Clayton Act, it would not necessarily be an unfair practice under the Consumer Fraud Act. (See Fitzgerald v. Chicago Title & Trust Co. (1978), 72 Ill.2d 179, 184 (not every violation of the Clayton Act is an unfair or deceptive practice under the Consumer Fraud Act).) Under the Consumer Fraud Act unfair conduct is defined on a case-by-case basis because of the futility of trying to anticipate all the unfair methods and practices a fertile mind might devise. Just as Congress left the concept of fairness to the FTC to define, so our legislature chose to frame the Consumer Fraud Act in general terms so as to permit construction and implementation of the statute on a case-by-case basis ( Scott v. Association for Childbirth at Home, International (1981), 88 Ill.2d 279, 290; Fitzgerald, 72 Ill.2d at 186), with the ultimate determination of what is unfair being left to the trier of fact ( Jays Foods, Inc. v. Frito-Lay, Inc. (N.D. Ill. 1987), 664 F. Supp. 364, 368). In the present case, plaintiffs have alleged that, pursuant to a contract between the defendants and Blue Cross, defendants pay rebates to Blue Cross and that, as a result of the rebates, the plaintiffs and the plaintiff class are required to pay higher prices than Blue Cross is required to pay for the same hospital services. The plaintiffs have not alleged in count I that the defendants' conduct either directly injured consumers or that it indirectly injured consumers by affecting competition. Injury to the public is required under section 5 of the FTC Act ( FTC v. Klesner (1929), 280 U.S. 19, 27, 74 L.Ed. 138, 144-45, 50 S.Ct. 1, 3), and the consensus of authority is that an injury to consumers, or at least injury to the public, is an essential element of a claim under the Consumer Fraud Act (see Jays Foods, Inc. v. Frito-Lay, Inc. (N.D. Ill. 1987), 664 F. Supp. 364 (and cases cited therein)). Plaintiffs have only alleged that, as a result of the defendants' conduct, they and other third-party payors have been economically injured. Injury to the public cannot be presumed from this allegation because, as the courts have repeatedly observed, injury to a competitor is not the same thing as injury to competition. ( Jays Foods, 664 F. Supp. at 372.) Because count I does not allege an injury to consumers, it fails to state a cause of action under the Consumer Fraud Act. Accordingly, count I was properly dismissed.