Opinion ID: 172353
Heading Depth: 2
Heading Rank: 1

Heading: Unfair-Practice Claim

Text: The FTCA prohibits unfair or deceptive acts or practices in or affecting commerce, 15 U.S.C. § 45(a)(1), and vests the FTC with authority to prevent such practices by issuing cease-and-desist orders, id. § 45(b), by prescribing rules, id. § 57a(a)(1)(B), and by seeking injunctive relief in federal district court, id. § 53(b). To be unfair, a practice must be one that [1] causes or is likely to cause substantial injury to consumers [2] which is not reasonably avoidable by consumers themselves and [3] not outweighed by countervailing benefits to consumers or to competition. Id. § 45(n). The FTC argued below that Accusearch's practice of offering consumer telephone records over the Internet satisfied all three requirements. First, the FTC contended that substantial injury was caused by the subversion of the Telecommunications Act; it argued that consumers whose telephone records were obtained through Abika.com suffered emotional harm (sometimes from being stalked or otherwise harassed) and often incurred substantial costs in changing telephone providers to prevent future privacy breaches. Second, the FTC contended that because Accusearch's researchers could override password encryption, consumers could not protect themselves by reasonable means but only by extreme measures such as ceasing telephonic communication altogether. Third, the FTC contended that the unconsented-to disclosure of telephone records provided no countervailing benefits to consumers. On appeal Accusearch does not challenge this analysis of the unfair-practice elements. Its arguments relate only to the FTC's reliance on the Telecommunications Act. One argument is that the FTC could not rely on the Act because it applied solely to telecommunications carriers, not to Accusearch or its researchers; during the period at issue, [3] contends Accusearch, there was no law preventing a third-party from collecting telephone records. Aplts. Am. Br. at 61. We reject the argument. Its premise appears to be that a practice cannot be an unfair one unless it violates some law independent of the FTCA. But the FTCA imposes no such constraint. See 15 U.S.C. § 45(n) (setting out elements of an unfair practice). On the contrary, the FTCA enables the FTC to take action against unfair practices that have not yet been contemplated by more specific laws. See Spiegel, Inc. v. FTC, 540 F.2d 287, 291-94 (7th Cir.1976) (catalog retailer's practice of suing customers in distant forum was unfair even if practice was perfectly proper under state law); 1 Stephanie W. Kanwit et al., Federal Trade Commission § 4.5 (2008) (The FTC is unfettered and free to proceed against practices not previously considered unlawful.). To be sure, violations of law may be relevant to the unfairness analysis. See 15 U.S.C. § 45(n) (In determining whether an act or practice is unfair, the Commission may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination.); Stephen Calkins, FTC Unfairness: An Essay, 46 Wayne L.Rev.1935, 1970 (2000) (discussing FTC enforcement actions in which claim that practice was unfair was predicated on violation of a law other than the FTCA). Here, for example, the FTC alleged that the substantial-injury element of an unfair practice, see 15 U.S.C. § 45(n), was met partly by the subversion of consumer privacy protections afforded by the Telecommunications Act. But the existence of that injury turns on whether the Telecommunications Act was violated (by somebody), not on whether Accusearch could itself be held liable under the Telecommunications Act. Accusearch also raises the related argument that the FTC had no authority to bring its claim because only the Federal Communications Commission may enforce the Telecommunications Act. This argument fundamentally misapprehends the nature of this lawsuit. The FTC brought suit under the Federal Trade Commission Act, seeking to enjoin an unfair practice affecting commerce. See id. § 45(a) (declaring unfair practices unlawful); id. at § 53(b) (giving the FTC authority to seek enjoinment of unfair practices in federal district court). As set out above, the Telecommunications Act was relevant to that claim. But the complaint does not allege that Accusearch violated that Act. In any event, the FTC may proceed against unfair practices even if those practices violate some other statute that the FTC lacks authority to administer. See Am. Fin. Servs. Ass'n v. FTC, 767 F.2d 957, 983 (D.C.Cir.1985) (certain creditor remedies, which violated laws in a number of states, also unfair under § 5(a)). Indeed, condemnation of a practice in criminal or civil statutes may well mark that practice as unfair. See FTC v. R.F. Keppel & Bro., 291 U.S. 304, 313, 54 S.Ct. 423, 78 L.Ed. 814 (1934); Am. Fin. Servs. Ass'n, 767 F.2d at 983. By the same token, a practice, such as Accusearch's, which either encourages such condemned conduct or encourages the use of fraud or theft to circumvent the statute, may likewise be considered unfair.