Understanding Unfair Trade Practices & Their Impact on Business

Understanding Unfair Trade Practices & Their Impact on Business

Part of owning a business means staying ahead of the competition, but what if a competing business engages in unfair or deceptive practices? What happens if one’s own business is accused of unfair trade practices? While federal and state laws offer consumer protection by governing and regulating fair trade, businesses facing allegations of unfair or deceptive trade practices can face significant costs. Having an attorney experienced in business law can help businesses navigate the often complex legal process.

In broad terms, unfair and deceptive trade practices involve dishonest or unethical tactics businesses use to boost their profits or gain an edge over competitors. This can include misleading advertising, false claims, price manipulation, or violating manufacturing standards. Such practices are prohibited by the Consumer Protection Laws and Section 5(a) of the Federal Trade Commission Act (FTC Act).

For any unfair or deceptive trade practices claim, the key questions are whether or not the conduct is likely to deceive a reasonable consumer under similar circumstances, and whether the accused business practice caused damages to the consumer.

What Is the FDUTPA?

Most states, including Florida, have passed their own laws modeled after the FTC Act, the landmark legislation passed in 1914 that established the Federal Trade Commission (FTC) and continues to empower it to regulate commerce in several ways: 

• preventing unfair competition and or deceptive practices that impact commerce
• imposing monetary damages and other compensation for conduct harmful to consumers
• establishing rules that define acts or practices that are unfair or deceptive
• gathering information and conducting investigations into businesses or organizations

State consumer protection laws are sometimes called “little FTC acts” because of their resemblance and deference to their federal counterpart. In fact, Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) prohibits unfair or deceptive business practices while providing that “due consideration and great weight shall be given to the interpretations of the Federal Trade Commission” (Fla. Stat. §501.204).   

Like its federal equivalent, the FDUTPA allows a person to sue a business for unfair competition and deceptive or unconscionable business practices while providing remedies for consumers that are not available under the FTC Act. When faced with any claims related to the FDUTPA, consulting an experienced lawyer to guide you through the process is important. 

What Constitutes an Unfair or Deceptive Practice?

Federal and state statutes distinguish between “unfair” and “deceptive,” as one may occur without the other. The FDUTPA defines unfair practices broadly, encompassing actions that “cause substantial consumer injury” or violate public policy. Deceptive practices are those that cause consumers to make decisions based on misleading information. 

Examples of Unfair Practices

Unfair practices include refusing to do business with certain individuals or companies in a way that harms competition, charging excessively high prices, and offering discounts that are not legally permitted. In other words, an unfair practice takes advantage of consumers and goes against public policy, often by being oppressive, unethical, or overly burdensome. Specific instances may include:

• Price Gouging: During natural disasters or emergencies, businesses that raise prices excessively on essential goods such as water or medicine are said to engage in unfair practices. In Florida, price gouging is especially regulated during hurricanes or other emergencies. For example, after Hurricane Katrina in 2005, several gas stations and hotels received fines for charging excessively high prices for basic services during a time of crisis. 
• Refusing to deal with certain customers or suppliers: A company may refuse to do business with competitors or certain groups in a manner that harms competition and limits consumer choice, such as predatory actions by large corporations against smaller competitors. More recently, large online retailers have been accused of refusing to deal with smaller third-party sellers amid accusations that they have delisted or suspended sellers whose products compete with its private-label goods.  
• Abusive debt collection practices: Harassing or misleading consumers into paying debts they don’t owe may also be considered unfair. In the U.S. these practices are often covered by laws like the Fair Debt Collection Practices Act (FDCPA), but violations can also be considered unfair trade practices under the FTC Act or state laws. Over the years, the FTC has brought multiple cases against debt collection agencies for abusive tactics.

Examples of Deceptive Practices

A deceptive practice involves any business conduct that misleads or is likely to mislead consumers in a way that can affect their purchasing decisions. Deception often revolves around false or misleading advertisements, representations, or omissions of material information. The key element here is whether consumers are deceived or confused, rather than the overall harm caused, with actions that include:

• False Advertising: A business may be accused of false advertising if it promotes claims about a product without adequate evidence to support it. One famous example is the case of 2015, in which the company was alleged to have falsely advertised its cars as low-emission vehicles while installing software that modified emissions test results. In a 2014 case, a cosmetics company agreed to settle FTC charges of deceptive advertising about unsubstantiated claims that certain skincare products provided anti-aging benefits by targeting users’ genes.   
• Bait and Switch Advertising: A bait-and-switch tactic is when a business advertises a product at an attractive price to lure in customers, only to inform them that the advertised product is unavailable or of poor quality. The goal is to push consumers toward a more expensive alternative. For example, a car dealership might advertise a low-priced car that seems like a great deal, only to reveal to consumers once they arrive that the advertised car has already been sold or has hidden fees. Sales reps then push customers towards more expensive cars or to purchase additional features and warranties for the car they initially wanted. If a home warranty service technician disassembles an air conditioning compressor and then refuses to reassemble it unless the customer pays for repair parts, the company may be guilty of coercive and deceptive bait-and-switch trade practices. 
• Misleading Labeling: This occurs when a company falsely labels a product using a particular language when, in fact, it fails to meet the stated manufacturing standards, misleading consumers about the nature of the product. For example, if a store sells certain products labeled as “organic” that do not meet U.S. Department of Agriculture (USDA) organic certification, the business may be subject to claims of misleading labeling.

What FDUTPA Means for Businesses

For Florida consumers, the FDUTPA provides any consumer the right to bring legal action against companies or retailers for consumer fraud, sometimes in the form of class action lawsuits. For these plaintiffs, having a Florida Unfair and Deceptive Trade Practices Act attorney by your side is paramount to help investigate and litigate your unfair trade practices allegations.

For businesses in Florida, lawsuits alleging unfair or deceptive trade practices can lead to financial burdens such as court costs and fines along with intangible costs caused by damages to brand reputation and customer loyalty. To avoid these problems, businesses must be aware of and ensure compliance with fair trade practices and public policy. An experienced FDUTPA attorney can help not only ensure compliance but also defend against false or frivolous allegations stemming from unjustified consumer inquiries.  

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