Unfair Business Practice Act
The Unfair Business Practice Act was passed by Congress in 1914 and has been amended several times since to protect businesses and consumers from unfair competition and unfair or deceptive practices. The Federal Trade Commission was also created under the act to enforce the provisions of the act, which cover four main areas: price fixing, mergers, unfair competition and deceptive practices.
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Intentionally Broad
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In a policy statement issued in 1980, the FTC said the Unfair Business Practices Act “was deliberately framed in general terms since Congress recognized the impossibility of drafting a complete list of unfair trade practices that would not quickly become outdated or leave loopholes for easy evasion. The task of identifying unfair trade practices was therefore assigned to the Commission.” As a result, many states have drafted their own unfair business practices laws that address issues with more specificity.
The Federal Statute: Price Fixing and Unfair Competition
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The FTC has banned both vertical and horizontal price fixing. Horizontal price fixing is accomplished by presumed competitors agreeing to sell the same or similar product at the same price. For example, pancake mix manufacturers agree to sell their product in markets at the same price, thus eliminating any competition. Vertical price fixing is when producers or distributors of a common product agree to supply predetermined amounts of a product, thereby controlling supply and driving up the cost of the product. Oil distributors, for example, when they agree to supply only certain amounts of gasoline to the market, will drive up up the price. The FTC bans unfair competition between larger businesses that use their size and market strength to coerce lower prices from suppliers or manufacturers from discounting products to larger buyers at the expense of smaller businesses.
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Federal Statute: Merger and Deceptive Practices
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Guidelines and criteria have been developed over time by the FTC that allow the challenges to mergers that lessen competition. The courts have ruled that the FTC can establish criteria to challenge mergers that lessen competition. The judgment of the courts has been that a merger must be shown to be “undue” and “unreasonable” before it can be found illegal. The prima facie tests are whether the merger would create a monopoly, oligopoly or otherwise lead to anti-competitive practices. Deceptive practices are usually a lot easier to identify and rectify. False advertising would be an example most frequently cited. To be deceptive doesn't always mean that a business represents one thing and doesn't meet the terms of what is represented. It can be considered a deceptive practice through omission of pertinent facts as well.
State Unfair Practices Law: Florida
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Consumer protection laws and how they are applied differ from state to state. Not all states have adopted their own unfair practices laws. Florida is one state that has unfair practices laws that go further and are more specific than that provided by the federal government. Because the federal act might only be enforced by the FTC, the state law allows private prosecution and, while covering many of the same areas, the law offers greater specificity on outlawed practices. Additionally, it also enables consumers to receive compensation for damages, attorneys fees and costs, something not covered under the federal act.
California
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California once had some of the strongest Unfair Practices Laws in the nation. The laws allowed private parties to pursue offenders with the ability of consumers to recover compensation for loss and damages. Remedies in the state still include injunctions and restitution, and can stop businesses from committing allegedly illegal actions immediately. However, the voters of California in 2004, voted to restrict financial recoveries involving unfair practices and prohibit private lawsuits by limiting legal action to only the California attorney general or local government prosecutors.
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References
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