Preliminary Report on State Consumer Protection Acts Is Important Reading
The Searle Civil Justice Institute at Northwestern University's School of Law recently released a preliminary report on two studies entitled "State Consumer Protection Acts: An Empirical Investigation of Private Litigation." The Institute was created last year with the mission of generating hard data on public policy issues related to the civil justice system through large scale empirical studies.
And the hard data it has generated is particularly telling. The Report's key findings:
* Litigation under state consumer protection acts has increased by 119% between 2000 and 2007.
* Vague statutory definitions of prohibited conduct are a major driver of state consumer protection act litigation.
* Between 1995 and 2007, the expected value of recovery for state consumer protection act plaintiffs increased dramatically as measured by the statutory requirements to bring a cause of action and available remedies.
* Those states with more generous remedies and less strict requirements for bringing an action see more consumer protection act litigation.
* Employing a "Shadow FTC" of five Shadow Commissioners who reviewed representative sample case scenarios, most state consumer protection act claims would not constitute illegal conduct under the Federal Trade Commission's consumer protection standards.
* Almost 40% of consumer protection act claims where the consumer plaintiff prevailed at trial would not constitute illegal conduct under the FTC's consumer protection standards.
These data have important potential policy implications, according to the study's authors:
1. To the extent that state consumer protection acts are envisioned as complements to FTC consumer protection, they appear to have overshot the mark.
2. Vague definitions of illegal conduct in consumer protection acts, while legislatively expeditious, create costly uncertainty and unpredictability in the law.
3. The statutory language of consumer protection acts matters, and legislatures can impact the amount of consumer protection act litigation by altering the statutory text to provide incentives or disincentives to suit.
4. Because amendments to consumer protection acts have generally tended to lower the requirements to bringing suit, it may be useful to investigate whether other established causes of action are being usurped.
5. To the extent that the FTC standard meets its goal of an optimal balance between the public interest and protection of individual consumers, it is uncertain that the broader coverage of consumer protection acts benefits consumers.
The Report makes for interesting reading, and in addition to its description of litigation trends and conclusions, it provides a good history of federal and state consumer protection efforts.
