FDUTPA for Civil Antitrust Additional Conduct, Party, and Geographic Coverage; State Actions for Consumer Restitution
Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA), in addition to prohibiting unfair, deceptive and unconscionable acts and practices, proscribes “unfair methods of competition. . . in the conduct of any trade or commerce.”1 It is modeled after and tracks the parallel language of §5(a) of the Federal Trade Commission Act,2 which addresses interstate commerce and provides causes of action only to the FTC. FDUTPA has as explicit statutory purposes “[t]o simplify, clarify, and modernize the law governing. . . unfair methods of competition. . . . ” and “[t]o protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition.”3
However, FDUTPA’s antitrust component has been used much less than its deception component. This article explores what FDUTPA adds to civil antitrust enforcement for Florida plaintiffs beyond the coverages of, and remedies available under, the other federal antitrust statutes (Sherman Act, Clayton Act, and amendments) and the Florida Antitrust Act (FAA). In doing so, the article addresses some issues, including state actions for monetary recovery for consumers and extraterritoriality, which apply to all types of FDUTPA claims. The article does not focus per se on Justice Department or FTC, or state criminal, enforcement authority.
FDUTPA, as its language indicates, is fundamentally a consumer statute. Although the private damages section (§501.211(2)) was amended in 2001 to cover actions “brought by a person [formerly consumer] who has suffered a loss,” the legislative history expressly indicates that the amendment was designed to clarify that businesses are entitled to the same remedies as individuals.4 That history does not reflect any intent to modify FDUTPA’s consumer protection purpose to create a damages remedy for competitors. This article’s position is that despite the language change, damages suits by competitors therefore remain disallowed. See Rush Prudential HMO, Inc. v. Moran et al., 127 S. Ct. 2151, 70 U.S.L.W. 4600 (No. 001021, June 20, 2002).
meeting the lower standard of “anyone aggrieved,” however, competitors as well as consumers can have standing under §501.211(1) to seek declaratory or injunctive relief as to actual or likely violations which are likely to cause consumer injury.5 FDUTPA’s substantive and geographic coverages add to such competitors’ antitrust arsenal.
Federal Antitrust Statutes
The Sherman Act prohibits, in general language, contracts, combinations and conspiracies in restraint of interstate commerce (see infra) or commerce with foreign nations (§1), as well as monopolizing, or conspiring or attempting to monopolize, such commerce (§2).6 The Clayton Act prohibits, inter alia, sales, or setting a price, discount or rebate, on condition that the buyer not deal with competitors of the seller (§3; “tie-in” sales, exclusive dealing arrangements) where the effect may be to substantially lessen competition in interstate commerce.7 Those types of practices have also been held to violate §1 of the Sherman Act.8 The Robinson-Patman Act (RPA),9 an amendment to the Clayton Act, prohibits sellers from engaging in price discrimination as between different buyers when the effect may be to substantially lessen competition.
Under these statutes certain types of practices, such as price fixing between competitors, horizontal market divisions, tying arrangements, and group boycotts, have been deemed so facially anticompetitive that plaintiffs are not required to offer proof of their anticompetitive effects (“per se” violations; although some evidence concerning market conditions and the defendant’s market power may be necessary to show that a practice fits one of the per se categories). For other practices, proof of anticompetitive effect in the relevant product or service and geographic market is still required (the “Rule of Reason”).10
For these Sherman Act and Clayton Act violations, injured persons and corporations, as well as the attorneys general of the states acting as parens patriae on behalf of injured natural persons residing in their states, have standing to bring actions for treble damages and costs, including reasonable attorneys’ fees.11
The Supreme Court in 1977 held, in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), that for reasons including judicial efficiency and avoidance of highly complex proof problems, only direct purchasers of goods or services could bring claims for damages for Sherman Act violations. Indirect purchasers (e.g., downstream purchasers in the distribution chain) lack such standing.
Another provision of the Clayton Act (§7)12 prohibits prospective corporate mergers and other asset acquisitions whose effects may be substantially to lessen competition in any activity affecting interstate commerce. Consummated mergers and acquisitions which actually restrain competition have been held to violate the Sherman Act.13
Any (other) person or corporation, including competitors and states, may seek injunctive relief against threatened loss or damage from any such prospective merger or any other violation of these federal antitrust laws.14
Claims for violation of the federal antitrust laws may only be brought in federal court.15
The Florida Antitrust Act
The FAA (1980) tracks the Sherman Act’s prohibitions and applies them to trade or commerce in Florida (“in this state”; see infra).16 Courts have held that the FAA effectively adopts as the law of Florida the body of antitrust law developed by the federal courts under the Sherman Act.17 The FAA similarly provides causes of action for treble damages and costs, including reasonable attorneys’ fees, to injured persons as well as the Florida attorney general and authorized state attorneys acting as parens patriae on behalf of natural persons residing within the state.18 Additionally, any person may sue for equitable relief (e.g., an injunction) against threatened loss or damage by a violation.19
FAA claims are often brought together with federal antitrust claims in federal court.20
FDUTPA’s Substantive (Conduct) Coverage
FDUTPA requires that, in construing its prohibition on unfair methods of competition, “due consideration and great weight” shall be given to the FTC’s and the federal courts’ interpretations of §5(a)(1) of the FTC act.21 Accordingly, FDUTPA’s conduct coverage should be coextensive with the FTC act’s coverage in this regard (except as to statutorily exempt business activities under §501.212 such as insurance and banking).22
The Sherman Act was enacted in 1890, and the Clayton and FTC acts in 191423 following the Supreme Court’s 1911 decision in Standard Oil Co. v. United States, 221 U.S. 1.Perhaps the most cogent explanation of the FTC act’s antitrust coverage (except for the apparent decline of the “incipiency” doctrine, infra) appears in the Second Circuit’s decision in E.I. Du Pont de Nemours & Co. v. FTC, 729 F.2d 128, 136 (1984)24:
The statute’s legislative history reveals that in reaction to the relatively narrow terms of the Sherman Act as limited by the Supreme Court’s adoption of the Rule of Reason in Standard Oil. . . Congress sought to provide broad and flexible authority to the Commission. . . [to] preserve business’s freedom to compete from restraints. . . . The specific practices that might be barred were left to be defined by the Commission. . . Congress’ aim was to protect society against oppressive anti-competitive conduct and thus assure that the conduct prohibited by the Sherman Act would be supplemented as necessary and any interstices filled. . . .
During the period since the enactment of the Federal Trade Commission Act the courts have established certain principles. . . . Although the Commission may under §5 enforce the antitrust laws, including the Sherman and Clayton Acts, FTC v. Motion Picture Advertising Service Co., 344 U.S. 392, 395; 73 S. Ct. 361, 363. . . (1953); FTC v. Cement Institute, 333 U.S. 683, 693, 68 S. Ct. 793, 799. . . (1948), it is not confined to their letter. It may bar incipient violations of those statutes, FTC v. Brown Shoe Co., 348 U.S. 316, 321-22. 86 S. Ct. 1501, 1504. . . ; Fashion Originator’s Guild v. FTC, 312 U.S. 457, 463, 61 S. Ct. 703, 706. . . (1941), and conduct which, although not a violation of the letter of the antitrust laws, is close to a violation or is contrary to their spirit. FTC v. Sperry & Hutchinson Co., 405 U.S. 233. 239, 92 S. Ct. 898, 903. . . . (1972)” (emph. added)
As a threshold matter, then, FDUTPA goes beyond the FAA by reaching all substantive Clayton Act violations. Furthermore, FDUTPA reaches to some extent (discussed infra) even beyond substantive Sherman Act and Clayton Act violations.
The federal courts have accepted the filling of interstices in the other antitrust laws to the extent of approving FTC attempts carefully to expand the range of practices held to be illegal without the need for proof of anticompetitive effect. In Grand Union v. FTC, 300 F.2d 92 (2d Cir. 1962), the court held that a grocery chain’s inducement of discriminatory promotional allowances from its suppliers violated the FTC Act because it clearly contravened the Robinson-Patman Act’s policy proscribing discriminatory promotional allowances even though RPA itself applies only to sellers. Because RPA outlawed those practices per se without requiring proof of anticompetitive effects, the FTC Act was similarly held not to require such proof in that situation. Several years later, the Supreme Court in Atlantic Refining Co. v. FTC, 381 U.S. 357 (1965), upheld the FTC’s administrative ruling that an FTC Act violation was made out when Atlantic and Goodyear Tire entered an agreement whereby Atlantic promoted sales of Goodyear products to its wholesalers and retail service stations in return for commissions on such sales. The Court held the FTC had properly applied the analysis appropriate to tying arrangements even though the facts did not precisely make out such an arrangement, and was thus not required to conduct a full analysis of anticompetitive effect or consider evidence of economic justification for the program. In FTC v. Brown Shoe Co., 384 U.S. 316 (1966), defendant provided special service benefits to retail shoe stores in exchange for their promise to deal primarily in Brown shoes and not handle directly competitive lines. Although not precisely an exclusive dealing arrangement, the Court found that it directly foreclosed Brown’s competitors, in a similar manner, from selling to a substantial number of dealers. The Court on that basis held the FTC was not required to present proof that the arrangement substantially lessened competition, and further explained that the FTC Act empowered the FTC to arrest trade restraints in their incipiency before they became “outright violation[s]” of the other antitrust laws.25
However, a number of later attempts by the FTC to avoid proof that a practice had actual anti-competitive effects, when the practice was not very similar to one statutorily specified or previously held illegal per se, have been disapproved by the courts.26 For example, in Boise Cascade Corp. v. FTC, 637 F.2d 573 (9th Cir. 1980), the FTC challenged plywood manufacturers’ system of delivered pricing (i.e., including transportation costs) which tended to result in very similar prices being charged by competitors. The FTC, however, presented no evidence of overt collusion by the manufacturers, and did not prove that the practices resulted in any exactly matching price offers by competitors to a given customer. The court refused to apply a per se analysis, and held that the mere theory that widespread use of the pricing system posed an incipient threat to competition did not make out an FTC Act violation. In the Du Pont case, the two largest manufacturers of lead antiknock gasoline additives independently adopted, at different times, use of a delivered price, and both also gave extra advance notice of price increases and used most favored nation clauses promising that a customer would not have to pay a price higher than other customers. The FTC did not allege an agreement or conspiracy among the companies, but charged that the practices nevertheless had the effect of substantially lessening price competition. The court held that without “collusive, predatory, restrictive or deceitful conduct,” it would not find an FTC Act violation in the absence of proof either of anticompetitive intent or purpose or lack of a legitimate business reason for the practice. It observed that legitimate conduct, not in violation of the antitrust laws, can nevertheless have anticompetitive effects, particularly in an oligopolistic market.27
Also, there is little if any recent FTC precedent relying on incipiency, and the doctrine’s continued viability is less than clear. While the FTC Act authorizes the FTC to take actions “to prevent” unfair methods of competition,28 an FTC administrative decision issued the same year as the Du Pont decision opined that the FTC Act requires nothing less in an attempted monopolization case than the same showing required by the Sherman Act: a dangerous probability of injury to competition.29
Note also that FTC Act antitrust coverage is generally subject to the same statutory and common law exemptions and immunities as prevail under the other federal antitrust statutes. See, e.g., In re Detroit Auto Dealers Ass’n v. FTC, 925 F.2d 457, 461 (6th Cir. 1992), cert. denied, 113 S. Ct. 461 (1993) (statutory and common law labor exemptions); FTC v. Ticor Title Insurance Co., 504 U.S. 621, 634 (1992) (state action immunity).30
Thus FDUTPA, following the above-mentioned FTC Act precedent, covers Sherman Act and Clayton Act violations.31 It furthermore covers, and can apply a per se analysis to other practices which are very similar to conduct which has been held to constitute per se violations of the Sherman or Clayton acts but nevertheless fall without their outer boundaries. However, it should be recalled that under the 2001 amendments to FDUTPA, the FTC Act precedent to which great weight and due consideration must be given is limited to that in effect as of July 1, 2001.32 Of course, Florida courts must be careful and clear in interpreting and applying that precedent to avoid raising the constitutional vagueness problems noted in Department of Legal Affairs v. Rogers, 329 So. 2d 257 (Fla. 1976).
Consumer Individual and Class Damages Actions
Based on the statute’s use of the term “consumer” and its express policy of consumer protection, the First DCA in 1996 held, in Mack, et al. v. Bristol-Myers Squibb Co., 673 So. 2d 100 (Fla. 1st DCA 1996), that under FDUTPA (unlike under the FAA) indirect purchasers have standing to seek damages for price-fixing conspiracies. The U.S. Supreme Court had in 1989, in California v. ARC America, 490 U.S. 102 (1989), held that indirect purchaser actions brought under state antitrust statutes are not preempted by federal antitrust statutes or inconsistent with the holding in Illinois Brick.
Thus, FDUTPA has opened the door to an entirely new class of antitrust plaintiffs, and has added a great measure of deterrence to anticompetitive conduct through the enabling of (indirect purchaser) consumer class action litigation. In fact, by order dated August 26, 2002, the circuit court in Miami certified a consumer indirect purchaser class action under FDUTPA against Microsoft Corporation for elevated prices of the PCs they purchased attributable to monopoly-priced, preloaded Microsoft software.33 In re Florida Microsoft Antitrust Litigation, No. 99-27340-CA-11 (Shapiro, J.). As the order recites, at 2, “According to Plaintiffs, Microsoft has used its monopoly power to stifle innovation in the operating system market, create a monopoly in the applications market, and overcharge consumers in both markets in violation of Florida’s deceptive and unfair trade practices laws.”
In Mack, the First DCA recognized that indirect purchasers may have problems in proving their damages, i.e., “the difficulties of tracing overcharges through a distribution chain” and separating the amount which they bore from the amount borne by the original, direct purchaser. The Microsoft order, however, opines, at 15, that Plaintiffs, through their expert economist, “have presented reasonable methods for estimating damages for each class member that a fact-finder could accept.” The order summarizes those proffered methods.
Monetary Relief and Relaxed Proof Requirements
FDUTPA contains provisions that substantially increase the monetary recoveries available to consumers in actions brought by the state. Under §501.207(1)(c) and (2), state attorneys or the Department of Legal Affairs, when determining that it would serve the public interest, may bring actions on behalf of consumers or governmental entities “for the actual damages caused by a violation.” Under subsection (3), however, on the state’s or any interested party’s motion in such a case the court “may make appropriate orders, including, but not limited to. . . reimburse consumers or governmental entities found to have been damaged. . . or to grant legal, equitable, or other appropriate relief (emphasis added).”
Section 501.207 makes no distinction between deception and unfair methods of competition cases. That it is fully intended to apply to the latter is reflected in the fact that subsection (3)’s designated remedies also include ordering any defendant “to divest herself or himself of any interest in any enterprise” and ordering “the dissolution or reorganization of any enterprise.” Divestiture of an acquired entity, or part of the acquiring or acquired entity, is a classic antitrust remedy for anticompetitive mergers.35
Actual damages suffered by purchasers in an antitrust case are, generally, the amount of the overcharge attributed to lessened competition.36 Reimbursement, then, may more closely approach, or possibly even reach, the full amount which the natural person or business consumer paid for the product or service, i.e., a full refund. The common English meaning of “reimburse” supports this construction: Merriam-Webster’s OnLine Collegiate Dictionary (2002) defines it as “1: to pay back to someone – repay; 2: to make restoration of payment of an equivalent to.”37 Furthermore, the section’s provision for “other appropriate relief,” beyond legal or equitable relief (the “legal, equitable” language was added in FDUTPA’s 2001 amendments),38 on its face permits relief even beyond that previously recognized in actions at law or equity. Rescissionary relief, entailing full restoration of consideration, is generally accepted in Florida in fraud-type actions at common law.39
Full refunds would be a major raising of the bar in antitrust cases since they will frequently exceed treble damages (i.e., three times the illegal overcharge) by a large amount. If awarded to indirect purchasers, full refunds could even exceed the defendant’s total sales revenue, since they will also include the direct purchaser’s mark-up. Subsection (3)’s “may make appropriate orders” language (emphasis added) indicates that the court should exercise its reasoned discretion in permitting and setting recoveries thereunder. As antitrust violations need not involve transactions procured by or infected with deception, judges presumably would order refunds approaching the purchase price only when warranted by highly aggravating circumstances. Possible examples are extremely large and widespread overcharges; serious economic effects on purchasers; and additional significant law violations. See discussion of FTC precedent infra.
This interpretation potentially permits a greater recovery for consumers than would be available in individual or class antitrust actions brought by the consumers themselves. It is supported, however, by precedent recognizing the particularly important deterrent role played by state enforcement of FDUTPA. Shortly after its enactment the Second DCA emphasized that role in light of the problems inherent in proving violators’ criminal intent,40 and in 1999 the Third DCA, in Warren Technology v. Hines Interests Ltd. Partnership,733 So. 2d 1146, referred specifically to §501.207 as “a comprehensive administrative scheme of enforcing consumer rights and punishing those who engage in unfair trade practices” (emphasis added). Finally, a federal district court recently rejected dismissal of a state claim for restitution for both direct and indirect purchasers in a competition case under §501.207. It reasoned that “the broad language of the Florida Act suggests that the Florida Legislature intended to provide a full range of equitable monetary relief,” and also cited FDUTPA’s “due consideration and great weight [to FTC Act precedent]” directive. FTC v. Mylan Laboratories, Inc., 99 F. Supp. 2d 1, 6 (D.D.C. 1999) (companion case by numerous state attorneys general for violations of Sherman Act and state antitrust statutes;41 see discussion infra). Interpreting these subsections42 to permit state pursuit of recovery up to full refunds is further supported, generally, by the statutory requirement that FDUTPA be construed liberally43 to promote its policy of consumer protection.
The reasoned discretion to be exercised on a case-by-case basis by state enforcers in deciding the appropriate measure of relief to seek or endorse, and by the Court in determining the appropriate remed(ies) to award, will help ensure that such public actions achieve the optimal balance of deterrence of future violations and remediation of past ones.
FTC Precedent for
Refunds to Consumers
The above interpretation of “reimburse” finds a measure of additional support in FTC precedent. A 1975 amendment to the FTC Act, 15 U.S.C. §53(b), provides that in proper cases under §5 of the FTC Act a district court may enter a permanent injunction. That amendment’s grant of equitable jurisdiction to the federal courts has consistently been held to invoke the full panoply of the federal courts’ equitable powers (including restitution). Furthermore, as the 11th Circuit has observed in §53(b) actions, “[s]ince the public interest is involved in a proceeding of this nature, those equitable powers assume an even broader and more flexible character than when only a private controversy is at stake” (citing Supreme Court precedent).44
In the first such published federal court decision, an FTC defendant was ordered to pay 12 deceived franchise investors the full amount of their $290,000 investments, even though the defendant’s commissions earned on those investments was less than $50,000. FTC v. H.N. Singer, Inc., 1982-83 Trade Cases (CCH) ¶65,011 (N.D. Cal. 1982). Full refunds, sometimes with refinements, have been ordered and upheld in numerous subsequent deception cases brought by the FTC.45 In fact, in a case handled by this author the district court in Miami held, inter alia, that releases previously executed by consumers upon receiving partial refunds from defendants were inapplicable, and did not preclude refunds of remainders of investments, in a FTC restitution action.46 (At least one district court opinion, however, used profits as the measure of restitution.)47 The decisions variously cite deterring others from engaging in similar conduct, preventing unjust enrichment by wrongdoers, and compensating victims as the rationales for ordering such relief. However, those which analyzed the issue relied on the misleading inducement of consumers to enter the transaction, an element not ordinarily present in unfair methods of competition cases.
The FTC, however, has recently begun to broach the measure of recovery issue in such unfair methods of competition cases. In 1999 in FTC v. Mylan Laboratories, 62 F. Supp. 2d at 25, the court, relying on the precedent in deception cases, interpreted §53(b) to permit the FTC similarly to seek monetary relief for consumers in a competition case. The FTC (and the states) had alleged that defendant generic drug company sought and obtained exclusive licenses from suppliers for ingredients for two of its generic drugs, cutting off access thereto by its competitors. It subsequently raised the price of one to various classes of customers by from 1,900 to 3,200 percent, and of the other by from 1,900 to 2,600 percent. The court denied the defendants’ motion to dismiss the FTC’s request for “disgorgement and restitution in an amount exceeding $120 million plus interest, as … necessary to redress and prevent recurrence of defendants’ violations of Section 5(a) of the FTC Act.”48 The court, while stating that “the precise form of monetary relief differs among the cases,” relied among others on the Eighth Circuit’s Security Rare Coin and the Seventh Circuit’s Febre decisions for “the FTC’s ability to seek disgorgement in the courts.”49 Bothdecisions had explicitly approved full refunds to consumers, even though they exceeded the amounts of unjust enrichment. The district court thus left open the measure(s) of such relief.
The majority of commissioners, who in November 2000 voted to approve the $100 million settlement,50 noted in a public statement that “[t]he measure of disgorgement is easily calculated—it is simply the totality of Mylan’s unjust enrichment. . . the full amount of the overcharge.” They further opined that disgorgement’s use in competition cases should be limited to those “in which defendants have engaged in particularly egregious conduct.”A dissenting commissioner publicly stated that disgorgement could create “a genuine risk of over-deterrence, particularly if §13(b) recoveries are potentially available across the full reach of the commission’s antitrust jurisdiction and if state authorities exercise comparable powers”51
In April 2001 the FTC filed, for disgorgement of $19 million in unlawful profits, a federal court case against the Hearst Trust,52 alleging that it illegally acquired a monopoly over a key drug information data base through its acquisition of its main competitor in that market. As aggravating circumstances, the trust allegedly had illegally withheld from the FTC important pre-merger reporting documentation53 and instituted “drastic” price increases following the merger, i.e., that in some instances more than doubled or tripled the fees previously charged.54 The case settled in December 2001.
The FTC seems sometimes to have used the term restitution as interchangeable with disgorgement in referring to return of overcharges in competition cases (rather than return of the purchase price). However, that it has not conclusively ruled out monetary relief beyond the amount of overcharge is reflected in its subsequent notice published at 66 Fed. Register 67254 (Dec. 28, 2001) soliciting public comment (now closed) on the factors it should consider in seeking monetary relief in competition cases and how it should be calculated. That notice treats disgorgement and restitution as referring to different measures of relief. Question (5) states:
In light of the fact that disgorgement and restitution have distinct theoretical underpinnings and equitable rationales, are there circumstances in competition cases in which one or the other of these remedies is more appropriate? What are the circumstances that should inform such decisions?
As of the time of submission of this article, the FTC had not yet taken a public position on these factors. That the FTC remains open and, at least arguably, flexible as to proper measure of relief in a given case is further reflected in the FTC office of general counsel’s “A Brief Overview of the Federal Trade Commission’s Investigative and Law Enforcement Authority, Revised, September 2002.”55 Although it uses “restitution” narrowly in its antitrust section, the overview cites Mylan Laboratories for the proposition that “[t]he Commission may also obtain permanent injunctive relief against an antitrust violation in an appropriate case, as well as disgorgement of unjust enrichment, restitution for injury suffered by consumers (e.g., the refund of overcharges attributable to price-fixing) or other appropriate equitable remedies.” (emphasis added). Note that in its consumer protection section the same term (“restitution and rescission of contracts”) is used to describe monetary equitable relief which court decisions have clearly indicated may include purchase price refunds.
If and when the FTC issues a public policy statement in follow-up to its Federal Register request for comment, its analysis could be a useful resource for the Florida courts in considering what types of circumstances justify awarding monetary relief beyond amount of overcharges. However, Florida courts will not obligated (absent further amendment to FDUTPA) to defer to it or to the FTC’s above-mentioned overview due to their post-July 1, 2001 dates.
In any event, §501.207(3) of FDUTPA clearly extends beyond the FTC Act and its precedent by explicitly referring to “other appropriate relief,” even in addition to that available at law or equity. Florida courts’ exercise of discretion in ordering and calculating relief under the section should therefore be informed but not limited by FTC precedent.
Section 501.207’s permission to order monetary recoveries for consumers beyond the amount of illegal overcharge also implicitly permits the courts to exercise their discretion to dispense with the requirement to prove the amount of the overcharge borne by consumers. Such a relaxation of proof requirements is consistent with the public purposes of government enforcement actions to deter wrongs. See, e.g., the presumption of reliance to which the FTC has been held entitled in §53(b) deception cases seeking restitution for consumers.56Such dispensation is also consistent with §501.207(7)’s relaxation of proof requirements in allowing hearsay evidence under the same conditions set out in Fed. R. Ev. 807.
Relief for Consumers
RPA extends only to activities “in [interstate] commerce,” as contrasted with the Sherman Act and the Clayton Act’s merger provision, which apply to activities that are “in [interstate]57 commerce” or “affect” or have “an effect on” [interstate] commerce.58 “In commerce” refers to “the flow of interstate commerce— the practical, economic continuity in the generation of goods and services for interstate markets and their transport or distribution to the consumer.”59 “Affecting commerce” requires only that defendant’s activity have an effect on some other appreciable activity demonstrably in interstate commerce.60 RPA thus will not reach some price discrimination by and between Florida companies with respect to wholly in-state business. Thus, Florida plaintiffs cannot reach such activities via the Clayton Act or via the FAA, whose language does not track the Clayton Act prohibitions.61
As discussed above, however, the FTC Act and therefore FDUTPA reach all types of substantive conduct reached by the Clayton Act or the Sherman Act. When it is a close question as to whether, for instance, price discrimination conduct by and between Florida corporations meets the “in [interstate] commerce” test, asserting a FDUTPA claim in state court will avoid the necessity of making any showing that such test is met. Of course, if a purchaser plaintiff wishes to pursue treble damages, or a competitor wishes to pursue such damages rather than just declaratory or injunctive relief, it will file (and attempt to remain) in federal court by also asserting an RPA claim under the Clayton Act.
While prospective mergers between Florida businesses operating solely in-state need only meet the “affect [interstate] commerce” test for federal jurisdiction, FDUTPA nonetheless ensures any such merger can be challenged by a competitor, consumer, or the state in state court.
The extraterritoriality of state antitrust statutes, i.e., coverage of out-of-state activity or defendants, has significance when a plaintiff seeks to reach conduct not covered by, or obtain remedies not available under, the Sherman or Clayton acts. It is also significant when the plaintiff has a choice but desires to litigate in state court.
As a starting point, FAA’s prohibitions refer to restraints of trade or commerce or monopolization of commerce “in this state,” while FDUTPA has no such limiting language. Its definition of “trade or commerce” refers to “sale…of any good or service…wherever situated.”62
When the defendant is out-of-state but is engaged in practices having anticompetitive effects in Florida, the Florida courts have jurisdiction under either FDUTPA or FAA so long as the long-arm statute and minimum contacts are satisfied. In Executech Business Systems, Inc. v. New Oji, 752 So.2d 582,63 the Florida Supreme Court in January 2000 held, in a FDUTPA price-fixing case brought by an in-state customer against foreign suppliers, that so long as the complaint alleged an in-state effect (price fixing activities designed to inflate prices throughout the United States) a motion to dismiss for lack of personal jurisdiction was properly denied. In June 2000 the Second DCA in Oce Printing v. Mailers Data Service, 760 So. 2d 1037, a proposed class action against foreign defendants, opined that both FAA and FDUTPA apply when there is an effect on trade in Florida, regardless of where the actions giving rise to the effect occur.64
A related issue is whether FDUTPA and FAA can reach an in-state defendant’s conduct directed out-of-state. One relevant scenario is when the state wishes to act against a wrongdoing resident despite a lack of in-state injury. Another likely scenario is when an injured, out-of-state private plaintiff wishes to sue in Florida.
In July 2000 the Third DCA in Millenium Communications & Fulfillment, Inc. v. Office of the Attorney General, 761 So. 2d 1256, held that FDUTPA’s above-mentioned statutory language permitted the state to bring an enforcement suit against a Florida corporationwhose sales activities were directed only at out-of-state consumers. FAA’s limiting language would not appear to permit such coverage of sales directed out-of-state. It is unclear from the decision, which refers explicitly to the state’s FDUTPA enforcement authority, whether it would extend to the additional scenario of a Florida corporation having multi-state operations and alleging competitive injury to its out-of-state business by another Florida, or a foreign, corporation. Florida arguably has a greater interest when both plaintiff and defendant are in- state.
There is conflicting precedent on whether suits by out-of-state plaintiffs against in-state defendants are permissible under FDUTPA, while no decision holds such plaintiffs have standing under FAA. In January 1999, the Fourth DCA ruled conclusorily in a discovery dispute that FDUTPA does not apply to out-of-state plaintiffs. Coastal Physician Services of Broward County v. Ortiz, 764 So. 2d 7. However, later that year it affirmed the certification of a nationwide FDUTPA consumer class action in Renaissance Cruises, Inc. v. Glassman, 738 So. 2d 436, and in 2000 the Third DCA cited that decision approvingly in reaching its decision in Millennium Communications.65 In Oce the Second DCAhad reversed a nationwide consumer class action certification under both FAA and FDUTPA. It noted FAA’s “in state” language, but nevertheless reached the same result under FDUTPA on the (conclusory) ground that as state statutory schemes, they do not permit suits by foreigners.
In any event, the above extraterritoriality scenarios do not appear to raise Constitutional problems. While the Commerce Clause gives Congress the authority to regulate interstate commerce, a state law having interstate as well as intrastate effects is generally permissible under the Supreme Court’s balancing test stated in Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1972),66 if it “regulates evenhandedly to effectuate a legitimate public interest, and its effects on interstate commerce are only incidental. . . unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.”
Moreover, in the antitrust field state regulation is accorded substantial berth. In holding that state antitrust statutes permitting recovery by indirect purchasers were not preempted by federal antitrust laws, the Court in California v. ARC America observed that many states provided statutory or common law remedies against monopolies and unfair business practices prior to the passage of the Sherman Act. The Court found its legislative history reflected that “Congress intended the federal antitrust laws to supplement, not displace, state antitrust remedies.” While the application of some state antitrust laws in certain situations have been held preempted by the Commerce Clause,67 none of the Florida decisions approving extraterritoriality appears impermissibly to “directly interfere with or burden [interstate] commerce.”68
One antitrust authority’s reasoning suggests that even the state’s challenge under FDUTPA to (solely) the local aspects of an interstate merger would likely pass muster, so long as it does not incidentally “impose requirements beyond those accepted by federal antitrust authorities directly on assets or conduct in other states.”69
FDUTPA provides to individual and business consumers, as well as competitors (through injunctive and declaratory relief), some additional substantive protection from anticompetitive conduct beyond that afforded by the Sherman or Clayton acts or the FAA. It also enables them to reach some price discrimination and prospective mergers activities which, by reason of their wholly intrastate nature, might avoid Clayton Act coverage. Even when targeted practices implicate interstate commerce, FDUTPA will usually permit Sherman and Clayton act violations to be pursued in state court. However, FDUTPA’s greatest contributions appear to be these: first, it expands the class of antitrust plaintiffs entitled to monetary relief to indirect purchasers, i.e., ultimate consumers. Second, in egregious cases it expands monetary relief available to consumers, through actions brought by the state on their behalf, up to potentially full refunds of the purchase price. In all these ways FDUTPA adds substantially to the deterrence of anticompetitive conduct in Florida, and to the recoveries available to Florida individual and business consumers for competitive injury in Florida from conduct originating in or out of state. q
1 Fla. Stat. §501.204(1).
2 15 U.S.C. §45(a).
3 Section 501.202(1), (2).
4 See David J. Federbush, Obtaining Relief for Deceptive Practices Under FDUTPA, 75 Fla. B.J. 22, 30 (Nov. 2001). That article, at page 28, maintained inter alia that based on the Supreme Court’s Affiliated Ute decision there should be a rebuttable presumption of reliance in nonclass FDUTPA damages actions based on omissions of material information. Part of the Court’s reasoning was that there was a duty to disclose based on the individual defendants’ position as a market maker of the securities. The article contended that the seller-consumer relationship was even more direct. However, in Affiliated Ute the duty arose not from contractual privity between parties but rather from the facilitating role played by defendants, who in actuality were in a position to gain financially from plaintiffs’ transactions. See also Chasins v. Smith, Barney & Co., 438 F.2d 1167, 1172 (2d Cir. 1970) (market maker had potential conflict of interest with client), cited in Affiliated Ute, 406 U.S. at 153. Thus, the author on further consideration submits that with respect to nonclass omissions claims, applying a rebuttable presumption of reliance is supported by FTC precedent and its rationale when something beyond the ordinary arm’s-length provider-consumer relationship is present and gives rise to a duty to disclose, e.g., facts indicating a facilitating or fiduciary role played by or a potential but nonobvious conflict of interest on behalf of defendant, or circumstances such that the consumer’s burden of proof would be inordinately difficult to meet.
5 Federbush, supra note 4, at 29.
6 15 U.S.C. §1, 2.
7 15 U.S.C. §§14.
8 See, e.g., U.S. v. Microsoft Corp., 87 F. Supp. 2d 30, 47, 51 (D.D.C. 2000), aff’d, in part, rev’d in part, remanded in part on other grounds, 253 F.3d 34 (D.C. Cir. 2001).
9 15 U.S.C. §§13, 13a, 13b, 21a.
10 See, e.g., All Care Nursing Service, Inc. v. High Tech Staffing Services, Inc., 135 F.3d 740 (11th Cir. 1988), cert. den., 526 U.S. 1016 (1999).
11 15 U.S.C. §§15, 15a–15g.
12 15 U.S.C. §18.
13 United States v. First National Bank, 376 U.S. 665, 671–72 (1964).
14 15 U.S.C. §§18a(f), 25, 26; Hawaii v. Standard Oil, 405 U.S. 251, 261 (1972); Burch v. Goodyear Tire & Rubber, 554 F.2d 633 (4th Cir. 1977) (state acting as parens patriae suing for injunctive relief); California v. Sutter Health System, 84 F. Supp. 2d 1059, 1066 (N.D. Cal. 2000) (injunction against prospective merger).
15 15 U.S.C. §§4, 9, 15, 15a, 25, 26; 15 U.S.C. §§45(a) et seq. (FTC Act).
16 Fla. Stat. §§542.18 (Restraint of trade or commerce—Every contract, combination, or conspiracy in restraint of trade or commerce in this state is unlawful), §542.19 (monopolization; attempts, combinations, or conspiracies to monopolize—It is unlawful for any person to monopolize, attempt to monopolize, or combine or conspire with any other person or persons to monopolize any part of trade or commerce in this state. See Fina Oil & Chemical Co. v. Boyette, 530 So. 2d 1037, 1039 (Fla. 1st D.C.A. 1988) (interstate commerce need not be affected).
17 See St. Petersburg Yacht Charters v. Charles Morgan Yacht, 457 So. 2d 1028, 1031 (Fla. 2d D.C.A. 1984), accord, Morris Communications v. PGA Tour, 117 Fed. Supp. 2d 1322, 1326 n.3 (M.D. Fla. 2000); Greenberg v. Mt. Sinai Medical Center, 629 So. 2d 252, 256 (Fla. 3d D.C.A. 1993); All Care Nursing, 135 F.3d at 745 n.11.
18 Section 542.22.
19 Section 542.23.
20 See, e.g., All Care Nursing, 135 F.3d 740; Balogh’s of Coral Gables v. Getz, 510 F. Supp. 741 (S.D. Fla. 1981).
21 Section 501.204(2).
22 Section 501.212. Additionally, under §501.203(3)(c), violations of FDUTPA may also be based on any law, statute, rule, regulation or ordinance which proscribes unfair methods of competition. There are many such Florida statutes which include, in their enumerated lists of unfair or deceptive practices, specified anticompetitive practices. See, e.g., §634.282 (motor vehicle service agreement companies); §497.445 (funeral and cemetery services); §686.413 (manufacturing and distribution of farm equipment).
23 The FTC Act’s prohibition of unfair or deceptive acts or practices was added by amendment in 1938. See FTC v. Sperry & Hutchinson, 405 U.S. 233, 244 (1972).
24 Accord, United Airlines v. CAB, 766 F. 2d 1107, 1114 (7th Cir. 1985).
25 See also Fashion Originator’s Guild, 312 U.S. at 466.
26 See 1 ABA Antitrust Law Section, Antitrust Law Developments (Fourth) (1997), at pp. 556–63.
27 See also FTC v. Abbott Laboratories, 853 F. Supp. 526 (D.D.C. 1994).
28 15 U.S.C. §45(a)(2).
29 General Foods Corp., 103 F.T.C. 204, 366 (1984) (“to distinguish between an attempt to monopolize and an incipient attempt on the basis of potential market power is to engage in such fine distinctions as to challenge the legal philosopher, let alone the competitor trying to conform its conduct to the law.”) But see The Coca Cola Company, 117 F.T.C. 795, 914 (1994), finding its contractual agreement to purchase Dr. Pepper in itself violated the FTC Act independent of whether it violated of the Clayton Act; see infra in text.
30 In Major League Baseball v. Butterworth, 181 F. Supp. 2d 1316 (M.D. Fla. 2001), notice of appeal filed, the court applied the common law baseball exemption in enjoining enforcement of state civil investigative demands issued under FAA and addressing competitive effects of proposed major league contraction. In response to the state’s contention that the demands were valid under FDUTPA, the court observed the exemption did not foreclose the state from investigating FDUTPA violations, but it appeared that it was referring to violations involving unfair or deceptive practices, and not unfair methods of competition. It further stated that the issue of state authority to investigate league contraction under FDUTPA was not properly before it.
31 See also FTC v. Indiana Federation of Dentists, 476 U.S. 447, 454 (1986).
32 Section 501.204(2), per 2001 amendments to FDUTPA. See S208 (S 0208ER), 2001 Fla. Laws ch. 39, amending §501.204(2); www.leg.state.fl.us/.
33 See Suit against Microsoft now a class action in Miami, Miami Daily Business Review, Sept. 4, 2002, at p. A7; Microsoft Suit ruled a class action, The Miami Herald, Sept. 4, 2002, p. C1; court on-line docket sheet.
34 Mack, 673 So.2d at 107, citing Illinois Brick.
35 United States v. E.I. DuPont de Nemours & Co., 366 U.S. 316 (1961); California v. America Stores, 495 U.S. 271 (1990).
36 Illinois Brick, 431 U.S. 720.
37 See also American Heritage Dictionary of the English Language (online), 4th ed. (2000): 1. To repay (money spent); refund. 2. To pay back or compensate (another party) for money spent or losses.
38 See Senate Staff Analysis and Economic Impact Statement, CS/SB 208, March 22, 2001, at p. 6 (www.leg.state.fl.us/).
39 See, e.g., Mulle v. Scheiler, 484 So. 2d 47 (Fla. 5th D.C.A. 1986), rev. den., 492 So. 2d 1334 (1986) (plaintiff excused from restoring consideration); Turner v. Fitzsimmons, 673 So. 2d 532 (Fla. 1st D.C.A. 1996).
40 Shevin v. Thuotte, 339 So. 2d 253, 255 (Fla. 2d D.C.A. 1976).
41 The court had dismissed Florida’s claim for restitution under FAA on the grounds that it did not expressly authorize such relief. Opinion and Order dated December 14, 1999 (Case No. 98-3115 (TFH), dkt. nos.110, 111.
42 Turner v. Tokai Financial Services, Inc., 767 So. 2d 494 (Fla. 2d D.C.A. 2000) (all of statute’s subsections must be read together to determine statute’s meaning). Also, the civil penalty section (§501.2075) provides that the state or court may waive a civil penalty if the defendant “has previously made full restitution or reimbursement or has paid actual damages to consumers or governmental entities which have been injured.” This language further confirms that reimbursement is not the same as or limited by actual damages. It may be that “restitution” and “reimbursement” are used here interchangeably, or simply are both set forth for inclusiveness purposes to ensure that there is power to grant waiver if any reasonable measure of recompense has been undertaken by the defendant.
43 Section 501.202.
44 FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431, 1434 (11th Cir. 1984); FTC v. Gem Merchandising Corp., 87 F.3d 466, 468 (11th Cir. 1996).
45 FTC v. International Diamond Corp., 1983-2 Trade Cases (CCH) ¶65, 725 at 69,709 (N.D. Cal. 1983); FTC v. Kitco of Nevada, 612 F. Supp. 1282, 1295 (D. Minn. 1985) (business opportunity investment; subtracting profits made by investor); FTC v. Security Rare Coin & Bullion Corp., 931 F.3d 1312, 1316 (8th Cir. 1991) (ordering monetary equivalent of rescission was not abuse of discretion, even though customers’ losses exceeded defendant’s gains through its “con game”); FTC v. Figgie International, Inc., 994 F.2d 595, 606 (9th Cir. 1993) (any excess that cannot be distributed to consumers must be returned to defendant; FTC v. Febre, 128 F.3d 530, 535–37 (7th Cir. 1997) (remedy prevents defendant from being unjustly enriched by his fraud and places the deceived consumer in the same position he would have occupied had the seller not induced him to enter into the transaction; to extent payment to consumers not feasible, excess to be paid to U.S. Treasury); McGregor v. Chierico, 206 F.3d 1378, 1387 (11th Cir. 2000) (action by receiver appointed in FTC case; monetary award for amount of gross sales made pursuant to contempt motion, but court explicitly followed a §13(b) analysis; full refund appropriate because seller’s misrepresentations tainted the customers’ purchasing decisions). See also FTC v. Atlantex Associates, 1987-2 Trade Cases (CCH) ¶59,245 (S.D. Fla. 1987) (amount invested less amounts previously returned); FTC v. National Business Consultants, Inc., 781 F. Supp. 1136, 1143 (E.D. La. 1991) (purchase price less refunds previously made by seller or money earned on investment; deduction of money earned however inappropriate in this franchise case in light of difficulty in obtaining return of “performance deposits.”).
46 FTC v. U.S. Oil & Gas Corp., 1987 U.S. Dist. Lexis 16137, at 64 (S.D. Fla. 1987).
47 FTC v. Wilcox, 926 F. Supp. 1091, 1106 (S.D. Fla. 1995) (recommendation of magistrate judge). See also FTC v. Pantron I Corp., 33 F.3d 1088, 1103 (9th Cir. 1994) (monetary relief to extent of defendant’s “unjust enrichment,” although measure unclear and citation made to other case’s language as to “return their money”); FTC v. Gem Merchandising, 87 F.3d 466 (measure of relief ordered ($100 to each of 5,000 consumers) was unclear; compensating victims and deterring others from engaging in similar conduct); FTC v. Amy Travel Service, Inc., 875 F.2d 564, 570 (7th Cir. 1989) (measure unclear; no refunds to consumers who accepted and made use of sold services).
48 Complaint, Prayer for Relief at ¶4. See www.ftc.gov.
49 FTC v. Mylan Laboratories, 62 F. Supp. 2d at 37.
50 See also 205 F.R.D. 369 (D.D.C. 2002) (court approval of settlement).
51 The majority cited a number of federal decisions to the effect that “[c]ourts have routinely coordinated remedies in government disgorgement actions and private damage actions, and are readily able to surmount the potential problem of duplicative recovery.” See press release, November 20, 2000, www.ftc.gov.
52 Civil No. 1: 01CV00734 (D.D.C.).
53 An amendment to the Clayton Act known as “Hart-Scott-Rodino,” 15 U.S.C. §§18, 18a.
54 See press release, April 4, 2001, www.ftc.gov.
56 Federbush, supra note 4, at 27.
57 15 U.S.C. §12(a) defines “commerce” as “trade or commerce among the several States and with foreign nations.”
58 McLain v. Real Estate Board of New Orleans, 444 U.S. 232 (1980).
59 Gulf Oil v. Copp Paving Co., 419 U.S. 186, 195 (1974).
60 See McLain, 444 U.S. 232. Under the Supreme Court’s 1991 decision in Summit Health, Ltd. v. Pinhas, 500 U.S. 322, much if not most in-state activity in restraint of trade will meet that standard. The Court held that allegations that a hospital and other health care providers’ boycott to exclude an ophthalmologist from the ability to practice in Los Angeles were sufficient for federal subject matter jurisdiction.
61 See ABA Antitrust Law Section, State Antitrust Practice and Statutes (1990), vol. 1 at p. Florida 11-7.
62 Section 501.203(8).
63 Accord, Wendt v. Horowitz, et al., 2002 Fla. LEXIS 1392, 27 Fla. L. Weekly S572 (Fla., June 13, 2002).
64 See also Morsani f/u/b/o Tampa Bay Baseball Group, Inc. v. Major League Baseball, 663 So. 2d 653, 657 (Fla. 3d D.C.A. 1995) (FAA claim; efforts by plaintiff to acquire major league baseball team in Florida); Miles v. America Online, 202 F.R.D. 297 (M.D. Fla. 2001) (certifying nationwide class action under FDUTPA, other state little FTC acts and other claims against out-of-state defendant, reserving option to create or decertify subclasses under the other state statutes).
65 Millenium Communications, 761 So.2d at 1262.
66 Floyd and Sullivan, Private Antitrust Actions: The Structure and Process of Civil Antitrust Litigation §2.2.4 (1996).
67 See, e.g., Flood v. Kuhn, 407 U.S. 258, 284–85 (1972) (the burden on interstate commerce outweighs the states’ interests in regulating professional baseball’s reserve system); K-S Pharmacies, Inc. v. American Home Products Corp., 962 F.2d 728, 730 (7th Cir. 1992) (Wisconsin statute prohibiting price discrimination in wholesale of prescription drugs construed to apply solely to purchases within the state, as applicability to out-of-state purchases would violate the Commerce Clause); Pike, 397 U.S. at 141 (statutes requiring processing of goods in home state before shipping to a sister state violate Commerce Clause).
68 Edgar v. Mite Corp., 457 U.S. 624, 642 (1982). See also Oil Resources, Inc. v. State of Florida Dept. of Banking, 583 F. Supp. 1027 (S.D. Fla. 1984), aff’d, 746 F.2d 814 (11th Cir. 1984) (state enforcement action against Florida corporation selling securities to foreign residents only did not violate commerce clause, noting state’s interest in upholding its general commercial reputation; citing Pike and Edgar).
69 Floyd and Sullivan, supra note 66.
David J. Federbush practices in Bethesda, Maryland. He was a senior litigator for many years at the FTC. He subsequently has had a commercial and plaintiff’s litigation practice in Miami and the Washington, D.C. area. Mr. Federbush graduated summa cum laude from Yale University in 1971 and received his J.D. from Stanford Law School in 1976.