Table of Contents
by Bob Lipson
State and federal statutes prohibit unfair and deceptive business acts and practices.1 Washington’s Consumer Protection Act, R.C.W. 19.86 et seq., passed in 1961, can be enforced either by the attorney general acting on behalf of all state consumers, or by private counsel acting on behalf of individual or class clients.2 The Federal Trade Commission Act, 15 U.S.C.§ 41-58, passed in 1914, is enforced exclusively by the Federal Trade Commission (FTC).3 While unfair behavior and deceptive behavior are both prohibited, historically most consumer protection actions have focused on deception.4 Few unfairness cases are brought. Although most complaints allege both unfair and deceptive business practices, despite this form of pleading, most cases are usually litigated as deception cases. What deception means is firmly rooted in case law. Judges, juries and lawyers have little trouble understanding and applying it. In contrast, the meaning of unfairness is less certain, although it is not so uncertain as to be unconstitutional.5 The purpose of this article is to explore what unfairness means in the context of consumer protection cases. The article will look at historical development of the concept at the FTC, examine types of unfairness cases brought by the FTC over the years, review significant state and federal cases, and reflect on how related concepts might inform our understanding.
The FTC’s First 50 Years: 1914-1964
Congress passed the Federal Trade Commission Act in 1914. The act’s original language outlawed “unfair methods of competition.” Passed primarily due to Congress’s dissatisfaction with judicial interpretation of the anti-trust provisions in the Sherman Act, which Congress thought the courts were interpreting too restrictively, Congress wanted to afford more complete relief against what it thought were unfair practices.6 Thus, while the primary purpose of the FTC was to enforce anti-trust laws, consumer protection lurked in the background as an intended purpose, too.7 The act’s legislative history and Congress’s debate over the meaning of unfairness indicate that a broad meaning was intended.8 Congress explicitly considered, and rejected, the idea that it might clarify what was meant by the phrase “unfair methods of competition” by tying it to a common law or statutory standard, or by trying to enumerate particular prohibited practices.9 “Unfair” was said to include that “for which a remedy lies either at law or equity,”10 as well as that which “shocks the universal conscience of mankind.”11 The House Conference Report stated, with regard to the meaning of unfairness, that: It is impossible to frame definitions to embrace all unfair practices. There is no limit to human inventiveness in this field. Even if all known unfair practices were specifically defined and prohibited, it would be at once necessary to begin over again. If Congress were to adopt the method of definition, it would undertake an endless task.12 Early judicial opinions also shed light on the meaning of unfairness. As the U. S. Supreme Court stated: “The careless and unscrupulous must rise to the level of the scrupulous and diligent. The Commission was not organized to drag the standards down.”13 The statute was said to be aimed at “the kind of unfairness” which business should be “under a powerful moral compulsion not to adopt, even though it is not criminal.”14 If something “exploits consumers, children, who are unable to protect themselves,” then it was unfair.15 “The Commission has a wide latitude in such matters; its powers are not confined to such practices as would be unlawful before it acted; they are more than procedural; its duty in part at any rate, is to discover and to make explicit those unexpressed standards of fair dealing which the conscience of the community may progressively develop.”16 In 1931, however, the U.S. Supreme Court interpreted the meaning of “unfair methods of competition” in the FTC Act to apply only to those situations where business competition was injured.17 A practice was thus not a violation of the act if it only harmed consumers; to be unlawful, the practice must injure competition. Three years later, the Court began to modify its view when it permitted an unfairness suit, even though only consumers and not competition were arguably injured.18 Four years after that, in 1938, Congress legislatively intervened and resolved all lingering questions by passing the Wheeler-Lea Amendment, which authorized the act to apply to “unfair or deceptive acts or practices” as well as “unfair methods of competition.” 19 After 1938, there was no question that the FTC’s unfairness jurisdiction applied to consumer harm. Over a quarter of a century later, in 1964, the FTC made its first systematic attempt to define what “unfairness” meant in the context of consumer protection. The occasion was the FTC’s publication of its Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking (1964 Cigarette Advertising Statement).20 In the 1964 Cigarette Advertising Statement, the FTC reviewed past business practices that it had banned as unfair, and attempted to extract those principles underpinning a judgment of unfairness. It concluded: The wide variety of decisions interpreting the elusive concept of unfairness at least makes clear that a method of selling violates Section 5 if it is exploitative or inequitable and if, in addition to being morally objectionable, it is seriously detrimental to consumers or others.21 Three factors thus emerged from the 1964 Cigarette Advertising Statement as criteria by which to judge unfairness. Those three factors were public policy, morality and ethics, and substantial consumer injury. Finally, the FTC had a working definition of unfairness.
Modern Times at the FTC: 1964-1994
The 1964 Cigarette Advertising Statement acquired elevated status when the U.S. Supreme Court cited its three factors with approval in a footnote in a 1972 case, FTC v. Sperry and Hutchinson. There the court noted in what became a widely used test: The Commission has described the factors it considers in determining whether a practice which is neither in violation of the antitrust laws nor deceptive is nonetheless unfair: whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; whether it is immoral, unethical, oppressive, or unscrupulous; whether it causes substantial injury to consumer (or competition or other businessmen).22 Adoption of this three-part test was a watershed in unfairness jurisprudence. Shortly thereafter, the FTC successfully litigated several other unfairness cases. After that, and apparently heady with its victories, it persuaded Congress to authorize formally its unfairness rule-making ability.23 The FTC then entered the arena of unfairness rule-making with vigor, especially with regard to advertising for children. Congress and the public reacted negatively to some of this and felt that the FTC had overreached its public purpose. It was accused of being the “National Nanny.”24 In early 1980 Congress responded to this public perception by preventing the FTC from engaging in further unfairness-based advertising rulemaking.25 The FTC responded to Congress in December 1980. The FTC’s response was the Commission Statement of Policy on the Scope of the Commission’s Unfairness Jurisdiction (1980 Policy Statement).26 The 1980 Policy Statement substantially changed the FTC’s unfairness criteria.27 It modified its position compared to the 1964 Cigarette Advertising Statement, and diverted from that which the Supreme Court had already approved of in Sperry and Hutchinson. In articulating its new test, the FTC remarked that since the 1964 Cigarette Advertising Statement and Sperry and Hutchinson: The Commission has continued to refine the standard of unfairness in its cases and rules, and it has now reached a more detailed sense of both the definition and the limits of these criteria.28 The new test for unfairness as embodied in the 1980 Policy Statement stated that: To justify a finding of unfairness the injury must satisfy three tests. It must be substantial; it must not be outweighed by any countervailing benefits to consumers or competition that the practice produces; and it must be an injury that consumers themselves could not reasonably have avoided.29 The 1980 Policy Statement changed how unfairness was to be determined. Consumer injury was now primary. Public policy was no longer directly referred to in the test. Elsewhere, the FTC stated that public policy would only be relied upon as a basis for agency action where it was a widely shared public view, and where it was declared or embodied in a formal source.30 Morality and ethics were also removed as touchstones. Thus, since 1980 the three-part FTC test for unfairness has been substantial consumer injury, which is not outweighed by countervailing benefits, and is not something the consumer could reasonably have avoided. In 1982, the FTC asked Congress to codify its 1980 Policy Statement as law.31 In 1994, it was finally codified as an amendment to the FTC Act at 15 U.S.C. §45(n).32 The 1994 amendment provides: The Commission shall have no authority under this section or section 57a of this title to declare unlawful an act or practice on the grounds that such act or practice is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition. 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. This is still the current FTC test and applicable federal law.
Types of Unfairness Cases
Review of cases litigated by the FTC under an unfairness theory helps reveal what unfairness means and how it has been applied. Sometimes these cases show that unfairness is the only theory that will work, while other fact patterns allow unfairness and deception to be used concurrently. In the 1960s and 1970s, FTC unfairness cases were usually one of four types: coercive and high-pressure sales, withholding of material information, unsubstantiated claims, and interference with post-purchase rights and remedies.33 Examples of coercive and high-pressure sales cases litigated under unfairness theories include advertising vitamins to children,34 a dance studio using cajolery and other high-pressure tactics to entice older women into buying dance lessons costing thousands of dollars,35 and a heating contractor dismantling home furnaces for cleaning and inspection, and then refusing to reassemble them until customers agreed to buy additional parts and services.36 Unfairness cases based on withholding of material information include where a lender failed to disclose its anticipated use of individuals’ tax information obtained from loan applications,37 and where a manufacturer packed new razor blades as free samples in newspapers which were delivered to homes.38 Unsubstantiated advertising claims have also formed the basis for unfairness cases. One such case involved advertisements for an over-the-counter sunburn ointment where the ads implied scientific proof of usefulness without there being such proof.39 Likewise, interfering with consumer post-purchase rights and remedies can also be unfair. Thus, there was unfairness where a business routinely assigned notes of indebtedness to third parties against whom claims and defenses would not be available without disclosing that to consumers,40 and where a national mail-order house sued delinquent customers in an inconvenient forum, even though it was entirely proper to do that under its home state’s jurisdictional long-arm statute.41 In the 1980s and 1990s, more recent FTC unfairness cases have tended to be slightly different. Most can be characterized as falling into one of five categories: theft and its facilitation; breaking or causing the breaking of other laws; insufficient care; interference with the exercise of consumer rights; and advertising that promotes unsafe practices.42 Examples of unfairness cases involving theft and its facilitation are: unauthorized billing of credit cards;43 unauthorized debiting of bank accounts;44 forcing consumers to send credit payments in a roundabout route which resulted in an increased percent of payments being received late;45 sale of cable decoders for unauthorized viewing of cable signals;46 Internet “page-jacking and mouse-trapping” where Web surfers are not permitted to exit a Web site when they hit their close-icon button, but are instead rerouted to the same or related Web sites;47 sale of customer lists with credit-card information to companies that then make unauthorized charges;48 sale of computerized templates for the creation of fake IDs;49 “cramming” of unauthorized services;50 billing telephone subscribers for services purchased over an 800 number where the individual owning the line did not specifically authorize the charge;51 charging a telephone line subscriber for Internet connections to a porn site where the line subscriber did not specifically authorize the connection;52 and an information broker impersonating bank customers and tricking banks and other financial institutions into disclosing the customer’s personal information.53 Breaking or causing the breaking of other laws has also been the basis for unfairness cases. Examples of these are: collecting consumer debts discharged in bankruptcy;54 magazine sellers approving debt-collection letters that were unlawful in violation of the Fair Debt Collection Practices Act;55 and lenders making sub-prime loans without regard to debtors’ ability to pay, in violation of the Home Owner and Equity Protection Act.56 Insufficient care has also been the basis for unfairness cases. Examples include: inaccurate credit information being reported by a retailer to credit agencies as a result of system errors;57 a car rental agency not disclosing to customers that it did not inspect its cars that were subject to manufacturers’ recalls;58 failure of a manufacturer to disclose that its exercise device could break and injure users;59 an auto manufacturer failing to make successful warranty repairs in a reasonably prompt manner because of ineptitude;60 poor application of car paint resulting in paint blisters;61 and failure to effect a successful merger of financial information during a corporate takeover resulting in nonpayment of mortgagees’ insurance by the mortgage company.62 Interference with the exercise of consumer rights is also unfair. Examples are: where a lender required purchase of credit insurance and then required the purchaser to sign a statement indicating that the purchase was voluntary;63 failure to honor a lifetime warranty;64 and failure to honor the stated price of an annual renewal of a lifetime guarantee.65 Finally, the promotion of unsafe behavior in ads can also be unfair. A good example is when a beer company went overboard by running TV advertisements that showed young adults on a boat drinking beer and not wearing life vests.66
Important Reported Unfairness Cases Since 1964
Evolution of the modern unfairness rule began in 1964. The following cases track judicial interpretation of the term and how courts have gone about measuring it since 1964. FTC v. Sperry and Hutchinson, 405 U.S. 233, 92 S.Ct. 898, 31 L. Ed. 2d 170 (1972), is the first and only U.S. Supreme Court case addressing unfairness in the consumer-protection context. Until the FTC changed its unfairness test in 1980 and Congress codified that change in 1994, this was the most important unfairness case. This case is still quoted today, and its test may still be used in some states including Washington. The importance of this case in the evolution of unfairness consumer law derives from footnote 5, in which the court approved the language used by the FTC in its 1964 Cigarette Advertising Statement. Thereafter, the 1964 Cigarette Advertising Statement’s three-part test was widely adopted and referred to as the Sperry and Hutchinson test. The three parts were whether the act or practice offends public policy as embodied in statutes, common law or otherwise, including any established concept of unfairness; whether the act or practice is immoral, unethical, oppressive or unscrupulous; and whether it causes substantial injury to consumers or to competition. PMP Associates v. Globe Newspaper, 366 Mass 593, 321 N.E. 2d 915 (1975), decided two years later, is one of the few state cases to address the meaning of unfairness. There, an escort service wanted to place an ad in a newspaper and the newspaper refused. The escort service claimed that the refusal was unfair. After adopting the Sperry and Hutchinson three-part test, the court used it to find no unfairness. Spiegel v. FTC, 540 F. 2d 287 (7th Cir. 1976), followed next. There, the 7th Circuit applied the Sperry and Hutchinson three-part test to uphold the FTC’s power to enjoin a company from suing its customers in its home state and not where the customer lived, even though long-arm jurisdiction in the company’s home state was proper under state law. The case rejected the argument that the FTC cannot characterize something as unfair and thus illegal if the act is otherwise within the technical bounds of the law. According to Speigel, even if a practice is not criminal or a violation of common law, if it is contrary to public policy, it can be prohibited as unfair. Johnson v. Phoenix Mutual Life Insurance Company, 300 N. C. 247, 266 S.E. 610 (1980), which involved the behavior of a mortgage broker and a lender, is one of the few other state cases that deals with what unfairness means. It adopts the Sperry and Hutchinson three-part test, and notes that the concept of unfairness is broader than, and includes, deception. It also concludes that a party is guilty of unfairness “when it engages in conduct that amounts to an inequitable assertion of its power or position.” Magney v. Lincoln Mutual Savings Bank, 34 Wn. App. 45, 659 P.2d 537 (1983), is the first of two Washington reported cases to discuss unfairness in the context of the Consumer Protection Act. It uses the 1972 three-part test from Sperry and Hutchinson, and does not mention the 1980 Policy Statement’s criteria for unfairness. The question before the court was whether a due-on-sale clause in a mortgage was enforceable, or whether it was an illegal restraint on alienation of property or a violation of the Consumer Protection Act. The court noted a split among the states on the issue of whether it was an improper restraint on alienation of property, but concluded the better rule was to disallow such provisions unless the lender could prove the provision was necessary to protect the lender’s security. On the unfairness question the court held that since some states permitted these practices, it therefore could not be oppressive or unfair.67 Blake v. Federal Way Cycle Center, 40 Wn. App. 302, 698 P. 2d 578 (1985), is the second and last reported Washington case to address unfairness in the Consumer Protection Act. In this case, an unhappy motorcyclist sued over his two-wheel lemon, claiming that the dealer’s post-sale dealings were unfair. The court stated whether behavior is unfair is a question of law. It then noted that since the Consumer Protection Act does not define unfair, FTC and federal law should be used for guidance. The court then cited the three-part test from Sperry and Hutchinson, as well as the different three-part test contained in the FTC’s 1980 Policy Statement. The case did not distinguish between the tests or indicate which it preferred, and thus seemingly approved of both. There have been no reported Washington cases since Blake that address unfairness. However, a 1996 unpublished Court of Appeals decision, Martin v. McEvoy, 1996 WL 335997 (Div. 1. 1996), uses the Sperry and Hutchinson test for unfairness, without mentioning the 1980 Policy Statement or the 1994 amendment. More recently, a 1999 unpublished Court of Appeals decision, Opportunity Management Co. v. Frost, 1999 WL 96001 (Div. 3 1999), again uses the Sperry and Hutchinson test for unfairness, without mentioning either the 1980 Policy Statement or the 1994 amendment. Whether these omissions were briefing, drafting errors, or judicial design is unknown. Nevertheless, since Washington courts are directed to look to FTC law in construing the Consumer Protection Act, logic dictates that the FTC’s 1980 Policy Statement, now codified as 15 U.S.C. §45(n), should be the main Washington test. American Financial Services v. FTC, 767 F. 2d 957 (D.C. Cir. 1985), is also worth noting. This case challenged the FTC’s credit-practices rules adopted pursuant to the 1980 Policy Statement criteria. The court, in a detailed and articulate opinion, reviewed the evolution of the unfairness standard from the 1964 Cigarette Advertising Statement, to the adoption of that standard in Sperry and Hutchinson and Spiegel, to the 1980 Policy Statement. It called the 1980 Policy Statement standard “the most precise definition of unfairness articulated by either the Commission or Congress,” and upheld the 1980 Policy Statement standard as not being arbitrary and capricious. The case also describes the difference between deception and unfairness in an interesting way. Deception occurs when the consumer is forced to bear a larger risk than expected because the consumer is misled. Unfairness occurs “when the consumer is forced to bear a larger risk than an efficient market would require…. This theory in effect posits a market imperfection which for some reason prevents the market from arriving at the most efficient distribution…. Faced with such an imperfection, the Commission steps in to correct the market’s results….” What is meant by market imperfection, how to recognize it, and how to judge when the market is not operating at its most efficient distribution is, unfortunately, unexplained. Orkin Exterminating Company v. FTC, 849 F. 2d 1354 (8th Cir. 1988), three years later, again upheld the three-prong criteria of the 1980 Policy Statement as a valid standard for determining unfairness. Orkin had offered lifetime guarantees for a fixed annual fee, but then changed the amount of the annual fee, contrary to what they had promised their customers. The FTC issued a cease-and-desist order on grounds that what Orkin did was unfair, and Orkin challenged the order. The court upheld the test and that what Orkin did was unfair. FTC v. Verity International, 124 F. Supp. 193 (S.D. N.Y 2000), is one of the most recent federal unfairness cases, and one of the few cases that takes into account the 1994 amendment. The case addresses whether Internet porn charges billed to telephone numbers without explicit authorization from the owner of the phone is unfair. The court noted that the FTC does not have to prove intent or bad faith in an unfairness case, and then acknowledged and used the three-part 1980 Policy Statement codified at 15 U.S.C. §45(n) to analyze and uphold the FTC’s determination of unfairness.
Unconscionability, good faith and fair dealing, and unfair acts and practices are closely related concepts. Each seeks to prohibit unspecified conduct in trade or commerce on the ground that the community’s sense of decency has been offended. At heart, they are all equitable concepts. Unconscionability has been described as a deal that “no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.”68 It is most often associated with the Uniform Commercial Code (UCC), although its origins clearly predate the UCC. Comment 1 to UCC 2-302 describes unconscionable clauses in contracts as “being so one-sided…under the circumstances existing at the time of the making of the contract.” Further, the comment continues, “The principle is one of the prevention of oppression and unfair surprise…and not of disturbance of allocation of risks because of superior bargaining power.”69 Thus, effective use of “superior bargaining power” is acceptable, but “oppression or unfair surprise” is not, and is unconscionable. At least one scholar has noted that it is not possible to define unconscionability, and that it is not a concept. Rather, it is a determination based on a variety of factors which cannot be unified into a formula.70 Unconscionability is of two varieties: procedural and substantive.71 Procedural unconscionability is “bargaining naughtiness.”72 It relates to “impropriety during the process of forming a contract.”73 Like deception, it involves lack of meaningful choice in the making of the bargain. It “is usually founded upon a recipe consisting of one or more parts of assumed consumer ignorance and several parts of seller’s guile.”74 Substantive unconscionability, on the other hand, applies to “overly harsh terms.”75 Like unfairness, substantive unconscionability “involves those one-sided terms of a contract from which a party seeks relief.”76 Substantive unconscionability cases are historically often excessive price cases or cases where a creditor has unduly restricted a debtor’s remedies or unduly expanded the creditor’s remedial rights.77 One court has said that for a price to be excessive and unconscionable, the price must be “shocking.”78 Other courts have focused on whether there was any true ability to bargain or negotiate, although these are not conclusive factors.79 Washington courts have used these terms to describe unconscionability: one- sided or overly harsh;80 shocking to the conscience;81 monstrously harsh;82 exceedingly callous;83 lack of meaningful choice;84 whether each party had a reasonable opportunity to understand the terms;85 and gross excessiveness of price.86 Unconscionability and unfairness are similar but distinct. Unconscionability seems to require more egregious conduct than unfairness. Consequently, an act or practice may be unfair but not unconscionable. Similarly, because different tests are used, all unconscionable acts are not necessarily unfair. Good faith and fair dealing is also a concept closely related to unfairness. Washington common law imposes an implied covenant of good faith and fair dealing on all contracts.87 So does the UCC88 and the Restatement (Second) of Contracts.89 The UCC defines good faith as “honesty in fact” and the “observance of reasonable commercial standards of fair dealing in the trade.”90 The restatement notes that good faith means different things in different contexts, but the term “emphasizes faithfulness to an agreed-upon common purpose and consistency to the justified expectations of the other party.”91 Under Washington common law, good faith requires “cooperation so that each may obtain the full benefit of performance,” although it does not require accepting material changes to a contract term, nor does it impose a duty outside the specific contract obligation.92 At the very least, good faith and fair dealing requires that the parties work cooperatively to fulfill expectations that are justified by the terms of the agreement. If something reasonable and justified ought to be understood as flowing from the agreement, then good faith and fair dealing seems to require that the other party supply positive efforts to that end and not try to undermine it. Good faith and fair dealing relates to unfairness in a straightforward way. If good faith and fair dealing is lacking, unfairness usually exists. Good faith and fair dealing involves a determination of what one ought to do; unfairness involves a determination of what ought not to be done.
From 1914 to 1980, the FTC evolved its definition of unfair business acts and practices. Not until 1980 did the FTC settle on its criteria. In 1994, that criteria was codified at 15 U.S.C. §45(n). For a business act or practice to be unfair, it must result in substantial consumer harm, not be outweighed by countervailing benefits to consumers or competition, and not be something the consumer reasonably could avoid. While the theory of most consumer protection cases has been and will continue to be deception, unfairness can and should be used, too. There are simply times when it is needed to remedy that which is unacceptable, but not necessarily deceptive. Increased use of unfairness in consumer protection cases would serve society well, and help define its parameters for the marketplace. Bob Lipson is an assistant attorney general with the Washington State Attorney General’s Office, where he is currently a trial lawyer in the Consumer Protection Division. His background includes personal injury, maritime, and constitutional tort work for the state. This article was written in honor of the 40th anniversary of Washington’s Consumer Protection Act. FOOTNOTES: 1. See RCW 19.86.020 and 15 U.S.C. §45 (a)(1). 2. See RCW 19.86.080; RCW 19.86.090; see also Pickett v. Westours Inc., 101 Wn. App. 901, 6 P.3d 63 (2000) rev. granted 143 Wn.2d 1001, 20 P.3d 944 (2001). 3. Baum v. Great Western Cities, 703 F.2d 1197 (10th Cir. 1983); Dreisbach v. Murphy, 658 F.2d 720 (9th Cir. 1981). 4. Pridgen, Consumer Protection and the Law, p. 8-3 and 9-2 (1986). 5. State of Washington v. Ralph Williams North West Chrysler Plymouth, 82 Wn.2d 265, 510 P.2d 233 (1973) (state CPA not unconstitutionally vague); Sears, Roebuck & Co. v. FTC, 258 F. 307 (7th Cir. 1919)(rejecting vagueness challenge to unfair methods of competition in FTC Act). 6. Erxleben, The FTC’s Kaleidoscope Unfairness Statute: Section 5, 10 Gonzaga Law Rev. 333 at 334-335 (1975). 7. Le, Protecting Consumer Rights, p. 4 (1987). 8. Calkins, FTC Unfairness: an Essay, 46 Wayne L. Rev. 1935 at 1944 (2000). 9. FTC v. Sperry and Hutchinson, 405 U.S. 233 at 239-240; 92 S. Ct. 898, 31 L. Ed. 170 (1972). 10. Calkins, supra at 1945 (quoting Senate consideration of H.R. 15613, S. 4160, reprinted in Kintner, The Legislative History of Federal Antitrust Laws and Related Statutes (1982)). 11. Id. at 1945. 12. FTC v. Sperry and Hutchinson, supra at 240 (quoting from House Conference Report No. 1142, 63 Cong., 2d Sess., 19 (1914)). 13. FTC v. Algoma Lumber Co., 291 U.S. 67 at 78-79, 54 S.Ct. 315, 78 L.Ed. 655 (1934). 14. R.F. Keppel & Bro., Inc v. FTC, 291 U.S. 304 at 313, 545 S.Ct. 423, 78 L.Ed. 814 (1934). 15. Id. at 313. 16. FTC v. Standard Education Society, 86 F.2d 692, 696 (2nd Cir. 1936) rev’d on other grounds 302 U.S. 112 (1937). 17. FTC v. Raladam Co., 283 U.S. 643, 51 S.Ct. 587, 75 L.Ed. 1324 (1931). 18. R.F. Keppel & Bro., Inc., supra. 19. Erxleben, supra at 336-337; Calkins, supra at 1948-1950. 20. Calkins, supra at 1950-1952. 21. Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed. Reg. 8355 (1964) (quoted in Sperry and Hutchinson, supra at 244, n.5). 22. Sperry and Hutchinson, supra at 244, n.5. 23. Calkins, supra at 1952-1954. 24. Id. at 1954. 25. Id. at 1954. See also, American Financial Services Assoc. v. FTC, 767 F.2d 957, 969 (D.C. Cir. 1985). 26. Id. at 1954. 27. Id. at 1954-1955. 28. Commission Statement of Policy on the Scope of the Consumer Unfairness Jurisdiction (1980 Policy Statement), attached to commission letter to Senators Danforth and Ford (Dec. 17, 1980), reprinted in H. Rep. No 98-156 at 33 (1983). See also, American Financial Services Assoc., supra at 971. 29. 1980 Policy Statement, supra. See also, American Financial Service Assoc., supra at 971; Calkins, supra at 1955. 30. 1980 Policy Statement, supra; Calkins, supra at 1954-1955. 31. Calkins, supra at 1955. 32. Calkins, supra at 1955-1961. 33. Calkins, supra at 1961. 34. In re Hudson Pharmaceuticals, 89 F.T.C. 82 (1977)(consent order). 35. Arthur Murray Studio, Inc. v. FTC, 458 F.2d. 622 (5th Cir. 1972). 36. Holland Furnace Co. v. FTC, 458 F.2d. 302 (7th Cir 1961). 37. Beneficial Corp. v. FTC, 542 F.2d 611 (3rd Cir. 1976). 38. In re Philip Morris Inc., 82 F.T.C. 16 (1973) (consent order). 39. In re Pfizer Inc., 81 F.T.C. 23 (1972). 40. In re All-State Industries, Inc., 75 F.T.C. 465 (1989), aff’d 423 F.2d 423 (4th Cir. 1970). 41. Spiegel Inc. v. FTC, 540 F.2d 287 (7th Cir. 1976). 42. Calkins, supra at 1962. 43. See FTC v. Credit Card Travel Services, No. 87 C 9443 (N.D. Ill. April 14,1999)(consent order); FTC v. Crescent Publishing Group, 129 F. Supp 2d 311 (S.D. N.Y. 2001); Calkins, supra at 1963. 44. See FTC v. J.K. Publications, Inc., 99 F.Supp 2d 1176 (C.D. Cal. 2000); Calkins, supra at 1964. 45. See FTC v. Credi-Care, Inc., Civ. No. 920 8000 N.D. Ill. (1992)(consent judgment); Calkins, supra at 1963. 46. See FTC v. C&D Electronics, 109 F.T.C. 72 (1987); Calkins, supra at 1963. 47. See FTC v. Pereira (E.D. VA)(filed September 13, 1999)(complaint only — case not resolved); Calkins, supra at 1964-1965. 48. See FTC v. Capital Club of North America, Civ., No. 94-6335 (D.N.J. 1994); Calkins, supra at 1965. 49. See FTC v. Martinez, Civ. No. 00-12701 CAS (C.D. Calif. 2000)(TRO granted); Calkins, supra at 1965. 50. See FTC v. American Telnet, Inc., (S.D. Fl. 1999)(stipulated judgment); FTC v. Hold Billing Services, Civ. No. 5A-98-CA-0629-FB (W.D. Tex 1999)(stipulated judgment); Calkins, supra at 1965-1966. 51. See FTC v. Interactive Audiotext Services, Inc., No. CV 98-3049 CBM (C.D. Calif. 1998) (stipulated judgment); Calkins, supra at 1966. 52. See FTC v. Verity International, Ltd., 124 F.Supp 2d 193 (S.D. N.Y. 2000)(preliminary injunction granted). 53. See FTC v. Touch Tone, Civ. No. 99-WM-783 (D. Colo 2000)(consent decree); FTC v. Reverse Auction, Civ. No 000032 (D.D.C. 2000)(consent decree); Calkins, supra at 1967. 54. See Sears Roebuck & Co., 125 F.T.C. 395 (1998)(consent order); May Dept. Stores Co., 1999 FTC Lexis 15 (1999)(consent order); Calkins, supra at 1970. 55. See American Family Publishers, 116 F.T.C. 66 (1993)(consent order); Calkins, supra at 1970. 56. Calkins, supra at 1970. 57. See May Dept. Stores, 122 F.T.C. 1 (1996) (consent order); Calkins, supra at 1971-1972. 58. See Budget Rent-A-Car, 113 F.T.C. 1109 (1990)(consent order); Calkins, supra at 1972. 59. See Consumer Direct, Inc., 113 F.T.C. 923 (1990)(consent order); Calkins, supra at 1972. 60. See Jeep Eagle Corp., 113 F.T.C. 792 (1990) (consent order); Calkins, supra at 1972-1973. 61. See SAAB-Scania of America, Inc., 107 F.T.C. 410 (1986)(consent order); Calkins supra 1959. 62. See Lomas & Nettleton Financial Corp., 102 F.T.C. 1356 (1983)(consent order); Calkins, supra at 1959. 63. See The Money Tree, 123 F.T.C. 1187 (1997) (consent order); Tower Loan of Mississippi, 115 F.T.C. 140 (1992)(consent order); Calkins, supra at 1973-1974. 64. See Sun Refining and Marketing Co., 104 F.T.C. 578 (1984)(consent order); Calkins, supra at 1959. 65. Orkin Exterminating Company v. FTC, 849 F.2d 1354 (11th Cir. 1988). 66. See Beck’s North America, 1999 F.T.C. Lexis 40 (consent order); Calkins, supra at 1974-1975. A number of earlier FTC cases dealing with promotion of unsafe practices are listed in Calkins, supra at footnotes 175 and 182. 67. This logic contrasts with that of Spiegel, where the opposite conclusion was reached with regard to a practice permitted under state law. 68. Earl of Chesterfield v. Janssen, 2 Ves. SR 125 28 Eng. Rep 82, 100 (Ch. 1750)(quoted in White and Summers, Uniform Commercial Code, p. 149 (2nd ed. 1979)). 69. Comment 1 to Section 2-302 of the UCC; see also, White and Summers, supra at 151. 70. White and Summers, supra at 151. 71. Nelson v. McGoldrick, 127 Wn.2d 124, 895 P.2d 1258 (1995); see also, White and Summers, supra at 150-166. 72. Leff, Unconscionability and the Code — The Emperor’s New Clause, 115 U. Pa. L. Rev. 485, 487 (1967)(quoted in White and Summer, supra at 151). 73. Christiansen Brothers v. State, 90 Wn.2d 872, 878, 586 P.2d 840 (1978). 74. White and Summers, supra at 153. 75. See Nelson, supra at 1262; Christiansen Brothers, supra at 878. 76. White and Summers, supra at 151. 77. Id. at 149. 78. Id. at 155. 79. See Christiansen Brothers, supra at 878 (citing Schroeder v. Fageol Motors Inc., 86 Wn.2d 256, 544 P.2d 20 (1975)). 80. See Nelson, supra at 1262. 81. Id. at 1262. 82. Id. at 1262. 83. Id. at 1262. 84. Id. at 1262. 85. Id. at 1262. 86. Id. at 1262. 87. Miller v. Othello Packers, 67 Wn.2d 842, 410 P.2d 33 (1966). 88. RCW 62A. 1-203 and RCW 62A 2-103(b). 89. Restatement (Second) of Contracts, §205 (1981). 90. RCW 62A. 1-201(19) and RCW 62A 2-103(b). 91. Restatement (Second) of Contracts, §205, comment a (1981); see Confederated Tribes and Bands of Yakima Indian Nation v. Baldridge, 898 F.Supp 1477 (W.D. Wa. 1995). 92. Badgett v. Security Bank, 116 Wn.2d 563, 807 P.2d 356 (1991); Johnson v. Yousoofiam, 84 Wn. App. 755, 930 P.2d 921 (1996). Reprinted from Washington State Bar Association Bar News May 2002 with permission for this website only.