DECEPTIVE TRADE PRACTICES: DEFINITIONS AND REMEDIES IN CALIFORNIA

Introduction:

As discussed on this website regarding false advertising and labeling, the seller of merchandise or services who falsely represents product content or source faces significant civil and criminal liability in this state.

On a broader front, both the Legislature and the courts have prohibited an entire range of actions generically called “deceptive trade practice” which is often nationwide defined as an activity in which an individual or business engaged in that is likely to mislead or lure the public into purchasing a product or service.  False advertising and odometer tampering are two examples of deceptive trade practice.  Deceptive trade practices are considered an offense against the general public and can be accorded by law special enforcement status.

This article shall discuss definitions and remedies as to deceptive trade practices in California.

The Basic Law:

Deceptive trade practices result in criminal prosecution in some states.  In some other states, statutes provide for private enforcement, whereby a citizen is entitled to sue a business for violating deceptive trade practice laws.  The victim may be able to recover punitive damages and/or statutory fines.  Moreover, the attorney general of the state may bring a lawsuit against an offending business enterprise.

A number of states have adopted the standardized Uniform Deceptive Trade Practices Act (UDTPA).  The Uniform Act does not add or detract from the law of any one state.  It covers almost all the prohibitions and issues addressed in state laws. 

California has not adopted the Uniform Deceptive Trade Practices Act.  Deceptive trade practices in the state are dealt under

California Business and Professions Code § 17500 et seq.  Sections 17500, 17500.5 and 17505 prohibit false advertisements.  Pursuant to Section 17500, violation by false advertisement is a misdemeanor punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding two thousand five hundred dollars ($2,500), or by both.

Pursuant to Section 17535, the state  Attorney General or any district attorney, county counsel, city attorney, or city prosecutor in California may bring an action upon their own complaint or upon the complaint of any board, officer, person, corporation or association or by any person, injured or damaged as a result of the violation of this Chapter.

But relief is not limited to relying upon a state officer. Under Section 17203 and 17535, any person may pursue representative claims or relief on behalf of others, provided the claimant meets certain standing requirements, usually requiring that the plaintiff be one of the persons victimized.  The court has the authority to issue orders or judgments in the effect of restoring damages incurred, including the appointment of a receiver, and providing injunctions.

As for vehicles, they receive additional protection. Sections 28050 and § 28051.5 of the California Vehicle Code makes it unlawful for any person to turn back or reset the odometer of any motor vehicle in order to reduce the number of miles indicated on the odometer gauge.

The Statutes:

Cal Bus & Prof Code § 17500

False or misleading statements generally
It is unlawful for any person, firm, corporation or association, or any employee thereof with intent directly or indirectly to dispose of real or personal property or to perform services, professional or otherwise, or anything of any nature whatsoever or to induce the public to enter into any obligation relating thereto, to make or disseminate or cause to be made or disseminated before the public in this state, or to make or disseminate or cause to be made or disseminated from this state before the public in any state, in any newspaper or other publication, or any advertising device, or by public outcry or proclamation, or in any other manner or means whatever, including over the Internet, any statement, concerning that real or personal property or those services, professional or otherwise, or concerning any circumstance or matter of fact connected with the proposed performance or disposition thereof, which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading, or for any person, firm, or corporation to so make or disseminate or cause to be so made or disseminated any such statement as part of a plan or scheme with the intent not to sell that personal property or those services, professional or otherwise, so advertised at the price stated therein, or as so advertised. Any violation of the provisions of this section is a misdemeanor punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding two thousand five hundred dollars ($2,500), or by both that imprisonment and fine.

Cal Bus & Prof Code § 17500.5

Advertisements as to quantity of article to be sold to single customer
(a) It is unlawful for any person, firm, corporation or association to falsely represent by advertisement the quantity of any article so advertised that will be sold to any one customer on his demand in a single transaction, and willfully or negligently to fail to include in such advertisement a statement that any restriction that is in fact put upon the quantity of any article so advertised that is sold or offered for sale to any one customer on his demand in a single transaction.
(b) Any person, firm, corporation, or association who, by means of such false or negligent advertisement or publicity, induces any individual retail purchaser and consumer to enter any place of business designated therein seeking to buy any article so advertised or publicized, and then refuses to sell to such person the article at the price advertised in any quantity then available for sale on said premises, shall be liable to each person so induced and refused, for the losses and expenses thereby incurred, and the sum of fifty dollars ($50) in addition thereto.

Cal Bus & Prof Code § 17505

Misrepresentation as to nature of business
No person shall state, in an advertisement of his goods, that he is a producer, manufacturer, processor, wholesaler, or importer, or that he owns or controls a factory or other source of supply of goods, when such is not the fact, and no person shall in any other manner misrepresent the character, extent, volume, or type of his business.

Cal Bus & Prof Code § 17535

Obtaining injunctive relief
Any person, corporation, firm, partnership, joint stock company, or any other association or organization which violates or proposes to violate this chapter may be enjoined by any court of competent jurisdiction. The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person, corporation, firm, partnership, joint stock company, or any other association or organization of any practices which violate this chapter, or which may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of any practice in this chapter declared to be unlawful.
Actions for injunction under this section may be prosecuted by the Attorney General or any district attorney, county counsel, city attorney, or city prosecutor in this state in the name of the people of the State of California upon their own complaint or upon the complaint of any board, officer, person, corporation or association or by any person who has suffered injury in fact and has lost money or property as a result of a violation of this chapter. Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of this section and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state.

Cal Bus & Prof Code § 17203

Injunctive relief; Court orders
Any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction. The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this chapter, or as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition. Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state.

Cal Veh Code § 28050

True mileage driven; Unlawful acts
It is unlawful for any person to advertise for sale, to sell, to use, or to install on any part of a motor vehicle or on an odometer in a motor vehicle any device which causes the odometer to register any mileage other than the true mileage driven. For the purposes of this section the true mileage driven is that mileage driven by the car as registered by the odometer within the manufacturer’s designed tolerance.

Cal Veh Code § 28051.5

Devices to turn back or reset odometer
It is unlawful for any person to advertise for sale, to sell, or to use, any device designed primarily for the purpose of turning back or resetting the odometer of any motor vehicle to reduce the number of miles indicated on the odometer gauge.

Practicalities:

As discussed in our article on American Litigation, our courts are expensive places for both plaintiffs and defendants and most plaintiffs in this area have damages that do not exceed a few hundred dollars. Thus, the State has allowed governmental enforcement and allows the plaintiff to plead on behalf of all the other victims of the activities alleged.

While that is theoretically a solution, practically speaking few citizens want to spend the many thousands of dollars and hundreds of hours necessary to bring such actions and governments, already stretched to the breaking point with other cases, are loathe to take one more burden on.

But that is not to say there is no effective relief. Most businesses do not want the adverse publicity and their own expense in defending against a claim and a great fear most businesses have is to encounter a truly enraged customer that is willing to spend the time and resources to “take on” the company. Quite often a business will quickly settle a claim simply to avoid that danger and just as often the business was not aware of the falsity or misleading aspect of their actions.

Recall that the statute is broader than intentional fraud. It imposes a duty to avoid what the business “should have known” and many an owner of a business discovers to his or her horror that an overly aggressive salesperson or a supplier has misrepresented a product or service despite assurances to that business that such is not the case. Typically, an offshore supplier provides a product to the local business and both the local business and the ultimate customer is the victim. Under the law, however, the local business remains liable if “it should have known.”

Local businesses often complain that they are held to a higher level of conduct than their own suppliers and face liability for acts that did not benefit them or were unknown to them. California has determined, however, that one who engages in business is still held to this standard and the local business must institute procedures to protect itself from inappropriate services or products being supplied to it for resale.

A typical plaintiff should make demand, use the local government to enforce if no relief is provided, and only consider bringing his or her own action if the government refuses to act. The typical defendant should conduct an aggressive fact investigation to determine the validity of the complaint and if true, make reparation and seek relief from its own supplier if warranted. Note that the criminal sanctions that apply can be truly catastrophic for a business owner, so such claims must be taken quite seriously.

Lastly, note that the internet is one means of communication that is specifically mentioned in the statute as a source of false information. A company using the internet who never actually sets up a store front in California may still be subject to these laws if it engages in significant business activity in California.

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These Articles are to give the reader a general description of certain areas of the law. Legal advice is necessary to apply these legal concepts to your particular situation. The Reader should obtain competent legal advice before relying on the Articles.

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