“Keeping Trade Practices on Your Radar”: Examining the Increased Federal & State Use of Unfair and Deceptive Trade Practices Laws and Ways to Safeguard Against Them

Note: We’d like to thank Natalie Garcia, summer associate, for her contributions to this article.

State Attorney Generals (“State AGs”) and the federal government are capturing headlines for increasingly suing large corporations for unfair and deceptive trade practices. In some cases, these actions are tackling politically charged issues like climate change, election integrity, and the impact of social media on children. With the White House and the Federal Trade Commission (the “FTC”)’s recent proclamations and efforts to coordinate more with State AGs, these suits are likely to continue and should be on the radar of large corporations, particularly those involved in the technology, energy, and pharmaceutical industries.

Recent State AG Activity

• In March of this year, Arkansas filed lawsuits against TikTok, its parent company, ByteDance, and Meta, the parent company of Instagram and Facebook, alleging both corporations engaged in deceptive trade practices related to content available to young adults, and data privacy.¹
• The Iowa AG recently sued several regenerative medicine institutes for allegedly engaging in false and deceptive conduct in advertising for stem cell and exosome therapy.²
• In 2022, a North Carolina court granted a motion to dismiss for lack of personal jurisdiction in a suit brought by the state against the directors and officers of JUUL Labs for their role in deceptively marketing e-cigarettes to children.³

These suits in Arkansas, Iowa, and North Carolina, are just a few of the recent actions initiated by State AGs. See, e.g., State ex rel. Weiser v. Ctr. for Excellence in Higher Educ., Inc., 529 P.3d 599 (Colo. 2023) (alleged deceptive marketing of degree and loan programs); State ex rel. Shikada v. Bristol-Myers Squibb Co., 152 Haw. 418 (2023) (alleged deceptive practices regarding an antiplatelet drug); Minnesota v. Am. Petroleum Inst., 2021 WL 1215656 (D. Minn. Mar. 31, 2021), aff’d sub nom.Minnesota by Ellison v. Am. Petroleum Inst., 63 F.4th 703 (8th Cir. 2023) (case against several oil and gas providers for purported deceptive practices related to fossil fuels); see also WinRed, Inc. v. Ellison, 59 F.4th 934, 938 (8th Cir. 2023) (decision permitting several states’ investigations into political action committee for purported misleading donation practices).

State AG activity in this field has been ramping up for years. Yet, these actions are gaining more prominence in the face of strong political divides and an emphasis on unfair and deceptive trade practices on the federal level.  For instance (and as discussed below), both the White House and the FTC have made increased enforcement in this area a top priority. In short, State AGs are aggressively pursuing these cases on hot button issues.

Increased Coordination Between State AGs and the Federal Government

On October 10, 2022, President Biden signed the FTC Collaboration Act of 2021 that directs the Federal Trade Commission (“FTC”) to facilitate coordination with State AGs to protect the public from unfair or deceptive business practices.⁴ On June 13, 2023, the FTC sought public comments on how it could work more effectively with State AGs.⁵ The FTC sought views on the respective roles and responsibilities of the FTC and State AGs, how resources should be dedicated to advance such collaboration, and which accountability mechanisms should be implemented to promote consumer protection.⁶ The deadline to submit comments was August 14, 2023, with the FTC receiving 16 public comments, including from the U.S. Chamber of Commerce, National Automobile Dealers Association, Retail Industry Leaders Association, and several others.⁷

The public notice comports with several actions taken by the FTC in the last few months.  In March, the FTC released an article warning corporations that it will take action against any producers, sellers, or users of AI technology who deceive consumers, even if that was not their intended or sole purpose.⁸ In April, the FTC sent a notice to hundreds of companies warning that if their product claims cannot be backed up, it will not hesitate to impose civil penalties upon them.⁹ That same month, the FTC also announced the return of over $1 million to consumers who it claims were subjected to “deceptive free trial offers” for tooth whiteners sold by RevMountain, LLC and related corporate defendants.¹⁰  A couple months later in June, the FTC filed a complaint against Amazon for alleged deceptive practices related to enrolling consumers in automatically-renewing Amazon prime subscriptions.¹¹ This activity as well as the White House making this a key priority for the agency, suggests the FTC will work to make good on its promise to ramp up enforcement.

The increased efforts on the state and federal levels are also important because it will inevitably impact the activities of the plaintiffs’ bar, which is very accustomed to using these laws for consumer class actions.  Just within the last two years, the plaintiffs’ bar has filed well over 200 class actions alleging unfair and deceptive trade practices in at least 100 different jurisdictions across the country.  Given that the impetus for many of these class actions are state and/or federal enforcement actions, the increased and coordinated enforcement activity will likely lead to more related class actions.

Proactive Steps to Avoid the Consumer Protection Spotlight

Large corporations, particularly those in the technology, energy, and pharmaceutical industries, should expect increased scrutiny on marketing practices given the State AGs’ and President Biden’s commitment to increase enforcement of unfair and deceptive practices laws. Companies should consider the following to be proactive to curtail and/or avoid paying civil penalties or legal damages:

1. Revisit labeling and representation policies to ensure marketing promises align with production.
2. In regards to technology, such as algorithms used on social platforms or the growing use of AI, adopt reasonable policies and other safeguards to manage the effectiveness of these tools and avoid designs that could lead to allegations of consumer deception.
3. Consult with an attorney on best practices for legal compliance in the unfair and deceptive trade practices space.

Foley’s consumer products team is ready to advise on compliance with FTC regulations and other state and federal laws governing unfair and deceptive practices.

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¹ Attorney General of Arkansas, News Releases, Governor Sanders and Attorney General Griffin Announce Filings of Lawsuits Against Meta, TikTok, (March 28, 2023), available at https://arkansasag.gov/news_releases/governor-sanders-and-attorney-general-griffin-announce-filing-of-lawsuits-against-meta-tiktok/.