State Consumer Protection Acts: An Empirical Investigation of Private Litigation
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Transcript of State Consumer Protection Acts: An Empirical Investigation of Private Litigation
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State Consumer Protection Acts:An Empirical Investigation of Private
LitigationPreliminary Report
The Army and Navy ClubWashington, DCDecember 2009
![Page 2: State Consumer Protection Acts: An Empirical Investigation of Private Litigation](https://reader036.fdocuments.in/reader036/viewer/2022082915/5482b4cdb4af9f690d8b4845/html5/thumbnails/2.jpg)
SCJI Task Force on State Consumer Protection Acts
Large-scale study of CPAs
Preliminary Report directed at two topics:
Trends and potential drivers of CPA litigation
Nature of CPA actions compared to FTC standards
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Data and Methodology
Trends and potential drivers of CPA litigation
Key characteristics of CPA statutes from all 50 states and DC
17,000 reported CPA decisions in federal district and state appellate courts from 2000 – 2007
Additional examination of 500 reported CPA decisions
Nature of CPA actions compared to FTC standards
CPA case scenarios given to 5 consumer protection experts (Searle Shadow FTC)
Shadow FTC was asked whether the cases involved illegal conduct and/or would likely be enforced under FTC standards
![Page 4: State Consumer Protection Acts: An Empirical Investigation of Private Litigation](https://reader036.fdocuments.in/reader036/viewer/2022082915/5482b4cdb4af9f690d8b4845/html5/thumbnails/4.jpg)
Key Findings – CPA Litigation Activity
Litigation under CPAs has increased dramatically since 2000
0
500
1000
1500
2000
2500
3000
3500
2000 2001 2002 2003 2004 2005 2006 2007
Num
ber o
f Rep
orte
d CP
A D
ecis
ions
Reported CPA Decisions by Court by Year(N = 17,061)
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Key Findings – Effects of Vague Definitions
Vague statutory definitions of prohibited conduct are a major driver of CPA litigation
States with vague definitions of prohibited conduct have more CPA litigation
This relationship is statistically significant
This result holds even after controlling for time trends and differences across states in population and wealth
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Key Findings – Changes in CPAs
CPAs are becoming more favorable and generous to consumer litigants
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10
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30
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Expe
cted
Val
ue In
dex
Scor
e
Expected Value Index Score by State 1995-2007(N = 663)
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Key Findings – Effects of CPA Changes
States with CPAs that are more favorable to consumers have more CPA litigation
y = 0.072x + 1.591R² = 0.048
0
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0 5 10 15 20 25 30
Log
of To
tal R
epor
ted
CPA
Dec
isio
ns
Expected Value Index Score (t-5)
Log of Total Reported CPA Decisionsby Expected Value Index Score with 5-Year-Lag by State by Year
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Cases Without Illegal Conduct
39
Total Cases 50
Percent of Total 78.0%
Proportion of CPA Case Sample Not Constituting Illegal Conduct
Under FTC Standards
Key Findings – FTC Standards, Random SampleMost CPA claims (78%) would not constitute illegal conduct under FTC standards
While relatively few CPA claims in a random sample would constitute illegal conduct under the FTC standard, even fewer (12%) would result in FTC enforcement
Cases Resulting in Enforcement
6
Total Cases 50
Percent of Total 12.0%
Proportion of CPA Case Sample Resulting in Enforcement
Under FTC Standards
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Cases Resulting in Enforcement
10
Total Cases 43
Percent of Total 23.3%
Proportion of CPA Trial WinsResulting in Enforcement
Under FTC Standards
Cases Without Illegal Conduct
19
Total Cases 50
Percent of Total 38.0%
Proportion of CPA Trial Wins Not Constituting Illegal Conduct
Under FTC Standards
Key Findings – FTC Standards, Trial WinsAlmost 40% of CPA claims where the consumer plaintiff prevailed at trial would not constitute illegal conduct under FTC standards
Although most of these successful cases would meet FTC illegality standards, only 23% would be enforced by the FTC
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Potential Policy Implications
If CPAs are envisioned as complements to FTC consumer protection, they appear to overshoot the mark.
Vague definitions in CPAs, while legislatively expeditious, create costly uncertainty and unpredictability in the law.
The statutory language of CPAs matters.
It may be useful to investigate whether other causes of action are usurped by increasingly expansive CPAs.
If the FTC standard does optimally balance the public interest and protection of individuals, it is uncertain that the broader coverage of CPAs benefits consumers.
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State Consumer Protection Acts:An Empirical Investigation of Private
LitigationPreliminary Report
The Army and Navy ClubWashington, DCDecember 2009