December 29, 2011
OLR BACKGROUNDER: CONNECTICUT UNFAIR TRADE PRACTICES ACT
By: Duke Chen, Legislative Analyst II
This report provides an overview of Connecticut Unfair Trade Practices Act (CUTPA) violations, enforcement methods, and penalties.
CUTPA is a state consumer protection law that prohibits unfair competition methods and unfair or deceptive acts or practices in trade or commerce (CGS § 42-110b). It is modeled after the Federal Trade Commission Act (15 USC § 45(a)(1)). There are two types of CUTPA violations, one judicially determined and the other statutorily defined.
CUTPA gives individuals the right to sue and gives the state certain enforcement powers. Anyone who suffers an ascertainable loss of money or property through a prohibited CUTPA act may bring an action to recover actual damages (CGS § 42-110g(a)). He or she does not need proof of public interest or public injury. CUTPA also allows class action suits (CGS § 42-110g(b)).
In addition to the private course of action, CUTPA provides enforcement tools for the Department of Consumer Protection (DCP). To this end, the commissioner may issue regulations defining what constitutes an unfair trade practice, hold investigations and hearings, order restitution, and enter consent agreements. CUTPA also allows DCP to ask the attorney general to seek certain court actions.
Under CUTPA, courts may issue restraining orders; award actual and punitive damages, costs, and reasonable attorneys fees; and impose civil penalties.
There are two types of CUTPA violations. The first is judicially determined, where the court decides if an act violates CUTPA. The second is a per se violation, which is a specific statutory act that automatically violates CUTPA. Generally speaking, mere negligent acts or simple contract breaches, even intentional ones, are not CUTPA violations.
CUTPA provides two specific exceptions that are not violations. It does not apply to (1) transactions or actions by any regulatory board or officer acting for the state or United States and (2) acts done by the publisher, owner, agent, or employee of a newspaper, periodical, radio, or television station in publishing or disseminating an advertisement, where they did not know of the advertisement's false, misleading, unfair or deceptive character, and did not have direct financial interest in the sale or distribution (CGS § 42-110c).
Court Determined Violations
In determining if an act is unfair, the Connecticut Supreme Court has adopted what is known as the “cigarette rule” from the Federal Trade Commission. This rule defines what types of conduct are unfair and deceptive under a three-part test.
The three prongs are whether the practice:
1. offends public policy as established by statute, common law, or at least within the area of some common law, statutory, or other established concept of unfairness;
2. is immoral, unethical, oppressive, or unscrupulous; and
3. causes substantial injury to consumers.
(Conaway v. Prestia, 191 Conn. 484, 464 A.2d 847 (1983).)
The third prong is also subject to a three-part test. The injury must (1) be substantial, (2) not be outweighed by any countervailing benefits to the consumer or competition that the practice produces, and (3) not be something the consumer could have reasonably avoided (Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 592, 657 A.2d 212, 228 (1995)).
All three prongs of the cigarette rule do not need to be met for there to be a violation. There may be a violation because of the degree to which it meets one criteria (Willow Springs Condominium Ass'n Inc. v. Seventh BRT, Dev. Corp. 245 Conn. 1, 717 A.2d 77 (1998)). There is no precise formula for the courts to balance the criteria (Callandro v. Allstate Ins. Co., 63 Conn. App. 602, 778 A.2d 212 (2001)).
Per Se Violations
Per se violations are specific actions prohibited by law and deemed to violate CUTPA. For example, anyone who violates the Home Improvement Act also violates CUTPA (CGS § 20-427(c)). For a list of all statutory per se violations, see Attachment 1.
In addition to statutory per se violations, CUTPA allows the DCP commissioner to issue regulations defining certain actions as an unfair trade practice (CGS § 42-110b(c)). For example, it is a CUTPA violation for car dealers to advertise a price without disclosing certain fees (Conn. Agencies Regs. § 42-110b-28(6)).
CUTPA authorizes DCP to investigate complaints. In this regard, the DCP commissioner may issue subpoenas, administer oaths, and conduct hearings (CGS § 42-110d(a)). Further, the DCP commissioner or his representatives may:
1. enter and investigate any establishment at reasonable times,
2. check invoices and records,
3. take samples of commodities for evidence,
4. subpoena documentary material, and
5. have access to and copy documents
(CGS § 42-110d(b)).
The commissioner may also mail an investigative demand to someone suspected of a CUTPA violation, so he or she can make sworn assurances that CUTPA has not, is not, or will not be violated (CGS § 42-110d(c)).
The commissioner may conduct a hearing if he has reason to believe someone violated CUTPA. He may conduct a hearing only after giving notice of the charges. Testimony must be taken under oath. The commissioner has the power to issue subpoenas to compel the witnesses to appear or produce of documents (CGS § 42-110d(d)).
If anyone fails or refuses to comply with the DCP commissioner's investigative demands, the commissioner may apply to Hartford Superior Court for (1) injunctive relief on the alleged act; (2) suspension of the offender's business license; and (3) other relief that may be required, until the person submits the required documents (CGS § 42-110k).
The commissioner may accept an assurance of voluntary compliance from alleged CUTPA violators. Assurances may include restitution to aggrieved persons. These assurances are not considered to be an admission of a violation (CGS § 42-110j).
If after a hearing, the commissioner feels that a violation has occurred, he must state in writing his findings of fact and issue a cease and desist order. In cases involving less than $5,000, he may also order restitution. The commissioner may also enter into consent agreements and ask the attorney general to seek judicial enforcement of his restraining or injunction orders (CGS §§ 42-110d, 42-110m, and 42-110n). The commissioner's order may be appealed to the Superior Court in accordance with the Uniform Administrative Procedure Act (CGS § 42-110e).
Courts may issue restraining orders; award actual and punitive damages, costs, and reasonable attorneys fees; and impose civil penalties of up to $5,000 for willful violations and $25,000 for violating a restraining order. The attorney general may recover civil penalties for the state (CGS §§ 42-110d, 42-110k, 42-110m, and 42-110o). The statute of limitations for CUTPA violations is three years (CGS § 42-110g(f)).
The attorney general may also petition the Hartford Superior Court to order the dissolution, suspension, or forfeiture of any corporation that violates any injunction terms (CGS § 42-110p).
Attachment 1: Per Se CUTPA Violations
Failing to affix tax stamp on cigarettes
Selling cigarettes below cost, with intent to injure competition
Violating motor vehicle rental contracts terms
Selling totaled or salvaged motor vehicles
Selling fake air bags
Adding a gas surcharge
Restricted use of customer information for marketing
Unauthorized switch in electric suppliers
Disclosing cell phone information
Unauthorized procurement and sale of telephone records
Unreasonably delaying telephone carrier switch
Failing to display fuel pump sign requirements
Unfair trade practices in selling fuel oil
Selling to independent retailers
Selling of anthracite
Violating home heating oil sales statutes
Prohibited utility charge
Violating unfair billing practice
Failing to disclose dental referral service
Violating where optical goods may be sold
Working without a license
Violating mechanical contractor statutes
Violating new home construction contractors statutes
Violating home improvement contractors statutes
Violating community association managers statutes
Violating locksmiths statutes
Violating closing-out sales statutes
Violating mobile manufactured homes statutes
Violating health club statutes
Failing to allow inspection under the State Child Protection Act
Failing to post notice for an article that has a banned substance
Violating the Home Food Service Plan Sales Act
Selling milk that creates an emergency condition
Written or oral contract for milk sale under an unfair trade practice
Violating corporate accountability statutes
Using a fictitious business name
Soliciting a residential mortgage loan application
Violating check cashing services statutes
Violating credit clinic statutes
Violating securing computerized data statutes
Failing to provide notice for replacement auto parts
Failing to comply with life settlement insurance disclosures
Violating certain small employer insurance statute provisions
List of unfair trade practices in the insurance industry
Violating certain provisions for time shares
Furnishing false information in time share expense statement
Refusing to accept returns
Cash register read-outs must be visible to consumer
Violating the unfair sales practices statutes
Violating the Unfair Photographic Sales Practices statute
Violating certain provisions for layaway plans
Sending unsolicited goods
Failing to disclose certain requirements for mail order business
Notice of magazine subscription expiration
Travel service surcharge for credit card use
Violating provisions of the Home Solicitation Sales Act
Violating new automobile warranties
Violating provisions of the funeral service contracts statutes
Violating gray market merchandise statutes
Violating rain check statutes
Violating automobile manufacturers' warranty adjustment programs statute
Violating profiteering statute
Selling products at an excessive price during energy emergency
Selling energy resources at excessive price during abnormal market disruptions
Violating consumer rent-to-own agreement statutes
Violating diet program statutes
Violating telemarketing statutes
Violating do not call registry
Violating sweepstakes statutes
Violating buying club statutes
Violating dating services statutes
Posting of dry cleaning prices
Posting of certain information on prepaid calling cards
Violating provisions of consumer discount cards statute
Conveyance that is not signed by duly authorized person
Misrepresentation of power to acquire property by eminent domain