Consumer protection laws have substantially strengthened across the country in recent years, and the COVID pandemic has only provided more cause for concern. Among the 24,000 unfair and deceptive business practice complaints filed by consumers in 2020, COVID-related issues placed second, only behind motor vehicle sales and advertising complaints. As a business operating in Ohio, you should understand the state and federal laws that regulate your business’s advertising and sales practices.
Ohio State Consumer Protection Laws
Ohio has many consumer protection laws that individually address issues ranging from credit card transactions to telemarketing to installment contracts. While many of the state’s more than 25 consumer-protection laws have a particular focus that may or may not apply to your business (e.g., the Hearing Aid Returns Act), you need to be familiar with at least two of the laws with the broadest application.
Ohio Consumer Sales Practices Act
The Ohio Consumer Sales Practices Act (CSPA, Oh. Rev. Code. §1345.01 et seq.) defines several business activities as unfair or deceptive and addresses intentional misconduct considered “unconscionable.” While most ethical businesses should only ever be concerned about whether their advertising or sales practices unintentionally fall within the scope of deceptive practices, it is helpful to understand the full scope of the CSPA.
The CSPA applies to transactions between “consumers” and “suppliers.” Activities that occur before or after a transaction are also within the scope of the CSPA if they are related to the transaction.
Most businesses that deal with individual customers fall within the broad definition of “supplier” under the CSPA. The CSPA defines a supplier as “a seller, lessor, assignor, franchisor, or other person engaged in the business of effecting or soliciting consumer transactions, whether or not the person deals directly with the consumer.” (Oh. Rev. Code. §1345.01(C)). Consumers, in turn, are generally defined as individuals engaged in transactions primarily for personal, family or household purposes.
Specific types of representations may subject a business to liability for deceptive trade practices under the CSPA. A significant source of potential liability under the CSPA involves trying to rely on other people’s or companies’ reputations by suggesting they sponsor, endorse, or approve you as the supplier or your goods or services. Not surprisingly, it is also problematic to ascribe properties to your goods or services that you cannot justify (e.g., goods are of a higher quality than they actually are).
Of course, advertising is well-known for using vague or overly-exaggerated assertions about quality and features. If reasonable consumers would not believe that a statement is meant to be wholly accurate or if they would understand it is an expression of opinion, then the statement is “puffery” rather than materially deceptive.
Ohio’s Attorney General has the power to investigate complaints about unfair and deceptive trade practices and can bring suit (including class action suits) against companies for alleged CSPA violations (Oh. Rev. Code 1345.07). Businesses should also be aware that there is a private right of action under the CSPA, meaning that individual consumers can also file suits seeking damages for CSPA violations (Oh. Rev. Code 1345.09). The attorney general then may intervene in the private suit.
Suppose a consumer successfully proves unfair or deceptive practices. In that case, the business may be subject to damages, including compensation for any actual economic damages and up to $5,000 in additional non-economic damages (i.e., a penalty). In some instances, the court may also increase the monetary damages up to three times and award attorney’s fees. (Oh. Rev. Code 1345.07 and 1345.09).
A significant amendment to the CSPA in 2012 allowed suppliers to cure an alleged violation. While the specifics of the cure process are more detailed than we can cover here, cure offers can help businesses potentially avoid enhanced damages, attorney’s fees and costs.
If you face a potential CSPA suit or have questions about the cure process, you should immediately contact your attorneys.
Ohio Deceptive Trade Practices Act
The Ohio Code also regulates trade practices and advertising through the Deceptive Trade Practices Act (DTPA; Ohio Rev. Code §4165 et seq.). While the DTPA focuses more on trademarks and service marks, it also addresses many of the same practices covered by the CSPA. It is essential to understand that the same business activity may be the subject of a complaint under both Acts and other provisions of the Ohio Code or federal laws.
The DTPA is somewhat broader than the CSPA as it does not require a transaction but instead generally applies to actions occurring “in the course of a person’s business, vocation or occupation.” (Oh. Rev. Code 4165.02(A)). The DTPA is also not limited to business conducted with consumers, who engage in transactions for primarily personal, family or household purposes.
The DTPA defines the same activities described above for the CSPA (misrepresentations about sponsorship, approval, affiliation, product quality, etc.) as deceptive trade practices. In addition, the DTPA defines the following as deceptive trade practices (among others):
- Passing off a business’s goods or services as someone else’s;
- Causing consumer confusion about the source of goods or services;
- Misusing a fictitious business name; or
- Making false statements that disparage another person’s business, goods or services.
(Oh. Rev. Code 4165.02(A)). The primary remedial actions under the DTPA lie with individual consumers or other businesses rather than the attorney general. Individuals can sue for an injunction without needing to show proof of any actual economic damage. If there is actual injury, complainants may also sue for actual damages. In either case, the court may also award attorney’s fees to the prevailing party (Oh. Rev. Code 4165.03).
Courts interpret the DTPA consistently with similar federal laws, particularly the Lanham Act, which we discuss below.
Federal Consumer Protection Laws
Just as in the state of Ohio, the federal government has promulgated a variety of consumer protection laws. The federal statute most often associated with false advertising practices is The Trademark Act of 1946, commonly referred to as the Lanham Act.
While much of the Lanham Act deals with actual trademark infringement, it also addresses false advertising. Specifically, the Lanham Act creates liability for misrepresentations in advertising about “the nature, characteristics, qualities or geographic origin” of goods or services (15 U.S.C. §1125(a)(1)(B)). And just as the DTPA covers disparagement, the Lanham Act applies whether the misrepresentations are about your goods or services or someone else’s.
Plaintiffs can seek injunctions and monetary damages for Lanham Act violations. As with the CSPA and DTPA, additional awards of up to treble damages and attorney’s fees and costs may also be available, depending on the conduct (15 U.S.C. § 1117).
Louis Licata is a managing partner. His practice is focused on employment law, litigation and business transactions. He can be reached at [email protected] or by phone at (216) 573-6000.
Michael Beardsley is an associate attorney. He can be reached at [email protected] or by phone at (216) 573-6000.
This article is meant as a general guideline. Nothing in this blog intends to create an attorney-client relationship or provide legal advice on which you should rely without talking to your own retained attorney first. If you have questions about your particular legal situation, you should contact a legal professional.
Please contact us for more information about CoverMySix®, our anti-litigation audit service that includes assessing your sales and marketing practices to ensure you are following state and federal consumer protection laws. We invite you to call 216-573-6000 or fill out our contact form to set up a consultation with one of our attorneys.
