The Origins of N.C. Gen. Stat. § 75-1.1

by Ellis & Winters LLP
Contact

Summer is the time for movies about superheroes. Often, after a couple of episodes in a movie franchise come out, the producers make a film about the origins of the protagonist, so the audience can better understand the hero’s motivations and origins.

Like a movie superhero, N.C. Gen. Stat. § 75-1.1 has super powers: it can triple a verdict and generate an attorney-fee award in a single bound. Like a superhero’s backstory, the history of section 75-1.1 is key to an understanding of these powers. In honor of the summer blockbusters, here is a brief history of section 75-1.1.

Where did section 75-1.1 come from?

Antitrust concepts have been a part of North Carolina law since colonial times. North Carolina’s constitution of 1776 declared that “perpetuities and monopolies” are “contrary to the genius of a free state and ought not to be allowed.” In 1889, North Carolina enacted its first antitrust statute.

It was not until the 1960s, however, that the General Assembly enacted a general-purpose statute that promotes litigation (as opposed to competition) as a way of protecting consumers. During that decade, the Federal Trade Commission, seeking to extend its own consumer protection efforts, encouraged states to enact consumer protection statutes. In 1969, section 75-1.1 emerged from those efforts.

For the text of section 75-1.1, the drafters of the statute made an intentional choice to copy the text of section 5 of the FTC Act. Both statutes declare “unfair or deceptive acts or practices” and “unfair methods of competition” to be unlawful.

(As an aside, a direct prohibition of unfair or deceptive acts and practices did not appear in the original FTC Act. Congress added this scope to section 5 in 1938. It added this language in reaction to Supreme Court decisions that had held that a section 5 violation requires an injury to the competitive process. By the time the North Carolina General Assembly copied the text of section 5, the FTC Act’s direct prohibition of unfair or deceptive acts and practices was already well known and in active use.)

By enacting statutes like section 75-1.1, states vastly expanded the resources available for consumer protection litigation. Section 5 contains no private right of action. The FTC enforces section 5, but its resources are not unlimited. Section 75-1.1 and most other “Little FTC Acts,” in contrast, allow private parties to sue. Indeed, many of these statutes use expanded remedies—like the treble damages and attorney fees available in North Carolina—to encourage private parties to act as private attorneys general.

In 1977, the North Carolina General Assembly broadened section 75-1.1 by deleting the word “trade” from the statutory text and by inserting a statement that the statute covers “all business activities, however denominated.”

Neither the original version of section 75-1.1 nor the 1977 amendment, however, offers a definition of what qualifies as an unfair or a deceptive act or practice. That lack of definition is what makes section 75-1.1 so challenging to apply (and so interesting to discuss).

For more detailed histories of section 5 and section 75-1.1, see pages 2037-38 and 2056-70 in Matt Sawchak’s and Kip Nelson’s 2012 article in the North Carolina Law Review.

How the history of section 75-1.1 affects today’s law

What does the history of section 75-1.1 mean for today’s law? This history most often comes into play when there is no binding authority on how section 75-1.1 applies to a particular fact pattern. Although there are over 2000 published opinions on section 75-1.1, courts often have to improvise when they apply the open-ended concepts of unfairness and deception.

In these situations, the historical link between section 5 and section 75-1.1 becomes especially important. The North Carolina Supreme Court has recognized this point. As recently as 1997, the court has stated that courts should look to authorities under section 5 “for guidance in construing the meaning of Section 75-1.1.”

To be sure, using section 5 standards to help apply section 75-1.1 is not a cure for every problem. Recent commentators, including FTC Commissioner Joshua Wright, have urged the FTC to add detail to its standards for unfairness and deception. But even if this further detail never arrives, the standards under section 5 are still far more developed than the standards under section 75-1.1.

In short, section 75-1.1 has super powers, but it suffers from a lack of predictable standards. The law under section 5 of the FTC Act can come to the rescue for courts that face uncertainty under section 75-1.1.

Written by:

Ellis & Winters LLP
Contact
more
less

Ellis & Winters LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.