Orrick State Attorney General Newsletter – May 2021

Orrick, Herrington & Sutcliffe LLP

Washington State Enacts Law Increasing Penalties under the Consumer Protection Act

The Washington State Legislature enacted legislation increasing civil penalties under the state’s consumer protection law. By substantially raising civil penalties, the new law provides the Attorney General significantly more leverage in enforcing Washington’s consumer protection statute.

Under that statute, it is deemed unlawful for a business to employ “unfair methods of competition and unfair and deceptive acts or practices in the conduct of trade or commerce.” The Washington consumer protection act also contains penalties for violating the state’s antitrust law and prohibition on restraint of trade. Consumers or the Washington Attorney General may bring actions to enforce against violations of the act.

Enacted on April 19, Senate Bill 5025 greatly increases existing penalties:

  • For consumer protection violations from $2,000 per violation to $7,500 per violation.
  • From $25,000 to $125,000 for violating any injunction issued under the consumer protection act.
  • For antitrust violations and restraint of trade by any individual from $100,000 to $180,000.
  • For antitrust violations and restraint of trade by any corporation from $500,000 to $900,000.

Lastly, the new law includes an enhanced penalty of up to $5,000 for “unlawful acts or practices that target or impact specific individuals or communities based on demographics,” including age, race, sex, sexual orientation, disability, religion, or veteran status.

California Attorney General Rob Bonta Confirmed by California Legislature to Replace former AG Xavier Becerra

Former California Assemblyman Rob Bonta was confirmed by the California Legislature on April 26 after being nominated by Gov. Gavin Newsom to replace former Attorney General Xavier Becerra. Mr. Becerra was nominated to be President Joe Biden’s Secretary for Health and Human Services and was confirmed in March.

One of General Bonta’s first moves as attorney general was to expand the Bureau of Environmental Justice to include more attorneys in order to “fight[] environmental injustices throughout the state of California” and give “voice to frontline communities who are all too-often under-resourced and overburdened.” The Bureau is charged with:

  • Ensuring compliance with the California Environmental Quality Act and land use planning laws;
  • Penalizing and preventing illegal discharge to air and water from facilities in communities…burdened disproportionately with pollution;
  • Eliminating or reducing exposure to lead and other toxins in the environment and consumer products;
  • Remediating contaminated drinking water; and
  • Challenging the federal government’s actions that repeal or reduce public health and environmental protections.

General Bonta is the state’s first Filipino American Attorney General. He is up for reelection in 2022 and already faces two opponents: former assistant U.S. attorney Nathan Hochman and Sacramento County District Attorney Anne Marie Schubert.

Facebook Seeks Dismissal of State AGs’ Antitrust Complaint

On December 11, 2020, New York led a broad coalition of states in filing a complaint against Facebook alleging antitrust violations under Section 7 of the Clayton Act and Section 2 of the Sherman Act. Facebook recently filed a motion dismiss, arguing:

  • The states lack standing to bring the case;
  • The claims based on Facebook’s acquisitions are barred by the doctrine of laches, or unfair delay;
  • The states fail to state a claim under Section 7 because the states only allege that Instagram and WhatsApp were potential competitors and have only speculated that these potential rivals could have brought benefits to competition and consumers; and,
  • The states’ Sherman Act claim fails because the states fail to plead that Facebook has monopoly power or failed to allege exclusionary conduct.

According to the company’s motion to dismiss, the “complaint filed by the State Attorneys General does not and cannot assert their citizens paid higher prices, that output was reduced, or that any objective measure of quality declined as a result of Facebook’s challenged actions.” The motion to dismiss further states the State AGs “ground their lawsuit in public policy concerns … that are not competition-law concerns.”

The case is pending in the United States District Court for the District of Columbia.

Indiana Attorney General Rokita Announces Investigation into Big Tech Companies over Censoring of Content

Recently elected Indiana Attorney General Todd Rokita announced his office has opened an investigation into several Big Tech companies—Amazon, Apple, Facebook, Google, and Twitter—over allegations of the companies potentially harming Indiana consumers by limiting access to certain content on the companies’ platforms. According to General Rokita’s press release, his office is investigating whether the companies have potentially harmed consumers “through business practices that are abusive, deceptive and/or unfair.”

Nebraska AG Doug Peterson Reaches Settlement with Company for Deceptive and False Statements Regarding COVID-19 Antibody Tests

Attorney General Doug Peterson announced he has reached a settlement with two Nebraska companies for violating the Nebraska Consumer Protection Act and the Uniform Deceptive Trade Practices Act for making false statements in advertisements related to COVID-19. The company will pay $25,000 under the settlement.

The Nebraska complaint alleges the companies failed to inform consumers that antibody tests were not meant to diagnose or exclude active infection of the COVID-19 virus. Instead, the tests look for certain antibodies in the blood, which, if present, may indicate the individual previously was infected with the COVID-19 virus.

Coalition of State AGs File Lawsuit Challenging President Biden’s Executive Order Mandating that Agencies Consider “Social Cost” of Greenhouse Gases in Regulatory Actions

On April 22, 2021, the Louisiana Attorney General and nine other states filed a lawsuit in the U.S. District Court for the Western District of Louisiana challenging Section 5 of the Executive Order 13990 signed by President Joe Biden on his first day in office. Among other features, Section 5 of Executive Order 13990 establishes an “Interagency Working Group on the Social Cost of Greenhouse Gases” whose mission is to “publish an interim” social cost of carbon, social cost of nitrous oxide, and social cost of methane. According to the executive order, these are estimates of “monetized damages associated with incremental increases in greenhouse base emissions.” The executive order further directs all federal agencies in decision making, including rulemaking, to consider the social costs of greenhouse gas emissions.

The lawsuit alleges Executive Order 13990 violates the Administrative Procedure Act (APA) (5 U.S.C. § 706). According to the state AGs’ complaint, the executive order’s social costs of greenhouse gas emissions are substantive rules and thus must go through the APA’s notice and comment procedures to allow the public the opportunity to provide written comments. The complaint alleges that by failing to follow the notice and comment procedures, the executive order violates the APA. Additionally, the complaint alleges the social costs for greenhouse gas emissions are arbitrary and capricious. Finally, the complaint alleges the executive order is unlawful because no federal law authorizes that social costs of greenhouse gas emission values consider global effects. Instead, the complaint alleges authority only exists for domestic effects.  

States joining Louisiana on the lawsuit are Alabama, Florida, Georgia, Kentucky, Mississippi, South Dakota, Texas, West Virginia, and Wyoming.

State AGs Send Letter Urging Congress to Disapprove the “True Lender” Rule under the Congressional Review Act

On April 21, 2021 state attorneys general  from the District of Columbia sent a letter to Congress urging it to repeal the “True Lender” rule adopted by Trump administration.

During the Trump administration, the Office of the Comptroller of the Currency issued the “true lender rule” which sought to clarify the legal framework around bank lending partnerships involving loans originated by a national bank or federal savings association under a bank partner program. Specifically, the true lender rule sought to provide a clear rule on when the bank or the third party would be considered the lender in the transaction.

The state AGs argue in their letter to Congress that the true lender rule would “sanction high-cost lending schemes devised to evade state usury laws.” According to the state AGs, states have begun to pass usury interest-rate caps on “high-cost small-dollar loans in an effort to protect their consumers from predatory financial products.” The state AGs allege the true lender rule would be “exploited” by lenders “seeking to circumvent these state interest-caps and invite…predatory consumer-lending partnerships between banks and lightly regulated non-depository lenders.”

Under the Congressional Review Act (5 U.S.C. §§ 801-808), Congress may rescind administrative rules issued by federal agencies within a certain timeframe.

The letter was authored by Illinois Attorney General Kwame Raoul, and joined by Colorado, Connecticut, District of Columbia, Hawaii, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, South Dakota, Vermont, Virginia, and Wisconsin.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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