Legg v. Castruccio

DAVIS, Judge. This is an appeal from a September 2, 1993 judgment and order of the Circuit Court for Anne Arundel County. The dispute is between landlords Sadie and Peter Castruccio (ap ⁷⁵² pellee's) and their former tenant Deborah Legg (appellant). An amicus curiae brief has also been filed by the Consumer Protection Division of the Office of the Attorney General (Division or amicus).

Amicus asserts an interest in this case because it “is the state agency charged with the responsibility for enforcing the Consumer Protection Act ... and several related laws for the protection of consumers.” Amicus adopted appellant’s statement of the case, statement of facts, and argument regarding the covenant of quiet enjoyment, but wrote separately on the issues involving the application of the Maryland Consumer Protection Act (CPA). The parties’ dispute began when the Castruccios brought a claim in the Anne Arundel County District Court for repossession of rented property. On the trial date, November 20, 1991, Legg filed defenses and counterclaims and a request for a jury trial. The case was transferred to the Circuit Court for Anne Arundel County.

Legg filed an amended answer and amended counterclaim that sought rent abatement, damages, and attorneys’ fees because “the Castruccios had illegally rented her an apartment in an unlicensed multiple dwelling containing numerous unsafe conditions.” She also claimed that “[b]y representing to [her] that one-half of the [utility bills 1 ] would be paid by the upstairs tenant but which in fact has not been paid, [the Castruccios] engaged in unfair or deceptive trade practices in the rental and offer of rental of consumer realty....” On May 5, 1993, the parties entered into a settlement that resolved all of the issues except whether the Castruccios have any legal responsibility for the unpaid utility bills of their upstairs tenant. A bench trial was held on June 22, 1993. Legg, Judith Papilon, one of the upstairs tenants, and Andrea ⁷⁵³ Compost, a BG & E representative, testified at trial, but the Castruccios did not. The trial judge, addressing “only the question of the Castruccios’‘ liability for the unpaid balance owing on Legg’s utility service bill” issued a written opinion and order dated September 2,1993 in favor of the Castruccios.

The court opined that the Castruccios’ refusal to pay Legg for the upstairs tenants’ utility service (1) did not create a dangerous defect under Md.Code (1974,1988 Repl.Vol.), § 8—211(e)(1) of the Real Property Article; (2) was not an illegal appropriation of utility charges under Md.Ann.Code Art. 78 § 54G(d)(l); (3) was not a breach of the covenant of quiet enjoyment; (4) was not a breach of an agreement for the landlords to pay the utility service; and (5) was not a deceptive or unfair trade practice under the Maryland Consumer Protection Act or Federal Trade Commission consumer unfairness doctrine. Legg appeals from that judgment and presents the following questions: I. Is it a deceptive trade practice, in violation of the Consumer Protection Act, for a landlord to fail to inform a tenant at the commencement of the lease that another apartment’s electric service is on her utility meter and to fail to inform her at the inception of her tenancy and subsequently that she will bear the risk of the other tenant’s nonpayment for their utility usage?

II

Is it ... an unfair trade praetice[ ], in violation of the Consumer Protection Act, ... for a landlord to burden a tenant with [other] tenants’ utility service and with the risk of the other tenants’ nonpayment for their utility usage?

III

Is it ... a breach of the covenant of quiet enjoyment for a landlord to burden a tenant with [other] tenants’ utility service and with the risk of the other tenants’ nonpayment for their utility usage? 2 ⁷⁵⁴ FACTS From April or May 1987 until November 20, 1991, the date the parties were scheduled for trial in the district court, Deborah Legg rented an apartment on the ground floor of a two-story house at 1139 Discus Mill Road from Sadie and Peter Castruccio on a verbal, month-to-month basis. The upstairs level was not occupied at the time. The parties agreed that Legg would pay rent to the Castruccios and would establish her own account for gas and electric service. Thereafter, Legg opened an account with BG & E, and the only utility meter on the premises was put into service.

Sometime after Legg’s tenancy began, a person named David moved into an upstairs apartment. The record extract is bereft as to who David was and how he came to rent the apartment. Legg testified that, pursuant to her oral agreement with him, David paid one-fourth of the utility bills, that he made his payments, and that she is seeking no redress regarding the period David lived in the upstairs apartment. For unknown reasons, the trial judge’s opinion and Legg’s brief do not address this first upstairs tenancy.

In June or July 1988, the Castruccios rented the upstairs apartment to Julie Papilon and Vinnie Harcourt under a verbal, month-to-month lease. The trial judge’s opinion makes no mention of Julie Papilon and indicates only that Harcourt was the upstairs tenant. This is misleading because Papilon testified at trial that she lived in the upstairs apartment, that the Castruccios were her landlords, and that she was the tenant who paid the rent to the Castruccios every month (Harcourt apparently was responsible for the utility bills). To prevent any further confusion, we shall refer to Papilon and Harcourt jointly as the “upstairs tenants” or “Papilon-Harcourt tenancy.” Papilon testified that Sadie Castruccio told her that she would have to pay one-half of the utility bills.

Legg was not ⁷⁵⁵ consulted in advance regarding the Papilon-Harcourt tenancy, but was informed by Sadie Castruccio that Papilon and Harcourt agreed to pay one-half of the utility bills. The trial judge found that “[t]he Castruccios prompted Legg to discuss the [utility bills] with [the upstairs tenants] from the beginning of [their] tenancy.” Following her discussion with Sadie Castruccio, Legg discussed the utility bills directly with the upstairs tenants. The upstairs tenants verbally agreed with Legg that they would pay one-half of the utility bills. A letter dated December 3, 1990, addressed “TO WHO IT MAY CONCERN” and signed solely by Sadie M. Castruccio, confirms that Sadie Castruccio was aware that an agreement was made between Papilon, Harcourt, and Legg, and that the Castruccios expected the upstairs tenants to pay their half.

It reads: This is to verify that Mr. Vincent Harcourt and Ms. Julia Papilon rent from me the premises at 1139 Discus Mill Road, Millersville, Maryland 21108, and that they are responsible for payment of one-half of the [utility] bill, which is in the name of Ms. Deborah Legg. They are also responsible for payment of the entire heating oil bill. Beginning July 1990, approximately two years after moving in, the upstairs tenants stopped paying Legg their share of the utility bills. From July 1990 until December 2, 1991, the cost of utility service totalled $4,310.73 (including late fees), making the upstairs tenants’ share $2,155.36.

Of this amount, Papilon and Harcourt paid only $140, leaving a remaining balance of $2015.36. Testimony of Andrea Compost, a BG & E representative, indicated that despite payments made by the upstairs tenants, Legg herself was in arrears with BG & E even before the upstairs tenants moved into that apartment. The actual amount of this arrearage was never established. Nonetheless, the utility service was never turned off while Legg lived at 1139 Discus Mill Road.

At some undetermined time after the upstairs tenants stopped paying their share of the utility bills, Legg complained to the Castruccios and requested that separate meters ⁷⁵⁶ be installed. According to Legg, the Castruccios said that “they would take care of it.” Legg’s testimony did not explicitly indicate that she told the Castruccios that the upstairs tenants were not paying the utility bills; it can, therefore, only be inferred that the Castruccios were aware of the upstairs tenants’ delinquency when Legg asked for separate meters, as that was apparently the only reason that she was asking for separate meters. Sometime in early November, 1991, the upstairs tenants moved out of 1139 Discus Mill Road without paying their remaining share of the utility bills. No security deposit was held by the Castruccios from the Papilon-Harcourt tenancy.

The Castruccios never attempted to evict the upstairs tenants. The Castruccios have refused to pay any portion of the utility bills for 1139 Discus Mill Road. Legg has never brought a legal action against either of the upstairs tenants for failure to pay their share of the bills. On November 20, 1991, Legg moved out of 1139 Discus Mill Road.

The current balance on the BG & E bill for 1139 Discus Mill Road is $2,092.01, and Legg is in danger of having her current electric service turned off at her new residence based on this prior unpaid balance. LEGAL ANALYSIS Background The purpose of the Maryland Consumer Protection Act (CPA) is well established. Md.Code (1975, 1990 Repl.Vol.), § 13-102 of the Commercial Law Article [hereinafter CPA]; CitaraManis v. Hallowell, 328 Md. 142 , 613 A.2d 964 (1992); Golt v. Phillips Bros. & Assocs., 308 Md. 1 , 517 A.2d 328 (1986). The Legislature’s goal in enacting the CPA was to provide protection against unfair or deceptive practices in consumer transactions by “implementing] strong protective and preventative measures to assist the public in obtaining relief from unlawful consumer practices and to maintain the health and welfare of the citizens of the State.” CitaraManis, 328 Md. at 150 , 613 A.2d 964 (citing CPA § 13-102).

In 1976, ⁷⁵⁷ the CPA was amended to include consumer real estate. Id. at 150, 613 A.2d 964 ; CPA § 13-303(1) and (2). Actions under the CPA may be brought by the Division or by private consumers. CitaraManis, 328 Md. at 150 , 613 A.2d 964 .

Although the Division is not required to show actual deception or damage, CPA § 13-302, a private consumer bringing an action under the CPA must show actual injury or loss sustained as the result of a practice prohibited under the CPA. CPA § 13-408; see also Galola v. Snyder, 328 Md. 182, 185-86 , 613 A.2d 983 (1992) (recapitulating the holding of CitaraManis); CitaraManis, 328 Md. at 151-53, 613 A.2d 964 ; Golt, 308 Md. at 12 , 517 A.2d 328 . The rationales undergirding the actual injury or loss requirement include preventing aggressive consumers from acting as self-appointed private attorneys general in situations in which the statutory violation did not personally harm the consumer and the violation was relatively minor, and the fear that consumers would use the statute’s power to harass or coerce merchants. CitaraManis, 328 Md. at 152, 613 A.2d 964 (quoting 1 H. Alperin & R. Chase, Consumer Law: Sales Practices and Credit Regulation § 136 at 193 (1986)).

The Division may initiate an action after a consumer files a complaint, CPA § 13-401, or after its own findings indicate a violation of the CPA. CitaraManis, 328 Md. at 150, 613 A.2d 964 . The Division may seek an injunction, cease and desist order, restitution, and civil penalties. CPA §§ 13-401 through 406 and 13—410.

The CPA also provides for criminal prosecution of violators. CPA § 13-411. A private consumer is not forced to elect between utilizing either the public or private enforcement proceedings but may proceed with both public and private enforcement. CitaraManis, 328 Md. at 151, 613 A.2d 964 .

The record in this case indicates only that Legg brought a private action pursuant to CPA § 13-408, “Action for damages,” which provides: (a) Actions authorized.—In addition to any action by the Division or Attorney General authorized by this title and any other action otherwise authorized by law, any person ⁷⁵⁸ may bring an action to recover for injury or loss sustained by him as the result of a practice prohibited by this title. (b) Attorney’s fees.—Any person who brings an action to recover for injury or loss under this section and who is awarded damages may also seek, and the court may award, reasonable attorney’s fees. (c) Frivolous actions.—If it appears to the satisfaction of the court, at any time, that an action is brought in bad faith or is of a frivolous nature, the court may order the offending party to pay to the other party reasonable attorney’s fees. CPA § 13-303, “Practices generally prohibited,” states that “[a] person may not engage in any unfair or deceptive trade practice____” CPA § 13-301 provides a nonexclusive list “defining” unfair or deceptive trade practices.

In addition, “[i]t is the intent of the General Assembly that in construing the term ‘unfair or deceptive trade practices’, due consideration and weight be given to the interpretation of § 5(a)(1) of the Federal Trade Commission Act by the Federal Trade Commission and the federal courts.” CPA § 13-105. Maryland appellate courts have not yet been called upon to distinguish between “unfair” and “deceptive” trade practices. The Federal Trade Commission and federal courts, however, have often treated them as separate and distinct prohibited practices. E.g., American Financial Servs.

Assn. v. F.T.C., 767 F.2d 957 , 971 n. 15 (1985) [hereinafter A.F.S.A.] (stating that the FTC’s reliance on a consumer unfairness rationale as an independent basis for its actions is of relatively recent origin); Pfizer, Inc., 81 F.T.C. 23 (1972) (stating that “[t]he Commission’s jurisdiction to proscribe ‘unfair’ commercial practices has been utilized frequently as an independent basis for Commission action.”). In Golt, 308 Md. at 8-9 , 517 A.2d 328 , the Court of Appeals reviewed three forms of unfair or deceptive trade practice listed in CPA § 13-301. (1) False, falsely disparaging, or misleading oral or written statement, visual description, or other representation of any ⁷⁵⁹ kind which has the capacity, tendency, or effect of deceiving or misleading consumers; (2) Representation that: (i) Consumer ... realty ... have a sponsorship, approval, accessory, characteristic ... which they do not have; (3) Failure to state a material fact if the failure deceives or tends to deceive.... In that case, John Golt, an elderly, disabled retiree, responded to an advertisement placed by Phillips Brothers for a furnished, multi-family, rental apartment.

When Golt inspected the premises, he found that repairs were necessary. Despite assurances from Phillips Brothers that those repairs would be made, the repairs were never made. Golt filed a complaint with the Baltimore City Department of Housing and Community Development regarding the condition of the apartment. A City housing inspector concluded that the unit was not licensed as required by the Baltimore City Code for multifamily use and that there were numerous housing code violations, including lack of a toilet, no fire doors, defective door locks, and no fire exits.

Rather than make the necessary repairs, Phillips Brothers evicted Golt during his lease term. Golt, 308 Md. at 5-6 , 517 A.2d 328 . A violation of CPA § 13-301(1) was found because Phillips Brothers rented an apartment to Golt without informing him that the advertised rental apartment was not licensed for rental in violation of the Baltimore City Code, art. 13, § 1101 (1983). The Court held that “[ijmplicit in any advertisement and rental of an apartment is the representation that the leasing of the apartment is lawful.” Golt, 308 Md. at 9 , 517 A.2d 328 .

Since the Phillips Brothers apartment was not lawfully licensed, the advertisement was a “misleading ... statement ... or other representation of any kind which has the capacity, tendency, or effect of deceiving or misleading consumers.” Id. (quoting CPA § 13-301(1)). Regarding CPA § 13-301(2), the Court stated that a false representation that a leased apartment is lawful is “in essence ⁷⁶⁰ a representation that the ‘realty ... [has] a sponsorship, approval ... [or] characteristic ... which [it does] not have’ ...—namely, licensing for operation as a multiple family dwelling.” Golt, 308 Md. at 9 , 517 A.2d 328 (quoting CPA § 13-301(2)). Moreover, the Court held that in the context of the CPA “the meaning of any statement or representation is determined not only by what is explicitly stated, but also by what is reasonably implied.” Id.

Regarding CPA § 13-301(3), the Court opined that an omission of fact is considered material “if a significant number of unsophisticated consumers would attach importance to the information in determining a choice of action.” Golt, 308 Md. at 10 , 517 A.2d 328 (citations omitted). Thus, the Golt Court concluded that “the lack of proper licensing for an apartment under most circumstances is a material fact that any tenant would find important in his[7her] determination whether to sign a lease agreement and move into the premises.” Id. I Legg’s first argument is that the Castruccios committed a deceptive trade practice when they failed to inform her that 1) when she obtained [utility] service in her name for her own apartment, she would also be potentially liable for the utility bill of anyone they chose to rent the other apartment; 2) [utility] service to her own apartment would be threatened if their other tenants failed to pay for their [utility] usage; 3) the Castruccios’ [sic] would take no action to attempt to correct the problem if the other tenants did not pay for their [utility] usage; and 4) they would, in the end, simply wash their hands of the predicament they had placed her in, leaving Ms. Legg responsible for the [utility] usage of their other tenants. ⁷⁶¹ A Single Utility Meter The undisputed facts of this case are that the Castruccios did not make Legg aware that her utility bill also would include the utility usage of the upstairs apartment until some time after she leased the downstairs apartment. In our view, a significant number of unsophisticated consumers who are shopping for a rental unit and are told that they must establish an account with the utility company and pay the utilities in addition to rent would attach importance to whether his/her bill will include utility usage of other tenants.

Moreover, whether the Castruceios intended to deceive Legg is irrelevant. Golt, 308 Md. at 10 , 517 A.2d 328 . The Castruccios’ failure to make this fact known to Legg prior to her tenancy was a “[failure to state a material fact” that deceived Legg in violation of CPA § 13-303(3). Nonetheless, since this is a private action pursuant to CPA § 13-408, it can only be maintained if the Castruceios’ prohibited acts caused Legg’s damages.

CitaraManis, 328 Md. at 153, 613 A.2d 964 . The trial court found that Legg’s damages were not actually caused by the Castruceios’ failure to disclose the utility situation to Legg because once she was aware that her account was for the entire house, she freely agreed to the billing arrangement. Thus, the trial judge opined: “It is incongruous to argue on the one hand that Legg knew of the arrangement from the beginning, and on the other hand argue that the Castruceios’ [sic] deceived Legg by misleading her in some way regarding the agreement.” Once Legg was made aware of the billing arrangement, she made a voluntary agreement with the upstairs tenants, David Bushell and later Harcourt and Papilon, to share the utility costs. These agreements caused Legg no problem for over two years.

Legg had a month-to-month lease and could have moved to a new apartment but she did not. Once she was aware of the material facts regarding the billing, Legg made a conscious choice to accept that arrangement and stay on the premises. The arrangement only became unacceptable when the upstairs tenants stopped paying their share of the utility ⁷⁶² bills. Thus, Legg’s damages were the result of the upstairs tenants’ delinquency and not the fact that she did not initially know that the utility bill included the upstairs tenants’ utility usage.

Continued Utility Service Threatened Legg’s second assertion of deception is without merit because it speaks only in terms of threats and not actual harm. The record is undisputed that Legg’s utility service was never terminated while she lived at 1139 Discus Mill Road and that service has not been terminated at her present residence. In addition, we are not persuaded that it was the Castruccios’ burden to inform Legg that if she did not pay a utility bill in her name the utility company would threaten to disconnect service. To be sure, any unsophisticated consumer would find it important to know that if he/she did not pay his/her utility bill, his/her service would be terminated; information regarding utility billing, however, is properly the jurisdiction of the utility company.

Moreover, the Castruccios’ letter clearly indicates that they did not intend to be liable for the failure of the tenants of either apartment to pay their respective share of the utility bill. Failure to Act or Take Responsibility Legg asserts that the Castruccios deceived and/or misled her when they did not inform her that “they would take no action to attempt to correct the problem” if the upstairs tenants failed to pay her their share of the utility bills, and that “they would, in the end, simply wash their hands of the predicament.” Both of these allegations are broad and vague. This fundamental problem is compounded by the structure of Legg’s supporting arguments. Apparently, Legg believed that Sadie Castruccio’s statement that she “would take care of it” after being requested to install separate meters mislead her into believing that “she would not be held responsible for the upstairs tenants’ utility service charges.” This argument is without logic because Legg’s testimony was that Sadie Castruccio was responding to ⁷⁶³ her request for separate meters, not a request to pay the upstairs tenants’ share of the utility bills.

Since this conversation was not regarding payment of utility bills, it could not have misled Legg into believing that the Castruccios would pay those bills. Legg further contends that “Mrs. Castruccio’s assurance that the upstairs tenants would be responsible for one-half of the [utility] bill” misled her into believing that the Castruccios would “require” the upstairs tenants to pay their share. Legg never expressly states what she believed the Castruccios could do to “require” the upstairs tenants to pay. Legg’s separate argument regarding the covenant of quiet enjoyment suggests that the Castruccios could have evicted the upstairs tenants, and thereby mitigated her damages, but she does not suggest that the Castruccios could have legally “required” the upstairs tenants to pay Legg the past due amount.

The most, therefore, Legg can contend only that the Castruccios deceived her into believing they would take appropriate legal action to evict the upstairs tenants if the tenants were delinquent in paying their share of the utility bills. This is essentially a question of whether the Castruccios breached the covenant of quiet enjoyment; since Legg would not be entitled to a double recovery, we also consider this issue as a potential breach of the covenant of quiet enjoyment. II Legg next argues that the Castruccios violated the CPA’s prohibition against “unfair” trade practices. She asserts three particular unfair trade practices: 1) preventing Ms. Legg from obtaining utility services, which they were required by law to make available, and without which her home would have been uninhabitable, unless the service for their other tenants was also in her name; 2) refusing to take any action to correct the problem when the upstairs tenants stopped paying; and ⁷⁶⁴ 3) requiring Ms. Legg to bear the risk of the other tenants’ nonpayment.

Legg suggests that this Court should follow the approach followed by the FTC and federal courts and permit a cause of action for unfair trade practices independent from deceptive trade practices. Relying on Golt, 308 Md. at 8 , 517 A.2d 328 , Legg contends that although the CPA does not provide an independent definition of unfair trade practice, and although the prohibited acts enumerated in the act “primarily involve deception,” the list was never intended to be exhaustive. Thus, pursuant to CPA § 13-105, Legg urges us to adopt the FTC’s current standards for finding an unfair trade practice as set forth in the FTC’s 1980 Policy Statement to Congress. See Policy Statement, infra.

Amicus also urges us to define a cause of action for unfair trade practices under the CPA. Unlike Legg, amicus argues that this Court should adopt the superseded federal regulatory standards defined in 1964 because the 1980 standards are repugnant to the CPA. Section 13-105 of the CPA requires that, in construing the term “unfair or deceptive trade practices,” we give due “consideration and weight” to the interpretation of that term by the FTC and federal courts. Pursuant to that mandate, a review of the relevant FTC actions and federal jurisprudence is warranted.

A Scope of the Consumer Unfairness Doctrine in the FTC and Federal Courts Congress created the FTC in 1914, delegating to it the limited power to determine and prevent “ ‘unfair methods of competition’ in commerce.” A.F.S.A., 767 F.2d at 965 (citing Federal Trade Commission Act, ch. 311, § 5, 38 Stat. 719 (1914) (current version at 15 U.S.C. § 45 (a)(1))). Congress specifically rejected enacting a statutory definition of the term ⁷⁶⁵ “unfair methods of competition.” Id. A House Conference Report articulated the prevailing thought: It is impossible to frame definitions which embrace all unfair practices. There is no limit to human inventiveness in this field.

Even if all known unfair practices were specifically defined and prohibited, it would be at once necessary to begin over again. If Congress were to adopt the method of definition, it would undertake an endless task. It is also practically impossible to define unfair practices so that definition will fit business of every sort in every part of this country. Whether competition is unfair or not generally depends upon the surrounding circumstances of the particular case.

What is harmful under certain circumstances may be beneficial under different circumstances. Id. at 966 (quoting H.R.Conf.Rep. No. 1142, 63d Cong., 2d Sess. 19 (1914)). Early on, the judiciary attempted to limit the FTC’s broad discretionary power to practices that hindered competition or tended to create monopolies.

These attempts were subsequently overturned by congressional and judicial action. Id. at 966; see also FTC v. R.F. Keppel & Bros., Inc., 291 U.S. 304 , 54 S.Ct. 423 , 78 L.Ed. 814 (1934) and the Wheeler-Lee Amendment to the Federal Trade Commission Act made in 1938. Ch. 49, § 3, 52 Stat. 111 (1938) (codified at 15 U.S.C. § 45 (a)). The Wheeler-Lee amendment, inter alia, “ ‘broaden[ed] the powers of the Federal Trade Commission over unfair methods of competition by extending its jurisdiction to cover unfair or deceptive acts or practices in commerce.’ ” A.F.S.A., 767 F.2d at 966 (quoting H.R.Rep.

No. 1613, 75th Cong., 1st Sess. 1 (1937)). Despite the Wheeler-Lee amendment in 1938, a growing consumer consciousness in the 1960’s and two critical oversight studies made of the FTC prompted Congress to conclude that “ ‘the FTC continued to be hampered as an effective force in promoting fair and free competition and safeguarding consumer public against unfair or deceptive acts or practices by ⁷⁶⁶ the scope of its authority being limited to matters ‘in commerce’ and by being made to rely solely on cease and desist order procedure for enforcement.’ ” Id. at 967 (quoting H.R.Rep. No. 1107, 93 Cong., 2d Sess. 29 (1974). In response, Congress enacted the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act “ ‘to codify the Commission’s authority to make substantive rules for unfair or deceptive acts or practices in or affecting commerce.’ ” Id. at 967 (quoting H.R.Conf.Rep.

No. 1606, 93d Cong., 2d Sess. 31 (1974) (footnote omitted)). Enactment of the Wheeler-Lee Amendment and the Magnuson-Moss Act legitimized the Commission’s authority to set rules governing unfair or deceptive practices, but what standards were to be applied by the Commission or the judiciary remained deeply obscured. Id. at 967. In light of the remaining broad authority that Congress granted the Commission in 1914 to define unfair competition, the Courts “accordingly adopted a malleable view of the Commission’s authority.” Id. at 967-68.

Of course, the judiciary remains the final arbiter as to questions of statutory construction. Id. As a byproduct of controversy surrounding the FTC’s exercise of its consumer unfairness authority in the late 1970’s 3 , the FTC provided a “definition” of unfair trade practices. Id. at 969-70.

The definition came in the form of a 1980 policy statement made at the request of Congress. See Letter from Federal Trade Commission to Senators Ford and Danforth (Dec. 17, 1980), reprinted in H.R.Rep. No. 156, Pt. 1, 98th Cong., 1st Sess. 33-40 (1983) [hereinafter Policy Statement ⁷⁶⁷ with page references to H.R.Rep. No. 156], quoted in A.F.S.A., 767 F.2d at 970.

The Policy Statement, subscribed to by each commissioner, attempted to “delineate ... a concrete framework for future application of the Commission’s unfairness authority.” Policy Statement at 34. The Commission suggested that the “present understanding of the unfairness standard is the result of an evolutionary process.” Id. at 35. Thus, the Commission began with its earlier three-part standard of unfairness: By 1964 enough cases had been decided to enable the Commission to identify three factors that it considered when applying the prohibition against consumer unfairness. Id. at 35 (emphasis added).

These factors were: “(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers (or competitors or other businessmen).” Id. at 35 n. 8. (quoting Statement of Basis and Purpose, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed.Reg. 8324, 8355 (1964)) [hereinafter 1964 standard]. The Policy Statement notes that the Supreme Court quoted these criteria “with apparent approval” in FTC v. Sperry & Hutchinson Co., 405 U.S. 233 , 244-45 n. 5, 92 S.Ct. 898 , 905-06 n. 5, 31 L.Ed.2d 170 (1972) [hereinafter S & H] Courts that have examined S & H in light of the Policy Statement have concluded that the most that can be reasonably inferred is that “the Supreme Court thus put its stamp of approval on the Commission’s evolving use of a consumer unfairness doctrine not moored in the traditional rationales of anticompetitiveness or deception.” A.F.S.A., 767 F.2d at 971 (footnote omitted). Indeed, the quoted 1964 standards were merely ⁷⁶⁸ used to exemplify the Supreme Court’s statement that “the Federal Trade Commission ... like a court of equity, considers public values beyond simply those enshrined in the letter or encompassed in the spirit of the antitrust laws.” S & H, 405 U.S. at 244 , 92 S.Ct. at 905 (footnote omitted).

The Policy Statement went on to state that, since the 1964 standards, “the Commission has continued to refine the standard of unfairness in its cases and rules, and it has now reached a more detailed sense of both the definition and the limits of these criteria.” 4 Policy Statement at 36. The Commission opined that consumer injury is the primary focus of the FTC Act and the most important of the S & H criteria. By itself, consumer injury could warrant a finding of unfairness. Nonetheless, not “every consumer injury is legally ‘unfair.’ ” Id. at 36.

To warrant a finding of unfairness, “the injury must satisfy three tests. It must be substantial; it must not be outweighed by any countervailing benefits to consumers or competition that the practice produces; and it must be an injury that consumers themselves could not reasonably have avoided.” Id. Consumer Injury as Refined in 1980 Regarding substantial injury, the Commission stated that it “is not concerned with trivial or merely speculative harms.” Id. (footnote omitted). “In most cases a substantial injury involves monetary harm ... [unwarranted health and safety risks may also support a finding of unfairness.” Id.

On the other hand, “[ejmotional impact and other more subjective types of harm ... will not ordinarily make a practice unfair.” Id. The countervailing benefits test recognizes that “most business practices entail a balancing of costs and benefits to the consumer.” A.F.S.A., 767 F.2d at 975. Since many trade ⁷⁶⁹ practices provide a mixed bag of costs and benefits, the Commission “will not find that a practice unfairly injures consumers unless it is injurious in its net effect.” Policy Statement at 37. This analysis includes the costs to “society in general in the form of increased paperwork, increased regulatory burdens on the flow of information, reduced incentives to innovation and capital formation, and similar matters.” Id.

The guiding principle of the not reasonably avoidable injury test is that [njormally we expect the marketplace to be self-correcting, and we rely on consumer choice—the ability of individual consumers to make their own private purchasing decisions without regulatory intervention—to govern the market. We anticipate that consumers will survey the available alternatives, choose those that are most desirable, and avoid those that are inadequate or unsatisfactory. Id. Corrective action is viewed as necessary only when consumers are prevented “from effectively making their own decisions.” Id.

The purpose of such action is “to halt some form of seller behavior that unreasonably creates or takes advantage of an obstacle to the free exercise of consumer decision making. Id. Violation of Public Policy as Refined in 1980 Regarding the second of the S & H standards, violation of public policy, the Commission stated that, despite its listing as a separate consideration, “it is used most frequently by the Commission as a means of providing additional evidence on the degree of consumer injury caused by the specific practices.” Id. at 38. Nonetheless, since evidence of consumer injury is not clear cut in all cases, the consideration permits the Commission to look to statutes or other sources of public policy to affirm that a practice is unfair.

Id. at 38-39. A public policy alone can support a Commission action when “the policy is so clear that it will entirely determine the question of consumer injury, so there is little need for a separate analysis by the Commission.” Id. at 39. Because the legislature or ⁷⁷⁰ court has already determined that such injury exists, an independent basis need not be proven. Id.

The Policy Statement warns: To the extent that the Commission relies heavily on public policy to support a finding of unfairness, the policy should be clear and well-established. In other words, the policy should be declared or embodied in formal sources such as statutes, judicial decisions, or the Constitution as interpreted by the courts, rather than being ascertained from a general sense of the national values. The policy should likewise be one that is widely shared, and not the isolated decision of a single state