Business owners, no matter what industry you are in, you are in the business of making customers happy.
Sometimes, for whatever reason, the customer might not be happy with the result of the transaction. If they believe there was some personal injustice, they might hire a lawyer and pursue a claim under the Michigan Consumer Protection Act (MCPA).
a. What conduct does the MCPA regulate?
Under the Michigan Consumer Protection Act, “[u]nfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce are unlawful ….”
Trade or commerce means the conduct of a business providing goods, property, or service primarily for personal, family, or household purposes. MCL 445.902. Therefore, if your business engages in business-to-business transactions, the MCPA likely does not apply.
The MCPA contains a laundry list, around 30, of what conduct is unlawful for business owners: Per MCL 445.903, a few of these enumerated violations include:
(a) Causing a probability of confusion…as to the source…or certification of goods or services. (If you say your coffee beans come from the mountains of Columbia, they better be!)
(c) Representing that goods or services have…characteristics, ingredients, uses, benefits, or quantities that they do not have… (e.g. if you drink our energy drink you will be dunking a basketball in no time!)
(d) Representing that goods are new if they are…secondhand. (You probably can’t reasonably believe this if you are purchasing an item from a Thrift Store.)
(e) Representing that goods or services are of a particular…quality…if they are of another. (e.g. – a ring with a diamond vs. cubic zirconia)
(f) Disparaging the goods, services, business, or reputation of another by false or misleading representation of fact. (e.g. – don’t go to X restaurant, I know they use rat meat!)
(g) Advertising or representing goods or services with intent not to dispose of those goods or services as advertised or represented. (A bait and switch)
(p) Disclaiming or limiting the implied warranty of merchantability and fitness for use, unless a disclaimer is clearly and conspicuously disclosed. (This speaks for itself! It is ok to disclaim such warranties, but they must be CONSPICUOUSLY DISCLOSED)
(z) Charging the consumer a price that is grossly in excess of the price at which similar property or services are sold. (Speaks for itself)
(aa) Causing coercion and duress as the result of the time and nature of a sales presentation. (I know I am not the only one who has sat through a time-share sales pitch)
b. What are the penalties?
Violation of the MCPA person include actual damages or $250.00, whichever is greater, together with reasonable attorneys’ fees. MCL 445.911. The possible recovery of attorney fees is a point not to be over looked, given that lawsuits are costly, and the general rule in Michigan is that each party to a lawsuit pays his own attorney fees, unless a specific law would provide otherwise.
c. What are the exceptions?
There are various industries that are exempt from the MCPA, any “transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States.”Liss v Lewiston-Richards, Inc, 478 Mich 203, 208; 732 NW2d 514, 517 (2007).
This basically exempts any licensed/regulated industry, however the burden of proof is on a defendant in a MCPA lawsuit to prove that its business is indeed exempt.
d. Where is the law headed?
There have been many bills proposed to put more teeth into the MCPA. Currently, House Bill 5378 was introduced in the Michigan House of Representatives on February 27th. http://www.legislature.mi.gov/documents/2013-2014/billintroduced/House/pdf/2014-HIB-5378.pdf.From my reading of it, it seems to be meant to clarify the reach of the MCPA, and the burden of proof when a business is claiming it is exempt.
e. Take away for businesses:
- Know whether the MCPA applies to your business. If you are licensed, or engage in purely commercial transactions, then likely it does not.
- Surround yourself with good employees. The most problems that I see where the MCPA is implicated is that business owners simply do not do a thorough job in vetting out the people who work for them, most of the problems can be avoided if the people who work for you know the rules of your organization and are honest folk.
- Take care in drafting your contracts. Make sure any that any warranties that you disclaim are clearly and boldly identified. Also, it is a good idea to limit your damages in your contracts, but such limitation of damage clauses won’t apply in cases of fraud or gross negligence.