Advertising & Marketing / Compliance / Contracts

Texas Deceptive Trade Practices Act – What Business Owners Must Know

The Texas Deceptive Trade Practices Act (DTPA) is a consumer protection statute that lists twenty-seven (27) specific prohibited actions, in addition to warranty violations, more general prohibitions and provides an increased penalty structure for other tie-in statutes.  Business owners should be aware of this statute and its prohibitions as many deal with advertising and pricing practices.

Advertising and marketing efforts can cause careless business to run afoul of the DTPA, and the consequences can be severe.  Businesses will not be shielded from liability due to good intentions or ignorance   Therefore, they should take pains to be accurate, clear and forthright with consumers.  Advertising claims should be verified in advance and supporting records should be kept to defend against any claims of consumer deception.

The “Consumer” – It Might Be You

Under the statute, a consumer is “an individual, partnership, corporation, this state, or a subdivision or agency of this state who seeks or acquires by purchase or lease, any goods or services, except that the term does not include a business consumer that has assets of $25 million or more, or that is owned or controlled by a corporation or entity with assets of $25 million or more.”  As a result, you may be able to recover under this statute for business to business deals that were deceptive, so long as you qualify as a consumer.  (There are also limitations on the size of the transactions which can be the basis of a DTPA claim.)

Who Can Sue – Consumer & the AG

The Texas Attorney General can bring suits on behalf of consumers in the state of Texas.  This is one of the AG’s primary functions, and to that end they provide educational material for consumers.  The AG’s powers under the DTPA are stronger than consumers.  Business owners should note that this statute is specifically written so that the AG’s Office may file suits against businesses engaged “false, misleading, or deceptive acts or practices,” which includes but is not limited to the specifically prohibited actions described below.

In suits brought by consumers themselves, the consumer must show evidence of one or more of the 27 prohibited actions or a breach of an express or implied warranty or an unconscionable action.

Damages – Actual, Mental Anguish, Punitive and Attorneys’ Fees

A consumer who wins a lawsuit under the DTPA may recover for economic (money) damages; mental anguish; enhanced (punitive) damages; and attorneys’ fees depending on the circumstances.  Depending on the level of knowledge or intent, the judge or jury may increase the amount of damages up to three times the actual damage.  An action is committed “knowingly” if it is done with knowledge that the statement or representation is false or deceptive.  It is not required that the business have any awareness that the action is unlawful.  Likewise, an action is “intentional” if defendant engaged in the trade practice knowing it was false or deceptive and intending for the consumer to rely upon the practice as part of the transaction.

violation = money damages + attorneys’ fees
violation committed knowingly ≤ (money damages x 3) + attorneys’ fees + mental anguish
violation committed intentionally ≤ (money damages x 3) + attorneys’ fees + (mental anguish x 3)

What is Prohibited

The DTPA lists 27 actions which are deemed to be deceptive.  A suit for one of these “laundry list” violations may be brought by the consumer, or the AG’s office.  However, additionally, the AG may bring suit against a company for “false, misleading, or deceptive acts or practices” even if the practice is one of the 27 specifically prohibited actions.  Therefore, cautious companies should treat the laundry list as not only as actions to avoid, but also as guidance for the sort of activity which may subject them to litigation.  Some of the more notable prohibitions for small businesses are as follows:

  • “Causing confusion or misunderstanding as to affiliation, connection, or association with, or certification by, another”
  • “Representing that goods or services have … characteristics, ingredients, uses, benefits, or quantities that they do not have”
  • “Disparaging goods, services, or business of another by false or misleading representation of facts”
  • “Advertising goods or services with intent not to supply a reasonable expectable public demand, unless the advertisements disclose limitation of quantity”
  • “Making false or misleading statements of fact concerning reasons for, existence of, or amount of price reductions”
  • “Failing to disclose information … to induce the consumer into a transaction the consumer would not have entered into had the information been disclosed.”

In addition, the DTPA may be invoked for a breach of warranty or unconscionable action, as discussed below.

Breach of Warranties

Warranties are legally-enforceable promises.  Some warranties are “express” meaning they are actually articulated to the consumer, either via the contract, verbally, and occasionally via advertising.  In addition, some warranties exist as a matter of law, which are called “implied” warranties.  A warranty is breached when the goods or services are not delivered as promised.  For sellers of goods, the most common warranty in question is the “warranty of merchantability.”  This means that the good sold must be fit for the ordinary purposes for which it is used.  If as part of the selling process you discuss the consumer specific needs, you may also be subject to the “warranty of fitness for particular purpose.”  As it’s name indicates, this warranty protects the consumer’s expectation that if you suggest a product is suitable for their needs, it will in fact be suitable.

Express warranties are as varied as your contract, representations or advertising might allow.  If your statements are specific and may lead customers to rely on them, expect that your products or services will be obligated to live up to them.

Unconscionable Action

Something is unconscionable when it “takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree.”  Hopefully, no one reading this article has any concern that their actions may be unconscionable.  The trier of fact (either a jury or a judge) will make a determination based on all the facts and circumstances in the case.

Tie-In Statues

In addition to its specifically delineated prohibitions, the DTPA also acts as a mechanism for assessing damages for other “tie-in” statutes.  The tie-in statutes may be attached to the DTPA by the legislature as new bills are drafted.  In this way, the DTPA provides a framework for future consumer protection statutes as well.

More Information

The Journal of Consumer & Commercial Law follows developments in tie-in statues, and has published “Consumer Status and Tie-In Statutes under the DTPA” about their operation and history.

For a more in-depth discussion of the DTPA, including it’s history and operation, please click here for Richard M. Alderman’s “The Texas Deceptive Trade Practices Act In Context: Not All That Bad.”

The Texas Attorney General’s website discusses consumer protection in general, with information regarding their latest DTPA-based cases.

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© 2013 The Law Offices of Jenny Allenbaugh, PLLC
Principal office in Austin, Texas

 
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