Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Idaho law would bar below cost pricing, deceptive advertising even if Unfair Sales Act is repealed: Attorney General, (Apr 17, 2014)

By John W. Arden, J.D., LL.M.

Even if the Idaho Unfair Sales Act were repealed, the state would have statutes prohibiting below cost pricing and deceptive advertising, according to an April 16 letter from the Idaho Attorney General’s office to Idaho State Representative Jason Monks. The Idaho Competition Act and Consumer Protection Act would address the issues of below cost pricing and deceptive advertising, respectively.

Rep. Monks asked the Attorney General whether there were Idaho laws addressing the issues of below cost pricing and deceptive advertising, apart from the seldom-used Unfair Sales Act. Deputy Attorney General Brett T. DeLange responded to this question with an eight-page letter, providing the legislative history of the Unfair Sales Act, setting out the enforcement history of the statute, and describing how the state Competition Act and Consumer Protection Act can be used against predatory pricing and deceptive advertising.

Legislative history. Enacted in 1939, the Unfair Sales Act (Idaho Code §48-401, et seq.) declared the practice of selling “certain items of merchandise below cost in order to attract patronage” to be a deceptive form of advertising and an unfair method of competition, since it “tends to create a monopoly in commerce.” The original version of the statute made county prosecuting attorneys responsible for enforcing the law and provided a private cause of action. In 1941, the statute was amended to require the state attorney general to assist in enforcing the law. In 1945, the primary responsibility for enforcement of the Act was transferred to the Commission of Finance. 1955 amendments obligated the Governor of Idaho to supervise and administer the statute.

Enforcement history. “Despite the Act’s 75-year history, there are no reported Idaho cases interpreting the below cost provisions of the Act,” according to the letter. There is one unreported district court memorandum decision, denying a defendant’s motion to dismiss a complaint filed by the state under the Unfair Sales Act. DeLange speculates that enforcement might have been deterred by exceptions found in the Act, such as a defense for an accused offender merely meeting its competitor’s low price.

Below cost sales. The Unfair Sales Act specifically bars the advertisement, offer, or sale of merchandise by a retailer or wholesaler if the advertisement, offer, or sale is (1) below “cost”; (2) designed to induce the purchase of other merchandise or unfairly divert trade from competitors; and (3) results in a tendency to deceive purchasers, to substantially lower competition, to unreasonably restrain trade, or to create a monopoly.

The Idaho Competition Act (Idaho Code §48-105, et seq.) prohibits predatory pricing, which has been defined by the U.S. Supreme Court as “pricing below an appropriate measure of cost for the purpose of eliminating competitors in the short run and reducing competition in the long run.” Cargill v. Montfort of Colorado, Inc., 479 U.S. 104, 1986-2 Trade Cases ¶67,366). Price cutting is not deemed to be predatory pricing under federal antitrust law merely because it is intended to, or does, meet or beat competition and is below the seller’s cost, the letter explained.

Since the Idaho Competition Act is to be construed in harmony with the federal judicial interpretation of comparable federal antitrust statutes, the rules laid down by the Supreme Court would be follow by Idaho courts in applying the Idaho Competition Act to predatory pricing. “The bottom line, then, is that Idaho’s Competition Act presently addresses below cost sales to the extent that such sales are deemed predatory, as set forth above,” DeLange wrote.

Deceptive advertising. The Unfair Sales Act further prohibits deceptive advertising. However, even if the Act were repealed, deceptive advertising would be prohibited by the Idaho Consumer Protection Act (Idaho Code §48-601, et seq.). This statute prohibits unfair and deceptive practices that have a tendency or capacity to deceive consumers. The statute sets forth a number of acts or practices that are declared false, deceptive, and misleading, including deceptive representations regarding the advertising or promotion of a product, the letter said. This statute is enforced by the Attorney General and provides a private cause of action. Thus, if the Unfair Sale Act were repealed, there would still be state and private enforcement of prohibitions against deceptive or misleading advertising.

News: Advertising Antitrust StateUnfairTradePractices IdahoNews