Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Ill.: Advertising of Christmas lights not deceptive, (Aug 29, 2013)

By Jody Coultas, J.D.

Marvellous Day Electric (S.Z.) Co. failed to state Illinois Uniform Deceptive Trade Practices Act (UDTPA) and Consumer Fraud and Deceptive Business Practices Act (CFA) claims against Ace Hardware Corp. for falsely advertising Christmas lights manufactured by a third party, according to the federal district court in Chicago (Marvellous Day Electric (S.Z.) Co . v. Ace Hardware Corp., August 27, 2013, Tharp, J.).

Marvellous Day alleged that Ace violated the UDTPA and CFA by advertising their lights as “always lit” and “patented.” Ace also allegedly used a photo of Marvellous Day’s Christmas lights, which featured removable and replaceable light bulbs, on its website to advertise for Christmas lights that were produced by another manufacturer and which do not have the same features.

The court declined to dismiss the CFA claim on the grounds that Ace intended to deceive consumers rather than Marvellous Day. Ace argued that the CFA required Marvellous Day to show that Ace intended to deceive the plaintiff, i.e. Marvellous Day. Non-consumers have standing to bring claims under the CFA so long as they allege deceptive trade practices addressed to the market generally or otherwise implicate consumer protection concerns. Courts have approved CFA claims by non-consumers where the plaintiff alleges that the defendant intended to deceive consumers, not the plaintiff itself. Therefore, defendants are not free under the CFA to use deceptive practices so long as the party deceived differs from the party harmed. The court found no logical reason why Marvellous Day should not be able to state a CFA claim merely because the deception was directed towards consumers.

The CFA claim failed for failure to show materiality, according to the court. A deceptive act is material if it concerned the type of information upon which a buyer would be expected to rely in making a decision whether to purchase the product. Consumers generally do not consider whether a product is patented when deciding to purchase a product. Marvellous Day failed to present any evidence to support its argument that consumers take the patent status of the bulbs used in strings of holiday lights into account when choosing which light strings to purchase. Likewise, Marvellous Day failed to show any evidence that consumers were influenced by the “always lit” term or the availability of replacement bulbs.

Marvellous Day argued that Ace caused consumers to purchase competing Christmas lights, which diminished demand for Marvellous Day’s Christmas lights, and caused its sales to drop 65%. The lost sales due to Ace’s wrongful conduct were sufficient to show damages, but insufficient to show that the drop in sales reflected the deception of any consumers. The drop in sales could have been due to the fact that Ace moved to another supplier and stopped buying Marvellous Day’s light strings.

Because Marvellous Day failed to adequately allege that the statements were material to consumers’ purchasing decisions or that the statements caused Marvellous Day to suffer damages, the court dismissed the UDTPA claim.

The cases are Nos. 11 C 8756 and 11 C 8768.

Attorneys: David L. Newman (Arnstein & Lehr LLP) for Marvellous Day Electric (S.Z.) Co., Ltd. Robert P. Greenspoon (Flachsbart & Greenspoon, LLC) for ACE Hardware Corp.

Companies: Marvellous Day Electric (S.Z.) Co., Ltd.; Ace Hardware Corp.; Holiday Bright Lights, Inc.

Cases: StateUnfairTradePractices Advertising IllinoisNews