Q2. What is meant by “unfair and deceptive trade practices?”

Q3. What does a claimant have to prove?

Q4. What is an unfair trade practice?

Q5. What is a deceptive trade practice?

Q6. How does the law of civil fraud factor into the discussion?

Q7. Is it necessary to prove fraud?

Q8. To what professions does the professional services exception extend?

Q9. Does the professional services exemption cover every act professional people do?

Q10. Why is the unfair and deceptive trade practices statute so important to consumers?

     North Carolina’s Unfair and Deceptive Trade Practices Act (UDTP) was adopted by the legislature in 1969 in an effort to provide ordinary citizens redress against businesses or individuals who engage in unfair or deceptive trade practices.  The law has proved to be a powerful resource in private litigation.

1. What is the “unfair and deceptive trade practices act”?

ANSWER: It is a statute enacted by the North Carolina legislature in 1969 in an effort to address unfair methods of doing business in the State. 

2. What is meant by “unfair and deceptive trade practices?”

ANSWER: The legislature intentionally left the definition of those terms to the courts, so there is no actual definition of the phrase in the statute. The statute, N.C. Gen. Stat. §75-1.1, simply says that “Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful.” (NCGS §75-1.1(a)) The statute does provide a broad definition of the term “commerce,” saying that “’commerce’ includes all business activities, however denominated, but does not include professional services rendered by a member of a learned profession.” NCGS § 75-1.1(b) There is also an exception that excludes owners, officers and employees of advertising media (newspapers, radio stations, TV stations and others) from liability for false, misleading or deceptive advertising so long as the media involved had no direct financial interest in the sale or distribution of the product or service advertised. It should be noted that although the title of the statute is “Unfair and Deceptive,” the actual words in the statute say “unfair or deceptive” acts or practices. That little difference in the language means that a claimant does not have to prove that a trade practice was both unfair and deceptive; only that the trade practice was either unfair or that it was deceptive. Because the legislature provided no definitions of those terms, it has been left to the courts to fill in those definitions.

3. What does a claimant have to prove?

ANSWER: The first step is to prove that the acts complained of occurred “in or affecting commerce.”  As noted above, commerce is defined in the statute as including “all business activities, however denominated.”  There are specific exemptions for professional services, largely because there is a substantial body of law in the area of professional negligence that provides protection for persons harmed in those transactions.  Once it is established that the acts took place in or affecting commerce, one must prove the occurrence of acts that were either unfair or deceptive.

4. What is an unfair trade practice?

 ANSWER: According to decisions of the North Carolina courts, an unfair trade practice involves conduct that is “immoral, unethical, oppressive, unscrupulous, or substantially injurious.” 

5. What is a deceptive trade practice?

ANSWER:

A deceptive trade practice is a practice that “possesses the tendency or capacity to mislead, or creates the likelihood of deception.”  The definitions of “unfair” and “deceptive” cover a lot of territory. 

6. How does the law of civil fraud factor into the discussion?

ANSWER: Under a line of decisions from the North Carolina courts, proof of fraud amounts to proof of an unfair or deceptive trade practice.  The elements of fraud fulfill the definitions of “unfair and deceptive trade practices” that have developed.

7. Is it necessary to prove fraud?

ANSWER: No, it is not necessary to prove fraud to win an unfair and deceptive trade practices case.  An act can be unfair or deceptive without the element of intent that is necessary in a fraud case.   In other words, to prove fraud, one must prove that the defendant acted with the intent to deceive the plaintiff.  There is no essential element of intent in unfair and deceptive trade practices. 

8. To what professions does the professional services exception extend?

ANSWER: By the language of the statute, the exception covers the “learned professions.”  Traditionally, that would include clearly attorneys, physicians, and dentists, but as licensing requirements for other professions have become more stringent, it is not unreasonable to think the courts might be willing to expand the exemption into non-traditional areas as well.  To some degree, that has been done by the legislature.  The practices of insurance adjusters, for example, are regulated under the North Carolina statutes governing insurance company practices generally.  It would not be surprising to see realtors, contractors, and a variety of other licensed occupations seek to come within the ambit of the professional services exemption as well. 

9. Does the professional services exemption cover every act professional people do?

ANSWER: No.  The exemption only covers “professional services rendered by a member of a learned profession.”  The theory underlying the exemption is that there are already remedies available for professional negligence or misconduct (i.e., “malpractice”).  A more difficult question is when a member of a learned profession engages in unfair and deceptive practices with regard to purely business matters, most notably billing and collections.  It seems readily apparent that a member of a learned profession would not fall within the professional services exemption if he or she engaged in unfair or deceptive billing or collection practices. 

10. Why is the unfair and deceptive trade practices statute so important to consumers?

ANSWER: A litigant who successfully proves a violation of the UDTP is entitled to have her actual damages trebled according to N.C. Gen. Stat § 75-16.  In other words, if someone engages in unfair or deceptive acts and you lose $20,000 as a consequence, the court has the power to triple that amount in the judgment against the defendant.  In addition, the court also has the power to award the successful litigant reasonable attorney’s fees.