In Camacho v. Automobile Club of Southern California, ___ Cal.App.4th ___ (May 3, 2006), the Court of Appeal (Second Appellate District, Division Eight) exacerbated the split in authority on what formulation of "unfair" should apply to consumer actions after Cel-Tech. It held that Cel-Tech overruled other formulations, but that the Cel-Tech formulation itself was unsuitable for consumer actions:
[W]e do not think that Cel-Tech’s definition of “unfair” in cases involving anticompetitive practices applies to consumer cases. There are two reasons for this. First, “tethering” a finding of unfairness to “specific constitutional, statutory or regulatory provisions” does not comport with the broad scope of section 17200. “Tethering” the concept of unfairness to existing positive law undercuts the principle that a practice is prohibited as “unfair” or “deceptive,” even if it not “unlawful” or vice versa. (Cel-Tech, supra, 20 Cal.4th at p. 180.) .... Second, anticompetitive conduct is best defined in terms of the policy and spirit of antitrust laws; the same cannot be said of a business practice that is “unfair” or “deceptive” in the terms of section 17200. That is, cases involving anticompetitive conduct move in a far smaller, and more clearly defined, universe than unfair or deceptive business practices. It is therefore possible to “tether” anticompetitive conduct to the antitrust laws, while the universe of laws and/or regulations that bear on unfair practices is so varied that it is not possible to achieve a consensus which of these laws and regulations might apply to define an unfair practice.(Slip op. at 9-10.) Therefore, the court developed a new, intermediate standard for consumer actions:
Cel-Tech itself holds the key to the definition of “unfair” in consumer cases. Cel-Tech holds that “we may turn for guidance to the jurisprudence” arising under section 5 of the Federal Trade Commission Act. (Cel-Tech, supra, 20 Cal.4th at p. 185.) Since 1980, the factors that define unfairness under section 5 are: (1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided. (Orkin Exterminating Co. v. F.T.C. (11th Cir. 1988) 849 F.2d 1354, 1364.) These factors have now been codified in title 15 United State Code section 45(n). This definition of “unfair” is on its face geared to consumers and is for that reason appropriate in consumer cases. It is also suitably broad and is therefore in keeping with the “sweeping” nature of section 17200. We will refer to this as the “section 5 test.”(Slip op. at 10-11.) The court then held that the plaintiff could not plead facts sufficient to meet its newly-adopted "section 5 test." (Slip op. at 11-13.)
This case harkens back to Bardin v. DaimlerChrysler Corp., ___ Cal.App.4th ___ (2006), in which the Court of Appeal (Fourth Appellate District, Division Three) asked the Supreme Court to tell us what formulation of "unfair" applies to consumer actions. (See my original post on this decision here.) However, no petition for review was apparently filed in that case.