Section 5 of the FTC Act

Section 5 of the FTC Act prohibits entities from engaging in unfair or deceptive acts or practices in interstate commerce. An act or practice is deceptive if it involves a representation, omission, or practice that is likely to mislead consumers acting reasonably under the circumstances, and the representation, omission, or practice is material. Thus, an advertisement is deceptive if it includes material information that is false or that is likely to mislead a consumer acting reasonably under the circumstances. Likewise, an advertisement is deceptive if it omits material information, and that omission is likely to mislead a consumer acting reasonably under the circumstances. Requiring accurate disclosure of material terms allows consumers to compare similar services offered by one or multiple providers and weigh the different terms being offered in making decisions about what services to purchase.

An act or practice is unfair, also in violation of the FTC Act, if it causes injury to consumers that: (1) is substantial; (2) is not outweighed by countervailing benefits to consumers and competition; and (3) consumers themselves could not reasonably have avoided. The Commission has used its unfairness jurisdiction in a broad array of cases. For example, the Commission has taken the position that cramming unauthorized charges for information services onto consumers’ telephone bills is an unfair practice. In the data security context, the Commission has challenged the failure to implement reasonable safeguards to protect the privacy of consumer information, where the failure causes substantial injury without offsetting benefits, as an unfair practice. See, e.g., CardSystems Solutions, Inc., FTC Dkt. No. C-4168 (Sept. 5, 2006) (decision and order) ; DSW, Inc., FTC Dkt. No. C-4157 (Mar. 7, 2006) (decision and order) ; United States v. ChoicePoint, Inc., No. 106-CV-0198 (N.D. Ga.) (settlement entered on Feb. 15, 2006); BJ’s Wholesale Club, Inc., FTC Dkt. No. C-4148 (Sept. 20, 2005) (decision and order).

The Commission also has taken the position that a unilateral change of contract may be an unfair practice.