Alert September 05, 2012

Federal Court Rules State Consumer Protection Statute Applicable to Consumer-Facing Conduct Only

The United States District Court for the Eastern District of New York ruled in favor of a credit card processing company and bank, holding that New York’s consumer protection statute cannot be extended to businesses where the alleged deceptive and unlawful conduct is not consumer-oriented. Plaintiff, an online provider of prepaid calling cards, alleged violations of New York common law and New York’s consumer protection statute for an alleged non-contracted-for per item fee. The Court dismissed plaintiff’s claims under New York’s consumer protection statute, which prohibits as unlawful, deceptive acts or practices in the conduct of any business, trade or commerce, or in the furnishing of any service. The Court found that plaintiff failed to establish one of the prima facie factors necessary to prove a violation—that defendant’s deceptive acts were directed at consumers. In reaching its decision, the Court held that a business is not a consumer under the New York law, and that “where the alleged conduct is targeted only at businesses, and has no direct impact on consumers,” a claim under the New York consumer protection law is not allowed. Because defendant’s credit card processing services were, “by nature, a business product,” plaintiff’s claims under the New York consumer protection law failed.