Philadelphia joins other major US cities in passing a local law to address consumer fraud and abuse. With its newfound enforcement authority, the Philadelphia Law Department can investigate and initiate legal action against businesses that engage in unfair, deceptive, or misleading practices that harm Philadelphia consumers. Corporations doing business in Philadelphia must be aware of the potential liability this new ordinance creates.
Mayor Cherelle Parker recently signed the Philadelphia Consumer Protection Ordinance (PCPO), which expands protections for consumers against unfair and deceptive business practices and provides several remedies. In passing this ordinance, Philadelphia joins a growing number of localities that have adopted similar ordinances, including Chicago, New York City, Baltimore, and Washington, DC.
What Gives Rise to Additional Consumer Protection Liability in Philadelphia?
The PCPO authorizes the Philadelphia Law Department to investigate and initiate legal action against businesses that sell, distribute, advertise, or lease goods or services in a misleading or deceptive manner, listing 22 forms of unfair methods of competition/unfair or deceptive acts or practices.[1] Any business alleged to have engaged in such acts or practices will be subject to legal action by the City of Philadelphia if unable to apply either a good-faith defense or any of the defenses found in Section 230 of the Communications Decency Act.[2]
While the PCPO supplements existing statewide consumer protection laws and expands the scope of unfair business practices, Philadelphia previously lacked its own enforcement mechanism to combat consumer abuse. Prior to this ordinance, offending companies were subject only to Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL) and relevant federal law.
Furthermore, only the State Attorney General and district attorneys can enforce and prosecute violations of the UTPCPL. With the PCPO, the Law Department can now investigate and initiate a legal action in any court with jurisdiction. No private right of action exists under the ordinance, so individuals subjected to violative conduct will have to convince the Law Department to initiate an investigation or lawsuit against an offender.
Both the UTPCPL and PCPO prohibit similar methods of unfair competition. However, the PCPO targets additional business practices, including those related to the following:
- Disclosure of certain material facts in advertising[3]
- Use of statements that rely on exaggeration, innuendo, or ambiguity[4]
- Terms and conditions governing subscriptions of products or services[5]
The PCPO authorizes the Law Department to seek various forms of relief in relation to a violation, including compensatory damages and restitution for affected consumers, civil penalties of up to $2,000 per violation, and injunctions for predatory behavior.
RELATED CONSUMER PROTECTION ENFORCEMENT ACTIONS & SETTLEMENTS
As of the date of this publication, and three months since its enactment, Philadelphia has yet to enforce the PCPO. However, actions brought in Pennsylvania under the UTPCPL and in multiple cities pursuant to their consumer protection ordinances may foreshadow potential enforcement targets in Philadelphia.
- Chicago, December 2022 – The city law department filed lawsuits related to unfair practices against food delivery services companies and settled for $10 million.
- Pennsylvania, July 2024 – The Attorney General recently settled a UTPCPL lawsuit for denying property access to timeshare owners and charging maintenance and usage fees. The owners were required to pay $5,000 in civil penalties, $50,000 in costs, and up to $250,000 in restitution.
- New York City, April 2024 – A New York–based funeral home company was recently sued by the city for obscuring pricing options and information, misrepresenting the quality and timing of services to be provided, and failing to complete services already paid for.
- New York City, January 2024 – A group of used car dealers agreed to a $1.5 million settlement for deceptive advertising related to the condition and price of used vehicles and for misleading customers and lenders to secure loans and financing. The city also obtained $300,000 in civil penalties and imposed a five-year ban on the owners’ operation of a used car dealership.
PHILLY SPECIAL: WHO AND WHAT INDUSTRY WILL BE FIRST?
It is hard to predict which company or industry will be the focus of the first investigation and ultimate lawsuit under the PCPO. Based on the expansive language of the ordinance and settlements related to similar laws, we offer the following insight and thoughts:
- Advertising, Statements, and Subscription Terms in Philadelphia Should Be Examined. The PCPO’s expansive language concerning deceptive or misleading advertising, exaggeration, and subscriptions signals that companies or industries that rely on these practices in their operations and have experienced significant customer complaints could be primary targets. An enforcement targeting such companies could lead to a potentially lucrative settlement as evidenced by two of the settlements discussed above. Companies should carefully review their advertisements, statements used to describe the company’s goods and services, and the terms and conditions governing subscriptions of their products or services. Companies should heighten this assessment if they have received complaints from Philadelphia consumers.
- Ecommerce, Retail, and Industries with Direct Interaction to Philadelphia Consumers Could Be First. Industries with the most direct outreach to or contact with Philadelphia consumers, such as ecommerce and retail, could be the first impacted industries. These industries’ direct daily interactions with Philadelphians would increase the potential exposure to consumer complaints and the attention of the City of Philadelphia. To avoid attention or scrutiny under the PCPO, companies within these industries should focus on their advertising, statements, and subscription of terms for their goods and services in Philadelphia.
- Municipalities Will Continue to Flex Their Legislative Power. Generally, the PCPO should serve as a reminder to businesses and industries of the additional liability that municipalities can create and ultimately enforce through their own local legislation. Further, municipalities can potentially legislate and try to enforce laws that contradict each other, making it difficult for national companies to simultaneously comply. It is important to review all applicable legislations, identify the provisions that overlap and the ones that conflict, and assess the related risk and potential liability.
[1] Phila. Code § 9-6201(i)–(xxii).
[2] Id. § 9-6202(2).
[3] Id. § 9-6201(ix).
[4] Id. § 9-6201(xx).
[5] Id. § 9-6201 (xxi).
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