Caldor, Inc. v. Heslin

• Decision Date: 10 July 1990
• Docket Number: No. 13754,13754
• Court: Connecticut Supreme Court
• Parties: , 59 USLW 2072 CALDOR, INC. v. Mary M. HESLIN, Commissioner of Consumer Protection, et al.

Page 1009

577 A.2d 1009

215 Conn. 590, 59 USLW 2072

CALDOR, INC. v. Mary M. HESLIN, Commissioner of Consumer Protection, et al.

No. 13754.

Supreme Court of Connecticut.

Argued April 12, 1990.

Decided July 10, 1990.

Eliot B. Gersten, with whom was Peter H. Lovell, Hartford, for appellant (plaintiff).

Stephen R. Park and John M. Looney, Asst. Attys. Gen., and, on brief, Clarine Nardi Riddle, Atty. Gen., and Robert M. Langer, Asst. Atty. Gen., for appellees (defendants).

Before PETERS, C.J., and CALLAHAN, GLASS, COVELLO and HULL, JJ.

HULL, Justice.

This appeal involves a challenge to a regulation promulgated by the named defendant, the commissioner of the department of consumer protection, ¹ that established as unfair or deceptive certain acts or practicies in the advertising of manufacturers' rebates. The plaintiff, Caldor, Inc., instituted the present action seeking a permanent injunction staying the effectiveness and enforcement of the regulation. The case was tried to the court and judgment was rendered for the defendants. From this judgment the plaintiff appealed to the Appellate Court. We subsequently transferred the case to ourselves pursuant to Practice Book § 4023. We affirm the judgment of the trial court.

The trial court's memorandum of decision reveals the following facts. The Connecticut Unfair Trade Practices Act (CUTPA) prohibits "unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110b(a). The legislature did not codify a comprehensive list of "unfair or deceptive acts or practices," but rather articulated its intent that, in construing the scope of the statutory prohibition, "the [named defendant] and the courts ... shall be guided by interpretations given by the Federal Trade Commission and the federal courts to Section 5(a)(1) of the Federal Trade Commission Act (15 U.S.C. 45(a)(1)) [prohibiting 'unfair or deceptive acts or practices'], as from time to time amended." General Statutes § 42-110b(b). The legislature delegated to the named defendant the authority to "establish by regulation acts, practices or methods which shall be deemed to be unfair or deceptive in violation of [CUTPA]." General Statutes § 42-110b(c). The named defendant's authority is limited, however, by the statutory requirement that her regulations "shall not be inconsistent with the rules, regulations and decisions of the federal trade commission and the federal courts in interpreting the provisions of the Federal Trade Commission Act." General Statutes § 42-110b(c).

Pursuant to § 42-110b(c), the named defendant promulgated § 42-110b-19 of the Regulations of Connecticut State Agencies, that provides in pertinent part: "It shall be an unfair or deceptive act or practice to ... (e) Advertise the availability of a manufacturer's rebate by displaying the net price of the advertised item in the advertisement, unless the amount of the manufacturer's rebate is provided to the consumer by the retailer at the time of purchase of the advertised item. A retailer will not be required to provide the purchaser of an advertised item with the amount of the manufacturer's rebate if the retailer advertises that a manufacturer's rebate is available without stating the net price of the item. For the purpose of this subsection, 'net price' means the ultimate price paid by a consumer after he redeems the manufacturer's rebate offered for the advertised item."

The plaintiff, a New York corporation engaged in the business of retail sales in Connecticut, instituted the present action, seeking a "permanent injunction staying the effectiveness of [Regulation § 41-110b-19(e) ] and its enforcement." At trial, the plaintiff argued that the regulation is: (1) inconsistent with, and in excess of, the statutory authority granted to the named defendant; (2) in violation of substantive due process in that it is arbitrary and capricious; and (3) inconsistent with the protections that are afforded commercial speech pursuant to the federal and state constitutions.

In addressing these claims, the trial court made the following findings of fact with respect to manufacturers' rebate programs. Such a program is a marketing technique that purports to return a portion of the purchase price to the consumer after purchase. The terms and conditions of a manufacturer's rebate, including the amount of the rebate, are determined by the manufacturer. While the terms and conditions vary from manufacturer to manufacturer and from product to product, three basic conditions are common to each manufacturer's rebate program. In order to obtain the rebate from the manufacturer, the consumer must deliver to a designated address: (1) a completed rebate certificate; (2) the original cash register receipt; and (3) a valid proof of purchase. The rebate certificate and the cash register receipt are obtained from the retailer and the valid proof of purchase is typically part of the package or container purchased by the consumer.

The language of the advertisement of a product for which a manufacturer's rebate is offered is determined by the retailer. An important marketing tool used by retailers is the prominent advertisement of a product's net price, i.e., the price of the product after subtracting the rebate allowance. Such net price advertising quickly "grabs" the attention of the consumer. Advertisements by the plaintiff of products included in a manufacturer's rebate program display, in large type, the net price and, in small type, the regular price, the sale price and the amount of the manufacturer's rebate. The following is an example of the plaintiff's net price advertising:

$1 after 50cents mfr. rebate ^*

reg. 2.99 sale 1.50

reg. 2.99 ea. sale

3/6.25 less 1.25 mfr. reb. ^* 3/$5

The trial court noted that such advertising is factually untrue because the consumer necessarily incurs costs in obtaining the rebate from the manufacturer. At the very least, the consumer must incur the expense of mailing the required items to the address designated by the manufacturer. In the advertisement reproduced above, therefore, the consumer pays, at the time of purchase, $1.50 for the advertised product and then incurs the cost of obtaining the 50 cent rebate. The trial court determined that the net price advertising is likely to mislead a consumer into believing that the price of the product is $1, a belief likely to affect the consumer's purchase decision.

The trial court concluded, therefore, that the plaintiff's net price advertising of a product included in a manufacturer's rebate program is "deceptive" as a matter of law. Accordingly, the court held that: (1) in promulgating the regulation at issue, the named defendant acted within the authority granted her by General Statutes § 42-110b(c); and (2) the advertising here at issue was not protected by the federal and state constitutions.

The plaintiff's appeal to this court raises three issues. First, the plaintiff contends that because its net price advertising of products included in a manufacturer's rebate program is not "deceptive" as a matter of law, the trial court improperly sustained the regulation. Second, the plaintiff claims that the trial court mistakenly determined that such net price advertising is not subject to constitutional protection. Finally, the plaintiff maintains that the trial court improperly refused to admit at trial certain evidence relevant to a determination of the statutory and constitutional validity of the regulation. We are unpersuaded.

I

We turn first to the plaintiff's claim that the challenged regulation is inconsistent with the statutory authority granted to the named defendant and, therefore, was improperly sustained by the trial court. The trial court determined that the plaintiff's net price advertising was "deceptive" as a matter of law. This finding served as the basis for the court's conclusion that, in promulgating the regulation, the named defendant acted within the authority granted her by § 42-110b(c). The plaintiff claims that a proper application of the standards set forth by the federal trade commission compels a finding that its advertising is not "deceptive." Accordingly, argues the plaintiff, the regulation of its advertisements pursuant to § 42-110b is invalid. We conclude that the trial court properly sustained the regulation; we rely on different grounds than did the trial court, however, in reaching this conclusion. ²

Initially, we note that the nature of the plaintiff's advertising is not the focus of our inquiry, nor should it have been in the trial court. At issue in this appeal is the validity of the regulation promulgated by the named defendant. " 'Judicial review of the [named defendant's] action is governed by the Uniform Administrative Procedure Act (General Statutes, c. 54, §§ 4-166 through 4-189), and the scope of that review is very restricted. Lawrence v. Kozlowski 71 Conn. 705, [707-708,] 372 A.2d 110 (1976) [cert. denied, 431 U.S. 969, 97 S.Ct. 2930, 53 L.Ed.2d 1066 (1977) ]. Neither this court nor the trial court may retry the case or substitute its own judgment for that of the [named] defendant.' C & H Enterprises, Inc. v. Commissioner of Motor Vehicles, 176 Conn. 11, 12, 404 A.2d 864 (1978); DiBenedetto v. Commissioner of Motor Vehicles, 168 Conn. 587, 589, 362 A.2d 840 (1975); see General Statutes § 4-183[j]. ³ 'The court's ultimate duty is only to decide whether, in light of the evidence, the [named defendant] has acted unreasonably, arbitrarily, illegally, or in abuse of [her] discretion.' Burnham v. Administrator, 184 Conn. 317, 322, 439 A.2d 1008 (1981); Riley v. State Employees' Retirement Commission, 178 Conn. 438, 441, 423 A.2d 87 (1979); see also Persico v. Maher, 191 Conn. 384, 409, 465 A.2d 308 (1983)." Buckley v. Muzio, 200 Conn. 1, 3, 509 A.2d 489 (1986); New Haven v. Freedom of Information Commission, 205 Conn. 767, 773, 535 A.2d 1297 (1988); ...