Luskin's v. Consumer Protection, 64

• Court: Court of Appeals of Maryland
• Citation: 353 Md. 335,726 A.2d 702
• Docket Number: No. 64,64
• Parties: LUSKIN'S, INC. v. CONSUMER PROTECTION DIVISION.
• Decision Date: 22 March 1999

726 A.2d 702

353 Md. 335

LUSKIN'S, INC. v. CONSUMER PROTECTION DIVISION.

No. 64, Sept. Term, 1998.

Court of Appeals of Maryland.

March 22, 1999.

Thomas M. Wood, IV (Cynthia L. Leppert, Neuberger, Quinn, Gielen, Rubin & Gibber, P.A., on brief), Baltimore, for Petitioner.

John Nethercut, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen.; Rebecca Bowman, Asst. Atty. Gen., on brief), Baltimore, for Respondent.

Brief of the Maryland Retailers Ass'n as Amicus Curiae in support of Petitioner. William C. MacLeod, Ann M. Plaza, Collier, Shannon, Rill & Scott, Washington, DC.

Argued before BELL, C.J., and RODOWSKY, CHASANOW, RAKER, WILNER, CATHELL, and RAYMOND G. THIEME, Jr. (specially assigned), JJ.

RODOWSKY, Judge.

Presented here is an enforcement action brought by the respondent, Consumer Protection Division (the Agency), under the Maryland Consumer Protection Act (the Act), Maryland Code (1975, 1990 Repl. Vol., 1998 Cum. Supp.), §§ 13-101 through 13-501 of the Commercial Law Article (CL).¹ At the time of the violations of the Act alleged by the Agency, the petitioner, Luskin's, Inc. (Luskin's), was a retailer of electric and household goods and services throughout Maryland, in Virginia, and perhaps elsewhere. In the summer of 1992, Luskin's advertised and conducted a conditional gift promotional program which the Agency found to be deceptive. Principal among the multiple issues raised by the parties are the standard for determining deceptive advertising, particularly advertising that something is "free" and the scope of relief that the Agency may order.

I. The Promotion

Vacation Ventures, Inc. (VVI), a Florida corporation, markets vacation packages. It sells certificates for these packages to retailers who distribute them to consumers as part of sales promotions. The certificates allow consumers to start a process to obtain VVI's vacation packages, which are subject to various conditions and qualifications. After investigating the experiences that certain retailers in other areas of the United States had had with VVI, Luskin's purchased 14,600 VVI travel certificates for $78,180.

Luskin's advertised the promotion by newspaper ads and on television. Set forth below is the text of the newspaper ad. The reproduction is not to scale. In brackets behind a line of text is the measured height of the lettering in the actual newspaper ad.

Also set forth in the ad were pictures and descriptions of color televisions, air conditioners, camcorders, a dehumidifier, a cellular telephone, a display pager, a sound system, and computers. In the television advertisements of the promotion the audio portion stated the minimum purchases required for free airfare to the particular destinations, but only a written text, briefly appearing visually on the screen, advised "Minimum hotel stay required. See store for details."

The Agency found that

"[p]rior to making a purchase at Luskin's, the consumer knew from the advertisements that: (1) free airfare was contingent upon the purchase of the requisite dollar amount of goods; (2) the airfare was offered through VVI which is not affiliated with Luskin's; (3) applicable taxes applied; and (4) a minimum hotel stay was required."

The details of how the "free airfare" could be obtained were set forth in a threefold, color brochure, purchased by Luskin's from VVI. It described the vacation packages, identified the hotels, stated the room rates, set forth a page of "terms and conditions," and included a reservation request form. As found by the Agency,

"[t]he VVI brochure discloses that the consumer is required to pay the following costs: (1) a $15.00 per person non-refundable processing fee; (2) seven [for Florida] to twelve [for Hawaii] nights hotel accommodations at the non-discounted or `rack' rate; (3) three meals at $25.00 per person on the `Discovery Cruise' (if the Bahamas vacation were chosen); (4) airfare between islands at rates set by VVI (if the Hawaiian vacation were chosen); (5) air tax; (6) fuel surcharges; (7) airport departure tax; (8) hotel tax; (9) port and service charges; (10) U.S. Government cruise passenger user fee; (11) Bahamian departure tax; and (12) hotel service charge."

The brochure further advises that the consumer must state first, second, and third preferences for departure dates for the vacation destination selected, that VVI must have forty-five days notice in advance of the first choice departure date, and that the succeeding choices must each be fifteen days apart. No requested vacation date was guaranteed, and all dates were subject to availability. There were also dates when travel was not available at all, including major holidays.

The reservation request form portion of the VVI brochure was referred to by the parties as the travel certificate. Each certificate bore a separate, preprinted, inventory control number which presumably identified it as one of the certificates sold to Luskin's. It was necessary for Luskin's to countersign and date a certificate when it was delivered to a buyer. Buyers who were interested in pursuing the promotion furnished VVI identifying information, three choices of dates, and a "non-refundable processing fee of $15.00 per person." If VVI confirmed availability of one of the dates, the consumer had to make a down payment, or payment in full, to VVI within ten days, at the risk of additional costs or of loss of monies previously paid.

The record does not reflect the total number of travel certificates issued to customers of Luskin's out of the 14,600 certificates purchased by Luskin's from VVI. Only 128 travel certificates were completed and sent to VVI and, of these, only eleven certificates were actually used for one of the vacations described in the VVI brochure.

The Agency found that the brochure, with the included travel certificate, was not furnished by Luskin's to a buyer until delivery of the goods that had been purchased. The president of Luskin's testified that a sample of the brochure was available in each of the Luskin's stores for review by customers. Through the Agency's own advertising, it located four customer witnesses who testified at the hearing. None of them saw a sample of the VVI brochure on display at the stores where they made their purchases. Nor did the salespersons volunteer details to those customer witnesses and, when asked, generally did not explain the promotion beyond the information presented in the Luskin's advertisements. Luskin's, however, did prepare a computer printout that listed the principal requirements for utilizing the VVI vacation package. This printout was affixed to the sales ticket at the time of purchase.

Thus, it appears that all customers who made purchases from Luskin's in the minimum required amount as set forth in Luskin's advertisements received a brochure, including a valid travel certificate, whether those customers were aware of the promotion or not. No customer, however, received the brochure prior to consummating the required minimum purchase. Those customers who took delivery at the point of sale received the brochure at that time, and those customers who had Luskin's make delivery did not receive the certificate until that delivery was made.

II. Procedural History

On July 27, 1992, the Agency notified Luskin's that the free airfare ad violated § 13-305 of the Act. Section 13-305(b) provides:

"A person may not notify any other person by any means, as part of an advertising scheme or plan, that the other person has won a prize, received an award, or has been selected or is eligible to receive anything of value if the other person is required to purchase goods or services, pay any money to participate in, or submit to a sales promotion effort."

The Agency ordered Luskin's to discontinue the promotion.

Luskin's disagreed that the ad violated the Act, but the Agency advised Luskin's that if it did not discontinue its current free airfare advertisements, the Agency would bring an enforcement action. Luskin's discontinued the ad and immediately began to work on a new ad. Luskin's then presented a proposed second ad to the Agency for its review and approval. The Agency advised Luskin's that the second ad also would violate § 13-305.

On September 11, 1992, Luskin's filed an action in the Circuit Court for Harford County, seeking a judgment declaring that the second proposed ad complied with the Act. On September 28, 1992, the Agency brought an administrative enforcement action, charging Luskin's, by having publicized the first ad, with violating the general deceptive trade practice prohibition in § 13-303 of the Act by engaging in the deceptive trade practices described in § 13-301(1), (3), and (9) of the Act. The action also reiterated the charge of violating § 13-305.

Under § 13-301(1), a "[f]alse, falsely disparaging, or misleading oral or written statement, visual description, or other representation of any kind which has the capacity, tendency, or effect of deceiving or misleading consumers" is a deceptive trade practice. Similarly, a "[f]ailure to state a material fact if the failure deceives or tends to deceive" is a deceptive practice under § 13-301(3). Likewise, § 13-301(9) proscribes "[d]eception, fraud, false pretense, false premise, misrepresentation, or knowing concealment, suppression, or omission of any material fact with the intent that a consumer rely on the same in connection with ... [t]he promotion or sale of any consumer goods...."

Luskin's obtained a favorable declaratory judgment from the circuit court as to the second, proposed ad, but that judgment was vacated by the Court of Special Appeals under the primary jurisdiction doctrine, and the action was dismissed. Consumer Protection Div. v. Luskin's, Inc., 100 Md.App. 104, 115, 640 A.2d 217, 222 (1994). We affirmed. Luskin's Inc. v. Consumer Protection Div., 338 Md. 188, 657 A.2d 788 (1995).

The enforcement action as to the published, first ad that is now before us was...