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F I S C A L I M P A C T R E P O R T

SPONSOR Cervantes

DATE TYPED 02/28/05 HB 905

SHORT TITLE “Unfair or Deceptive Trade Practice” Defined

SB

ANALYST Ford

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB 360, SB 118

SOURCES OF INFORMATION

LFC Files

Responses Received From

Administrative Office of the Courts (AOC)

Attorney General (AGO)

Regulation and Licensing Department (RLD)

SUMMARY

Synopsis of Bill

House Bill 905 narrows the definition of unfair or deceptive trade practice for purposes of the

Unfair Practices Act. The bill defines an unfair or deceptive trade practice as a practice or act

that “deceives or misleads”, as opposed to the current law, which includes an action or practice

that “may, tends to, or does deceive or mislead.”

Significant Issues

The Unfair Practices Act prohibits unfair or deceptive trade practices and unconscionable trade

practices in the conduct of any trade or commerce. The Act provides for enforcement by the at-

torney general and also private remedies.

The AGO argues that the change proposed in House Bill 905 would significantly hamper its abil-

House Bill 905 -- Page 2

ity to halt deceptive trade practices before there is widespread consumer damage because it

would establish a higher standard for claims brought under the Act. The AGO writes that adop-

tion of the definition in House Bill 905 would:

“…[p]ossibly prohibit the courts from granting injunctive relief to the State without a showing

of harm incurred by the public. New Mexico would thereby become the only state in the U.S.

where the Attorney General would be prevented from taking remedial action to protect the

public from possible harm. This is contrary to established law, as, to date, no court in the

country has required any State to show reliance or damages when seeking injunctive relief to

protect the public.

“Injunctive relief … is designed to prevent future harm or to halt ongoing harm. Under current

law, the Attorney General can seek a temporary or permanent injunction on behalf of the pub-

lic if consumers are likely to be harmed. HB 905 would require the State to prove that con-

sumers have actually been harmed before injunctive relief can be granted.”

The AGO notes that the change in the definition could also hamper private remedies. For exam-

ple, under current law, a private business can request injunctive relief from the courts under the

Unfair Practices Act for trademark infringement based on the argument that the practice is likely

to deceive consumers. Under the proposed definition, it appears the claimant would have to

identify a consumer who was actually deceived.

Finally, the AGO argues that adoption of House Bill 905 would put New Mexico law in conflict

with case law precedent established by the U.S. Supreme Court, federal courts throughout the

country, and many state courts.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

House Bill 905 relates to House Bill 360 and Senate Bill 118 would both require private claim-

ants to participate in mediation before filing a claim under the Unfair Practices Act.

EF/lg