The Supreme Court has been asked to decide whether a state can combat unfair and deceptive trade practices in the automobile-repair industry with an approach similar to that taken by the Federal Trade Commission for more than 60 years.
The case comes from Michigan, where a 1974 "little FTC" law empowers the secretary of state to define such practices, and to investigate, adjudicate and punish apparent violations. Before imposing civil or criminal sanctions, however, the secretary must provide notice and opportunity for a hearing.
This mingled array of powers was challenged by the Automotive Service Councils of Michigan. "How much raw, unfettered, totally discretionary power over individual liberty, property and freedom may a state confer on its bureaucracy with any particular statutory scheme?" the non-profit trade group asked.
By giving FTC-type powers to a single official, without any legislative direction as to what does or should constitute an unfair or legislative or deceptive practice," the statute denies the due process of law guaranteed by the state and federal constitutions, the council argued.
Ruling for the council, state Judge James T. Kallman found it difficult to see how there can be due process "when a person has made a decision as to what is right or wrong . . . and then the same person or one in the same department sits in judgement . . . Under such a system there is likely to be some bias, and unquestionably the appearance of some bias on the part of the person sitting in judgement."
Last April, however, the Michigan Court of Appeal reversed with an opinion that the state's highest tribunal left standing.
Two of the three appeals judges held that Supreme Court rulings laid down a "probability of unfairness" standard that presumes honesty and integrity in adjudicators.
Moreover, the majority said, Secretary of State Richard H. Austom had promulgated rules that appear to comply with a state law intended to assure fairness and impartiality in administrative proceedings.
Kallman had ruled that the "little FTC" law impermissibly delegated legislative powers to the secretary because it contained no standard to guide his exercise of rule-making.
All three appeals judges disagreed. They held that taken as a whole, the law does give "meaning and precise" content to a standard that the secretary must follow.
For example, the court said, the law requires mechanics or repair shops to provide each customer with an advance estimate of the cost of labor and parts for a specific job, to obtain the customer's consent for charging more than the estimate, and to include in the estimate the cost of[WORD ILLEGIBLE] the problem before making a diagnosis.
At the same time, the court pointed out, the law makes the customer liable for the cost of restoring his car to its previous condition if he refuses to authorize repairs that would cost more than the original estimate.
Kallman also had found impermissibly vague a provision of the law [WORD ILLEGIBLE] . "If the actual cost of repair is less than the agreed upon estimated cost the consumer shall pay only the actual cost."
Interpreting "actual cost" to be the sum of the cost to the consumer of parts actually used and labor actually required," the appeals judges, again unanimously, disagreed.