BILL ANALYSIS Ó
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|Hearing Date:June 11, 2012 |Bill No:AB |
| |1581 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: AB 1581Author:Wieckowski
As Amended:April 26, 2012 Fiscal:Yes
SUBJECT: Advertising: business location representations: floral
businesses.
SUMMARY: Makes it an infraction for a provider or vendor of floral or
ornamental products or services, as defined, to misrepresent the
geographic location of its business, as specified.
Existing law, the Business and Professions Code:
1)Regulates advertising, generally, and makes it unlawful for any
person, firm, corporation or association, or any employee to make
any statement in any advertising which is untrue or misleading, and
which is known or, in the exercise of reasonable care, should be
known to be untrue or misleading. (Business and Professions Code
(BPC) §17500)
2)Provides that unfair competition includes any unlawful, unfair or
fraudulent business act or practice and unfair, deceptive, untrue or
misleading advertising and other prohibited acts, as specified.
(BPC § 17200)
3)Provides that violation of the provisions above is a misdemeanor, and
that remedies for violations are cumulative to each other and to
other applicable remedies. (BPC §§ 17534, 17534.5)
4)Provides for injunctive relief, as specified, for a violation of the
above statutes. (BPC § 17535 et seq., BPC §17203 et seq.)
Existing law, the Civil Code:
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1) Provides, among other things, that using deceptive representations
or designations of geographical origin in connection with goods or
services in a consumer transaction and misrepresenting the source,
sponsorship, approval, or certification of goods and services are
unlawful as unfair methods of competition and unfair or deceptive
acts or practices.
(Civil Code (CC) § 1770)
2) Provides various remedies and penalties, as specified, for a
violation of the above statutes, including injunctive relief, civil
and/or criminal penalties, actual and punitive damages, and
attorney's fees. (CC § 1780 et seq.)
This bill:
1)Makes it an infraction for a provider or vendor of floral or
ornamental products or services to misrepresent the geographic
location of its business by either:
a) Listing a local telephone number in any advertisement or
listing, unless the advertisement or listing identifies the true
physical address, including the city, of the provider's or
vendor's business.
b) Listing a fictitious business name or an assumed business name
in any advertisement or listing if both of the following are met:
i) The name of the business misrepresents the provider's or
vendor's geographic location;
ii) The advertisement or listing does not identify the
true physical address, including the city and state, of the
provider's or vendor's business.
2)Provides that a violation of these provisions is an infraction,
punishable by a fine of up to $250.
3)Specifies that the bill's provisions does not create or impose a duty
or obligation on a person other than a vendor or provider of floral
or ornamental products and services.
4)Exempts from the bill's provisions:
a) A publisher of a telephone directory or other publication or a
provider of a directory assistance service publishing or
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providing information about another business.
b) An Internet Web site that aggregates and provides information
about other businesses.
c) An owner or publisher of a print advertising medium providing
information about other businesses.
d) An Internet service provider.
e) An Internet service that displays or distributes
advertisements for other businesses.
5)Defines the following terms for purposes of the provisions above:
a) "Floral or ornamental products or services" to mean floral
arrangements, cut flowers, bouquets, potted plants, balloons,
floral designs, and related products and services.
b) "Local telephone number" to mean a specific telephone number
(area code and prefix) assigned for the purpose of completing
local calls between a calling party or station and any other
party or station within a designated exchange or all of its
designated local calling areas. The term does not include long
distance telephone numbers or any toll-free telephone numbers
listed in a local telephone directory.
FISCAL EFFECT: The Assembly Appropriations Committee analysis dated
April 25, 2012 cites potential non-reimbursable costs to local
government for additional enforcement, offset to some extent by
additional fine revenues.
COMMENTS:
1.Purpose. This bill is sponsored by the Author who states:
"At its core, this bill is about combating consumer deception.
Local consumers are misled when orders are routed to non-local
business locations because fees and commissions are usually
taken out of the order price.
"These non-local fees and commissions are not normally paid when
the consumer places a floral order directly with a truly local
florist, as intended. Ironically, oftentimes the non-local
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telemarketer who falsely represents himself as a local florist
simply re-routes the order to a truly local florist for
processing. In these cases, the consumer paid a higher price,
and received less value, while the local florist was subjected
to sharing their profit with an unnecessary and non-local third
party.
"The consumer has the right to know and choose when he wants his
floral dollars and sales taxes to leave his local community and
state. This will provide interested consumers relevant
information about the location of a floral retail business and
prevent unscrupulous floral retailers from parasitical
advertising activities on existing community based local flower
shops."
2.Background. Current law generally prohibits and provides remedies
for misleading or fraudulent advertising practices. Proponents of
this bill and the four previous bills on this issue have argued that
the flower industry has been targeted by telemarketers using
misleading sales practices. They contend that out-of-state
businesses adopt local sounding names, and then list a local
telephone number in an effort to mislead consumers into believing
that the business is a local operation. Then the local telephone
number is automatically transferred to a distant location, and the
business in fact has no local presence. Proponents have suggested
that while there is nothing wrong with non-local telemarketing of
florist services, the consumer should be aware that the presumed
local small business does not in fact have a local physical
presence.
Consumers may wish to patronize local establishments. For a variety of
reasons, many consumers desire to patronize local businesses. Many
consumers desire to support the local economy in the area in which
they live. Others wish to have a physical location to visit in the
event that problems arise in the delivery of telephonically ordered
goods or services. Still others may simply desire to patronize a
small business rather than a much larger national organization.
Listing and advertising local names and telephone numbers can
seriously interfere with these interests.
3.Federal Trade Commission (FTC) Consumer Alert. In April 1998, the
FTC issued a consumer alert regarding absentee, "long-distance"
florists that mislead consumers into believing they are local
florists but are not:
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Flowers are a great way to celebrate a birthday, cheer up a sick
friend, or simply brighten someone's day. Your local florist is
just a phone call away, or so you think. Some unscrupulous
telemarketing firms are posing as local florists, charging you
higher fees and taking business away from legitimate florists in
your town.
Here's how the deception works: A telemarketer takes out a bogus
listing in the white pages of your telephone directory. The
company may use your town's name in its own to make you believe
it's local. Or, name of a legitimate local florist may be listed
with a different local phone number.
When you call, you're unknowingly forwarded to an out-of-town
telemarketing operation. The telemarketer takes your order and
credit card information for payment, and forwards your order to
an area florist. The telemarketer pockets a processing fee and
usually a percentage of the sale as well. You don't realize
you've been scammed until you get higher than expected charges
from an out-of-town company on your credit card statement, or
learn that the flowers weren't delivered as ordered, or were
never delivered at all.
Following the FTC's consumer alert, Congress adopted a concurrent
resolution resolving that the FTC should exercise its broad
authority "to investigate businesses that are engaging in the
deceptive advertising practice of misrepresenting their geographic
location in telephone listings, Internet advertisements, and other
advertising media." (H. Con. Res. 318, 105th Congress, 2d Session,
August 1998)
4.Prior Legislation. This bill is the fifth bill introduced in the
last thirteen years on this same issue. Each of the four previous
bills was sponsored by the California State Floral Association.
Each of the bills was substantially the same. Each bill has been
vetoed by the Governor . In vetoing the latest bill, AB 2076 in
2010, Governor Schwarzenegger stated in part, "In today's global
economy, it is unreasonable to limit out-of-area businesses from
using local names and telephone numbers. In virtually every aspect
of the economy, consumers are accustomed to purchasing products from
around the world via many methods."
AB 2076 (Salas 2010) was nearly identical to this bill. The bill was
vetoed by Governor Schwarzenegger.
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AB 1282 (Salas, 2007) a nearly identical measure which was vetoed by
Governor Schwarzenegger.
AB 1074 (Nakano, 2002), also a substantially similar bill, was vetoed
by Governor Davis, who noted the same concerns as Governor
Schwarzenegger did in his veto of AB 1282 (Salas).
AB 1375 (House, 1999) a similar measure was also vetoed by Governor
Davis.
5.Arguments in Support. Writing in support, the California State
Floral Association (CFSA) argues that the bill promotes consumer
awareness to help educate consumers of floral products and provide
relevant information to consumers about the location of a business
and prevent unscrupulous retailers from parasitical advertising
activities on existing local flower shops. CFSA states that besides
informing consumers and preventing inappropriate advertising
activities, the bill will also result in increased sales tax
revenues and job creation and retention. CFSA argues: "Studies
from the Buy California marketing program show that California
consumers prefer to purchase from local retailers and California
Grown product. This bill will provide those consumers who believe
they are purchasing from a local floral retailer the information
necessary to make an informed decision."
Society of American Florists (SAF) states in support that over the past
15 years, SAF has been warning retail florists about deceptive
advertising practices. These practices started out via local phone
books and have now spread to the Internet. Currently 28 states
across the county have laws banning deceptive advertising in print
advertising, while four states have outlawed deceptive advertising
online, according to SAF.
California Association of Nurseries and Garden Centers argues that the
bill's requirements will provide certainty to California consumers
seeking to do business locally.
National Federation of Independent Business (NFIB) states: "This is
simply a truth in advertising bill. If a company advertises that it
is local, then it is only reasonable that they provide their
address. Large out-of-state companies often use local phone
numbers, which are rerouted and fictitious business and Internet
domain names purporting to be local. If they are misleading
consumers, it puts the local small business florist at a competitive
disadvantage. Recent amendments have narrowed the bill and have
created a reasonable penalty. This bill will provide protection for
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California's small businesses in the floral industry, as well as for
consumers, without interfering in a florist's ability to contract as
a provider for a larger network."
SUPPORT AND OPPOSITION:
Support:
California Association of Nurseries and Garden Centers
California Small Business Association
California State Floral Association
Fremont Chamber of Commerce
National Federation of Independent Business
Society of American Florists
Opposition:
None received as of June 4, 2012
Consultant:G. V. Ayers