The Michigan Supreme Court recently overruled long‑standing precedent that had shielded regulated businesses from Michigan Consumer Protection Act (MCPA) liability when their transactions or conduct were generally authorized by state or federal law. The decision potentially expands businesses’ exposure to consumer protection claims.
The MCPA’s Long-Standing Exemption
The MCPA is Michigan’s primary consumer protection statute. It prohibits unfair, unconscionable or deceptive methods, acts or practices in trade or commerce and is frequently invoked in consumer lawsuits and enforcement actions.
For decades, Michigan courts broadly interpreted one of the MCPA’s key exemptions, providing significant protection to businesses operating in regulated industries. Under that exemption, the MCPA does not apply to “[a] transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States.” MCL 445.904(1)(a).
In Smith v. Globe Life Insurance Co. and Liss v. Lewiston‑Richards, Inc, the Michigan Supreme Court held that the exemption applied when the general transaction or conduct at issue was authorized by law, even if the specific conduct alleged to violate the MCPA was not. In Smith, for example, the Court held that an insurer was exempt from MCPA liability because it was authorized by the state to sell the life insurance at issue. In Liss, the Court similarly held that a licensed residential builder was exempt because it was authorized under state law to build homes.
Together, these decisions established a relatively straightforward rule: if state or federal law authorized the general transaction or conduct at issue, the MCPA generally did not apply.
What Changed?
In Attorney General v. Eli Lilly & Co., the Michigan Supreme Court overruled Smith and Liss, concluding that they interpreted the exemption too broadly.
The case arose from the Michigan attorney general’s investigation into Eli Lilly’s pricing of insulin products. The attorney general alleged that Eli Lilly artificially increased insulin list prices in violation of the MCPA. In a 4-3 decision, the Court held that the relevant question is no longer whether the general transaction or conduct is authorized by law. Instead, courts must ask whether the specific conduct being challenged is authorized.
This shift is significant. A business may be fully licensed and operate within a heavily regulated industry yet still face potential MCPA liability if the particular practice being challenged is not itself specifically authorized by law.
What This Means for Michigan Businesses
The impact of Eli Lilly extends well beyond the pharmaceutical industry. Regulated businesses in the automotive, manufacturing, healthcare, real estate, hospitality, financial services and other sectors should keep two points in mind:
- General regulation or authorization alone is no longer a shield. A license, regulatory approval or other government authorization to operate in a particular line of business may not protect a business from liability under the MCPA. The focus is now on the specific transaction or conduct being challenged and whether that transaction or conduct is specifically authorized by law.
- Existing business practices may deserve another look. Businesses should consider revisiting consumer‑facing pricing, advertising, marketing, disclosures, contracting and sales practices to assess MCPA compliance, even when those activities are already subject to industry-specific regulation.
When assessing whether the MCPA exemption applies, the key question for businesses is no longer simply, “Are we authorized to engage in this type of business transaction or conduct?” It is now, “Is this specific transaction or conduct authorized by law?” If not, the exemption may no longer provide protection.
If you would like assistance evaluating your current consumer-facing business practices, determining whether specific transactions or conduct qualify for the MCPA exemption or assessing potential exposure to consumer protection claims following the Michigan Supreme Court’s decision, please contact Brenden Catt, Katie Crysler or your Warner attorney.
