Enforcement

2018 is, once again, an election year! State attorney general campaigns will be in full swing with 31 elections, of which 10 are open seats, including big-state races in Florida, Illinois, Ohio, Michigan, and the most competitive per-capita primary in South Dakota. In addition, next year triggers up to three gubernatorial appointments among Alaska, Wyoming and Hawaii, where the attorney general is running for Congress on the heels of his Trump travel ban lawsuit. And finally, Maine may have its own open seat where, unique to itself, a newly elected Legislature will pick the AG.

State attorneys general are formidable enforcers in the area of consumer protection. When state AGs bind together in multistate investigations and actions, they combine their powers and often seek fines that match that of their federal counterparts. Most prominently, state AGs use their various unfair and deceptive practices statutes to pursue allegations such as violations of consumer expectations, false marketing and hidden fees. Additionally, state AGs can enforce in conjunction with certain federal authorities, creating multipronged investigations leading often to multitudinous penalties. And above all, state AGs are political, often guided by their own policy interests and reacting to those of the current administration.

Three policy areas to receive state AG scrutiny in 2018, as well as attention on the campaign trail, are cybersecurity and privacy concerns, the ever-expanding opioid investigations, and consumer finance with changes at the Consumer Financial Protection Bureau. In addition to these top substantive areas, campaign issues themselves will influence how state attorneys general prioritize enforcement and its impact for businesses and consumers.

Online Data Privacy

Last month, the government did something unheard of — a federal agency actually gave up authority and walked away from a turf war. With its net neutrality rule repeal, the Federal Communications Commission essentially ceded back to the Federal Trade Commission its consumer protection enforcement of the internet. The FTC will maintain jurisdiction to enforce proper disclosures and take action on deceptive acts. Yet, controversy over the repeal ensued, and several state attorneys general, including Kentucky AG Andy Beshear, have vowed to challenge the repeal, some citing the need to protect consumer privacy.

The bread and butter of AG authority lies in states’ unfair and deceptive acts and practices (UDAP) statutes. Similar to the FTC, state AGs apply their traditional UDAP enforcement on a host of modern technology issues. With particular focus on privacy and data security, AGs closely follow developments in the sharing economy, in driverless vehicles, in home automation, and in consumer-oriented internet-based products and services. For instance, 32 state AGs and the FTC recently settled with Lenovo over laptops sold with so-called “man-in-the-middle” software already installed and able to access consumer personal information and to target online advertisements.

In 2018, a top concern for state AGs will be harm that may result from the disclosure and use of consumer online data. In recent years, federal circuit courts and the U.S. Supreme Court, in Spokeo v. Robins, have grappled with limiting litigation on the basis of potential harm. But state AGs continually assert their authority to enforce expansive UDAP claims regarding online data, irrespective of the harm required to access federal court. This means AGs may take a more prominent role as enforcers and standard setters for how companies manage internet-based information.

Opioid Investigations

“Is opioid litigation the next tobacco?” is the big question being asked of attorneys general. Forty-one state AGs have joined a multistate investigation into whether manufacturers engaged in unlawful marketing of prescription opioids in light of their addictiveness. Additionally, AGs are investigating opioid distributors and wholesalers. And several bipartisan states, including Missouri AG Josh Hawley and New Mexico AG Hector Balderas, have filed their own lawsuits against multiple companies.

While attorneys general this year will campaign on the slogan of the “top cop” addressing the opioid crisis, the bulk of state AG power actually lies in their civil authority for consumer protection. Opioid investigations, however, uniquely touch on the ends of the spectrum of AG powers — on one side, the ability to shepherd criminal authorities within their state, as Florida AG Pam Bondi has successfully done in attacking pill mills and counterfeit drugs. On the other side of the spectrum, some AGs have outsourced their civil authority via contingency fee representations to plaintiffs lawyers, reminiscent of the tobacco litigation. Overall, just as the president called opioids a national health emergency, 2018 will evince the importance of this public concern in AG enforcement and in AG campaigns.

Consumer Finance

This year will bring the most significant change in the CFPB since the Dodd-Frank Act itself with the naming of a new director. For state AGs who can enforce both the federal UDA(A)P law, containing an additional abusive standard, and CFPB regulations, changes at the bureau will see a corresponding response in AG enforcement.

Seventeen Democratic AGs criticized the president’s acting director stating sharply that if the new leadership hinders the bureau’s aggressive pursuits, these AGs will “redouble” their consumer protection efforts. For instance, Pennsylvania AG Josh Shapiro opened his own Consumer Financial Protection Unit led by a former top CFPB attorney. And worth noting, just this month, 45 state AGs settled with PHH Mortgage for $45 million over loan servicing and related issues, even without the CFPB.

One specific area to watch is fintech, including online lending, payment processing and credit scoring, as well as financial products and services involving artificial intelligence. With financial technology, AGs have defended their states’ ability to regulate on behalf of consumers and businesses. One interesting example is in Arizona, where AG Mark Brnovich is helping to create a regulatory “sandbox” to allow fintech companies to innovate in a monitored environment without being burdened by regulatory requirements and costs.

Finally, 2018 will bring changes among the state AGs themselves. As in the recent past, national policies involving positions of the president himself will define the issues in these races. A few weeks ago, New York AG Eric Schneiderman filed his 100th lawsuit directed at President Donald Trump and his administration. This year will bring many more.

Joe Jacquot’s article has been published to Law360 in the “Expert Analysis” column. To view the article, click here.