Does Your Business License Shield You From Consumer Protection Lawsuits?
Many Michigan business owners assume that operating in a licensed or heavily regulated industry protects them from consumer lawsuits. If the state already oversees how you sell cars, build homes, or dispense medication, the assumption is that a customer cannot also sue you under a general consumer statute. For years, that assumption held up in Michigan courts. A recent Michigan Supreme Court decision, Attorney General v. Eli Lilly and Company, changes it. The ruling narrows a long-standing protection that many regulated businesses had previously relied on.
What Does the Michigan Consumer Protection Act Cover?
The Michigan Consumer Protection Act bars unfair, unconscionable, or deceptive practices in consumer transactions, meaning sales primarily for personal, family, or household use rather than deals between businesses. It reaches conduct like charging a price grossly higher than what similar goods sell for, making false claims about price reductions, and running deceptive advertising. The Act carries real teeth. A consumer who wins can recover actual damages or a statutory minimum of $250, whichever is greater, plus attorney fees, and can bring the claim on behalf of a class of consumers. The Attorney General can seek civil fines and injunctions, or investigate a business without ever filing suit. But the Act contains an exemption for conduct “specifically authorized” under laws administered by a state or federal regulator. In two earlier decisions, the Court read that exemption broadly. It asked whether the general line of business was authorized by law, not whether the specific misconduct was. Under that approach, a company licensed to build homes or sell insurance could see nearly any claim tied to its work dismissed.
How Did the Court Rule in the Eli Lilly Case?
The Attorney General sought to investigate Eli Lilly’s insulin pricing, alleging the prices charged in Michigan far exceeded what the same products sold for elsewhere. Eli Lilly argued that making and selling drugs is a licensed, regulated activity, so it was immune from the Consumer Protection Act. The lower courts agreed and dismissed the case based on that earlier line of cases. The Supreme Court reversed and overruled both decisions. It held that the exemption is narrow. The word “general” never appears in the statute, and reading it into the statute effectively wrote the phrase “specifically authorized” out of the law. Going forward, a court must look at the specific transaction or conduct a plaintiff challenges and ask whether that conduct is specifically authorized by law. A business is not exempt simply because it holds a license or operates in a regulated business.
What This Means for Michigan Businesses:
The practical effect is that a license no longer works as a shield against Consumer Protection Act claims. Regulation protects the conduct the regulator actually authorizes, not everything a business does under that license. One caveat is that the new standard is fact-intensive, and courts have not yet defined how closely the challenged conduct must connect to a regulator’s authorization for the exemption to apply. For businesses in regulated fields, this is a new exposure they did not face before. A claim they could once knock out at the pleading stage can now go forward, carrying the attorney fees and statutory penalties that make the Act an attractive claim to bring. Owners in these fields should not assume that oversight elsewhere immunizes their pricing, advertising, or sales practices from a Consumer Protection Act claim. The safer approach is to assume the Act applies and to review those practices with that exposure in mind. For consumers, and for the honest businesses that compete against bad actors, the decision reopens a path to challenge unfair or deceptive practices that courts had closed for over twenty years.