Paying the Government to Investigate You: The AG’s New Weapon in Consumer Protection Probes

This article was originally published by The Legal Intelligencer on February 19, 2025.

Under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), the Pennsylvania Office of Attorney General (OAG), Bureau of Consumer Protection, regularly conducts investigations of companies for unfair or deceptive business practices in the consumer product and service industry. While the UTPCPL has been enforced for years and has permitted the OAG to recover statutory penalties and restitution on behalf of consumers, it has not allowed the OAG to recover its own costs unless agreed to as part of a settlement—until now.

Buried deep inside Pennsylvania’s new budget package signed last year is a provision permitting a Pennsylvania court to order a business under investigation to pay not only the costs of the OAG’s investigation but also the value of any time spent by its attorneys in investigating and enforcing the UTPCPL (attorney fees).

More specifically, this new section reads:

In addition to the other relief authorized under Section 4.1 of the act of Dec. 17, 1968 (P.L. 1224, No. 387), known as the Unfair Trade Practices and Consumer Protection Law, a court may in its discretion direct that a defendant or defendants reimburse the commonwealth for its costs of an investigation and litigation, including attorney fees, under the Unfair Trade Practices and Consumer Protection Law. 72 P.S. Section 1602-U.

This provision was part of the annual Fiscal Code bill (Act 54 of 2024), accompanying the general appropriations bill, and was included at the last minute as part of the budget process. This explains why the business community was not sufficiently alerted to it ahead of time, with an opportunity to object.

At first blush, this change may not seem like a big deal to the commonwealth’s business community. Indeed, Pennsylvania is not the first state to allow its attorney general to recover these types of costs/fees in consumer protection investigations, and only those companies that find themselves under investigation are affected. The problem with this line of thinking is that the consumer-packaged goods industry in Pennsylvania is huge, contributing over $110 billion to its economy each year and supporting over one million jobs (according to the Consumer Brands Association). To investigate this industry, the OAG has a current total annual budget of nearly $144 million, employs 1,059 attorneys, agents and support staff in offices statewide, and processes more than 34,000 consumer complaints annually. Translation: The chances of a business operating in Pennsylvania becoming the target of an OAG investigation is greater than it may first appear, and once it starts, it becomes a “front burner” agenda item.

Unfortunately, this new cost/fee-shifting provision of the UTPCPL will present a real problem for the business community. First, there is the language. Unlike other cost/fee-shifting statutes, Section 1602-U does not require the OAG to be the prevailing party. It also contains no standards, allowing courts complete discretion to award whatever amounts they deem appropriate. Second, there is business reality. The OAG’s new power forces companies under investigation to consider the OAG’s costs and attorney fees when deciding whether to resist or surrender. Since these costs/attorney fees may end up far exceeding the statutory penalties and restitution traditionally recoverable by the OAG, many companies may end up admitting violations they are not guilty of to avoid financial ruin. Third, the OAG’s new power may embolden it to pursue questionable cases and force settlements, using its new power as unfair leverage. Finally, this new provision may operate to boost the OAG’s budget for consumer protection investigations, allowing it to broaden its enforcement efforts.
What can the business community do about this? Unfortunately, not much. Absent corrective legislative action, Section 1602-U is here to stay. However, here are three (imperfect) suggestions for minimizing legal exposure to orders requiring payment of the OAG’s costs/fees:

Prevention

Businesses in the consumer product/services industry should carefully review their business practices to avoid becoming the target of an OAG investigation. The best way to do this is to build a strong compliance program and then constantly evaluate it by monitoring consumer complaints (sent to the OAG, posted online, and lodged internally) for patterns that could attract the attention of OAG investigators. If patterns are detected, companies should determine the root causes and correct them before trouble begins. The problem with this suggestion is that the OAG has the power to initiate investigations in the absence of complaints.

Avoid Injunctions

Section 1602-U references Section 4.1 of the UTPCPL, which triggers a court’s authority to award restitution upon the issuance of a permanent injunction. Although Section 1602-U does not contain such language, I believe that it should be read in pari materia with Section 4.1, requiring the issuance of a permanent injunction before investigative costs and legal fees can be recovered. Therefore, it would be wise for companies to take steps early in the investigation to avoid an injunction, possibly by pausing the activity under investigation. The problems with this suggestion are two-fold. First, my legal theory is totally unproven. Second, pausing the business activity under investigation may be a company killer.

Negotiate Concessions

In a typical OAG consumer protection investigation, the OAG will issue a letter or subpoena demanding an enormous amount of information about the company, including but not limited to its formation/structure, financial data and sales/marketing practices. In response, it is fair for counsel for any company under investigation to push back not only on the breadth of such a letter/subpoena from a relevance perspective but also based the added costs/fees that will be incurred by the OAG (and later, the company) to review irrelevant information. The problem with this suggestion is that the OAG is unlikely to curb its demand for large amounts of information on the basis of cost concerns that may never materialize. Therefore, as a fallback, counsel can attempt to negotiate a concession from the OAG to refrain from seeking reimbursement for its costs/attorney fees in exchange for arguably overbroad discovery.

Reprinted with permission from the February 19, 2025 edition of “The Legal Intelligencer” © 2025 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.