California Cell Phone Regulation Provided Safe Harbor from Unfair Competition Claims

The California Court of Appeals has upheld a trial courts decision that a taxpayer’s unfair competition and misleading advertisement claims against a telecommunication provider be dismissed. In compliance with the California Code of Regulation, providers selling cell phones at half-price as an incentive to enter into a calling plan package are required to charge sales tax on the full retail value of the phone, which may be passed onto the customer. The provider passed this tax amount on to the taxpayer without informing him prior to the sale that the tax was based off of the retail price, even though the amount was stated on the sales invoice and the taxpayer could have refused to enter into the contract for the stated price. Since the applicable Regulation is silent on the provider’s duty to state the amount of sales tax prior to sale, it provides a safe harbor that permits this conduct and may not be challenged with general unfair competition laws. (Yabsley v. Cingular Wireless, LLC, California Court of Appeals, Second Appellate District, Division Six, 2d Civil No. B198827, August 18, 2008)

Posted on April 9, 2009