Michigan Supreme Court Expands Liability Under the Michigan Consumer Protection Act: What it Means for Businesses
In Attorney General v. Eli Lilly (July 31, 2026) the Michigan Supreme Court overruled two prior cases that had substantially reduced the exposure of many businesses to claims under Michigan’s Consumer Protection Act (“MCPA”). The Eli Lilly decision1 addressed the meaning of a statutory exception to liability, so that will be the focus of this Alert, but an overview of the MCPA is necessary to understand the decision.
The MCPA generally applies only to transactions “for personal, family, or household purposes” (“consumer transactions”), not to transactions between businesses. It prohibits no less than 39 subcategories of “unfair, unconscionable, or deceptive methods, acts, or practices” that might apply to most business. Many of the subcategories relate to false, misleading, or deceptive actions but unlike misrepresentation claims under the common law, which generally require, among other things, an actual misrepresentation (or material omission) and reliance by the allegedly injured party, it is sufficient under the MCPA that the conduct “causes probability of confusion or of misunderstanding.” In addition to representation-related conduct, other subcategories address conduct such as “charging the consumer a price that is grossly in excess of the price at which similar property or services are sold” and “offering a consumer a prize if the consumer is required to submit to a sales presentation to claim the prize,” without a prominent written disclosure. Further, the MCPA applies to a variety of industry specific conduct, such as a charity’s operation of a clothing donation drop-box. The MCPA may be enforced by consumers and by the Attorney General. Consumers may recover the greater of actual damages or $250 (or for certain violations, a larger amount), as well as attorney fees and, in the court’s discretion, punitive damages. The Attorney General may also bring both civil and criminal claims and may investigate possible violations without filing suit.
However, the MCPA contains an important limitation–it 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” (the “Exemption”). When it applies, the Exemption protects businesses that are subject to regulation, either directly or through licensure requirements.
The Michigan Supreme Court first addressed the Exemption’s meaning in Attorney General v. Diamond Mtg Co, 414 Mich 603 (1982) and held that it applied only if the specific conduct that allegedly violated the MCPA was authorized by regulation. It was not enough that the activities of Diamond, a real estate brokerage, were subject to regulation.
In Smith v. Globe Life Ins Co (1999), the Michigan Supreme Court reversed course, holding that:
the relevant inquiry is not whether the specific misconduct alleged by the plaintiffs is ‘specifically’ authorized.’ Rather, it is whether the general transaction is specifically authorized by law, regardless of whether the specific misconduct alleged is prohibited.
Thus, the Michigan Supreme Court held that the Exemption applied, regardless of whether the allegedly deceptive conduct was authorized by regulation. The Michigan Supreme Court next addressed the issue in Liss v. Lewiston-Richards, Inc (2007) and held that “the exception requires a general transaction that is ‘explicitly sanctioned.’” In Liss, the defendant was a licensed home builder and the “general transaction” was the construction of a home. Liss held that the Exemption barred a claim of shoddy construction. Since Smith and Liss, courts have held that the Exemption barred MCPA claims in many industries, such as car dealers, car makers, mortgage lenders and servicers, plumbers, doctors, and grocery stores, because the general business of the sale of those goods or services to consumers was subject to regulation.
Smith and Liss were heavily criticized because, as stated in Eli Lilly, “most businesses . . . are subject to regulation and licensure, [so] are now almost entirely exempt from liability under the MCPA, even when they engage in unfair, unconscionable, deceptive, or even illegal practices.”
Eli Lilly overruled Smith and Liss, holding that:
[W]hen determining whether the [Exemption] applies, the proper inquiry is whether the specific transaction or conduct at issue, rather than the general transaction, is authorized by law. When applying the exemption, courts should first consider the specific transaction or conduct that the plaintiff alleges violates the MCPA. Then courts should determine whether that transaction or conduct is “specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States.” . . . . This approach is consistent with our holding in Diamond Mortgage and the plain language of [the Exemption].
The only question that Eli Lilly answered was whether the old standard should be overruled and what standard should replace it. It did not address whether the Exemption applied to the specific conduct at issue in that case, leaving the question to the lower court. Further, the new standard is, on its face, fact intensive, so that in many cases determining whether the Exemption applies will be neither certain nor quick. Over-simplified, the central question under the old standard was whether the defendant business was regulated. Now, there must be a connection between the allegedly wrongful conduct and the regulatory authorization, but it is not clear how close the connection must be for it to be “specifically authorized.” These and other questions will be clarified over time through specific cases.
There are several other considerations relevant to assessing the impact of Eli Lilly. First, if the Exemption applies, a business is not liable even if it otherwise violated the Act. But it leaves open the question whether the business violated the MCPA. In attempting to prove that it did not, the business can advance many factual and legal defenses. Many potential legal defenses have not been considered in the case law because there was no need to – when the Exemption applied there was no need to address other possible legal defenses. Now those defenses, some novel, may be available. Second, the MCPA is typically not the only claim brought in a lawsuit. It is typically accompanied by, depending on the facts, a variety of contract, fraud, or other tort or statutory claims. There are advantages to not having to face an MCPA claim, such as, as mentioned above, MCPA claims sometimes being easier to prove than other legal theories, and the possible exposure to attorney’s fees. There will be litigation with or without an MCPA claim.
As noted above, the Supreme Court’s decision significantly narrowed an exception to the MCPA, an exception that formally protected practices and industries regulated by other law. In short, the Supreme Court made it far easier for claims under the MCPA to be brought. After Eli Lilly, businesses should not assume that their consumer transactions are shielded from MCPA liability just because their business is subject to general regulation. Businesses and practitioners must now take care that transactions comply not only with relevant industry regulations but also with the MCPA’s requirements for consumer transaction. Businesses and practitioners should also be aware that Eli Lilly has created open questions about the MCPA’s scope and application, such as where to draw the line on “specifically authorized” transactions exempted from the MCPA. It remains to be seen how Michigan courts will resolve such questions. However, after Eli Lilly, businesses should consult with counsel to review their actions and activities to assess and minimize potential exposure under the MCPA.
Please feel free to contact the authors of this Client Alert or your Butzel attorney for more information.
Sheldon H. Klein
248.258.1414
klein@butzel.com
Jennifer A. Dukarski
734.213.3427
dukarski@butzel.com
Daniel J. McCarthy
248.258.1401
mccarthyd@butzel.com
Javon R. David
248.258.1415
davidj@butzel.com
Brian K. Weber
517.372.4449
weberb@butzel.com
[1] The decision was a 4-3 decision. However, the three dissenting justices did so because they believed that for procedural reasons the case should not have been reviewed by the Court. They did not address the proper interpretation of the MCPA. Thus, the dissent is not discussed further.
