Orkin Exterminating Co., Inc. v. Federal Trade Commission

Orkin Exterminating Co., Inc. (Orkin) (defendant) provided insect-extermination services. A customer could sign up for a lifetime guarantee for termite protection for an annual fee. As long as the customer paid the annual fee each year, Orkin agreed to reinspect and retreat the building as needed. A pamphlet distributed by Orkin stated that the annual fee “never increases.” In 1980, Orkin notified customers of an increase to the annual fee on contracts signed before 1975. Many customers complained, and Orkin sent those customers a letter blaming the price increase on inflation and insisting that the price increase was contractually valid. Eventually, Orkin agreed to rescind price increases for all contracts signed in 1968, as well as those signed by customers citing sales presentations or contract terms. By 1984, Orkin had generated over $7,500,000 in additional revenue from the price increase. The Federal Trade Commission (FTC) (plaintiff) filed a complaint. The FTC argued that Orkin’s price increase was a unilateral breach of over 200,000 consumer contracts. The FTC argued that the widespread price increase was an unfair trade practice in violation of § 5 of the Federal Trade Commission Act (FTC Act). The administrative-law judge entered a cease and desist order requiring Orkin to rescind all price increases. Orkin appealed, arguing that a breach of contract does not come within the scope of an unfair or deceptive trade practice prohibited by the FTC Act.