Between 1966 and 1975, the Orkin Exterminating Company, the world’s largest termite and pest control

Between 1966
and 1975, the Orkin Exterminating Company, the world’s largest termite and pest
control firm, offered its customers a “lifetime” guarantee that could be
renewed each year by paying a definite amount specified in its contracts with
the customers. The contracts gave no indication that the fees could be raised
for any reasons other than certain narrowly specified ones. Beginning in 1980,
Orkin unilaterally breached these contracts by imposing higher-thanagreed-upon
annual renewal fees. Roughly 200,000 contracts were breached in this way. Orkin
realized $7 million in additional
»

Between 1966
and 1975, the Orkin Exterminating Company, the world’s largest termite and pest
control firm, offered its customers a “lifetime” guarantee that could be
renewed each year by paying a definite amount specified in its contracts with
the customers. The contracts gave no indication that the fees could be raised
for any reasons other than certain narrowly specified ones. Beginning in 1980,
Orkin unilaterally breached these contracts by imposing higher-thanagreed-upon
annual renewal fees. Roughly 200,000 contracts were breached in this way. Orkin
realized $7 million in additional revenues from customers who renewed at the
higher fees. The additional fees did not purchase a higher level of service
than that originally provided for in the contracts. Although some of Orkin’s
competitors may have been willing to assume Orkin’s pre-1975 contracts at the
fees stated therein, they would not have offered a fixed, locked-in “lifetime”
renewal fee such as the one Orkin originally provided. Under the three-part
test stated in the text, did Orkin’s behavior violate FTC Act section 5’s
prohibition against unfair acts or practices?

»

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