In the business world, unfair competition law is meant to help keep the markets “fair.” Even though fairness can be a gray concept sometimes, laws are in place to help the government do what it can to keep a level playing field. 

This article will cover the basics of unfair competition law and what you should know about it. 

What is Unfair Competition Law? 

This term refers to a part of the law focused on deceptive business practices. These practices are usually meant to mislead or confuse a potential consumer of the business’s product, whether a physical good or service. However, these practices can also harm another business’s reputation or goodwill in the consumer’s eyes. 

While some methods are more common than others, there are a few ways that businesses can mislead customers. 

Common Unfair Competition Examples

False advertising – covered in part of the Lanham Act – is one of the most common forms of unfair competition. This can occur with actual advertising or someplace like a company’s website or product packaging. 

Fraudulent activities are another example. An example is when a company hides or misrepresents specific facts to help itself look better. 

Artificial lowering of prices – also called predatory pricing – is when a company lowers its prices very low to eliminate a competitor. So, for example, a big company with a lot of cash may lower prices so low that they can’t make money. But they do this to reduce the overall market’s value so their smaller competitor can’t compete and runs out of money, thus eliminating them as a competitor. 

“Passing off” goods is a way for a company to hide where the products really came from. 

Unauthorized product substitution is when a company supplies a different material than they were contracted to. They may do this to save money or due to their own supply issues, but it’s fraudulent because they’re supplying something they weren’t supposed to. For example, a raw materials supplier may send an inferior raw material to their client, who is a manufacturer. 

Trade libel is when a company makes a false statement to intentionally disparage the quality of another company’s products or services. In other words, it’s “bad talking” about their product. 

Misappropriation of trade secrets is when a trade secret has been, without consent, taken or disclosed unlawfully. 

Parts of an Unfair Competition Case

Generally, there are two main elements to unfair competition. 

  1. There needs to be some economic harm done to a business. Typical examples are either a loss of sales or a loss of consumer goodwill. This will need to be proven by the plaintiff. 
  1. There needs to be evidence that the economic harm was because of unfair competition actions taken.

Each case is different, and most cases will have several parts to each element. For example, there will probably be several pieces of evidence that point to a company’s lost sales or goodwill due to the harmful act done by the defendant. 

Are you involved in an unfair competition situation? Whether you are being accused of it or believe your business has been a victim, let us know. Send us an email or give us a call at 714.456.9118. We know this can be a trying time, and we want to help you through it in any way we can. 

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