An unfair competition claim is a legal assertion made when a business believes another entity engages in deceptive or unethical practices that harm its competitive standing. Such a claim protects businesses and consumers from dishonest practices and ensures fair market competition. Laws related to unfair competition can vary by jurisdiction, so businesses must consult with legal professionals here in California to understand their rights and options if the dispute involves a California company.
It’s different than IP infringement
Unfair competition and intellectual property (IP) infringement are related but distinct legal concepts. Unfair competition focuses on deceptive or unethical business practices. IP infringement involves the unauthorized use of protected IP, such as patents, trademarks, copyrights or trade secrets. While unfair competition can sometimes involve IP infringement (e.g., using a competitor’s trademark to deceive customers), they are not the same and can be addressed under different legal frameworks.
Examples of unfair competition
Disputes often involve one or more of the following circumstances:
- False advertising: This involves making false or misleading statements about a product or service to deceive consumers. For example, advertising a product as having certain features or benefits that it does not actually possess.
- Trademark infringement: This occurs when a business uses a logo, name or symbol that is identical or confusingly similar to a registered trademark owned by another company. This can mislead consumers into thinking they are purchasing from the trademark owner.
- Trade secret misappropriation: This involves the unauthorized use or disclosure of a company’s confidential information, such as formulas, practices, processes or designs, that provides a competitive advantage.
- Bait-and-switch tactics: This deceptive practice involves advertising a product at a very low price to attract customers but then attempting to up-sell them a more expensive item once they are in the store.
- Passing off: This occurs when a business presents its goods or services as those of another business. For example, using similar packaging or branding to make consumers believe they are buying a product from a well-known brand.
The legal penalties for unfair competition
In California, the penalties for unfair competition can be stringent:
- Civil penalties: Violations of California’s Unfair Competition Law (UCL) can result in civil penalties of up to $2,500 for each violation. These penalties can be sought by the California Attorney General, local public prosecutors or other authorized government officials.
- Injunctions: Courts can issue injunctions to stop the unfair practices. This means the offending party must cease the unlawful behavior immediately.
- Restitution: Courts may order the offending party to pay restitution to the victims. This involves returning any money or property gained through unfair practices to the affected parties.
- Attorney’s fees and costs: In some cases, the court may order the offending party to pay the attorney’s fees and expenses incurred by the plaintiff in bringing the lawsuit.
- Criminal penalties: Although less common, certain egregious violations of unfair competition laws can lead to criminal charges. Depending on the severity of the offense, this can include fines and imprisonment.
These penalties aim to deter businesses from engaging in unfair competition and protect consumers and other companies from deceptive and harmful practices.
Not sure where to start?
Some business law attorneys handle disputes and litigation involving unfair business practices. Those with questions about a potential claim can learn more by discussing the specifics of their issue during an initial consultation. Attorneys can explain possible strategies and likely outcomes.
