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Unfair Competition: Methods, Elements & Laws

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  • 0:07 Unfair Competition
  • 1:30 Types of Unfair Competition
  • 3:12 Decceptive Advertising
  • 4:34 Laws Governing Unfair…
  • 6:07 Lesson Summary
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Lesson Transcript
Instructor: Ashley Dugger

Ashley is an attorney. She has taught and written various introductory law courses.

Unfair competition refers to several different types of intentional torts that cause economic injury to another person's business. These torts are various forms of deceptive business practices. This lesson explains unfair competition.

Unfair Competition

Welcome to Barks and Bubbles! I spent years building my pet grooming and pet supply business. I was shocked and disappointed to hear that my ex-employee, Wilma, opened a very similar business across town. She even used my same pink logo that I designed myself. I'm headed off to see my attorney because I think Wilma's purposely trying to steal business away from me.

Unfair competition refers to several different types of intentional torts that cause economic injury to another person's business. The torts are many various forms of deceptive or wrongful business practices that will allow a civil cause of action and damages for the plaintiff if the plaintiff is successful. Some forms of unfair competition can also be accomplished through a crime, like stealing a client list.

These torts are sometimes broken into two broad categories:

  • The term 'unfair competition' can refer only to those torts involving an attempt to pass off goods or services as if they belonged to another business.
  • The term 'unfair trade practices' can be used to refer to all other torts falling under unfair competition.

I think Wilma's committed both categories. Let's take a look at what I've discovered.

Types of Unfair Competition

The first thing I noticed about Wilma's business was her logo. It's too much like mine! She has it on her sign, her marketing information, her website, and her products. I think she wants people to confuse her business for mine.

I'm pretty sure this is a case of trademark infringement and a form of unfair competition. Trademark infringement is using a trademark without authorization from the owner or licensee, thereby causing a violation of trademark rights. I never gave Wilma permission to use my logo. Since Wilma used to work for me, I know she copied my logo on purpose.

I next noticed Wilma's marketing list. It seems that all of my customers received invitations to her grand opening. Now they're receiving her unsolicited coupons emailed to their personal email addresses. I think Wilma misappropriated my trade secrets when she left.

Generally speaking, a trade secret is any confidential business information that provides the business with a competitive edge. This includes things like sales methods, distribution methods, marketing methods, research methods, consumer profiles, advertising strategies, suppliers lists, client lists, firm software, and manufacturing processes. I never gave Wilma my client list, but she had access to it as an employee in my store. It looks like she took a copy of it when she left and is now using it to target my customers! This will be unfair competition and may even be a crime.

Deceptive Advertising

The third thing I noticed about Wilma's business concerns an advertisement. She placed an ad in our local paper last Sunday. In it, she lists several pet products that she knows I sell. The products appear to be knock-offs of my line of homemade, organic pet hair care products. She lists several products, and then lists a 'Barks and Bubbles' price that is much higher than what I actually charge. She then lists her price, which is, of course, much lower. The ad isn't true! This is deceptive advertising and unfair competition because Wilma is using an inaccurate advertisement to make a false statement about quality or price in comparison to another's product.

Deceptive advertising can be accomplished in many other ways, too, such as through bait and switch schemes. This is when a business advertises a low cost item to bait a customer into a store, and then switches the item for something higher priced. This scheme is illegal if the business refuses to show the low cost item to the customer, doesn't have enough of the low cost item on hand or try to make appropriate concessions, or if the business discourages salespeople from selling the low cost item.

Laws Governing Unfair Competition

Bait and switch schemes, as well as deceptive comparisons and other deceptive advertisements, are made illegal under most state laws. Some states have adopted a form of the Uniform Deceptive Trade Practices Act, which simply makes a private civil remedy available to plaintiffs due to any misleading advertising, false disparagement, trade symbol infringement, or other deceptive trade practice. The plaintiff can be a consumer or a competing business.

Federal law also governs unfair competition. The Lanham Act devotes an entire section to unfair competition between businesses. Section 43(a) allows businesses to sue other businesses for a wide-range of false, misleading, confusing, or deceptive statements or practices.

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