What Is Competition Law?

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 What Is Competition Law?

Business law regulates market competition between companies through competition law. It is also called antitrust law or antimonopoly law.

Competition laws are divided into three main categories:

  • Contracts that severely restrict trade or commerce should be prohibited
  • Monopolies should be prohibited
  • Mergers and takeovers of multiple businesses should be regulated

Various federal statutes, state laws, and company policies regulate and enforce competition laws.

What Are Some Common Competition Law Disputes?

One of the main goals of competition laws is to prevent monopolies from forming (i.e., preventing one company from dominating an entire industry). Therefore, many competition laws are concerned with disputes that involve companies driving their competitors out of business.

There are several common competition law legal disputes, including:

  • Various business sales and marketing violations, such as false advertising and “bait and switch”
  • Misrepresentation when dealing with consumers or other business entities
  • Contracts that limit one party from participating freely in the market
  • Various types of conduct fall under the category of “unfair competition,” such as using illegal business tactics or methods

Many of these types of violations are outlined in detail in federal acts, such as the Sherman Anti-Trust Act and the Clayton Act. Violations of this type can result in serious penalties for the offender.

What Are Unfair Trade Practices?

Individuals or companies engage in unfair trade practices when they use certain methods to obtain business, such as:

  • Fraudulent;
  • Deceptive; or
  • Unethical.

These types of practices may be aimed at rival businesses or consumers.

What Are the Types of Unfair Trade Practices?

There are several types of unfair trade practices, including:

  • Misrepresentation;
  • False advertising;
  • Selling tactics; and
  • Deceptive trade practices.

What Is False Advertising?

False advertising is any advertisement that contains the following representations:

  • Misleading;
  • False; or
  • Deceptive.

This type of advertising is unfair trade practice, as previously noted.

The following are examples of false advertising:

  • False statements about a product’s effectiveness or quality;
  • Fake endorsements;
  • Fake testimonials;
  • Fake picture of the product;
  • Fraudulent prices in the advertisement; and
  • Bait and switch advertising.

What Are Deceptive Business Practices?

A business or an individual engages in a deceptive business practice when they engage in business activities that might mislead the public. As a result of their negative effects on the general public, these kinds of practices are prohibited by law.

Deceptive practices can include passing off fake goods as real ones and causing confusion regarding the approval of services and goods.

Is Puffery an Unfair Trade Practice?

Puffery is not an unfair trade practice. Exaggerated or extravagant statements attract buyers to purchase a particular product or service.

As long as it is an opinion rather than a fake fact, puffery is not illegal.

Is an Unlawful Business Practice the Same Thing as Puffery?

Puffery is not an unlawful business practice. The purpose of puffery is to attract customers through exaggerated statements.

In general, puffery statements are viewed as subjective opinions. According to the Federal Trade Commission (FTC), a reasonable person would not consider these statements to be literal statements of fact.

An advertising or promotional statement is considered to be a puffery statement, which is a legal practice. Imagine that someone advertises their cabin rental as “Heaven on Earth.”

The owner, in this case, would not commit an unlawful business practice. Although exaggerated, they are considered to be advertising in a manner that is attractive to individuals who are considering renting the cabin.

In contrast, false advertising is a type of advertising that is considered to be against the law.

Any promotion or advertisement that misrepresents the quality, nature, characteristics, or origin of:

  • Commercial activities;
  • Goods; or
  • Services.

False advertising differs from puffery since it is a factual statement rather than an opinion used to deceive the general public rather than attract customers intentionally.

It is common for a company to advertise a product as having healthy ingredients and high quality when it contains high amounts of chemicals and sugar. It is also common for companies to advertise a product at a certain price when it requires undisclosed fees to be paid.

What Is the Difference between Unlawful and Unfair Business Practices?

Corporations or owners who engage in unfair business practices often act unethical or immoral. If a company owner takes or destroys the work product of a competitor or violates a company policy, that would be unfair business practice.

As previously noted, an unlawful business practice violates the law instead of unfair business practice. Unfair business practices do not violate the law but may violate a company’s or individual’s moral code.

What Is an Unfair Competition Lawsuit?

Recent years have seen an increase in unfair competition lawsuits filed against businesses. Every lawsuit expands the definition of unfair competition.

The following are examples of business practices that may result in an unfair competition lawsuit:

  • Misrepresentations to consumers;
  • Discriminatory treatment of consumers;
  • Advertisements expressing hostile treatment of competitors; and
  • Unreasonable non-compete clauses in employment contracts.

What Constitutes Unfair Competition?

Federal laws and state laws address unfair competition in different ways. Business practice is unfair when it violates an established public policy or when it is immoral, unethical, oppressive, unscrupulous, or substantially harms consumers.

Most business actions classified as unfair competition are plaintiff-friendly under state unfair competition laws. As a result, many state courts are now using a rule of reason analysis.

As a result of this framework, the motive and utility of the alleged wrongdoer’s conduct are weighted against the severity of the harm to the alleged victim.

Can I Sue a Business for Unfair Competition?

An individual who believes they have been the victim of unfair competition may be able to sue the company directly and force the company to:

  • Providing monetary damages for slanderous or false statements;
  • Refund any revenue generated by the alleged unfair business practices;
  • Put an end to unfair business practices; and
  • You will have to pay substantial fines and penalties to the government.

Are There Any Remedies Available under Competition Laws?

There are many legal remedies available for violations of business competition laws. Violations of different types will have different consequences.

The following are some common remedies:

  • Damages awards, especially special damages that are awarded to compensate for damage to business reputation
  • Cease and desist orders, which are court-sanctioned orders instructing one company to stop performing a certain act, usually in connection with intellectual property usage
  • Injunctions instructing one company to perform a certain act that they are otherwise refusing to perform

Multiple plaintiffs can be involved in a competition lawsuit. For example, some lawsuits might affect many consumers, while others may involve several businesses. It may be necessary to file a class action lawsuit in these cases.

Do I Need a Lawyer for Help with Competition Law Issues?

Competition law is a broad law area with many complex laws and statutes. You may need to hire a business lawyer near you if you need assistance with any competition law issue. In case of legal conflicts or disputes, your attorney can provide you with legal assistance and representation.

Your lawyer can help you understand your rights and options under current antitrust and competition law by performing legal research. A lawyer can also assist you during the court process if you need to file a lawsuit.

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