An unfair trade practice is a practice which is engaged in by an individual or a company when they use certain means to obtain business, such as means that are:
- Deceptive; or
These types of practices may be aimed at rival businesses or at consumers.
What Are the Types of Unfair Trade Practices?
An unfair trade practice may include any business action which is declared unlawful by law, including:
- False advertising;
- Selling tactics; and
- Deceptive trade practices.
What is False Advertising?
False advertising is any advertisement which contains representations that are:
- False; or
As previously noted, this type of advertising is an unfair trade practice. False advertising may include:
- 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 that engages in a deceptive business practice when they engage in any business activities that might mislead the public. These types of practices are prohibited by law due to their negative effects on the general public.
Examples of deceptive practices may include passing off fake goods as the real things and causing misunderstanding and confusion regarding the approval of the services or goods.
Is Puffery an Unfair Trade Practice?
No, puffery is not an unfair trade practice. Puffery involves the use of extravagant or exaggerated statements which are made to attract buyers to purchase a particular product or service.
Engaging in puffery is not against the law because a company is permitted to puff up their product so long as it is an opinion rather than a fake fact.
Is an Unlawful Business Practice the Same Thing as Puffery?
No, puffery is different from an unlawful business practice. As previously noted, puffery is an exaggerated statement that is made for the sole purpose of attracting customers.
Typically, puffery statement is viewed as a subjective opinion. The Federal Trade Commission (FTC) does not consider these statements to be unlawful because a reasonable person would not take them to be a literal statement of fact.
A puffery statement is viewed as a legal practice which is frequently associated with language that is found in advertising or promotional sales. For example, suppose that an individual advertises their cabin rental as “Heaven on Earth.”
In this case, the owner would not be engaging in an unlawful business practice. They are considered to be advertising in a manner which, although it is exaggerated, 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. False advertising may apply to any promotion or advertising which misrepresents the quality, nature, characteristics, or origin of:
- Commercial activities;
- Goods; or
False advertising differs from puffery because it is a factual statement instead of an opinion that is used to intentionally deceive the general public instead of being used to attract a customer.
Examples of false advertising may include when a company advertises a product as having healthy and high quality ingredients when the product actually contains high amounts of chemicals and sugar or advertising a product at a certain cost when it, in fact, requires the payment of undisclosed fees.
What is the Difference between Unlawful and Unfair Business Practices?
Pursuant to unlawful business practice laws, unlawful business practices differ from unfair business practices. Typically, an unfair business practice is legal.
Unfair business practices often involve a business behavior by a corporation or an owner that is immoral or unethical. An example of an unfair business practice would be if a company owner takes or destroys the work product of a competitor or if they violate a company policy.
The main difference between an unlawful business practice and an unfair business practice is that an unlawful business practice actually violates the law, as previously noted. An unfair business practice does not violate the law but may violate a company or personal moral code.
What is Unfair Competition?
Unfair competition is the area of antitrust and trade regulations which deals with dishonest or fraudulent rivalry in commerce and trade, or deceptive trade practices. Examples of deceptive trade practices include:
- False advertising;
- Passing off;
- Commercial disparagement; and
For more information related to Antitrust and Trade Regulation, see the following LegalMatch articles:
- What Is Antitrust Law?;
- What Is Trade Regulation?;
- The Sherman Antitrust Act;
- The Clayton Act of 1914;
- The Robinson-Patman Act; and
- The Cartwright Act.
For more information regarding Consumer Protection, Consumer Fraud, and False Advertising, see the following LegalMatch articles:
- What Do Consumer Protection Laws Cover?;
- What Is the Fair Packaging and Labeling Act?;
- What Constitutes Consumer Fraud?;
- What Constitutes False Advertising?; and
- What Is Franchise Fraud?.
For more information regarding the Federal Trade Commission, see the following LegalMatch articles:
- What Is The Federal Trade Commission?;
- What Is The Federal Trade Commission Act?;
- The Fair Credit Reporting Act;
- The Fair Credit Billing Act; and
- The Federal Trade Commission Cooling-Off Rule.
What is an Unfair Competition Lawsuit?
The number of unfair competition lawsuits filed against businesses have risen in recent years. With each lawsuit, the exact definition of what constitutes unfair competition expands.
Common examples of business practices which may result in an unfair competition lawsuit being filed includes:
- 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. Pursuant to federal unfair competition laws, business practices are unfair when they offend “an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.”
In many states, the state unfair competition laws are considered to be plaintiff friendly in most business actions which can be considered unfair competition. Because of this, many state courts have begun using a rule of reason analysis.
Using this framework, the motive of the alleged wrongdoer and the utility of their conduct are weighed against the gravity of the harm to the alleged victim.
Can I Sue a Business for Unfair Competition?
If an individual believes they are the victim of unfair competition, they may be able to sue the company directly and get the company to:
- Pay monetary damages for any slanderous or false or representations;
- Refund any revenue which resulted from the alleged unfair business practice;
- Cease performing the unfair business practices; and
- Pay substantial government fines and penalties.
Should I Seek Legal Advice?
Consumer protection, antitrust, and unfair competition laws can be very technical and complex. If you think that someone has employed an unfair business practice to your detriment, it may be helpful to consult with a business lawyer.
Your lawyer can guide you through the legal process; ensure your rights are protected; and, if applicable, help you file a report with the Federal Trade Commission. If necessary, your lawyer can even help you file an unfair competition lawsuit.
An experienced lawyer will help explain the complex and vague nature of unfair competition laws and inform you of your legal rights as well as preserve any possible legal remedies you may have. If your business has been accused of unfair competition, you should speak to a business lawyer immediately.