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What is unfair competition?

A little healthy competition never hurt anybody, right?

Healthy competition between businesses can actually spur innovation, drive progress, open doors to choices for consumers and create all sorts of opportunities for positive growth.

Unfair competition, on the other hand, can do exactly the opposite -- stunting the industry, hurting consumers and driving any business without an established name and financial security right back into nonexistence.

What exactly is unfair competition between businesses? Between businesses, unfair competition includes things like:

  • Trademark or brand infringement
  • Spreading untrue, negative press about the quality of the competition's product
  • Buying business secrets from current or former employees
  • Using trademarked images in a "switch and bait" on consumers
  • False advertising

Each of these can directly harm other businesses in the same industry.

For example, if a child's clothing company opens a line of "princess" clothing that has styles named after Cinderella, Snow White, Ariel and Jasmine, all of which bear a striking resemblance to the Disney costumes of the same characters, an unobservant customer could easily be fooled into believing the products were backed or made by Disney. That customer might buy from the company, thinking that the products are official Disney products -- taking that revenue out of Disney's rightful revenue.

Similarly, a company might decide to advertise actual Disney princess outfits on its website, with images stolen from a Disney merchandise catalog -- knowing it doesn't have anything close to the same product available and is sending out cheap, handmade imitations instead. That "switch and bait" damage's Disney's reputation (with customers who don't realize they've been duped) and hurts consumers as well.

Buying business secrets from current or former employees is probably going to get the employee in trouble if he or she gets caught -- but that doesn't mean it won't happen. If an ex-employee offers to sell a stockbroker's client list, what those clients have invested and what rate of return they're getting for the their money, that could be used to lure those clients away.

Unfair business practices can be against the law, depending on what exactly is done. However, you may have to go into civil court to stop the action -- particularly if there is trademark or brand theft. To collect damages, you may have to prove actual losses.

An experienced attorney can provide you with information on how to handle issues of intentional fraud.

Source: FindLaw, "Unfair Competition," accessed Sep. 19, 2017

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