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3 Forms of Unfair Business Competition That Can Lead to a Lawsuit

William B. Hanley Oct. 5, 2020

You’ve devoted your life and resources — human, economic, and otherwise — to building up a business, only to have it challenged and undercut by another entity engaging in unfair business practices. Whether it is misappropriation, theft of trade secrets, false advertising, or the other party’s tortious interference, you have the law on your side and you need to take action.

If your business is operating in Orange, Los Angeles, or San Diego counties in California, and is suffering from unfair competition, you need to contact William B. Hanley, Attorney at Law, who will bring his 40 years of practice in business litigation to your case and help you assert your rights.

Defining Unfair Business Competition in California

The Unfair Competition Law of California (UCL) is one of several statutes that provide businesses with the legal means to protect themselves from predatory competitors. It also protects consumers against unfair business practices.

Examples of unfair competition under the UCL include theft of trade secrets, interfering with a business relationship or contract, bait-and-switch marketing, price manipulation, the sale of products or services below cost, and generally “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.”

The statute of limitations on unfair business competition lawsuits is four years.

Trade Secrets as Defined by California Law

Many people will assume that a trade secret, to use an example, is like the recipe for Coca-Cola that’s locked up in Atlanta. That certainly is a trade secret, but in California, the law is much broader. The California Uniform Trade Secrets Act (UTSA) provides protection for everyday business undertakings such as customer lists, business plans, spreadsheets, corporate minutes and agendas, and bid specifications.

The UTSA uses the term “misappropriation” rather than “theft” to specify what is prohibited. It further defines misappropriation as having two components: the acquisition of trade secrets by improper means, and the use or disclosure of trade secrets.

Further, misappropriation in California does not have to involve physical or digital documents that have been illicitly obtained. The term also covers a former employee’s “memory.” For instance, If an employee of Company A jumps ship to Company B, that person cannot reveal to B trade information acquired at A that is now stored in his or her brain.

False Advertising as Unfair Competition

Reference has already been made to some of the advertising tactics that companies can employ to unfairly and illegally undercut a competitor’s market. These methods include bait-and-switch advertising, selling below cost, and making false claims about one’s own or another company’s products. False advertising can be carried out through a variety of media, including print, display, radio, television, and digital.

False advertising is covered by the California Business and Professional Code (BPC), Division 7, and covers advertising that is done to entice buyers based on an untrue to exaggerate premise. For example, making exaggerated claims about the nutritional benefits of a particular product. In general, California has some of the strictest laws and regulations governing unfair competition and false advertising in the nation.

Tortious Interference in Economic and Contractual Relationships

As opposed to a criminal act, a tort is a civil wrong that causes harm to others. Tortious interference refers to the act of a third party who interferes in the economic enterprise of two other parties, whether they are bound by a contract or not. The interfering party can be sued to recover any economic loss it causes, plus damages and injunctive relief.

California recognizes two types of tortious interference: “interference with prospective economic advantage,” or IWPEA, and IWCR, “interference with contractual relations.” An IWPEA claim does not require a contractual relationship between the parties who were harmed, while an IWCR does necessitate the existence of a contract, written or oral.

In both types, a third party who interferes with the business operations of the collaborating parties can be held liable for any economic damage caused by the interference or disruption. Unlike some states, California recognizes that such interference can be either intentional or the result of negligence, but only for an IWPEA claim. An IWCR disruption must be intentional. A negligent claim does not require proof of deliberate intent, only that the disruptor knew or should have known of the existing business relationship.

The Importance of Seeking Legal Counsel

When your business is under attack and its economic success threatened, you need an attorney who has the experience, tenacity, and commitment to lead your legal response. William B. Hanley, Attorney At Law is a business owner and a commercial litigator with four decades of experience. He’s handled all aspects of unfair business practice litigation, and he can help you too. If you’re in Irvine or anywhere in Orange County, San Diego County, or Los Angeles, call William B. Hanley, Attorney at Law today for a consultation.