What is unfair competition in business?

On Behalf of | Mar 8, 2024 | Business Disputes

The old adage says that “a little competition is healthy,” and that’s true in business as much as any other aspect of life. Healthy competition gives consumers real choices – and it encourages companies to be both responsive to their customers’ needs and innovative with their products or processes.

However, some companies take competitiveness to an unhealthy – and illegal – level. Unfair competition refers to various deceptive, underhanded business practices that hurt both the company’s rivals and consumers – and the market as a whole.

What does unfair competition look like?

Unfair competition can take various forms, ranging from false advertising to intellectual property infringement, and it often violates established laws and regulations. Here are a few examples of what that might mean in practice:

  • False advertising: This occurs when a company makes misleading or outright false claims about a product or service to trick people into buying what they’re selling. For example, Gerber said that its Good Start Gentle infant formula would prevent babies from developing allergies, which was not backed up by any solid research – and the Federal Trade Commission ultimately filed a lawsuit to shut down those claims.
  • Trademark infringement: This involves the unauthorized use of another company’s logo, slogan or other branding, which can lead to concussion among consumers and possible damage to the original brand’s good name. An example might be someone opening a burger joint called “MacDonald’s” and displaying the iconic “golden arches” trademarked by McDonald’s on their sign. 
  • Misappropriation of trade secrets: When business relationships sour, someone may try to parlay their knowledge of a company’s secrets into financial rewards from another company. This could involve something like a former business partner taking the formula for your “secret sauce” and selling it to a competitor.
  • Price discrimination: This is a practice where a company charges different prices for the same product or service based on factors like the customer’s location, type or purchasing power. For example, a supplier might charge you 50% more for a product simply because your company has “bigger purchasing power,” while offering the same product to your competitor for the regular price.
  • Libel: This is any situation where one business actively (and unfairly) denigrates another business, attacking their products or services in a way that’s designed to cause financial harm or even drive them out of business. Often this involves statements made as facts, not opinions, like “Joe’s Pizza uses expired products in its sauce,” instead of “I think the sauce at Joe’s Pizza tastes old.”

These are not the only forms unfair competition can take, but these examples give you an idea of what sort of issues could lead to litigation. 

If your company has been the victim of unfair competition, you need to act quickly to protect your brand and everything you’ve worked so hard to achieve. In many cases, a cease and desist letter to the offending party may be enough to stop the activity – but you may also want to seek injunctive relief through a court order to mitigate your losses. If your financial losses are severe, you may need to take the issue even further and initiate a lawsuit.