Unfair Competition

The law of unfair competition primarily is comprised of torts that cause an economic injury to a business through a deceptive or wrongful business practice. Unfair competition can be broken into two broad categories: unfair competition, which sometimes refers to only those torts meant to confuse consumers as to the source of a product, and unfair trade practices, which comprises all other forms of unfair competition.

In this context, unfair competition does not refer to the economic harms involving monopolies and antitrust legislation. What constitutes an unfair act varies with the context of the business, the action being examined and the facts of the individual case.

The most familiar example of unfair competition is trademark infringement. Another common form of unfair competition is misappropriation. This involves the unauthorized use of an intangible asset not protected by trademark or copyright laws. Other practices that fall into the area of unfair competition are false advertising, "bait and switch" selling tactics, unauthorized substitution of one brand of goods for another, use of confidential information by a former employee to solicit customers, theft of trade secrets, breach of a restrictive covenant, trade libel and false representation of products or services.

The law of unfair competition mainly is governed by state common law. In the areas of trademarks, copyrights and false advertising, federal law may apply.

The Federal Trade Commission protects consumers from deceptive trade practices. It indirectly protects competitors because some deceptive trade practices (e.g. bait-and-switch tactics) that injure consumers also injure competing businesses. Regulations concerning unfair competition are found in various parts of Title 16 of the Code of Federal Regulations. If there is a conflict between federal and state law, the state law may be pre-empted.

Last updated: Sept. 30, 2008

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