In the United States, generally speaking, businesses have the legal privilege to compete against each other in the marketplace. Businesses are legally allowed to use any lawful means in that competition to sell their goods and services and to “woo” customers. However, the privilege to compete involves only LAWFUL means and methods. That said, some businesses compete in the marketplace with unlawful means and methods. Some of these are criminal in nature, such as, at one extreme, the use of criminal elements to literally destroy a competing business through something like arson. More modern forms of criminal unfair competition include hacking, denial of service attacks, and other cybercrime. Law enforcement and the criminal justice system handle unfair competition that is criminal in nature.
There are, however, several other forms of unfair competition that are still unlawful (even if they do not generally rise to the level of criminal behavior). A few examples include:
- False advertising – a large category of unfair competition including false labeling, false claims of effectiveness, slack filling of packaging, false origin and source claims, misleading sales tactics, and offerings like “bait-and-switch” sales where a high-quality product is advertised but not available leading consumers to buy the substitute lower-quality product, etc.
- Trade defamation — like spreading false rumors about a competitor
- Theft of trade secrets
- Trademark infringement — using a competitor’s trademark on your goods/services without permission
- Theft of the right of publicity — use of a person’s likeness without permission
- Patent infringement — using a competitor’s invention without permission
- Copyright infringement — using a competitor’s original works of art without permission
- Trade dress infringement — offering a “look-alike” product meant to confuse consumers
- Luring and poaching of a competitor’s employees
- Breaching agreements related to noncompetition and restrictive covenants
- Spying and corporate surveillance
Federal and State Sources of Unfair Competition Law
Unfair competition law in the United States draws from multiple overlapping sources. At the federal level, Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)) is the primary vehicle for civil unfair competition claims. It prohibits false designations of origin, false descriptions, and false or misleading representations in commercial advertising or promotion. The Federal Trade Commission Act (15 U.S.C. § 45) declares unfair methods of competition and unfair or deceptive acts unlawful, and empowers the FTC to pursue enforcement actions. The Defend Trade Secrets Act of 2016 (18 U.S.C. §§ 1836–1839) federalized trade-secret misappropriation claims, giving businesses a federal cause of action in addition to state-law remedies.
At the state level, every state has its own unfair competition statutes. The Uniform Trade Secrets Act, adopted in some form by nearly every state, governs misappropriation of trade secrets. Many states also have broad consumer protection statutes—California’s Unfair Competition Law (Business & Professions Code §§ 17200 et seq.) and Michigan’s Consumer Protection Act (MCL § 445.901 et seq.) are well-known examples—that permit private plaintiffs to sue for unlawful, unfair, or fraudulent business practices. The Restatement (Third) of Unfair Competition provides a comprehensive common-law framework that courts frequently cite when resolving claims not squarely addressed by statute.
False Advertising Under the Lanham Act
False advertising is one of the most commonly litigated forms of unfair competition. A plaintiff pursuing a Lanham Act false advertising claim must establish five elements: (1) the defendant made a false or misleading statement of fact in a commercial advertisement; (2) the statement actually deceived or had the capacity to deceive a substantial segment of potential consumers; (3) the deception was material, meaning it was likely to influence purchasing decisions; (4) the defendant caused the statement to enter interstate commerce; and (5) the plaintiff was or is likely to be injured as a result.
False statements come in two varieties. A literally false statement is one that is untrue on its face—no extrinsic evidence of consumer deception is required. A misleading statement is one that is literally true but nevertheless conveys a false impression; the plaintiff must provide consumer survey evidence or other proof of actual deception. Courts have found liability in cases involving cherry-picked clinical data, misleading comparative advertising, and product descriptions that technically accurate language renders deceptive in context. Remedies include injunctive relief, disgorgement of profits, actual damages, and in exceptional cases, attorney’s fees.
Trade Secret Misappropriation
A trade secret is information—a formula, pattern, compilation, program, device, method, technique, or process—that derives independent economic value from not being generally known or readily ascertainable by others who could obtain economic value from its disclosure or use, and that is subject to reasonable measures to maintain its secrecy. Customer lists, pricing strategies, manufacturing processes, software source code, and marketing research can all qualify as trade secrets.
Misappropriation occurs when a trade secret is acquired by improper means—theft, bribery, misrepresentation, breach of a confidentiality agreement, or industrial espionage—or when someone discloses or uses a trade secret knowing or having reason to know it was acquired by improper means. Under the Defend Trade Secrets Act, a plaintiff can seek injunctive relief, damages for actual loss, unjust enrichment, and in cases of willful and malicious misappropriation, exemplary damages of up to two times actual damages plus attorney’s fees.
Unfair Competition in the Digital Economy
The internet has introduced forms of unfair competition that did not exist a generation ago. Keyword advertising—buying a competitor’s trademark as a search ad trigger—has generated significant litigation over whether such use constitutes trademark infringement or false advertising. Web scraping, account hijacking, fake reviews, and astroturfing (creating the appearance of grassroots consumer support through coordinated fake accounts) are modern unfair competition tactics that courts are increasingly being asked to address under existing statutes.
The Computer Fraud and Abuse Act (18 U.S.C. § 1030) can also support unfair competition claims when a competitor accesses computer systems without authorization to obtain competitive intelligence. Courts have applied CFAA liability in cases involving competitors scraping pricing data from password-protected platforms and in cases where former employees accessed company systems after resignation to exfiltrate confidential information.
What to Do If You Are the Victim of Unfair Competition
If a competitor is engaging in unfair competition, acting quickly is important. Courts routinely grant preliminary injunctions in unfair competition cases when the plaintiff can show a likelihood of success on the merits and that the balance of hardships favors relief. The standard for preliminary injunctions in Lanham Act cases is well-developed and plaintiffs with clear evidence of ongoing harm—such as a documented false advertising campaign or a demonstrated theft of trade secrets—often succeed in obtaining emergency relief.
Before filing suit, you should preserve all evidence of the unfair competition: screenshots, advertisements, communications, and any documentation of economic harm. You should also consider whether a cease-and-desist letter is appropriate. In many cases, a well-drafted letter from experienced litigation counsel will prompt the competitor to stop the conduct without the expense of litigation. In other cases, only litigation will provide adequate relief.
The attorneys at Revision Legal handle unfair competition matters across a range of industries. If a competitor is using unlawful means to gain an edge in your market, call us at 231-714-0100 or 855-473-8474 for a consultation.
