Tips for Avoiding Disparagement of a Competitor

What is Commercial Disparagement?

In the broadest sense, commercial disparagement involves advertising or other public statement including  false or misleading information about a business that discourages consumers from buying from or dealing with that business. There is no requirement that the other business be your competitor, although that is the context in which problems most frequently arise.

Where and What Kind of Claims/Statements Count as Disparagement?

The most common cases of commercial disparagement involve advertising, but disparagement can occur in many types of statements that might not be obvious. For example, product packaging can sometimes implicate issues of competitor disparagement. For example, if your packaging states that your butter is the “only organic butter certified for sale in Lake County,” that might be commercial disparagement. Using the word “only” might be false and misleading if there are other organic butter producers in Lake County.  Even claims with multiple interpretations that a reasonable consumer could read as implying false or misleading information can give your competitor or other businesses a cause of action against you.

You business should also take care to avoid disparagement in these not-so-obvious circumstances:

  • In statements provided by your staff/employees generally
  • In responses to consumer reviews (such as those on Yelp)
  • In consumer reviews made by your customers uploaded to your website
  • In testimonials prompted or purchased by your company and uploaded to social media pages
  • In social media posts made by your business
  • In filings with governmental agencies
  • In press releases and other statements to media outlets

You should create and implement employee policies that limit or at least provide training to your employees about what they should and should not say on social media platforms and other forums. Uncorrected false statements by your employees might cause legal problems.

Vague Claims and Puffery are Probably Okay, but Might Still Lead to Litigation

Aggressive advertising is often essential to maintain and grow your market share. Businesses frequently push the envelope with vague claims and puffery. Puffery is generally exaggerated or indefinite claims about the virtues of your product compared to other products in the marketplace. For example, it is probably mere puffery to claim that your butter “is better than all the butter in all the world.”  The crucial question is how a claim is interpreted by reasonable consumers.

Even seemingly innocuous puffery can cause problems and result in litigation. For example, Pizza Hut took umbrage after Papa John’s Pizza used the advertising slogan “Better ingredients. Better pizza.” Pizza Hut sued Papa John’s, and a jury awarded Pizza Hut nearly $500,000 in damages and barred Papa John’s from using the slogan. The verdict was eventually reversed on appeal, but most businesses do not relish prolonged litigation even when victorious.

What Can Happen if You Disparage a Competitor?

Commercial disparagement can be a form of defamation or libel. Generally, defamation is false, disparaging statements made orally. Libel is false, disparaging statements made in writing.

While defamation and libel are creatures of state law, the following elements are generally required to prove a commercial disparagement:

  • False statement
  • Intent by the person/business to harm (e.g., cause loss of business for the competitor)
  • Actual loss by the competitor; and
  • Malice or reckless disregard for the truth (in some cases)

The range of possible false statements is broad. Aside from comparative claims like those discussed above, other common statements that lead to litigation are claims that a competitor is incompetent, dishonest, unethical, or on the verge of bankruptcy. Reported cases have involved alleged false statements that a product was being sold in violation of a patent, that a shopping mall was unsafe, and that some other product was 40% less effective.

What Should You do if You Get Sued?

If you are facing an actual or threatened commercial disparagement lawsuit, you should immediately contact  business litigation attorneys with experience in this area. The sooner you can evaluate your options, the better you can protect yourself.

As with all claims of defamation or libel, truth is an absolute defense. Even if your statement upset a competitor, you are protected if your statement is true. Privilege is also a defense. Under some circumstance, such as statements made during a court proceeding, your statements are privileged and exempt from possible liability. Another available defense exists for statements that only assert your opinion. In addition, if your competitor cannot show damages linked to your statement, your competitor likely cannot prevail.  

A Few Tips to Help Avoid Commercial Defamation

Here are a few tips to help avoid committing commercial defamation:

  • Document and keep records related to any claims you make — truth is an absolute defense
  • As noted above, instruct your employees’ statements and social media — create employee policies and provide training
  • Monitor customer reviews and comments if you control website content
  • Respond quickly to any claim of disparagement — intent and malice may be defeated if you retract an offending statement quickly
  • Make sure your insurance covers disparagement claims — often part of the “personal and advertising injury” coverage
  • Do not make false statements
  • Contact a good lawyer with experience in advertising law for advice

Contact Revision Legal

Every business needs experienced business attorneys like the professionals at Revision Legal. If you need information or have questions about your advertising, we can offer advice and can help. If you have been sued or threatened, our experienced litigators are here for you.

 

We can be reached by using the form on this page or by calling us at 855-473-8474.

 

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