Unfair competition

Last updated

Unfair (or disloyal) competition in commercial law is a deceptive business practice that causes economic harm to other businesses or to consumers. [1] [2] It includes a number of areas of law involving acts by one competitor or group of competitors which harm another in the field, and which may give rise to criminal offenses and civil causes of action.

Commercial law body of law that applies to persons and businesses engaged in commerce

Commercial law, also known as trade law, is the body of law that applies to the rights, relations, and conduct of persons and businesses engaged in commerce, merchandising, trade, and sales. It is often considered to be a branch of civil law and deals with issues of both private law and public law.

Crime unlawful act forbidden and punishable by criminal law

In ordinary language, a crime is an unlawful act punishable by a state or other authority. The term "crime" does not, in modern criminal law, have any simple and universally accepted definition, though statutory definitions have been provided for certain purposes. The most popular view is that crime is a category created by law; in other words, something is a crime if declared as such by the relevant and applicable law. One proposed definition is that a crime or offence is an act harmful not only to some individual but also to a community, society or the state. Such acts are forbidden and punishable by law.

A cause of action, in law, is a set of facts sufficient to justify a right to sue to obtain money, property, or the enforcement of a right against another party. The term also refers to the legal theory upon which a plaintiff brings suit. The legal document which carries a claim is often called a 'statement of claim' in English law, or a 'complaint' in U.S. federal practice and in many U.S. states. It can be any communication notifying the party to whom it is addressed of an alleged fault which resulted in damages, often expressed in amount of money the receiving party should pay/reimburse.

Contents

Common actions

The most common actions falling under the banner of unfair competition include:

European Union Economic and political union of European states

The European Union (EU) is a political and economic union of 28 member states that are located primarily in Europe. It has an area of 4,475,757 km2 (1,728,099 sq mi) and an estimated population of about 513 million. The EU has developed an internal single market through a standardised system of laws that apply in all member states in those matters, and only those matters, where members have agreed to act as one. EU policies aim to ensure the free movement of people, goods, services and capital within the internal market, enact legislation in justice and home affairs and maintain common policies on trade, agriculture, fisheries and regional development. For travel within the Schengen Area, passport controls have been abolished. A monetary union was established in 1999 and came into full force in 2002 and is composed of 19 EU member states which use the euro currency.

Competition law is a law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. Competition law is known as "antitrust law" in the United States for historical reasons, and as "anti-monopoly law" in China and Russia. In previous years it has been known as trade practices law in the United Kingdom and Australia. In the European Union, it is referred to as both antitrust and competition law.

Predatory pricing, also known as undercutting, is a pricing strategy in which a product or service is set at a very low price with the intention to achieve new customers, or driving competitors out of the market or to create barriers to entry for potential new competitors.

Various unfair business practices such as fraud, misrepresentation, and unconscionable contracts may be considered unfair competition, if they give one competitor an advantage over others. In the European Union, each member state must regulate unfair business practices in accordance with the principles laid down in the Unfair Commercial Practices Directive, subject to transitional periods.

Unfair business practices encompass fraud, misrepresentation, and oppressive or unconscionable acts or practices by business, often against consumers, and are prohibited by law in many countries. For instance, in the European Union, each member state must regulate unfair business practices in accordance with the Unfair Commercial Practices Directive, subject to transitional periods. Unfair business practices may arise in many areas, including:

In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law, a criminal law, or it may cause no loss of money, property or legal right but still be an element of another civil or criminal wrong. The purpose of fraud may be monetary gain or other benefits, for example by obtaining a passport, travel document, or driver's license, or mortgage fraud, where the perpetrator may attempt to qualify for a mortgage by way of false statements.

A concept of English law, a misrepresentation is an untrue or misleading statement of fact made during negotiations by one party to another, the statement then inducing that other party into the contract. The misled party may normally rescind the contract, and sometimes may be awarded damages as well.

See also

Trade regulation is a field of law, often bracketed with antitrust, including government regulation of unfair methods of competition and unfair or deceptive business acts or practices. Antitrust law is often considered a subset of trade regulation law. Franchise and distribution law, consumer protection law, and advertising law are sometimes considered parts of trade regulation law.

"Embrace, extend, and extinguish", also known as "embrace, extend, and exterminate", is a phrase that the U.S. Department of Justice found was used internally by Microsoft to describe its strategy for entering product categories involving widely used standards, extending those standards with proprietary capabilities, and then using those differences to strongly disadvantage its competitors.

A category killer is a retailer that specializes in and carries a deep product assortment within a given category and through selection, pricing and market penetration obtains a massive competitive advantage over other retailers. Chains such as Barnes & Noble, Best Buy, and Staples are considered category killers.

Related Research Articles

Sherman Antitrust Act of 1890 US antitrust Congress Act of 1890

The Sherman Antitrust Act of 1890 was a United States antitrust law that regulates competition among enterprises, which was passed by Congress under the presidency of Benjamin Harrison.

Clayton Antitrust Act of 1914 US antitrust Congress Act of 1914

The Clayton Antitrust Act of 1914, was a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act sought to prevent anticompetitive practices in their incipiency. That regime started with the Sherman Antitrust Act of 1890, the first Federal law outlawing practices considered harmful to consumers. The Clayton Act specified particular prohibited conduct, the three-level enforcement scheme, the exemptions, and the remedial measures.

The Federal Trade Commission Act of 1914 established the Federal Trade Commission. The Act, signed into law by Woodrow Wilson in 1914, outlaws unfair methods of competition and outlaws unfair acts or practices that affect commerce.

The Robinson–Patman Act of 1936 is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination. It was designed to protect small retail shops against competition from chain stores by fixing a minimum price for retail products.

United States Antitrust law is a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers. The main statutes are the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914. These Acts, first, restrict the formation of cartels and prohibit other collusive practices regarded as being in restraint of trade. Second, they restrict the mergers and acquisitions of organizations that could substantially lessen competition. Third, they prohibit the creation of a monopoly and the abuse of monopoly power.

Federal Trade Commission Government agency

The Federal Trade Commission (FTC) is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act. Its principal mission is the promotion of consumer protection and the elimination and prevention of anticompetitive business practices, such as coercive monopoly. It is headquartered in the Federal Trade Commission Building in Washington, D.C.

False advertising is the use of false, misleading, or unproven information to advertise products to consumers. The advertising frequently does not disclose its source. One form of false advertising is to claim that a product has a health benefit or contains vitamins or minerals that it in fact does not. Many governments use regulations to control false advertising. A false advertisement can further be classified as deceptive if the advertiser deliberately misleads the consumer, as opposed to making an honest mistake.

The Competition and Consumer Act 2010 (CCA) is an Act of the Parliament of Australia. Prior to 1 January 2011, it was known as the Trade Practices Act 1974 (TPA). The Act is the legislative vehicle for competition law in Australia, and seeks to promote competition, fair trading as well as providing protection for consumers. It is administered by the Australian Competition and Consumer Commission (ACCC) and also gives some rights for private action. Schedule 2 of the CCA sets out the Australian Consumer Law (ACL). The Australian Federal Court has the jurisdiction to determine private and public complaints made in regard to contraventions of the Act.

Restraint of trade

Restraints of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. It is a precursor of modern competition law. In an old leading case of Mitchel v Reynolds (1711) Lord Smith LC said,

it is the privilege of a trader in a free country, in all matters not contrary to law, to regulate his own mode of carrying it on according to his own discretion and choice. If the law has regulated or restrained his mode of doing this, the law must be obeyed. But no power short of the general law ought to restrain his free discretion.

Microsoft Corp v Commission (2007) T-201/04 is a case brought by the European Commission of the European Union (EU) against Microsoft for abuse of its dominant position in the market. It started as a complaint from Sun Microsystems over Microsoft's licensing practices in 1993, and eventually resulted in the EU ordering Microsoft to divulge certain information about its server products and release a version of Microsoft Windows without Windows Media Player. The European Commission especially focused on the interoperability issue.

The Unfair Commercial Practices Directive 2005/29/EC regulates unfair business practices in EU law, as part of European consumer law. It requires corresponding laws to be passed that incorporate it into each member state's legal system.

The Antitrust Paradox is a 1978 book by Robert Bork that criticized the state of United States antitrust law in the 1970s. A second edition, updated to reflect substantial changes in the law, was published in 1993. It is claimed that the work is the most cited book on antitrust. Bork has credited Aaron Director as well as other economists from the University of Chicago as influences.

United Kingdom competition law is affected by both British and European elements. The Competition Act 1998 and the Enterprise Act 2002 are the most important statutes for cases with a purely national dimension. However, if the effect of a business' conduct would reach across borders, the European Commission has competence to deal with the problems, and exclusively EU law would apply. Even so, the section 60 of the Competition Act 1998 provides that UK rules are to be applied in line with European jurisprudence. Like all competition law, that in the UK has three main tasks.

In regulatory jurisdictions that provide for it, consumer protection is a group of laws and organizations designed to ensure the rights of consumers as well as fair trade, competition and accurate information in the marketplace. The laws are designed to prevent the businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors. They may also provides additional protection for those most vulnerable in society. Consumer protection laws are a form of government regulation that aim to protect the rights of consumers. For example, a government may require businesses to disclose detailed information about products—particularly in areas where safety or public health is an issue, such as food.

The unfairness doctrine is a doctrine in United States trade regulation law under which the Federal Trade Commission (FTC) can declare a business practice "unfair" because it is oppressive or harmful to consumers even though the practice is not an antitrust violation, an incipient antitrust violation, a violation of the "spirit" of the antitrust laws, or a deceptive practice.

In addition to federal laws, each state has its own unfair competition law to prohibit false and misleading advertising. In California, one such statute is the Unfair Competition Law [hereinafter “UCL”], Business and Professions Code §§ 17200 et seq. The UCL “borrows heavily from section 5 of the Federal Trade Commission Act” but has developed its own body of case law.

FTC v. Motion Picture Advertising Service Co., 344 U.S. 392 (1953), was a 1953 decision of the United States Supreme Court in which the Court held that, where exclusive output contracts used by one company "and the three other major companies have foreclosed to competitors 75 percent of all available outlets for this business throughout the United States" the practice is "a device which has sewed up a market so tightly for the benefit of a few [that it] falls within the prohibitions of the Sherman Act, and is therefore an 'unfair method of competition' " under § 5 of the FTC Act. In so ruling, the Court extended the analysis under § 3 of the Clayton Act of requirements contracts that it made in the Standard Stations case to output contracts brought under the Sherman or FTC Acts.

References

  1. "Unfair Competition". FindLaw.com. Retrieved February 6, 2017.
  2. "Unfair Competition". Legal Information Institute of Cornell University Law School. Retrieved February 6, 2017.