Arthur R. Lehman, L.L.C.

A basic overview of unfair competition

In today's active business climate, staying competitive is more important than ever. Businesses in New York will want to make sure their advertising is effective and that their trademarks and trade secrets are protected. They will also want to increase their customer base and see an uptick in sales of their goods or services. All of these actions can lead to a profitable and successful business. However, sometimes, in pursuit of these goals, a business will either be accused of committing unfair competition or will claim it is the victim of unfair competition.

In very general terms, unfair competition exists when a business, for its own gain, deceives or misleads consumers or other businesses, causing the other business or consumers to suffer financial harm. Unfair competition is a business tort.

Federal law addresses unfair competition through the "Commerce Clause" of the United States Constitution and the Lanham Act. Many states, including New York, also have laws addressing unfair competition. When one business claims they are the victim of unfair competition, that business may be able to file a lawsuit. In this lawsuit, the harmed business can seek an injunction (a court order for the other business to stop doing something) and/or financial compensation.

There are numerous types of activities that fall under the umbrella of unfair competition. Some examples include:

  • Trademark infringement
  • Misappropriating trade secrets
  • False advertisements
  • False representation of products or services; or
  • Substituting one brand of product for another without authorization

Claims of unfair competition are very serious. If a business is accused of committing unfair competition they may face a lawsuit. If that lawsuit is successful, the business may be facing an injunction and it may have to pay financial compensation. This could seriously impact the business's credibility and bottom line. Conversely, if a business claims it is the victim of unfair competition, the damage done to it could significantly affect its business operations, products, profitability and customer base. Therefore, it is important to have a good understanding of what constitutes unfair competition, so a business can take the steps necessary should they be accused of committing this business tort or claim they have been the victim of this business tort.

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