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In Law, what is Unfair Competition?

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  • Written By: T. Webster
  • Edited By: J.T. Gale
  • Last Modified Date: 06 December 2016
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Laws that govern unfair competition generally involve deceptive business practices that cause economic hardship to an individual, a group of individuals, or another business. These laws or regulations attempt to ensure fair competition, honesty in advertising, and the protection of trademarks. Such laws are often civil but may be criminal in nature if trade secrets are stolen through theft, coercion, or another illegal activity. Unfair competition laws may also define the circumstances under which damages may be recovered. Both consumers and competing businesses can claim damages.

Two main areas of unfair competition laws are unfair business practices and deliberate attempts to misrepresent a product. These definitions can vary widely and may depend on the type of business, what actions were taken, and supporting evidence. Depending on the country, there may be national laws and regulatory agencies that protect against unfair competition.

Practices that might fall under unfair competition laws include trademark infringement, false advertising, and selling products by using bait-and-switch techniques. Using similar packaging or a similar name in an attempt to confuse customers into thinking they are buying a different product may also be viewed as unfair competition. Other potential problem areas include misstating ingredients or appropriate product use. Badmouthing the quality of a competitor's product is another potential problem area.

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Former employees can even get into trouble with unfair competition laws. This may occur if business secrets are used or sold for personal gain. Some businesses require employees to sign agreements that protect trade secrets and prevent them from disclosing them; generally, this applies to information that is not known by the public. Individuals who steal trade secrets through illegal means are also at risk. Before a third party can be sued, it may have to be proven that the party who received and used a trade secret knew it was acquired by illegal means and that it was a trade secret.

Another area covered is privacy matters. These laws provide a check-and-balance system that attempts to ensure businesses follow their own privacy policies. In some cases, both consumers and regulatory agencies may seek damages for violations in this area. Not following privacy policies falls under the category of deceptive business practices. This may include Websites that list a promise of how personal information is handled.

Some locales may have limits on who can sue a business for unfair practices and under what conditions. For example, all applicable procedural laws must be followed. A plaintiff may also have to prove that actual losses or injuries were incurred. These controls are sometimes put in place to avoid an excess of frivolous lawsuits.

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