Unfair competition

Unfair Competition law: an overview

The law of unfair competition is primarily comprised of torts that cause an economic injury to a business through a deceptive or wrongful business practice. Unfair competition can be broken down into two broad categories. First, the term "unfair competition" is sometimes used to refer only to those torts that are meant to confuse consumers as to the source of the product. The other category, "unfair trade practices", comprises all other forms of unfair competition.

Unfair competition does not refer to the economic harms involving monopolies and antitrust legislation. What constitutes an "unfair" act varies with the context of the business, the action being examined, and the facts of the individual case.

Two common examples of unfair competition are trademark infringement and misappropriation.  The latter involves the unauthorized use of an intangible assets not protected by trademark or copyright laws. See also Right of Publicity. Other practices that fall into the area of unfair competition include: false advertising, "bait and switch" selling tactics, unauthorized substitution of one brand of goods for another, use of confidential information by former employee to solicit customers, theft of trade secrets, breach of a restrictive covenant, trade libel, and false representation of products or services.

The law of unfair competition is mainly governed by state common law. Federal law may apply in the areas of trademarks, copyrights, and false advertising. See Trademark, Copyright, and § 1125 of the Lanham Act.

Congress established The Federal Trade Commission (FTC) in part to protect consumers from deceptive trade practices. The FTC indirectly protects competitors because some deceptive trade practices (e.g. "bait and switch tactics") that injure consumers also injure competing businesses. The FTC regulations concerning unfair competition are found in various parts of Title 16 of the Code of Federal Regulations. If there is a conflict between federal and state law, the state law may be pre-empted.

A few states have enacted legislation dealing with specific types of unfair competition. See, e.g., Uniform Deceptive Trade Practices Act.

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