While all is fair in love and war, established laws of competition govern in the California business arena; specifically California’s Unfair Competition Law (“UCL”) (found under California Business & Professions Code Section 17200 et seq.). Under the UCL, unfair competition refers to any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.
Unfair Competition in California
In other words, there are three varieties of unfair competition in California—acts or practices that are unlawful or, unfair, or fraudulent. While the UCL is typically in the headlines as a consumer protection statute, it can be used effectively to assert claims against an unfair business competitor as illustrated by a recent holding. In this case, Higbee, the plaintiff, was a law firm specializing in providing record expungement services. The defendant provided the same services, but did so using employees who were not licensed to practice law. Thus, the plaintiff alleged that the defendant was able to undercut the competition by using unlicensed persons to perform legal work, thereby saving on attorneys’ fees. Higbee also alleged that by doing this, the defendant diverted business from Higbee, thereby causing his firm injury and damage. In order to compete, Higbee claimed that he had to expend additional sums on advertising and lower his prices for expungement services.
The trial court essentially sided with the defendant, finding that because Higbee had no direct business dealings with the defendant, he lacked standing to assert a cause of action under Section 17200. To have standing to bring a UCL claim, a business or consumer must have suffered an actual injury and have lost money or property as a result of the unfair competition.
Standing to bring an unfair competition claim
Things turned around at the appellate level, however, and in a win for business owners, the Court of Appeal reversed the trial court’s opinion, holding that Section 17200 was enacted to protect BOTH consumers and competitors by promoting fair competition in commercial markets for goods and services. The Court noted that the UCL was originally conceived to protect business competitors, and that the deterrence of unfair competition between businesses is an important goal of the UCL. Accordingly, the Court held that the lack of direct dealings between the two business competitors is not necessarily fatal to UCL standing provided the plaintiff competitor has suffered injury in fact and lost money or property as a result of the defendant competitor’s unfair competition.
Takeaway for business owners dealing with unfair competition
The takeaway for business owners throughout the state is that a business who loses customers, market share and profits (that is, suffers monetary injury in fact) because of the unfair competition of a competing business can bring a UCL action and seek injunctive relief.
To discuss bringing a claim for unfair competition, contact experienced business lawyer Drew E. Pomerance today.