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A guide to understanding unfair competition

Unfair competition refers to fraudulent or dishonest rivalry. Most cases of unfair competition are characterized by bad faith and deception. People who partake in acts of unfair competition counterfeit or imitate the products or services of another business. Learn about examples, remedies and laws regarding unfair competition.

Common examples

Many illegal dirty tricks within trade and commerce fall under the term of unfair competition. Here are some examples:

  • False advertising: An example would be a drug company making exaggerated claims about its products being able to guarantee weight loss.
  • Trademark infringement: Such as a soda manufacturer using a trademarked logo of a competitor.
  • Unauthorized substation: Commonly referred to as bait and switch. An example would be a manufacturer using images of a designer handbag to sell a cheaper handbag.
  • False representation: Such as a misleading product guarantee or warranty.
  • Misappropriation of trade secrets: For example, a fast food restaurant stealing a secret recipe for monetary gain.

Most instances of unfair competition fall under state common law, although federal law often applies in cases of false advertising, copyrights and trademarks.


Victims of unfair competition have several opportunities to restore damages. California allows victims to get injunctive relief and monetary damages in applicable circumstances. Injunctive relief restricts the competitor from partaking in the unlawful practices. Some cases result in significant losses for the victim, which is why monetary damages may be awarded.

Calculating compensation

Due to the fact there are many different types of unfair competition, damages awards vary widely depending on the specific case. Factors considered when determining the damages award include:

  • Nature of the misconduct.
  • Intentionality of the misconduct.
  • Duration of the misconduct.
  • Liabilities, assets and net worth of the defendant.
  • Number of violations.

Damages are not awarded in each case. In certain circumstances, injunctive relief may be enough.

When unfair competition does not apply

There are some situations where it seems as if unfair competition may apply, but upon further inspection, it is not unlawful. For example, trade secrets are often obtained through lawful means. When trade secrets are obtained by reverse engineering, independent discovery or inadvertent disclosure, it does not count as misappropriation.

Unfair competition is regulated through various state and federal laws . If you are unsure whether a competitor is taking part in unlawful misconduct against your business, consult a small business attorney. An attorney can help you understand the laws, determine whether they apply and what actions can be taken to ensure your property or information is not harmed.

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