Small businesses in California face various challenges. When an unfair competition claim arises, it can represent a significant threat.
California law broadly defines unfair competition, which includes any unlawful, unfair or fraudulent business practice. For small businesses, these claims can lead to costly litigation, damage to their reputation and even the possibility of shutting down.
What does the law say about unfair competition?
Unfair competition in California falls under the Business and Professions Code Section 17200, commonly known as the Unfair Competition Law. This law prohibits any business practice that is unlawful, unfair or fraudulent. It also includes acts of false advertising. A small business can face an unfair competition claim even if it did not intend to engage in wrongful conduct. Competitors, consumers and government entities can all file these claims.
How do unfair competition claims come about?
False advertising is one particularly common source of unfair competition claims. If a business promotes products or services with misleading information, it can face serious legal consequences. For example, exaggerating the benefits of a product or making false statements about a competitor’s product can result in a lawsuit. Even unintentional errors in marketing materials can lead to legal action.
Another common issue involves trade secrets. If a small business misappropriates trade secrets from a competitor, it can face an unfair competition claim. This can include anything from using a competitor’s customer list to replicating a proprietary process. These claims can be difficult to defend and may result in significant financial penalties.
Small businesses must also be aware of pricing practices. Predatory pricing, or setting prices below cost to drive competitors out of the market, can lead to an unfair competition claim. This practice violates California’s UCL because it harms competition and consumers.
Unfair competition claims pose a real threat to small businesses in California. The broad nature of the law means that even unintentional actions can result in legal trouble. Maintaining respectful measures toward other businesses is essential for the long-term survival and success of small businesses in California.