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Legal Encyclopedia - Unfair competition

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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.

In this context, 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.

The most familiar example of unfair competition is trademark infringement. Another common form of unfair competition is misappropriation. This 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. In the areas of trademarks, copyrights, and false advertising Federal law may apply. See Trademark, Copyright, and § 1125 of the Lanham Act.

The Federal Trade Commission (FTC) (http://www.law.cornell.edu/cfr/cfr.php?title=16&type=chapter&value=I) was established by Congress 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 (http://www.law.cornell.edu/cfr/cfr.php?title=16&type=title&value=16). 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 (http://www.law.cornell.edu/uniform/vol7%2ehtml#dectr).

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