Unfair competition is using illegal, deceptive, and fraudulent selling practices that harm consumers or other businesses to gain a competitive advantage in the market. Federal and state laws fight against these issues.
There are several types of unfair competition. Let’s consider them in detail.
Types of unfair competition
There are seven most popular types of unfair competition. We’ll review each of them and provide examples.
- False advertising. This is a well-known issue that has provoked hundreds of scandals and cost some brands millions. It means making untrue statements about a product to gain more revenue. Such ads usually promise that a product will solve a particular problem when it actually doesn’t. It is a widely-used practice among manufacturers of dietary supplements and food. For example, it cost Dannon $45 million in 2010. They claimed that their yogurt helped regulate the digestive system, for which there was no scientific evidence.
- Trademark infringement. It means stealing your intellectual property. For example, if competitors want to increase their market share, they can use your logo or slogan to promote their products. Hence, it’s vitally important to register your trademark.
- Bait-and-switch tactics. This deceptive practice is widely used in retail stores. Advertisers promote a product at an extremely low price, and when consumers visit a store, they’re told that it has run out of this product. Hence, they are offered to buy a similar, more expensive product. Some states in the U.S. consider this practice a crime.
- Unauthorized substitution. This practice is similar to the previous one. It means promoting a product that is not what consumers expect to buy. After a seller gets money, they provide a client with a worse quality product or even a counterfeit. The features of such goods are often exaggerated.
- Misappropriation of trade secrets. It means that your competitor discovered the secret of your recipe, strategy, or formula that was your competitive advantage and uses it to gain more revenue. An employee can be a source of information leakage in this case. A non-disclosure agreement regulates confidentiality clauses.
- Rumor mongering. This practice speaks for itself. Competitors can slander your business in their marketing campaigns to look superior.
- Below-cost selling. A company sets a much lower price than others in the market, even if its net cost is higher. This way, they operate at a loss, but it allows them to increase their market share and fight off competition.
Now you are familiar with the types of unfair competition, you can protect your business and fight fraudulent selling practices.
- This article explains where unfair competition laws originate.
- This article provides tips on how to fight unfair competition in advertising.
- This article considers protection against unfair competition.
Last Updated: 26.10.2021