False or Deceptive Competitor Advertising Hurting Your Bottom Line?

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There are resources and options available for business owners when competitors undercut pricing by selling inferior goods or services.

As a business owner, you expend time and resources to make your product or service the best it can be. You ensure the highest degree of quality possible, sourcing the best components, and advertising in a truthful manner. All this can be frustrated, however, when a competitor is able to undercut your pricing by selling inferior goods or services, but advertising them as equal to or better
than yours. Or, perhaps a competitor infringes your trade dress or trade name, seeking to invoke your goodwill to their own benefit. Thanks to the powerful Lanham Act statute, you are not without remedies.

The Lanham Act prohibits commercial advertising which is factually untrue or, even if literally true, if it is likely to deceive “as to the affiliation, connection, or association of such person with another person,” or as to “the origin, sponsorship, or approval of” goods and services by another person, or when a competitor “misrepresents the nature, characteristics, qualities, or geographic origin of” their own goods/services or the competition’s goods, services or commercial activities. 15 U. S. C. §1125.

The Lanham Act applies to product labeling, descriptions, product trademarks (i.e., counterfeiting), and all forms of advertising in interstate commerce, including the Internet. For example, “Made in the USA” has been a popular advertising trend in recent years. Some goods must be marked with country of origin labeling, but outside those contexts “Made in the USA” is largely a voluntary representation that a business will make to attract consumers. Under FTC standards, the good must “all or virtually all” made in the United States for the Made in the USA advertising not to be false or deceptive. And, not just express representations of “Made in the USA” can invite scrutiny. Geographic symbols such as flags, the words USA or American, maps, and references to manufacturing facilities in the United States can create a net impression in the minds of consumers that a good is all or virtually all American sourced. If this advertising is false or deceptive, the competitor could be violating the Lanham Act.

A business can seek injunctive relief (meaning, a court order that a competitor stop doing something) by showing threatened injury to business profits, even if damages have not yet arisen. If damages have already occurred, those are recoverable as well. In exceptional cases, attorney’s fees can be sought. Where the competing advertising is proven as factually untrue, the materiality – or importance to a consumer – of the advertising statement is presumed, making it easier for businesses to protect the marketplace and keep it free of false advertising.

If you believe a competitor has violated the Lanham Act as to your business, you are not without remedies.

Skye Resendes is an Attorney for Watkins Firm, APC.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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