What constitutes unfair competition in California? What is the difference between competing with another company for business and unfair competition in San Diego or throughout the State of California? When does a company cross the line between “competing hard” and “unfair competition?”
Key Takeaways About What Constitutes Unfair Competition in California?:
- Understanding what constitutes unfair competition in California is critical for business owners, executives, and investors because our State’s statutes are intentionally broad and carry serious financial and operational consequences.
- Many people assume unfair competition law applies only to misleading advertising aimed at consumers. In reality, California’s statute reaches far beyond public-facing marketing and can arise in several distinct business contexts.
- The analysis in these legal matters usually begins with whether a business practice crosses the line from aggressive competition into unlawful, deceptive, or fundamentally unfair conduct.
- Unfair competition claims often accompany allegations of unfair business practices, fraud, breach of fiduciary duty, or interference with contractual relations.
What is Considered to be Unfair Competition in California
Understanding what constitutes unfair competition in California is critical for business owners, executives, and investors because our State’s statutes are intentionally broad and carry serious financial and operational consequences. California’s unfair competition laws are not limited to consumer advertising claims or obvious fraud. They reach deep into how businesses operate, compete, price, market, and interact with competitors, partners, and the public.
At its core, unfair competition refers to business conduct that goes beyond legitimate competitive strategies and interferes with others’ ability to compete fairly in a market or geographic area. California law defines unfair competition as any unlawful, unfair, or fraudulent business act or practice, as well as unfair, deceptive, untrue, or misleading advertising. Our laws are designed to protect businesses and consumers alike from deceptive business practices.
Many people assume unfair competition law applies only to misleading advertising aimed at consumers. In reality, California’s statute reaches far beyond public-facing marketing and can arise in several distinct business contexts, including:
- Conduct between competing businesses that distorts fair market competition
- Internal company actions that unfairly advantage specific individuals or groups
- Disputes among stakeholders such as partners, LLC members, shareholders, or investors
- Business practices that undermine fair dealing rather than violate a particular contract
In these cases, courts focus less on traditional contract interpretation and more on whether the underlying business behavior is unlawful, deceptive, or fundamentally unfair.
How are Unfair Competition Laws in California Applied in Practical Terms?
So, how are unfair competition laws in California applied in practical terms? The analysis in these legal matters usually begins with whether a business practice crosses the line from aggressive competition into unlawful, deceptive, or fundamentally unfair conduct. Courts are given broad discretion under California law to evaluate new schemes, pricing tactics, and market behavior as industries change.
Common examples include business fraud or deception in commercial transactions. The legal standard for fraud under California’s unfair competition law is broader than traditional common-law fraud. A business may be found to have engaged in unfair competition even when intent is difficult to prove, if the practice itself is misleading or likely to deceive.
Other frequently cited examples include:
- False or misleading representations about products, services, or pricing
- Market manipulation, such as fake “discounts” where prices were never higher
- Sales below cost designed to eliminate competitors rather than compete fairly
- Bait-and-switch advertising tactics
- Misrepresentation of a competitor’s products or business practices
Unfair competition can also involve actions taken within a company itself, or conduct between business entities. This often includes illegal use of confidential information or trade secrets, or engaging in a pattern of practices designed to distort “fair competition.” The statute is intentionally flexible, allowing courts to evaluate whether a practice undermines market fairness, even if it does not violate a specific regulation.
One of the most critical aspects of understanding what constitutes unfair competition in California is recognizing how remedies work. Unlike many other California civil or business lawsuits, unfair competition claims do not allow recovery of what most would consider to be “traditional financial damages.” Remedies are often limited to restitution and injunctive relief. Restitution seeks to restore money or property obtained through unfair practices, while injunctive relief allows courts to stop the challenged conduct immediately.
However, this does not mean exposure is limited. There can be a significant financial risk in unfair competition cases, particularly when remedies open the door to recovery of plaintiff’s attorneys’ fees. If a business is accused of unfair competition and the claimant prevails, the court may require the company to pay restitution and the opposing party’s legal fees. For many businesses, this combination poses a serious threat to cash flow and operations.
Unfair Competition in California Rarely Exists in Isolation from a Legal Perspective – It’s Usually Part of a Potentially Expensive Cocktail of Allegations
These cases rarely exist in isolation. Unfair competition claims often accompany allegations of unfair business practices, fraud, breach of fiduciary duty, or interference with contractual relations. While these issues may appear to be inter-related, unfair business practices can, in some cases, increase the types and value of available remedies to include additional forms of damages beyond restitution and injunctive relief.
The potential for recovery of plaintiffs attorneys fees and the seemingly contradicting menu of remedies is one of the primary reasons you will need an experienced litigation attorney from the Watkins Firm. Evaluating what constitutes unfair competition in California requires a careful review of business conduct, market context, and statutory interpretation. Minor missteps, especially in pricing, advertising, or competitive strategy, can trigger outsized legal consequences.
The experienced, proven business litigation attorneys at the Watkins Firm do much more than respond to allegations. We help assess risk before practices are implemented, develop defensible strategies, and protect businesses when claims arise. Your Watkins Firm lawyer(s) can make a significant difference in the outcome of your case. In disputes involving unfair competition, timing, documentation, and legal positioning often determine whether a case is resolved efficiently or escalates into prolonged litigation.
California’s unfair competition laws are designed to protect markets, competitors, and consumers alike. Businesses that understand how these laws operate are better positioned to compete aggressively without crossing lines that courts take seriously.
Pro-tip: ” if something’s being done to you, we know how to capture information, capture evidence without setting off alarms so that you’re in a much more advantageous position to either stop it or if you have to take action against the guilty party. You should understand that the first thing you need to do, if you think that business fraud has occurred in your business or in your dealings, is ask yourself, ‘have you lost money’? Or have you lost the opportunity to earn or make money?
And those things are not simple questions. Something may feel wrong, something may seem wrong, or you just may know it’s a gut instinct before you’ll write to the law, go right to your damages. And in unfair business practices and business fraud, we have a saying, if it’s off a penny, it’s off a million. If it doesn’t add up to the penny, there’s a reason.
So business to business fraud is a big topic. It happens. You’re in the marketplace, you are doing great, and all of a sudden no one’s coming to you anymore. And then you find out that the number one competitor has taken some of the elements of your website are saying bad things about you, or they’re doing a lost leader advertising BA and switch on the price. And they’re grabbing all your customers, but you have the best product and the best service. They are defrauding you out of your rightful profits. And you should, I’ll say it again, if for for unknown reason, all of a sudden you’re not making the money you used to. You might be the victim of fraud and don’t know it. Go see a lawyer who knows this stuff. We’ll spot it.
I have literally seen one company take the actual products of another company, relabel them and sell them. I’ve seen other cases where they’ll be an insider in one company, invested in another company and they’ll steal intellectual property and they’ll steal physical property and bring it over to the other company that are also invested in because they have a partnership dispute with their partner. And so they figure ‘I’m going to steal it before I fight it out in court or before I do all the other things.’ And so that’s crazy in and of itself. And then your general business to business fraud, where you defame the other company, you go out and steal their intellectual property, you steal their customer list, you advertise fraudulently about them. Business is brutal. And so we see a lot of that.” – Dan Watkins, Founding Partner
Get Answers to Your Questions Unfair Competition in California
What constitutes unfair competition in California? When does business cross the line into unfair competition here in San Diego, and throughout the State of California? If you have been accused of unfair competition in California, or are concerned about the practices of another competitor we invite you to review our Podcast Episode 16 – Unfair Competition, as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
Unfair competition is a complex and somewhat vague area of the law and requires the decades of experience and legal skill which the Watkins Firm brings to our business clients.
Meet Daniel Watkins:
Daniel W. Watkins is a true people person who sincerely listens. He cares deeply about what others are going through. Dan enjoys digging into the facts and finding creative solutions to problems. He contributes his insights candidly and constructively.
Dan’s interest in people make him deeply invested in every relationship and his exuberant personality makes him a true litigator. Dan fights for his clients with a fierce and calculated commitment.
Dan has practiced in the areas of business, medical practices and healthcare business, high tech/science, real estate and employment defense law since 1987. He is a trusted litigation strategist and true trial attorney with over 50 jury and bench trials to his credit. Dan has successfully represented both large companies and individuals and achieved substantial victories in well-publicized trials throughout California and the U.S.
He is experienced in business and corporate formation and administration, as well as all forms of alternative dispute resolution, including binding arbitration and mediation.
THE ROAD TO BECOMING A BUSINESS LAWYER AND LITIGATOR
Dan has almost 40 years of experience working with, for and against some of the largest insurance companies in the country. He has successfully tried and litigated cases in the areas of Healthcare Compliance, Commercial Litigation, Unfair Business Practices, Fraud, Breach of Contract, Battery, Premises Liability, Product Defect, Medical Malpractice, Discrimination, Sexual Harassment, Construction Defect, as well as Unfair Competition, Defamation, and Trade Secrets.
In December 2003, Dan commenced litigation against Health South Surgery Centers-West, Inc and its’ subsidiaries, exposing the company’s extensive mismanagement and misconduct of its’ surgery centers. Dan has also been asked by some of California’s largest municipalities and corporations to conduct legally required investigations into matters involving alleged employment discrimination and harassment.
