Unfair Competition Unlawful Fraudulent Business Practice Business & Professions B&P 17200 Law Definition Defense Lawyer

Definition. As its name suggests, California’s Unfair Competition Law forbids acts of “[U]nfair competition.” (People v. Persolve, LLC. (2013) 218 Cal.App.4th 1267, 1272.) Business and Professions Code section 17200 prohibits any “unlawful, unfair or fraudulent business act or practice” and any “unfair, deceptive, untrue or misleading advertising.” (Bus. & Prof. Code, § 17200.)

Note: Statutory unfair competition differs from common law unfair competition in that the statutory cause of action: (1) extends to all unfair and deceptive business practices; (2) does not require the plaintiff to prove damage as a result of the defendant’s actions; (3) does not require the plaintiff to prove there was any competition or rivalry with the defendant; and (4) limits relief to injunction and restitution. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264; see also Bronco Wine Co. v. Frank A. Logoluso Farms (1989) 214 Cal. App. 3d 699, 704.)


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Lawsuit Threshold: Plaintiff’s Standing

A person has standing to bring a claim under the Unfair Competition Law only if she establishes that (1) she “has suffered” “economic injury” or “damage,” and (2) this injury or damage “was the result of, i.e., caused by,” the unfair business practice “that is the gravamen of [her] claim.” (Shaeffer v. Califia Farms, LLC (2020) 44 Cal.App.5th 1125, 1137; Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322, 326.) To prove the second element of causation, the plaintiff must show that she “actual[ly] reli[ed]” on the “allegedly deceptive or misleading statement” and that it “was an immediate cause” of her injury. (Kwikset, at pp. 326-327.)
 

Element 1: Business Act or Practice

A single business act is actionable. At one time, unfair competition related to business “practices” but not to single unfair acts. In 1992 the Legislature broadened section 17200 to cover a single business “act” as well as a business “practice.” A cause of action for unfair competition under the UCL may be established “ ‘independent of any contractual relationship between the parties.’ ” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1471; Acree v. General Motors Acceptance Corp. (2001) 92 Cal.App.4th 385, 396.)

Thus, the determination whether plaintiffs have stated a cause of action for violation of the UCL is not dependent upon their ability to plead the existence of an implied agreement to charge only pass-through costs for underwriting, tax services and wire transfer services. (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1471.)


Since 1992, out-of-state practices affecting California consumers are actionable. (Bus. & Prof. Code, § 17200 (amended in 1992).)

Examples

A ski resort’s removal of trees to develop ski runs constituted a “business practice” subject to the unfair competition statute. (See Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499.)


A garment factory’s imprisonment and enslavement of Thai immigrants was a business practice under §17200. (See Bureerong v. Uvawas (C.D. Cal. 1996) 922 F. Supp. 1450, 1477.)


A collection agency’s practice of filing actions in the wrong county was a business practice under §17200. See Barquis v. Merchants Collection Ass’n (1972) 7 Cal.3d 94, 114.)

 

Element 2: Unlawful or Unfair or Fraudulent

The Unfair Competition Law is written in the disjunctive and it establishes three varieties of unfair competition. The acts or practices may be unlawfulor unfairor fraudulent.(People v. Persolve, LLC. (2013) 218 Cal.App.4th 1267, 1272, citing Cel–Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) “ ‘ “In other words, a practice is prohibited as ‘unfair’ or ‘deceptive’ even if not ‘unlawful’ and vice versa.” ’ ” (Ibid.) For example, a “fraudulent” practice does not refer to the common law tort of fraud. Rather, to state an unfair competition law claim “one need only show that ‘members of the public are likely to be deceived.’ ” (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267.)

Note to lawyers: The defendant’s business practice has to be at least one i.e. unlawful, unfair, or fraudulent.


Unlawful Business Practice

 “Unlawful” business activity under the unfair competition law includes “ ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ” (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 113.) Thus, the unfair competition law “ ‘ “borrows” violations of other laws and treats them as unlawful practices’ that the unfair competition law makes independently actionable. [Citations.]” (People v. Persolve, LLC. (2013) 218 Cal.App.4th 1267, 1272, citing Cel–Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) Accordingly, the unfair competition law’s scope is broad.


However, the Unfair Competition Law’s scope is not unlimited. Courts may not simply impose their own notions as to what is fair or unfair. Cel–Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 183.) If the Legislature has permitted certain conduct or considered a situation and concluded no action should lie, courts may not override that determination and declare the conduct unfair. “When specific legislation provides a ‘safe harbor,’ plaintiffs may not use the general unfair competition law to assault that harbor.” (Ibid.) However, the Legislature’s mere failure to prohibit an activity does not prevent a court from finding it unfair. Accordingly, while plaintiffs may not “ ‘plead around’ ” a “ ‘safe harbor’ ” by recasting the cause of action as one for unfair competition, the “ ‘safe harbor’ ” must be more than the absence of danger. (Id. at pp. 182, 184.)


Section 17200’s “unlawful” prong “borrows violations of other laws … and makes those unlawful practices actionable under the UCL.” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342; Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494, 1505.)

“ ‘[V]irtually any law or regulation—federal or state, statutory or common law—can serve as [a] predicate for a … [section] 17200 “unlawful” violation.’ [Citation].” (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 681; see also Ticconi v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528, 539.)
 

Examples

A hospital’s practice of charging patients with delinquent accounts a collection agency fee of one-third of the balance due, irrespective of the actual cost of collection, constituted an unlawful imposition of liquidated damages under former Civil Code Sections 1670 and 1671, and was unfair competition. (Bondanza v. Peninsula Hosp. & Med. Ctr. (1979) 23 Cal.3d 260, 269.)

Under section 17200, a manufacturer of ophthalmological laser systems could redress violations of the California Sherman Act, the California Consumer Legal Remedies Act, the Lanham Act and Business & Professions Code §17500. (Summit Tech. v. High-Line Med. Instruments, Co. (C.D. Cal. 1996) 933 F. Supp. 918, 943 [violations committed by laser importer, doctors and medical clinics].)


A ski resort’s removal of trees to develop ski runs in violation of provisions in the Z’berg-Nejedly Forest Practice Act, provisions of a conditional use permit, and terms of a temporary restraining order, constituted a business practice subject to the unfair competition statute. (Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499.)


Unlawful conduct may include any business act forbidden by civil, criminal, federal, state, municipal, statutory, regulatory or court-made law. (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 839.)



Unfair Business Practice

 In consumer cases arising under the Unfair Competition Law, a business practice is “unfair” if (1) the consumer injury is substantial; (2) the injury is not outweighed by any countervailing benefits to consumers or competition; and (3) the injury could not reasonably have been avoided by consumers themselves. (Camacho v. Automobile Club of Southern California (2006) 142 Cal.App.4th 1394, 1403.) “Whether a practice is … unfair is generally a question of fact which requires ‘consideration and weighing of evidence from both sides’ and which usually cannot be made on demurrer. [Citations.]” (Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 134–135.)


An unfair practice occurs when it offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. (Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632.)


Another test in determining whether a particular business practice is “unfair” involves an examination of its impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer. The court weighs the utility of the defendant’s conduct against the gravity of the harm to the alleged victim. (Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632; Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499.)

Examples

A defendant did not commit unfair competition by allegedly showing a prototype of a talking bear at a trade show, taking orders, and then shipping a slightly modified final version of the bear, since there was no evidence that anyone was harmed. (Alchemy II v. Yes! Entertainment Corp. (C.D. Cal. 1994) 844 F. Supp. 560, 571.)


The failure of a film company to include a writer’s name on the screen credits was a sufficient basis for a statutory unfair competition claim. However, relief under section 17200 is limited to an injunction and restitution and since that particular claim was not restitutionary in nature, relief was limited to an injunction barring future acts of unfair competition. Meta-Film Assocs., Inc. v. MCA, Inc. (C.D. Cal. 1984) 586 F. Supp. 1346, 1363.)


The plaintiff stated a claim for unfair competition against a grape buyer that reneged on its contract to purchase grapes by, among other things, improperly downgrading the quality rating of plaintiff’s grapes. (Allied Grape Growers v. Bronco Wine Co. (1988) 203 Cal.App.3d 432, 449.)


A car rental agency’s collision damage waiver contracts were ambiguous, misleading and deceptive, and thus unfair, where the language of the agreement was complex and the print size minuscule, and where rental agents gave customers erroneous explanations of the contract. (People v. Dollar Rent-A-Car (1989) 211 Cal.App.3d 119, 131.)


Thai immigrants who alleged that the defendants imprisoned and enslaved them in defendant’s garment factory stated a claim for unfair business practices. (Bureerong v. Uvawas (C.D. Cal. 1996) 922 F. Supp. 1450, 1477.)


A movie distributor did not commit unfair competition by soliciting bids from exhibitors for the rights to show The Cotton Club without first screening a print of the film. (Orion Pictures Distrib. Corp. v. Syufy Enters. (9th Cir. 1987)829 F.2d 946, 949 [finding even if film was not as good as distributor had represented, at the time distributor accepted blind bids for rights to show film, it was in a stage of production not suitable for screening].)


Fraudulent Business Practice

 To prevail on a claim under the fraudulent prong of the Unfair Competition Law “based on false advertising or promotional practices,” the plaintiff must “ ‘show that “members of the public are likely to be deceived.’ ” ” (Shaeffer v. Califia Farms, LLC (2020) 44 Cal.App.5th 1125, 1135 citing Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 951 quoting Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 211, superseded by statute on other grounds as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242; In re Tobacco II Cases (2009) 46 Cal.4th 298, 312.)


An advertisement or promotional practice is likely to deceive if it includes assertions that are (1) untrue, or (2) “ ‘true[, but] are either actually misleading or which [have] the capacity, likelihood or tendency to deceive or confuse the public.’ [Citation].” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 951; Leoni v. State Bar (1985) 39 Cal.3d 609, 626.)


By focusing on whether “members of the public” are likely to be deceived, the Unfair Competition Law views the challenged ad or promotional practice through the eyes of the “reasonable consumer”—that is, the “ordinary consumer acting reasonably under the circumstances”—unless the advertisement or practice is “aimed at a particularly susceptible audience.” (Lavie v. Procter & Gamble Co. (2003) 105 Cal.App.4th 496, 506-507, 512; Freeman v. Time, Inc. (9th Cir. 1995) 68 F.3d 285, 289; see also Lavie, at p. 504 [rejecting a “ ‘least sophisticated consumer standard’ ”].)


This focus on the “reasonable consumer”—rather than any particular consumer—means that an ad or practice may be “fraudulent” even without any “ ‘individualized proof of deception, reliance and injury.’ [Citation].” (In re Tobacco II Cases (2009) 46 Cal.4th 298, 326.)

Remedies

 Injunctive Relief

Injunctive relief is available for past, present, or proposed unfair competition. (Bus. & Prof. Code, § 17203.)

Civil Penalties for Intentional Violation of Injunction

Any person who intentionally violates any injunction prohibiting unfair competition issued pursuant to section 17203 shall be liable for a civil penalty not to exceed six thousand dollars ($6,000) for each violation. Where the conduct constituting a violation is of a continuing nature, each day of that conduct is a separate and distinct violation. In determining the amount of the civil penalty, the court shall consider all relevant circumstances, including, but not limited to, the extent of the harm caused by the conduct constituting a violation, the nature and persistence of that conduct, the length of time over which the conduct occurred, the assets, liabilities, and net worth of the person, whether corporate or individual, and any corrective action taken by the defendant. (Bus. & Prof. Code, § 17207.)

Restoration of Money or Property Acquired by Unfair Competition

Money or property acquired by unfair competition can be restored. (Bus. & Prof. Code, § 17203; Meta-Film Assocs., Inc. v. MCA, Inc. (C.D. Cal. 1984) 586 F. Supp. 1346, 1363 [failure of film company to include writer’s name on screen credits was not restitutionary in nature]; Bronco Wine Co. v. Frank A. Logoluso Farms (1989) 214 Cal.App.3d 699, 704 [award for grape buyer’s underpayment for grapes purchased on contract]; Fletcher v. Security Pac. Nat’l Bank (1979) 23 Cal.3d 442, 451 [disgorgement of profits earned by unlawful sales].)

No Compensatory Damages

Because an action under the Unfair Competition Law is equitable, there are no compensatory damages for a violation of the Unfair Competition Law. (Korea Supply Co. v. Lockheed Martin Corp (2003) 29 Cal.4th 1134; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266.)

Additional Civil Penalties

There are additional civil penalties for acts of unfair competition against senior citizens or disabled persons. (Bus. & Prof. Code, § 17206.1.)

Note: The remedies available under the Unfair Competition Law, which are generally limited to injunctive relief and restitution, are “cumulative … to the remedies or penalties available under all other laws of [California].” (Bus. & Prof. Code, § 17205; Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1152-53.)

Statute of Limitations

 The statute of limitations is four years after the cause of action accrues. (Bus. & Prof. Code, § 17208.) This period begins to run on the easier of the discovery of the unfair act or when, in the exercise of reasonable diligence, the wrongful act should have been discovered. (Ibid.)

Affirmative Defenses

Laches

Laches may be a defense against injunction in unfair competition actions if infringement has been innocent. (SeeTustin Community Hosp., Inc. v. Santa Ana Community Hosp. Ass’n (1979) 89 Cal.App.3d 889, 894.)
 

Inequitable Conduct by Plaintiff

Inequitable conduct includes improper or unlawful conduct in gathering evidence (e.g., unauthorized use of underage decoys), action initiated for reasons other than redressing unfair business practices, or engaging in extortionate conduct. (Allen v. Los Angeles County Dist. Council of Carpenters (1959) 51 Cal.2d 805, 811-12; Garamendi v. Mission Ins. Co. (1993) 15 Cal.App.4th 1277, 1289.)