California’s Unfair Competition Law is found in Business & Professions Code sections 17200 et. seq. The Unfair Competition Law (“UCL”) prohibits two types of conduct: (1) any “unlawful, unfair, or fraudulent business act or practice,” and (2) any unfair, deceptive, untrue, or misleading advertising, or other type of advertising prohibited by Business & Professions Code sections 17500 et. seq. This article deals with unlawful, unfair, or fraudulent business acts or practices.
“Unlawful” Business Act or Practice.
An “unlawful” act or practice is one engaged in in connection with a business activity, and which is prohibited by law. The law can be any type of law — a statute, a court decision, a rule, a regulation, a felony, a misdemeanor, a civil wrong, and any act or practice made unlawful either under state or federal law. The “act or practice” can be a one-time act or practice, and need not be an ongoing course of conduct.
“Unfair” Business Act or Practice
What is an “unfair” business act or practice is difficult to define, and the courts in California have provided differing descriptions of what constitutes an “unfair” act or practice. The courts, however, are in accord in noting that there are two types of “unfair” acts or practices — an unfair act or practice perpetrated by a competitor which is harmful to other competitors and to competition, and an unfair act or practice perpetrated by a seller of goods or services which is harmful to a consumer.
With respect to anti-competitive conduct, to be actionable, the act or practice cannot simply be harmful to an individual competitor. It must be harmful to competitors in general, i ,e., harmful to competition.
With respect to acts or practices harmful to consumers, some courts weigh the harm to the consumer against any benefits to society from the act or practice, and find an “unfair” act or practice if the harm to the consumer outweighs the utility of the act or practice.
Other courts require that the act or practice must be tethered to a particular statute, constitutional provision, rule or regulation in order to be considered “unfair”. Still other courts decline to apply this test, reasoning that an act or practice tethered to a particular statute, constitutional provision, rule or regulation would be prohibited under the “unlawful” test. Consequently, they reason, what is “unfair” must be something different from what is “unlawful.”
Still other courts have applied the same test applied by courts in similar cases in which a consumer has alleged a violation of the Federal Trade Commission Back. Under that test, a consumer must show that the harm to him is (1) substantial, (2) is not outweighed by benefits to consumers from the act or practice, and (3) is not a harm that the consumer could easily have avoided.
“Fraudulent” Act or Practice
Fraudulent acts or practices are those which deceive the public, either by actual misrepresentations, or misleading statements. In order for a consumer to show that he has been harmed by a “fraudulent” act or practice, he must show that the statements made are “material”, and that he relied on the statements in taking the actions he took, typically, purchasing goods or services. The consumer must also show that he sustained injury in acting in reliance on the untrue or misleading statements. A misrepresentation or misleading statement is “material” if a reasonable person would consider it important in taking the action he took.
Remedies for Violation of the UCL
Damages are not an available remedy for violations of the UCL. However, restitution is an available remedy. Restitution involves the return by the defendant to the plaintiff of the funds received by the defendant from the plaintiff as a result of the violation.
Another remedy is injunctive relief. Since injunctive relief is an equitable remedy, the court has considerable discretion and latitude in creating an injunction which will remedy the violation and protect the public going forward. The injunction will not necessarily benefit the individual plaintiff, who may have no intention of dealing further with the defendant. However, an injunction which prohibits the defendant from engaging in the unlawful, unfair or fraudulent acts and practices of which he has been found liable will protect the public at large.
Attorney’s fees are not recoverable under the UCL. However, they may be recoverable under Code Civil Procedure section 1021.5. That statute provides for an award of attorney’s fees if the following requirements have been met: (1) the action has resulted in the enforcement of an important right affecting the public interest; (2) a significant benefit has been conferred on the general public or a large class of persons; (3) the necessity and financial burden of private enforcement are such as to make the award appropriate; and (4) the fee should not in the interest of justice be paid out of the recovery, if any.
Similarly, if the restitutionary portion of the judgment results in the recovery of a significant fund to be used for the benefit of others, the court may award attorney’s fees from this “common fund.” In that instance, fees will be a reasonable percentage of the funds recovered.
The Law Office of William J. Tucker is familiar with California’s Unfair Competition Law and provides free initial phone consultations to individuals and companies which have issues involving business dealings between competitors and with consumers. Feel free to Schedule an Appointment.