Trade Libel

business law

A “libel” is a false statement. Thus, libel, in the sense of defamation (referred to below as “ordinary libel”), and trade libel are similar in that they are causes of action available to plaintiffs about whom, or about whose trade or goods, false statements are made. However, “libel” in the sense of defamation is a false statement injurious to one’s reputation, whereas trade libel is a false statement resulting in economic injury to the plaintiff.

Trade libel is an intentional and false disparagement of the quality of the plaintiff’s business or goods. It need not impugn the merchant’s honesty or integrity.

One might suppose that the essential elements of a claim of libel and a claim of trade libel are virtually the same, but they are not. The requirements for establishing a claim of trade libel are more onerous than those for establishing a claim of libel. With respect to a claim of libel, the disparaging statement is presumed to be false, and the burden is placed on the defendant to prove that the statement is true. Not so with a claim of trade libel, for which the burden is placed on the plaintiff to prove that his trade or goods are not as falsely represented by the defendant.

A second distinction is that in a case of ordinary libel, it matters not whether the defendant knew or thought that the defamatory statement he made was false. If the statement is false, the defendant is strictly liable. With respect to trade libel, however, the plaintiff must prove that the defendant knew that his disparaging statement about the plaintiff’s business or goods was false, or acted with reckless disregard of whether it was true or false.

A third distinguishing characteristic is that in an ordinary libel action, the plaintiff need not prove special damages. The general damages arising from an ordinary libel is an injury to the plaintiff’s reputation.  Such injury naturally results from false and disparaging statements about one’s honesty, integrity or morals, or which naturally cause others to think ill of the plaintiff. Ordinary libel will not necessarily cause economic injury to the plaintiff. On the other hand, a trade libel will not necessarily injure the plaintiff merchant’s reputation, but will likely cause him to lose sales. Thus, the plaintiff in a trade libel action must prove that he has suffered pecuniary loss as a result of the false and disparaging statement made about his business or goods.

The remedies for ordinary libel and trade libel may also differ. Whereas both causes of action give rise to monetary damages, injunctive relief is not available to enjoin an ordinary liable. Injunctive relief is available, however, to enjoin a false disparagement of a merchant’s business or goods.

There are, however, certain constitutional limitations on a plaintiff’s right of action in the case of either ordinary libel or trade libel. Statements involve speech and the First Amendment guarantee its citizens of freedom of speech.  Consequently, a plaintiff who is a public figure must show in both cases not only that he has suffered harm as a result of a false and disparaging statement, but must also show that the defendant acted with actual malice. That is because of the importance encouraging free exchanges of ideas on important issues affecting the public, and that includes information about public figures. Similarly, because of the First Amendment’s freedom of the press, a plaintiff must prove actual malice if the defendant is a member of the media.

The Law Office of William J. Tucker is familiar with tort principles, including issues involving libel, slander and trade libel, and provides free initial phone consultations to individuals and companies dealing with such issues.  Feel free to Schedule an Appointment.