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Criminal Misrepresentation and the Latham Act

June 2010


IANAL:  I am not a lawyer and this is not legal advice.  If you want legal advice, consult an attorney, not my web pages!


The Latham Act was designed to protect business from competitors who play "dirty tricks", those who misrepresent the quality of the products of their business competitors:

"Any advertising or promotion that misrepresents the nature, characteristics, qualities or geographic origin of goods, services or commercial activities"

(Lanham Act, 15 U.S.C.A. § 1125(a)).

False Advertizing and the Latham Act

This page gives the proof requirement for false advertizing.  To prove that an advertisement is false, a plaintiff must prove five things:

(1) a false statement of fact has been made about the advertiser's own or another person's goods, services, or commercial activity;
(2) the statement either deceives or has the potential to deceive a substantial portion of its targeted audience;
(3) the deception is also likely to affect the purchasing decisions of its audience;
(4) the advertising involves goods or services in interstate commerce; and
(5) the deception has either resulted in or is likely to result in injury to the plaintiff.

The most heavily weighed factor is the advertisement's potential to injure a customer.

Failure to Disclose

Failure to disclose happens when a business competitor fails to disclose a material fact about a business competitor, a form of "tortuous interference

This page discusses the failure to disclose.  It is considered false advertising under the Lanham Act if a representation is "untrue as a result of the failure to disclose a material fact."

Therefore, false advertising can come from both misstatements and partially correct statements that are misleading because they do not disclose something the consumer should know. The Trademark Law Revision Act of 1988 (15 U.S.C.A. § 1051 et seq.), which added several amendments to the Lanham Act, left the creation of the line between sufficient and insufficient disclosure to the discretion of the courts.

Product Disparagement and the Latham Act

Product disparagement involves discrediting a competitor's product. The 1988 amendment to the Lanham Act extends claims for false advertising to misrepresentations about another's products.

Unfair Competition (dirty tricks) and the Latham Act

Section 43(a) of the Lanham Act attempts to define “unfair competition” as occurring when:

Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . .
 in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.

Tortuous Interference

Tortuous interference is the unlawful interference into one’s contractual or business affairs.  For example, someone who uses the web to defame an individual’s business and contacts their customers (or prospective customers) may be violating this law.  A special case of tortuous interference called “Tortuous Interference with Prospective Advantage” is available in some states to punish those who seek to damage one’s ability to find and retain new customers.

The elements of the tort of interference with contract are:

  • A valid contract between the plaintiff and a third person that confers upon plaintiff a contractual right against a third person.
  • The defendant knows of the contract.
  • The defendant intentionally induces the third person not to perform the contract.
  • The defendant acts without justification.
  • The defendant’s conduct causes actual pecuniary harm to the plaintiff.

In the USA, you can be sued for “tortuous interference” if your blog comments defame, encourage harassment or interfere with someone’s normal course of business.

 

The North Carolina Supreme Court has held that tortious interference with prospective economic advantage occurs when a party interferes with the freedom of contract and “not in the legitimate exercise of defendant's own right, but with design to injure the plaintiff . . ." (see Owens v. Pepsi Cola Bottling Co. of Hickory, N.C., Inc., 330 N.C. 666, 680, 412 S.E.2d 636, 644 (1992)).

For a simple example of "unjustified", a business competitor would be unjustified in conducting a "smear" campaign against a business competitor, which results in advertisers withdrawing from existing contracts for fear of bad publicity.

On the web, it suggests that statements below, while not libelous per se, may be actionable as tortuous interference, especially if the publisher induces the public to interfere with the business relationship:

  • "I cannot believe that people actually pays Waldo's Widgets money"
  • "I feel sorry for anyone unfortunate enough to use Waldo's Widgets services"
  • "Waldo's Widgets products are shoddy and poorly made"
  • "I wonder if their clients know what serial offenders Waldo's Widgets are?"
  • "Amy Author's article is wrong, it's a fact, not my opinion"
  • "The owner of Waldo's Widgets is a fraud"

Also see:  Employer responsibility for employee misconduct

 

 

Note: The opinions expressed on these pages are the sole opinion of Donald K. Burleson and do not reflect the opinions of Burleson Enterprises Inc. or any of its subsidiaries.

Suggestions?  We are always seeking new tips for the professional at leisure, and any suggestions would be most welcome.  If you find an error or have a suggestion for improving our content, we would appreciate your feedback. 

Copyright ? 1996 -  2010 by Donald K Burleson. All rights reserved.