The law of unfair competition encompasses torts that cause economic harm to a business through deceptive or wrongful business practices. It is designed to protect both consumers and businesses from unethical conduct that disrupts fair market competition. The term "unfair competition" can be used both broadly, to describe a wide range of wrongful business practices, and narrowly, to refer specifically to deceptive practices involving consumer confusion.
Unfair Competition (in the narrow/traditional sense)
The narrow category of unfair competition specifically refers to practices that mislead or confuse consumers about the source, sponsorship, affiliation, or quality of goods or services. The central focus is on protecting the commercial identity or goodwill of businesses. Typical examples include trademark infringement, passing off, and false designation of origin. These are often enforced through trademark and unfair competition provisions under the Lanham Act, particularly 15 U.S.C. § 1125(a).
Unfair Trade Practices
Unfair trade practices is a broader category of unfair competition that includes a wide array of unethical or deceptive conduct in the marketplace, even if it doesn’t involve consumer confusion about product origin. It focuses on preventing harmful practices directed at consumers or competitors more generally. Examples include false advertising, bait-and-switch tactics, misuse of trade secrets, breach of non-compete agreements, and fraudulent business schemes.
In short, unfair competition deals primarily with consumer confusion about branding or origin, while unfair trade practices deal with broader misconduct that harms competitors or consumers, regardless of branding or misrepresentation. Unfair competition law does not address issues related to monopolization, price-fixing, or other market dominance concerns; those fall under the domain of antitrust law.
The Lanham Act (15 U.S.C. § 1125) covers trademark infringement and false advertising at the federal level. The Federal Trade Commission (FTC) enforces regulations against deceptive trade practices, especially those that harm consumers, through its authority under the FTC Act. These rules are set out in Title 16 of the Code of Federal Regulations. Federal law may preempt conflicting state rules, especially where federal trademark or advertising standards apply. Some states have enacted statutes specifically addressing unfair trade practices. An example is the Uniform Deceptive Trade Practices Act (UDTPA), which many states have adopted to provide clarity and consistency.
[Last reviewed in June of 2025 by the Wex Definitions Team]