What is a Lanham Act False Advertising Claim and Why Does it Matter for Competition?

You might have a Lanham Act claim if your competitor is making false statements to promote its products or services in a way that deceives customers and injures you because you lost business, for example, as a result.

Although many people think of the Lanham Act as a trademark statute—and it is—it also allows competitors to sue each other for false advertising.

So the Lanham Act is on the battlefield for competition as competitors often use lawsuits as part of their arsenal to gain whatever advantage they can.

The Lanham Act is particularly interesting because it allows competitor standing when the true harm is done to consumers, so long as the plaintiff suffered lost profits or something similar because of the false statements.

Indeed, Congress designed the competitor enforcement mechanism because competitors have both the knowledge and motivation to enforce the Lanham Act. The Supreme Court explained this enforcement rationale in its POM Wonderful LLC v. Coca-Cola case, which you can read about here:

“Competitors who manufacture or distribute products have detailed knowledge regarding how consumers rely upon certain sales and marketing strategies. Their awareness of unfair competition practices may be far more immediate and accurate than that of agency rulemakers and regulators.”

Importantly, however, the Supreme Court clarified in its Lexmark decision that the plaintiff need not necessarily be a competitor, so long as they suffered “an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.” This is an important opening and you can read more about our discussion of the Supreme Court’s Lexmark standing decision here.

The Lanham Act is, however, primarily a statute that competitors use to sue each other. You also see this in antitrust law—of course—and intellectual property law (including trade secret and trademark cases). And, under state law, competitors sue for tortious interference, of some sort, along with state statutes that prohibit false advertising and antitrust. And there are other causes of action, state and federal, that come up in specific circumstances.

For better or worse, business competition often takes a detour to the courthouse and companies use litigation to their advantage. Filing a lawsuit for the sake of filing one, without a meritorious claim, could subject you to actions for malicious prosecution, abuse of process, and even antitrust liability in certain circumstances. But companies with prima facie claims against their competitors often relish the opportunity to carry the market fight to the legal forum. We’ve seen this from both sides, many times, over the years.

Sometimes antitrust lawyers call themselves antitrust and competition lawyers. The reason for that is that in the United States our laws that govern competition are called “Antitrust” laws (because of the unique history of the federal statutes that went after the “Trusts” back in the day). In Europeand much of the rest of the world, by contrast, these law are called, straightforwardly, “Competition” laws. And the lawyers that practice in this area are called Competition Lawyers.

But there is a second great reason for US antitrust lawyers to more accurately describe themselves as antitrust and competition lawyers. That is because when you represent clients that compete in a marketplace, you experience their hard-core focus on competition and, necessarily, their competitors.

You help them manage the rules of competition, with your own tools. Many of those involve antitrust knowledge and experience. But—to really help your clients—you also need to understand and have experience with the other causes of action that come up among and between competitors. And that includes, of course, the Lanham Act.

So—while we can accurately call ourselves antitrust lawyers, we are really antitrust and competition lawyers because we advise clients on the rules of competition generally, which are much broader than simply the antitrust laws. We are soldiers on the legal battlefield of competition. Antitrust laws are great weapons, but they aren’t the only ones.

As sort of a related aside, I’ve been thinking a lot lately about what I have learned advising clients in antitrust and competition law. Over time, you experience competition in all forms. You see different ways that competitors try to knock each other out of the market, or otherwise take market share. Sometimes this is about competing better, but it is often about competing differently—that is, adjusting your service and product to not only differentiate yourself, but to create a new market altogether.

 Understanding exactly how competition works has allowed me to better counsel clients, not only on the rules of competition, but how to minimize risk and maximize revenue. You can’t really help a client if you don’t understand how they actually make money and how they actually compete in the market.

This experience has also been invaluable to running a business—Bona Law. The reason my title is CEO and Attorney is because running a law business isn’t just about practicing law, which is, oddly, how many lawyers view it. A law firm competes in a market just like any other business, even though it is, in many ways, a strange market. Constant exposure to various forms of competition over many years has, in fact, improved our ability to compete in the legal market.

We strive to compete better, with top-quality work from top-quality attorneys. But just as importantly, we also compete differently. We offer big firm quality, but better prices and efficiency. And we can match big firm resources by strategically engaging third parties.

When I started Bona Law in the Spring of 2014, some people told me we couldn’t practice antitrust and competition law unless we were part of a big law firm or did plaintiff-side class action work by teaming up with many smaller firms. But they were viewing the legal market the way it was, not the way it is and the way it will be. Companies are increasingly understanding that they need not pay big firm costs for their legal work—including for antitrust and competition services. That is why big law firms are having so many problems.

That tangent turned a short blog post into a long one. Thanks for reading, especially those of you that started this article just wanting to read about the Lanham Act.

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Contributing Advisors