3. Law against Unfair competition in the U.
Introduction
The struggle between competition and regulation is as old as commerce itself. While free-market
principles promote innovation and growth, they also allow considerable opportunities for
exploitation, deception, and manipulation. And throughout history, societies have understood and
recognized the importance of legal protection against unfair competition.
In medieval England for instance, bakers selling a loaf of bread lighter than what was advertised
would face severe punishment because deception in trade was considered theft under the Assize
of Bread and Ale of 1266. Their punishments would range from fines to public humiliation and
physical punishments1.
The same deceptive practices, such as trade secret theft, predatory pricing, and misrepresentation
in advertising, are still prevalent in modern day world of trade and commerce. However, instead
of facing the medieval punishments, these entities have learned to work around the provisions of
law by exploiting the legal loopholes and regulatory gaps allowing them to easily get away with
morally questionable acts.
American economic history is filled with ruthless business tactics, cutthroat competition, and anti-
competitive acts. They have shaped the texture of American economic history thus requiring some
form of legal protection. While it is true that capitalism thrives on competition, it is equally true
that it is vulnerable to exploitation. The right question is, then, not whether there should be
competition but how it should be regulated fairly. Hence the Law on Unfair competition.
The unfair competition law has a broad underlying idea to it, primarily owing to the broad scope
conferred to it by the virtue of Article 10bis of Paris convention.
1
A. W. B. Simpson, The Assize of Bread, 13(2) ECON. HIST. REV. 21 (1957), https://www.jstor.org/stable/2591750
(accessed Feb. 14, 2025).
The law on unfair competition initially came up as a measure to address issues pertaining to passing
off/ any other misappropriation relating to Trademark. It was based on the principle of Trademark
law that “no one has the right to represent his goods as the goods of another.”2 This principle over
time, evolved beyond its boundaries in trademark law, and ended up encompassing all commercial
conduct that unduly harms a competitor’s business interests.3
It is to be noted at this point that there exists a clear mental distinction that one should be able to
draw up, while Unfair competition, and Anti-trust/ Anti-Competitive trade practices operate in
different spheres of the law, there is a scope for overlap. When there is an act of competition which
is contrary to honest business practices, it is deemed to be an Unfair method of competition4.
However, an Anti-Competitive Trade practice is one which “distorts” the market. Conceptually,
speaking an Anti-competitive act would also constitute “an of competition which is contrary to
honest business practice”.
It is also possible for us to understand unfair competition as a broader conceptual category, under
which there can be various wrongful acts including acts which are understood as Anti-Trust.
Therefore, all anti-trust/anti-competitive act by definition are unfair methods of competition, but
all unfair methods of competition aren’t always Anti-trust/ Anti-Competition in nature.
Overview of Unfair Competition Laws in the USA
The unfair competition law functions as an essential mechanism to regulate business conduct and
uphold the integrity of commerce in the United States. It is an amalgamation of common law
principles and statutory enactments. For the purpose of this chapter, we will be focusing primarily
on the Federal Acts that govern Unfair competition Law in US. The Legal regime surrounding
Unfair competition is somewhat codified at the Federal level but is not consolidated. There are
also state laws which are codified that govern the matter of Unfair competition, like the
2
Reddaway v. Banham, [1896] A.C. 199, 204 (HL).
3
Charles Grove Haines, Efforts to Define Unfair Competition, 29 YALE L.J. 1, 1–28 (1919),
https://www.jstor.org/stable/786890 (accessed Feb. 14, 2025).
4
Paris Convention for the Protection of Industrial Property, art. 10bis (as revised at Stockholm, July 14, 1967).
California’s Unfair competition Law or Illinois Consumer Fraud and Deceptive Business Practices
Act etc.
The following laws at the federal level regulate Unfair Competition:
• Federal Trade Commission Act- this act created the Federal Trade Commission (FTC), the
primary authority in the USA enforcing laws against unfair competition and deceptive business
practices. It was established in 1914 to stop dishonest business behavior harmful to consumers and
other businesses.
• Sherman Act- The Sherman Act was the first U.S. antitrust law that was passed in 1890 to
prevent large businesses from monopolizing markets; it ensures that the competition remains fair
by prohibiting monopolies and restraining trade.
• Clayton Act- The Clayton Act that was passed in 1914 was designed to further strengthen the
antitrust laws by prohibiting unfair business conduct before it developed into a more significant
concern. It focuses on mergers, price discrimination, and exclusive deals that reduce competition.
• Lanham Act- The Lanham Act, passed in 1946, protects Trademark from fraudulent advertising
and stops businesses from lying about their products in ads. It is thus an essential piece of
legislation that ensures consumers are not misled.
• Defend Trade Secrets Act (DTSA)- the DTSA was the act that passed in 2016, which gives
protection against Trade secret misappropriation to businesses; it empowers an employer to sue
that individual employee when that person steals the company secrets. The DTSA amended the
Economic Espionage Act of 1996 (EEA) and provided businesses with stronger legal tools to
protect their confidential information from theft.
Analysis of the federal Laws Governing Unfair Competition
The aforementioned laws aim to deter Unfair methods of competition such as monopolistic
practices, deceptive trade, false advertising, and trade secret misappropriation, ensuring a level
playing field for all businesses.
However, as a member of international agreements such as the Paris Convention for the Protection
of Industrial Property (1883) and the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS, 1994), the U.S. must ensure that its domestic legal framework aligns with global
standards. This section will provide an in-depth analysis of U.S. unfair competition laws, assessing
whether they comply with international obligations,
i. The Federal Trade Commission Act (FTC Act) (1914) Section 5 (15 U.S.C. § 45) of the
FTCA prohibits unfair methods of competition, and the prohibition extends to all persons
engaged in commerce, including banks.
The act states that "Unfair Acts or Practices includes an act or practice is unfair where it
• Causes or is likely to cause substantial injury to consumers,
• Cannot be reasonably avoided by consumers, and
• Is not outweighed by countervailing benefits to consumers or to competition.
Public policy, as established by statute, regulation, or judicial decisions, may be considered
with all other evidence in determining whether an act or practice is unfair."5
FTC Act Section 13(b) (15 U.S.C. § 53) allows the FTC to stop such practices through
injunctions and Section 19 (15 U.S.C. § 57b) empowers the FTC to seek consumer redress
for fraudulent business practices.
Landmark case: - In Federal Trade Commission v. R.F. Keppel Bro Inc6. the matter at
issue was the use of chance-based promotion for sales of candy called “break and take”.
The Federal Trade Commission (FTC) charged the Keppel Bro., Inc., the candy producer,
of engaging in unfair method of competition under Section 5 of the FTC Act. The Court
of Appeals for the Third Circuit favored Keppel Bro and reversed the FTC's order holding
that the practice did not harm competition or create a monopoly, or involve fraud. The
5
Federal Trade Commission Act, 15 USC §§ 41–58 (1914)
6
Fed. Trade Comm’n v. R.F. Keppel Bros., Inc., 291 U.S. 304 (1934).
U.S. Supreme Court, later, reversed the judgement and ruled in favour of the FTC holding
that; :
1. While it may be accepted by the court that the practice Keppel bro Inc was involved in
did not involve fraud or deception, the court held that FTC’s authority is not limited to
only to fraud or deceptive acts or those types of unfair competition that have already been
addressed in past cases.
2. The court emphasizes that the FTC has broad powers to determine what constitutes
“unfair competition,” even as new and evolving business practices emerge. This ensures
that harmful or deceptive methods can still be regulated, even if they do not fit into
previously decided cases.
3. The court delves into the Legislative intent of the Act by analysing the language and the
history of the act stating that the phrase “unfair methods of competition” has been
intentionally kept broad and must be interpreted flexibly. The Court clarified that
Congress deliberately chose a broad definition so that the FTC could regulate evolving
forms of unfair competition.
4. The court compares the element of chance in Keppel Bro.’s sales tactic to the deception
in labelling cotton goods as “Natural Wool” in the Winsted case7, stating that it sees no
meaningful distinction between the gambling aspect of candy sales and deceptive
labelling, as both manipulate consumer choices unfairly.
5. It observed that even if such a practice has not been explicitly covered by any criminal
law, it is still the kind of conduct that has long been condemned by common law and
public policy and should be considered unfair under the FTC Act. Stating that it would
seem a gross perversion of the normal meaning of the word, if such practice is not
considered unfair.
6. Finally, the court also clarifies that its ruling does not imply that the FTC has unlimited
authority to prohibit every unethical business practice. Rather, each new or different
7
Fed. Trade Comm’n v. Winsted Hosiery Co., 258 U.S. 483 (1922).
method of competition must be examined by the FTC in light of the specific
circumstances in which it is employed.
The Paris Convention, Article 10bis, requires countries to prevent unfair competition, including
misleading advertising and deceptive trade practices. The FTC Act meets this requirement by
regulating false advertising and unfair competition broadly. Similarly, TRIPS Article 2(1)
mandates compliance with the Paris Convention, meaning the FTC Act fully incorporates these
principles.
ii. The Sherman Antitrust Act (1890)
Section 1 (15 U.S.C. § 1) of the Sherman Act prohibits cartels, price-fixing, and anti-competitive
agreements. It states that “Every contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is
declared to be illegal.”8
Section 2 (15 U.S.C. § 2) bans monopolization and attempts to monopolize markets, and states
“Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any
other person or persons, to monopolize any part of the trade or commerce among the several States,
or with foreign nations, shall be deemed guilty of a felony”9
Landmark case: - In Eastman Kodak Co. v. Image Technical Services, Inc. (1992)10, Kodak
restricted Independent Service Organizations (ISOs) from purchasing replacement parts, forcing
customers to buy Kodak’s repair services along with its parts. This policy drove ISOs out of
business and increased service costs, leading to a lawsuit alleging violations of Sections 1 and 2
of the Sherman Act.
The court found Kodak guilty of violating Sections 1 and 2 of the Sherman Act and reiterated the
well-established principle that power gained through some natural and legal advantage such as a
8
Sherman Act, 15 U.S.C. § 1 (1890).
9
Sherman Act, 15 U.S.C. § 2 (1890).
10
Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992).
patent, copyright, or business acumen can still give rise to liability if “a seller exploits his dominant
position in one market to expand his empire into the next.”
Under TRIPS Article 40, countries are allowed to regulate anti-competitive licensing agreements
that harm fair market competition. The Sherman Act aligns with this provision, as it prevents
companies from using monopolistic practices to control markets unfairly, additionally the United
states also has Claytons Act (1914) governing aspects which Sherman Act neglects, both of them
together serve as a comprehensive law governing Anti-trust matters.
iii. The Lanham Act (1946)
Section 43(a) (15 U.S.C. § 1125(a)) – Prohibits false advertising and misleading branding.
It states – “(1) 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—
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection,
or association of such person with another person, or as to the origin, sponsorship, or approval of
his or her goods, services, or commercial activities by another person, or
(B) 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,
shall be liable in a civil action by any person who believes that he or she is or is likely to be
damaged by such act.”11
Therefore, we can understand that the Lanham Act is an indispensable weapon that combats one
of the popular forms of unfair competition, i.e, false or misleading advertising.
Landmark case: - In the case of L’Aiglon Apparel, Inc. v. Lana Lobell, Inc. (1954) 12the plaintiff,
a dress manufacturer, sued the defendant, a retailer, under Section 43(a) of the Lanham Act for
false advertising. The plaintiff had widely advertised its high-quality dress for $17.95, but the
11
Lanham Act, 15 U.S.C. § 1125(a) (1946).
12
L’Aiglon Apparel, Inc. v. Lana Lobell, Inc., 214 F.2d 649 (3d Cir. 1954)
defendant used an image of this dress in an ad to promote a cheaper, lower-quality dress priced at
$6.95. The plaintiff claimed this misled customer, causing financial loss and reputational harm
The court in this case ruled that Section 43(a) of the Lanham act applies to false advertising and
that federal jurisdiction exists under the Lanham Act. The court held that misrepresenting a
product’s quality or origin in advertising is actionable under the statute and rejected argument that
the Lanham Act should be restricted to common law “palming off” cases, affirming that Congress
intended the Act to broadly protect against deceptive marketing practices.
However later, in Dastar Corp. v. Twentieth Century Fox Film Corp(2003) 13the US supreme court
clarified certain crucial aspects and limited the previously assumed broad scope of Lanham act.
In the case of Dastar Corp. v. Twentieth Century Fox Film Corp., Dastar Corporation produced
and sold a video series titled World War II Campaigns in Europe, derived from the television series
Crusade in Europe. The Crusade in Europe series was based on General Dwight D. Eisenhower’s
book of the same name and had originally been owned by Twentieth Century Fox. However, its
copyright had expired in 1977, placing the work into the public domain.
Dastar took public domain footage from the original series, edited it, made modifications, and
released it under its own name without crediting the original creators. Twentieth Century Fox,
along with its co-plaintiffs, sued Dastar under Section 43(a) of the Lanham Act, alleging that
Dastar had engaged in “reverse passing off”
1. The Court clarified that the term “origin” in §43(a) of the Lanham Act refers to the producer of
the tangible goods sold in the marketplace, not the author of any idea, concept, or communication
embodied in those goods. Therefore, Dastar, having produced and sold the physical videotapes,
was considered the origin of the goods.
2. The Court emphasized that allowing a Lanham Act claim based on failure to credit the original
creator would create a species of mutant copyright law that limits the public’s federal right to copy
and to use expired copyrights.
13
Dastar Corp v Twentieth Century Fox Film Corp 539 US 23 (2003)
This decision prevented the Lanham Act from being used as a perpetual copyright, ensuring it
applies only to consumer deception, not intellectual property disputes.
iv. The Defend Trade Secrets Act (DTSA) (2016)
18 U.S.C. § 1839 (3)defines the term “trade secret” as “all forms and types of financial, business,
scientific, technical, economic, or engineering information, including patterns, plans,
compilations, program devices, formulas, designs, prototypes, methods, techniques, processes,
procedures, programs, or codes, whether tangible or intangible, and whether or how stored,
compiled, or memorialized physically, electronically, graphically, photographically, or in writing
if—
(A) the owner thereof has taken reasonable measures to keep such information secret; and
(B) the information derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable through proper means by, another person
who can obtain economic value from the disclosure or use of the information.”14
18 U.S.C. § 1839(5) defines “misappropriation” as:
“(A) Acquisition of a trade secret of another by a person who knows or has reason to know that
the trade secret was acquired by improper means; or
(B) Disclosure or use of a trade secret of another without express or implied consent by a person
who—
(i) Used improper means to acquire knowledge of the trade secret;”
(ii) At the time of disclosure or use, knew or had reason to know that the knowledge of the trade
secret was—
(I) Derived from or through a person who had used improper means to acquire the trade secret;
(II) Acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret;
14
Defend Trade Secrets Act, 18 U.S.C. § 1839(3) (2016).
(III) Derived from or through a person who owed a duty to maintain secrecy.”15
It provides for remedies such as Injunctive relief, Monetary damages, Reasonable royalties,
Exemplary damages, attorney fees etc in case of a Trade Secret misappropriation. [18 U.S.C. §
1836(b)(3)]
One of the key features of this act is that it provides Whistleblower Protection and Immunity if an
individual discloses any trade secret in confidence to a Federal, State, or local government
official… for the purpose of reporting a suspected violation of law. Or discloses the Trade Secret
through a complaint or other document filed in a lawsuit or other proceeding, if such filing is made
under seal.” [18 U.S.C. § 1833(b)]
Previously, trade secret protection was primarily governed by state laws under the Uniform Trade
Secrets Act (UTSA), leading to inconsistencies across states. The DTSA federalized trade secret
protection, allowing companies to file lawsuits in federal courts. Uniquely enough, unlike other
federal intellectual property laws, the DTSA does not preempt state trade secret laws. So, plaintiffs
can choose to file under state law, federal law, or both, depending on what is most beneficial for
their case.
Landmark case: - In the case of BRIGHTVIEW GRP. V. TEETERS 16, it was held that “All forms
and types of financial, business, scientific, technical, economic, or engineering information,"
regardless of whether it is tangible or intangible, or how the information is stored, memorialized,
or maintained, can qualify for protection as a "trade secret" under the federal Defend Trade Secrets
Act”.
Provided that the owner must undertake reasonable measures to maintain the secrecy of that
information, and such information must have independent economic value owing to its secrecy.
Additionally, there must be ambiguity in the value of that information, making it
15
Defend Trade Secrets Act, 18 U.S.C. § 1839(5) (2016).
16
BrightView Grp., LP v. Teeters, No. SAG-19-2774, 2021 WL 1238501 (D. Md. Mar. 26, 2021).
unascertainable through proper means by another person, yet capable of deriving economic
value from its disclosure.
However, such information only becomes a trade secret if (1) the owner of the trade secret takes
"reasonable measures to keep such information secret," and (2) the information "derives
independent economic value . . . from not being generally known to, and not being readily
ascertainable through proper means by, another person who can obtain economic value from the
disclosure of use of the information.”
Conclusion
In conclusion, Since India does not possess a comprehensive and consolidated law on unfair
competition; therefore, the present state of law seems to be a patchwork of various statutes like the
Competition Act, 2002, the Trademarks Act, 1999, and the Consumer Protection Act, 2019 and
other common law remedies. This leaves considerable amount of leeway for the Courts to interpret
problems and innovate solutions as they like, which in turn leads to inconsistencies. Such a
fragmented and inconsistent approach will often times hinder the enforcement against evolving
Unfair trade practices.
The U.S. regime offers lessons for India in developing a coherent and enforced structure of law on
the subject of unfair competition. In India, an independent body for regulation of unfair
competition should be created, similar in nature to the FTC. This would allow for swift regulatory
redress.
Another important lesson from the U.S. is the Lanham act which specifically allows the businesses
to file for action against false advertisement; India on the other hand lacks such specific law for
the firms to sue for misleading advertisement.
The DTSA assures the federal protection of trade secrets concerning which for long now India has
been solely reliant on contract law and principles of common law thus exposing businesses to the
misconduct of trade secret misappropriation.
For India to create a clear and enforceable law on unfair competition, it must codify all aspects of
that law as one uniform code that defines unfair competition, collates all facets of deceptive
business practices, and creates a central mechanism for enforcement of this law. This law must
also be flexible to accommodate changes in markets and, as much as possible, be in line with its
international obligations under the Paris Convention and TRIPS Agreement.
Learning from the U.S. model, India should set up a viable regulatory structure that respects
business, supports fair competition, and consequently earns consumer confidence in the market.
