Companies Can Sue Their Competitors for False Advertising Under State and Federal Law

Convincing consumers to buy a small company’s products over that of a competitor is hard enough. This task only becomes more difficult when a competitor outright lies about the characteristics and benefits of its own products. What many businesses do not know is that they can sue competitors for such false advertisement.

That said, it is important to understand what types of claims are actionable and which are not. No matter the legal theory or statute, “puffery” is never actionable. Puffery has been defined by courts as: exaggerated blustering and boasting upon which no reasonable buyer would rely or a general claim of superiority over comparable goods that is so vague as to be understood as an expression of the seller’s opinion. An example would be labeling a product as “The World’s Best.” Such a statement is simply not capable of being objectively proven. In contrast, statements that a product is “99% effective” or will “leave teeth 4 shades whiter in only 3 days” are not puffery. These claims are specifically measurable and as such can be objectively proven or disproven.

Companies looking to bring false advertising claims against competitors have a few avenues for asserting their claims that they suffered injury, such as lost sales or reputational damage, as a result of the a competitor’s false statements. The first is under state statutes such as the Illinois Uniform Deceptive Trade Practices Act. Some states also have common law claims for unfair competition. The final avenue is under federal law, namely the Lanham Act, 15 U.S.C. § 1125(a).

In a landmark case, the United States Supreme Court clarified in Lexmark Intl., Inc. v. Static Control Components Inc., 572 U.S. 118 (2014), that companies had the right to sue competitors for the competitor’s false claims. Before Lexmark, the circuits were split regarding who exactly had standing to sue under the Lanham Act for false advertising. The Second and Sixth Circuits applied a “reasonable interest” test for standing while the Seventh, Ninth and Tenth Circuits applied a categorical test. The Third, Fifth, Eighth, and Eleventh Circuits used a third “AGC” test derived from an earlier Supreme Court case. The Supreme Court ultimately rejected all three tests followed by the various circuits and created instead a two-prong test for standing under Lanham Act claims, requiring that (1) plaintiff’s interest fall within the “zone of interests” protected by the law invoked; and (2) plaintiff’s “injuries are proximately caused by violations of the statute.” Today, it is generally accepted that a company that can meet both prongs of the Lexmark standing test can sue a competitor for false advertising, alleging damages under a variety of theories, including diminution in sales by the company as the damage caused by the competitor.

Some free market theorists propound that competitors are more efficient regulators than the government when it comes to claims of false advertising. The thought is that competitors have the expertise to identify misleading claims as they know their competition’s products better than almost anyone else. The government conversely may lack the necessary technical expertise and resources needed to identify and prosecute false advertising claims.

For instance, a company may suspect unscrupulous tactics when a competitor’s product is priced lower than its product. This indeed may be due to the competitor’s cutting corners in order to lower prices. By purchasing and testing the competitor’s product, the company may learn that the competitor is able to price its product lower by removing certain ingredients while still including such ingredients on its labeling.

Our Chicago business lawyers have more than thirty-five years of experience helping business clients on unraveling complex business fraud and breach of fiduciary duty cases. Our Chicago business, commercial, and class-action litigation lawyers represent individuals, family businesses and enterprises of all sizes in a variety of legal disputes, including disputes involving false and misleading advertising as well as lawsuits between businesses and consumer rights, auto fraud, and wage claim individual and class action cases. In every case, our goal is to resolve disputes as quickly and successfully as possible, helping business clients protect their investments and get back to business as usual. From offices in Elmhurst and Wilmette, near Waukegan, and Oak Brook, we serve clients throughout Illinois and the Midwest. To set up a consultation with one of our Naperville and Chicago business law attorneys and class action and consumer trial lawyers, please call us toll-free at 833 306-4933, locally at 630 333-0333 or contact us online.

Client Reviews
★★★★★
"I was referred to Peter Lubin from someone in the car business to handle a law suit. From the moment I made the appointment Peter and his staff were outstanding. This wasn't an easy case, most lawyers had turned me down. However, Peter took the time to meet with me and review everything. He took on the case, and constantly communicated with me about updates and case information. We beat this non-compete agreement case in record time. I would use him again and recommend him to my closest family and friends. 5 stars is not enough to thank him for his service." Sebastian R.
★★★★★
"I worked on two occasions with Peter Lubin and his staff. They took their time with me and discussed each and every item in detail. The group makes you feel like you are part of the family and not just another hourly charge. I recommend Peter to anyone who asks me for a referral. If you are looking for a top notch attorney at a reasonable rate, look no further than Lubin Austermuehle." Kurt A.
★★★★★
"Excellent law firm. My case was a complicated arbitration dispute from another state. Was handled with utmost professionalism and decency. Mr. Peter Lubin was able to successfully resolve the case on my behalf and got me a very favorable settlement. Would recommend to anyone looking for a serious law firm. Great staff and great lawyers!" Albey L.
★★★★★
"I have known Peter Lubin for over 30 years. He has represented me on occasion with sound legal advice. He is a shrewd and tough negotiator leading to positive outcomes and averting prolonged legal hassles in court. He comes from a family with a legal pedigree and deep roots in Chicago's top legal community. You want him on your case. You need him on your opponents case. He won't stop fighting until he wins." Christopher G.
★★★★★
"Peter and his team helped us with an auto fraud case. They communicated well (timely and very responsive), investigated deeply, and negotiated a very good settlement. We were able to resolve our significant issue without a large burden and in a manner that allowed for us to come out ahead. I'd recommend Peter and his team strongly!" R.J. Callahan