California’s Unfair Competition Law (UCL), found in Business & Professions Code section 17200, is a powerful and often misunderstood legal tool. While its name suggests a narrow focus on competition between rival businesses, the UCL’s reach is exceptionally broad, and serves as a cornerstone of consumer protection.  The expansive range of conduct subject to the UCL also makes the law a potent weapon in business litigation. Businesses should understand both the risks involved when defending UCL claims as well as how it can be used to proactively protect your business when you’ve been wronged.

What is California’s UCL?

California’s UCL prohibits “any unlawful, unfair, or fraudulent business act or practice.” This “three-pronged” definition encompasses a wide array of potentially wrongful business conduct.

  • Unlawful Prong: This is the most straightforward and far-reaching part of the law. The unlawful prong “borrows” violations of other laws and makes them actionable under the UCL. If a business practice violates any state or federal law—be it a statute, regulation, common law claim, or even a local ordinance—it can be the basis for a UCL claim.  So long as the law allegedly violated does expressly prohibit enforcement by private actors, it can be the basis of a UCL claim.
  • Unfair Prong: “Unfair” is a broad “catchall” category of conduct under the UCL. A business practice can be “unfair” even if it’s not technically illegal. California courts have defined “unfairness” in various ways, but it generally refers to conduct that is against public policy or substantially injurious to consumers. For a business-to-business dispute, an act is often considered unfair if the harm to competition outweighs any benefits. This prong gives courts significant discretion to address novel or unethical practices that fall into a legal gray area.
  • Fraudulent Prong: This prong prohibits conduct that is “likely to deceive the public.” Despite being called “fraudulent,” a claim under this prong is very different from a common law fraud claim.  A common law fraud claim requires a plaintiff to prove that the defendant knowingly made false statements with the intent that another person rely on those false statements and that other person is harmed as a result.  A UCL claim alleging fraudulent business practices has a lower burden of proof; the plaintiff doesn’t need to show the defendant meant to deceive customers, only that the conduct was likely to deceive customers and that the misleading information was part of the “total mix” of information the plaintiff considered in engaging in the transaction. This makes it a potent tool against any communications to potential customers that are false, misleading, or involve deceptive omissions.

In addition to the fraudulent practices prong, which can be used to bring cases about deceptive conduct, the law also specifically prohibits false, misleading, or deceptive advertising – these are separate violations of Business and Professions Code Section 17500-17577.5.

Standing: Who Can Sue and What Can They Recover?

In 2004, California’s Proposition 64 significantly changed the standing requirements for private UCL lawsuits. Proposition 64 was designed to prevent so-called “private attorneys general” from suing on behalf of the public without any personal harm. Now, to bring a claim, a plaintiff must have suffered an “injury in fact” and “lost money or property as a result of” the alleged unfair competition. This economic injury requirement is a critical defense for businesses facing a UCL claim, as that business can challenge a plaintiff’s standing if they can’t demonstrate a tangible loss.  While the new standing requirement limits the types of plaintiffs who can bring a suit to only those who suffered actual injury, the UCL still allows competitors who can show they lost business because of a rival’s unfair conduct to sue as well as customers who were mislead about a transaction.  Courts also allow plaintiffs who can show an injury to bring cases on behalf of a class of consumers without showing that each individual consumer was deceived by a fraudulent business practice.

Although the UCL’s scope is broad, the remedies available under the UCL are limited. Plaintiffs cannot recover compensatory or punitive damages. Instead, the primary remedies available are:

  • Injunctions: A court order to stop a specific business practice. This is often the most significant remedy, as it can force a company to change its operations, advertising, or business model to avoid repeating the unfair conduct.
  • Restitution: An order to return money or property acquired as a result of the unfair competition. The goal of restitution is to restore the status quo, not to award damages. A plaintiff must demonstrate that the defendant acquired money or property from them as a result of the unlawful conduct.

Defending Against a UCL Claim: Key Strategies

Facing a UCL claim can be daunting due to its broad scope. Robust defenses are, however, still available.

  1. Challenge Standing: Your first line of defense should be to scrutinize the plaintiff’s standing. Did they truly suffer an economic injury? Did they lose money or property as a result of your actions? If not, the claim should be dismissed.
  2. No Unlawful, Unfair, or Fraudulent Act: You can argue that the challenged business practice does not fit within any of the three prongs.
    • For the unlawful prong, show that the practice did not violate any underlying law.
    • For the unfair prong, demonstrate that the practice is not substantially injurious, is not against public policy, or that the utility of the practice outweighs any harm.
    • For the fraudulent prong, prove that the practice is not likely to deceive a reasonable person.
  3. Statute of Limitations: A UCL claim has a four-year statute of limitations, which begins when the plaintiff became aware or should have become aware of the injury. While this can be a long time, it’s a critical defense if the plaintiff waited too long to sue.

Leveraging the UCL as a Plaintiff

The UCL can also be a powerful tool for your business. It allows you to protect your company and your ability to compete in the market from competitors’ unfair or unlawful conduct. In addition to bringing a claim for the underlying misconduct, consider also bringing a claim under the UCL to challenge:

  • False Advertising: A competitor’s misleading claims about their product, service, or pricing.
  • Deceptive Practices: A competitor’s “bait-and-switch” tactics or undisclosed fees that divert your customers.
  • Regulatory Violations: A competitor’s failure to comply with an industry regulation that gives them an unfair advantage.
  • Interference with Your Contracts or Business Relationships: A competitor’s effort to entice your vendors, customers, or clients to breach their agreements with you.
  • Misappropriation or Theft of Trade Secrets: A competitor’s efforts to improperly profit from your work or property.

Conclusion

California’s Unfair Competition Law is a dynamic and evolving area of law that demands careful attention from business leaders. When a business dispute arises in California, a thorough analysis of potential UCL claims and defenses is not just good practice—it’s essential for a successful outcome.  Whether you are facing a UCL suit or believe a competitor’s unfair practices are harming your business, you need skilled counsel with deep experience handling UCL claims.  Keller Anderle Scolnick’s team of outstanding trial attorneys stand ready to assist.

Bring us your toughest case.  We’ll get the job done.