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Companies that engage in unfair competition and other unfair trade practices may violate the duties they owe to their stockholders and prospective investors. If companies misrepresent their competitive or trade practices as lawful, if they make false financial projections based on prohibited business activities, or if they omit information about potential legal action, investors who lose money as a result of relying on these misrepresentations or omissions could have claims for fraud.

For investors who suffer losses due to companies’ unfair competition or unfair trade practices, recovering their losses may involve filing a claim in securities litigation. Those who relied on the advice of their broker or advisor may also be able to recover damages through FINRA arbitration. If you believe you may have a claim, you should speak with an unfair trade practice lawyer promptly, and we encourage you to schedule a free, no-obligation consultation at Zamansky LLC.

What Constitutes Unfair Competition or an Unfair Trade Practice?

Unfair competition and unfair trade practices can take many different forms. While many of these practices harm consumers (and can give rise to claims under state and federal consumer protection laws), others may primarily or solely result in harm to a company’s competitors. In either scenario, investors can face losses if a company’s practices have a direct or indirect impact on its share price.

Examples of Unfair Competition and Unfair Trade Practice

Some examples of unfair competition and other unfair trade practices include:

  • Engaging in “bait and switch” tactics, which involve advertising a high-quality product or service and then providing consumers with a different product or service of inferior quality
  • Engaging in trademark infringement or misappropriation, which involves using another company’s brand or logo (or a confusingly similar brand or logo) to mislead consumers
  • Libeling or slandering a competitor by making false and harmful statements about its leadership team, products, services, or corporate practices (i.e. equality or sustainability practices)
  • Making misleading or unsubstantiated claims about a product’s or service’s qualities, capabilities or customer reviews
  • Misappropriating a competitor’s or other company’s trade secrets or other proprietary information, whether through theft or violating the terms of an agreement
  • Misleading consumers by making false statements or omitting information from marketing materials  

When Can Investors Pursue Claims for Unfair Competition or Trade Practices?

While a company’s unfair competition or unfair trade practices won’t necessarily give rise to claims for investor fraud, investors will be able to pursue claims with an unfair competition attorney in many cases. Some examples of potential investor claims related to a company’s unlawful business practices include:

Falsely Reassuring Investors of Legal Compliance

If a company falsely reassures investors that it is in compliance with all unfair competition and unfair trade practice laws, this false reassurance could provide aggrieved investors with a claim for fraud.

Failing to Disclose Litigation or Enforcement Action

If a company faces litigation or enforcement action as a result of engaging in unfair competition or unfair trade practices, failure to disclose the financial risks associated with the litigation or enforcement action could constitute investor fraud.

Failing to Disclose Financial Risks of a Change in Business Practices

If a company is forced to cease engaging in practices that have been deemed unfair, and if changing its business practices presents a financial risk, this may be material information that investors are entitled to know. Failure to adjust prior revenue guidance based on such a change could violate the company’s disclosure obligations under federal law.

Making Inflated and Unjustified Business or Financial Projections

If a company makes inflated and unjustified business or financial projections based upon what company insiders know (or should know) to be unfair competitive or trade practices, then publicizing these projections or including them in corporate filings could also give rise to a claim for fraud.  

Unfair Trade Practices Claims Against Brokers and Financial Advisors

Additionally investors may be able to pursue claims against their brokers or advisors. Brokers and advisors must provide suitable investment recommendations, and this means that they must adequately assess the risks associated with the investments they recommend. If your broker or advisor recommended investing in a company despite knowing about (or having access to information about) the company’s false, misleading or incomplete disclosures, then your broker or advisor could be legally responsible for your investment losses.

Do You Have an Unfair Competition Investment Fraud Claim?

To find out if you have an investment fraud claim involving unfair competition or unfair trade practices, schedule a free and confidential consultation at Zamansky LLC. For more information about filing a claim in securities litigation or pursuing a claim against your broker or advisor in FINRA arbitration, call 212-742-1414 or tell us how we can reach you online now.