Unfair Competition Under Massachusetts Law
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Though businesses are allowed to compete with one another in the marketplace, even aggressively, there are boundaries. Massachusetts has a statute prohibiting unfair and deceptive business practices. This is frequently invoked as a consumer protection statute, but it also applies to business to business activity.
Unfair Competition: The Legal StandardM.G.L. Chapter 93 is the statute that governs unfair business practices. There is no fixed definition in the statute, which states:
"Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful." In the context of transactions between businesses and consumers, a wide variety of things can be found unfair or deceptive, many of which are specifically laid out in the Attorney General's regulations under Chapter 93A. When the dispute is between two businesses, the standard is a little higher. It has been articulated differently over the years, and by different courts, but the bottom line is that businesses are expected to compete with each other, and some additional level of unfairness must be shown to make a Chapter 93A claim. Simply breaching a contract, for example, is not unfair competition under the law. Nor would, in most cases, hiring away a key employee from a competitor. Things that might push a simple contract claim into a 93A violation include misrepresentations, trademark or other intellectual property infringement, violation of state or federal anti-trust laws, or other conduct that is considered unlawful separate from the underlying contract or agreement. Unfair Competition: LocationTo bring a claim under Chapter 93A, you must show that the conduct occurred "primarily and substantially" in Massachusetts. This does not mean that all parties have to reside or do business in Massachusetts. If you are a Massachusetts business that suffered damages in Massachusetts as a result of something an out of state business did, you likely can meet this test.
In contrast, claims based on transactions that only incidentally touch Massachusetts may not lie under Chapter 93A. There may, however, be similar state statutes in the state where the conduct occurred that you could still include in a lawsuit in Massachusetts. |
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Unfair Competition: The Demand Letter
If you are a consumer with a complaint about a business, the statute requires you to first send a demand letter and give them 30 days to make a reasonable settlement offer.
There is no such requirement for business-to-business claims under Chapter 93A. However, there are still good reasons to consider a demand letter before filing suit. The obvious reason is you might be able to resolve the dispute. Secondarily, if you are later going to ask the court to award you legal fees, you want to be sure that you can show you made best efforts to settle the matter before incurring those costs.
There is no such requirement for business-to-business claims under Chapter 93A. However, there are still good reasons to consider a demand letter before filing suit. The obvious reason is you might be able to resolve the dispute. Secondarily, if you are later going to ask the court to award you legal fees, you want to be sure that you can show you made best efforts to settle the matter before incurring those costs.
Unfair Competition: Excluded Relationships
There are certain relationships in business that courts have specifically excluded from the unfair competition statute.
One is the employer-employee relationship. This relationship is considered internal, and not something "in the marketplace" that would bring it under 93A.
An exception to this rule was laid out in 2021 by the Massachusetts Supreme Judicial Court in Governo Law Firm LLC v. Bergeron et al. In that case, the court held that an employee's unfair conduct as an employee in misappropriating confidential information could become subject to Chapter 93A if the employee left and used that information in competition with their former employer.
A second exclusion involves the relationships between business partners or shareholders in a closely held corporation. That too is considered an internal relationship. Claims by one partner or shareholder that another wrongfully forced them out, or breached a fiduciary duty to them, would not be governed by Chapter 93A. The same would apply to disputes over distribution of profits or management of the business.
There may be a situation where a partner breaches a fiduciary duty to their other partners and uses the fruits of that breach in competition. Based on the decision in Governo, this could potentially fall within the scope of Chapter 93A.
One is the employer-employee relationship. This relationship is considered internal, and not something "in the marketplace" that would bring it under 93A.
An exception to this rule was laid out in 2021 by the Massachusetts Supreme Judicial Court in Governo Law Firm LLC v. Bergeron et al. In that case, the court held that an employee's unfair conduct as an employee in misappropriating confidential information could become subject to Chapter 93A if the employee left and used that information in competition with their former employer.
A second exclusion involves the relationships between business partners or shareholders in a closely held corporation. That too is considered an internal relationship. Claims by one partner or shareholder that another wrongfully forced them out, or breached a fiduciary duty to them, would not be governed by Chapter 93A. The same would apply to disputes over distribution of profits or management of the business.
There may be a situation where a partner breaches a fiduciary duty to their other partners and uses the fruits of that breach in competition. Based on the decision in Governo, this could potentially fall within the scope of Chapter 93A.
Unfair Competition: The Consequences
If you succeed in an unfair competition claim against another business, the court has the discretion to award you three times the damages you suffered, as well as to require the other side to pay your legal fees.
This is in contrast to a simple contract or tort action, where you are only entitled to your actual damages, and each party is expected to cover their own legal costs, no matter what the outcome.
If you have a dispute with another business, you should talk to a lawyer familiar with Chapter 93A to find out if there are additional claims under this statute that you might want to bring.
This is in contrast to a simple contract or tort action, where you are only entitled to your actual damages, and each party is expected to cover their own legal costs, no matter what the outcome.
If you have a dispute with another business, you should talk to a lawyer familiar with Chapter 93A to find out if there are additional claims under this statute that you might want to bring.
How We Can Help
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We have years of experience representing individuals and small businesses in business disputes, including unfair competition claims. You can use the button below to schedule a call back from a member of our team, or give us a call at 781-784-2322.
