Understanding Unfair Competition Laws in Massachusetts

Unfair Competition Laws in Massachusetts: What You Need to Know

Competition in the business world is expected, even encouraged. However, there are boundaries that businesses must not cross. In Massachusetts, there exists a statute that explicitly prohibits unfair and deceptive business practices – M.G.L. Chapter 93. While this statute is often associated with consumer protection, it's important to note that it also applies to business-to-business interactions.

Unfair Competition: The Legal Standard

M.G.L. Chapter 93A outlines the regulations for unfair business practices. It states:

"Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful."

When it comes to disputes between businesses, the threshold for proving unfair competition is slightly higher. While businesses are encouraged to compete with one another, demonstrating a higher level of unfairness is crucial to making a Chapter 93A claim. Simple breaches of contracts or hiring key employees from competitors typically do not constitute unfair competition under the law.

Unfair Competition: Location Requirements

To file a claim under Chapter 93A, you must demonstrate that the unfair conduct primarily and substantially occurred in Massachusetts. This does not necessarily mean that all parties involved need to be Massachusetts-based. If your Massachusetts business suffers damages as a result of actions taken by an out-of-state business, you can likely meet this requirement.

Conversely, claims related to transactions that only minimally involve Massachusetts may not fall under Chapter 93A. However, similar state statutes in the state where the conduct took place may still be relevant in a Massachusetts lawsuit.

Unfair Competition: The Demand Letter

Unlike consumer claims, business-to-business disputes under Chapter 93A do not require a demand letter. However, there are compelling reasons to consider sending one before resorting to litigation. Not only could this help resolve the issue, but it also demonstrates your genuine efforts to reach a settlement before incurring legal fees.

Unfair Competition: Excluded Relationships

Some business relationships are specifically excluded from the scope of the unfair competition statute. The employer-employee relationship, for instance, is generally considered an internal matter rather than a marketplace issue under Chapter 93A. Nevertheless, a 2021 Massachusetts Supreme Judicial Court decision extended Chapter 93A to instances where an employee misappropriates confidential information and uses it to compete with their former employer.

Similarly, relationships between business partners or shareholders in closely held corporations are typically considered internal. Claims related to wrongful exclusion, breach of fiduciary duty, profit distribution, or business management issues are usually not governed by Chapter 93A. However, if a partner breaches their fiduciary duty and uses the benefits of that breach for competition, Chapter 93A may come into play.

Unfair Competition: The Consequences

Succeeding in an unfair competition claim against another business can lead to significant outcomes. The court has the authority to award damages up to three times the amount you've suffered, as well as require the opposing party to cover your legal fees. This stands in contrast to standard contract or tort actions, where you are typically entitled to only actual damages, and each party bears their own legal costs, regardless of the verdict.

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