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When can businesses pursue Deceptive Trade Practices Act claims?

On Behalf of | Oct 16, 2024 | Business Litigation

Businesses operate in competitive markets that require fair practices. However, some entities may engage in deceptive tactics to gain an unfair advantage. When this occurs, affected companies can potentially take legal action thanks to the Deceptive Trade Practices Act (DTPA).

This statute was designed to protect both consumers and businesses from fraudulent or misleading business practices. Although the DTPA is commonly associated with consumer rights, businesses also have standing to pursue claims if they suffer financial losses due to certain kinds of unfair competition or deceptive conduct.

False advertising by competitors

False advertising occurs when a competitor makes misleading claims about their product or service to attract customers, often at the expense of other businesses. This can include false promises about a product’s:

  • Quality
  • Performance
  • Characteristics

This can include claiming a product is “organic” when it isn’t or falsely advertising certifications or awards.

When a competitor’s false advertising deceives consumers and causes a business to lose sales or market share, they may have grounds to file a claim under the DTPA. Courts can award damages, including compensation for lost profits and sometimes punitive damages, to deter future misconduct.

Misrepresentation of services or products

Another common scenario occurs when businesses intentionally or negligently misrepresent goods or services. This could include competitors providing false information about their offerings to mislead clients.

For example, a business could falsely claim that its technology is proprietary when it has simply repackaged another company’s work. This can distort the market, potentially harming legitimate competitors. The aggrieved business may pursue a DTPA claim when such misrepresentation leads to financial harm.

Bait-and-switch marketing schemes

A bait-and-switch tactic involves advertising a product or service at an attractive price to lure customers, only to pressure them into purchasing a more expensive or inferior option. While these schemes are traditionally consumer-focused, businesses can also fall victim.

For example, a wholesaler may advertise specific goods at a discount to attract retail buyers but deliver inferior products or refuse to honor the deal. If a business experiences financial loss due to a bait-and-switch campaign by another party, it can file a DTPA claim.

The DTPA offers critical protection to businesses facing unethical behavior in the marketplace. Beyond seeking compensation, DTPA claims can serve as a powerful deterrent against future misconduct, helping to ensure a fair competitive landscape. For businesses encountering any of these scenarios, enlisting dedicated legal support can make a significant difference in successfully navigating a DTPA claim.

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