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Unfair Competition: When Are Competitors Liable For Interference With Another’s Business?

By Burg Simpson
September 11, 2013
3 min read

The business world is full of competition. Almost every business faces pressure from other businesses competing for the same customers or opportunities. Generally, the law permits competition. There is, nonetheless, a line that can be crossed. At some point competition can be deemed unfair or wrongful. In those instances the damaged competitor business may be able to sue for intentional interference with business relationship or intentional interference with prospective business advantage.

Colorado has adopted The Restatement (Second) of Torts § 766B which provides:

One who intentionally and improperly interferes with another’s prospective contractual relation (except a contract to marry) is subject to liability to the other for the pecuniary harm resulting from loss of the benefits of the relation, whether the interference consists of:

(a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or

(b) preventing the other from acquiring or continuing the prospective relation. Tortious interference with a prospective business relation requires a showing of intentional and improper interference preventing formation of a contract.

In short, if a business engages in conduct whereby it intentionally seeks to damage its competitor under the guise of “competition” it may be liable for any damages it causes. This law protects damage to actual contract relationships as well as less formal business relationships. The law also protects prospective contracts and prospective business relationships from unfair or wrongful competitive actions.

Some examples:

  1. Alpha and Beta both make chocolate and are competitors. Both businesses purchase their cocoa beans from Co-Co. Alpha’s purchases constitute 80% of Co-Co.’s sales. Alpha threatens Co-Co. that it will stop making purchases unless Co-Co. stops selling to Beta. Alpha makes this threat to damage Beta’s business. Beta may be able to sue Alpha for intentional interference with contractual relationship if Co-Co. stops selling it cocoa beans as a result of Alpha’s threats.
  2. Alpha sought a contract to supply chocolate to Big Store. Beta went to Big Store and stated that Alpha was recently investigated by the FDA for contaminants in its chocolate. The FDA has never investigated Alpha and Beta knows this. Alpha may be able to sue Beta for intentional interference with prospective business relationship.

Colorado law protects businesses and individuals from action by competitors that are motivated by a desire to injure another’s business. If your business has been damaged by unfair or wrongful competition you may be entitled to money damages. The Commercial Litigation Group at Burg Simpson has broad experience in resolving business disputes. Please contact us for a free consultation if you would like to discuss a competitor’s wrongful conduct that has damaged your business.

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