You are Going Bankrupt!
Recently a member telephoned in an outrage. His nearby competitor was telling customers that his business was going bankrupt. If the customer bought from him it was possible the product would not be delivered, and if it was, it may not be installed or supported. These statements were causing him to lose sales and tarnish his reputation in the community. The member simply was unable to assure potential customers that the information was false and he would be around another twenty-five years. He wanted to know what he could so to stop his competitor from continuing to spread these vicious lies.
Although contacting me suggests the member was looking for a legal solution, my first recommendation was to call the owner directly. It is possible the statements are being made by a renegade salesperson without the owner’s knowledge. If the owner was aware and refused to stop then proceeding judicially would be appropriate. The most important consideration is to have the statements cease and the competitor was in the best position to end them.
There are numerous legal theories that can be considered to curtail wrongful statements by a competitor. The law of defamation is different for individuals and corporations. To prove defamation against a corporation one must show 1) there was a false statement; 2) the statement was not privileged; and 3) there were damages as a result. One must be careful to distinguish whether a statement is factual or opinion, a distinction that is usually left to a judge or jury. Of course, truth is an absolute defense to any claim for defamation. Due to the First Amendment guarantee of free speech, it is often difficult to enjoin a party from making certain statements. Thus, one is often left to the pursuit of damages. In this instance any lost sales would clearly qualify as damages.
It is also possible to consider an action for interference with contract. If the member had entered into a contract for point-of-sale system and the competitor’s statements caused the consumer to cancel the purchase that would be an interference with contract. Due to the difficulty in joining free speech, consideration should be given to an action under your State’s Deceptive Trade Practices Act. These statutes prohibit deceptive practices and often include a provision for injunctive relief. The Illinois Act establishes a violation where “A person engages in a deceptive trade practice when, in the course of his or her business, vocation, or occupation, the person…disparages the goods, services, or business of another by false or misleading representation of fact.” It is unlikely that a single statement would be sufficient for injunctive relief, but rather repeated statements would be required. An action pursuant to the Deceptive Trade Practices Act would be an effective means to curtail the negative comments by utilizing the Act’s injunctive powers.
In difficult times unscrupulous competitors may resort to improper means to gain an advantage. It is imperative that you address such immediately. Failure to do so may actually result in a bankruptcy.