Disparagement

Definition

The term disparagement refers to the practice of making false claims or statements about a competitor.  Disparagement is considered an anticompetitive practice, since false or misleading statements about a competitor can cause irreparable harm to their business.

Disparagement may also be considered a criminal offense in the United States under antitrust laws.  While the Lanham Trademark Act regulates false advertising at the federal level, the Uniform Deceptive Trade Practices Act is used by most states to regulate claims or statements between competitors.

Explanation

Companies are prohibited from making false statements or claims about competitors, since they serve to harm competition in a given market, increase the perceived value of their products and services, and confuse consumers.  Making such statements is punishable under a number of antitrust laws.

Generally, the anticompetitive practices of making disparaging statements fall into three categories:

  • Characteristics:  includes making false statements concerning the features, ingredients, intended use, benefits, and quantity of a product or service.
  • Originality:  includes making false statements that a product or service is innovative, new, or unlike similar products or services currently found in the marketplace.
  • Quality: includes making false statements concerning the production standards used by a company, or the grade of a competitor's product or service.

Companies may also choose to make ambiguous statements concerning a competitor.  For example, one competitor might characterize another as being unreliable.  Ambiguous statements require clarifying data to support such claims or they may be classified as disparaging.

In addition to disparagement, anti-competitive practices may include dividing markets, boycotts, bid rigging, dumping, exclusive dealing, price fixing, tying, as well as the unethical collection of business intelligence.

Anti-competitive laws in the United States were passed to promote fair competition for the benefit of consumers.  This includes a collection of both federal and state laws that are an extension of antitrust laws such as the Sherman Antitrust Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914.

Related Terms

anti-competitive practice, confidentiality agreement, conflict of interest, dividing markets, price fixingbid rigging, group boycott, dumping, exclusive dealing, tying arrangements, Sherman Antitrust Act of 1890, Clayton Antitrust Act of 1914, limit pricing, Federal Trade Commission Act of 1914, resale price maintenance