California Unfair Competition Law

In addition to federal laws, each state has its own unfair competition law to prohibit false and misleading advertising. In California, one such statute is the Unfair Competition Law [hereinafter “UCL”], Business and Professions Code §§ 17200 et seq. The UCL “borrows heavily from section 5 of the Federal Trade Commission Act” but has developed its own body of case law.

California Civil Code § 3369, enacted in 1872, was California’s early unfair competition statute. It “addressed only the availability of civil remedies for business violations in cases of penalty, forfeiture, and criminal violation.” A 1933 amendment expanded the law to prohibit “any person [from] performing an act of unfair competition.” This amendment did not, however, extend UCL protection to consumers. This limitation was in response to the U.S. Supreme Court’s 1931 decision in FTC v. Raladam. In Raladam, the Court held that a FTC Act Section 5 violation must show actual injury to competition. This ruling prevented individual consumers from suing under the FTC Act. Following this rationale, California applied the UCL to unfair business practices that affected business competitors, not consumers.

In 1935, consumers, not just business competitors, were given the opportunity to sue under the UCL. The Supreme Court of California clarified the statute in American Philatelic Soc. v. Claibourne, stating that “the rules of unfair competition” should protect the public from “fraud and deceit.” In 1962, a California appellate court reiterated this rule by stating that the UCL extended “equitable relief to situations beyond the scope of purely business competition.” In 1977, the legislature moved the UCL to the California Business and Professions Code § 17200. In 2004, California voters enacted Proposition 64, which limited UCL standing to individuals who suffered financial/property loss because of an unfair business practice.

The UCL confers standing on both private parties and public prosecutors. Section 17204 authorizes the Attorney General, district attorneys, county counsels and city attorneys to file lawsuits on behalf of injured citizens. Prior to Proposition 64, any consumer, regardless of whether they were adversely affected by unfair business acts, could bring a UCL action. In addition, any consumer could act as a representative and file a class action lawsuit against a business committing unfair competition. Proposition 64 allows only private plaintiffs who have “suffered injury in fact and lost money or property as a result of such unfair competition” may file suit, while “unaffected” plaintiffs now lack standing. Furthermore, the California Supreme Court expanded this amendment to class actions in Arias v. Superior Court by holding that “unaffected” plaintiffs no longer may bring a class action lawsuit unless they satisfy the regular requirements laid out in Cal. Civ. Code § 382. The requirement does not apply to all class members, however; only class representatives must meet these requirements.

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