Online Trade Libel Lawsuits on the Rise as the Credit Crunch Continues On

online trade libelIn attorney speak, trade libel is defined as “the intentional disparagement of a commercial business or product that results in pecuniary loss for the plaintiff.” In other words, lying about a product or company on the Internet will probably lead to an online trade libel lawsuit.

New media companies are popping up like Starbucks — and the global credit crunch means corporations are working hard to protect the things they can control – especially reputation capital.

Since the success of most new media companies is directly proportional to the amount of content they generate (the more the better), editing is quickly becoming a lost art — and increasing amounts of illegal, libelous content is finding its way online.

With hawk-like fervor, businesses have begun to monitor their online buzz for two main reasons:

(1) Corporate entities have become obsessive about maintaining positive online reputations;


(2) In the event a company is unfairly maligned online, the settlement could prove lucrative.

What is Online Trade Libel?

Like other defamation torts, trade libel — or commercial disparagement — is bound to the standard of actual malice. Often problematic for plaintiffs, actual malice addresses a defendant’s motivations. To win a defamation lawsuit, the accuser must provide evidence which elucidates the accused party’s premeditated intent to commit slander or libel. In addition, plaintiffs must illustrate how the defamatory statements have had a direct, negative impact on their financial well-being. Trade libel differs from plain ole’ defamation in that trade libel only applies to instances where a product or business — not an individual — is being unfairly impugned.

Salesmanship vs. Online Trade Libel

There’s a thin line between love and hate; same goes for effective salesmanship and online trade libel. For eons, discrediting the competition has been a common sales tactic. So while it may seem like corporations are constantly criticizing each other, there’s a legal rubicon that must never be crossed: lying.

You’d be hard pressed to find a sales rep that doesn’t point out the deficiencies of a competitor’s product when extolling the virtues of their own. But the moment an eager advertiser makes a spurious claim, expect a trade libel lawsuit to ensue.

Online Trade Libel Case Study: Factory Outlet Store v. Better Business Bureau of Metropolitan New York, Inc.

The Better Business Bureau (BBB) is having a tough year. First there were accusations of giving inflated ratings to companies who paid for BBB accreditation. And now, online retailer, Factory Outlet, is suing the non-profit for online trade libel.

After being given an F-rating on the BBB’s website, electronics dealer, Factory Outlet, filed a $4M trade libel lawsuit against the consumer watchdog group. The plaintiff’s attorney argued that the BBB rating is a lie that’s negatively impacting his client’s bottom line. Factory Outlet contends they’ve handled every report that’s been registered with the BBB; but the non-profit insists the retailer has yet to address 79 outstanding complaints. In addition, the NY BBB chapter says they are unable to determine Factory Outlet’s incorporation date – an omission which, according to the Bureau, is also contributing to the store’s failing grade.

The New York Supreme Court will be hearing arguments in Factory Outlet Store v. Better Business Bureau of Metropolitan New York, Inc.

Contact A Trade Libel Lawyer

As our lives and businesses become more intertwined with the World Wide Web, expect to see more lawsuits alleging online trade libel. Like online defamation, legal precedence for electronic trade libel has yet to be set. Interesting cases which challenge conventional trade libel statutes are bound to pop up over the next several years.

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