Online Trade Libel Cases Skyrocket as Credit Crunch Continues

online trade libel In legalese, trade libel is defined as “the intentional disparagement of a commercial business or product that results in a pecuniary loss for the plaintiff.” In other words, lying about a product or company on the is against the law — online or off.

New media companies are spawning like Starbucks — and the global credit crunch means corporations are working hard to protect controllable things — like 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 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?

Trade libel — or commercial disparagement — is bound to the actual malice standard. Often problematic for plaintiffs, actual malice addresses a defendant’s motives. To win a trade libel lawsuit, the accuser must provide evidence elucidating the accused party’s premeditated intent to commit slander or libel. Additionally, plaintiffs must illustrate how the defamatory statements have had a direct and adverse 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 accreditation payola. 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 watchdog group. The plaintiff’s attorney argued that the BBB rating is a lie that’s damaging his client’s bottom line. Factory Outlet contends they’ve handled every report that’s been registered with the BBB; the non-profit, however, insists that 79 outstanding complaints remain on the retailer’s record. Additionally, the NY BBB chapter says it’s been unable to determine Factory Outlet’s incorporation date — an omission which, according to the Bureau, is also contributing to the store’s low grade.

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

Contact A Trade Libel Lawyer

As our lives and businesses continue to move more online, expect to see an increase in online trade libel cases.

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