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Commercial Disparagement

Small-business owners face many challenges that can affect their success. One such challenge is the potential for commercial disparagement. This legal issue involves false statements or defamatory remarks about a business, its products, or its services. Commercial disparagement can tarnish a business's reputation. Further, it may lead to financial harm or legal action.

Commercial disparagement is also known as:

  • Slander of goods
  • Trade libel
  • Product disparagement
  • Business disparagement

In this article, you can learn more about what qualifies as commercial disparagement, how it differs from defamation, and how you can protect your business.

Understanding Commercial Disparagement

Commercial disparagement (CD) is a tort under business law. A tort is a civil wrong or injury committed against an individual, leading to legal liability for the person who caused the harm.

A defamatory statement is a false assertion that harms the reputation of the subject — in this case, a business. To establish a defamation or disparagement claim, you must prove that:

  • The speaker published a false statement
  • The false statement damaged your business
  • The statement was made with reckless disregard for the truth or with actual malice

CD deals with false statements about a business's products, services, or reputation to cause financial loss. Defamation encompasses false statements about a person. Commercial disparagement is about false statements related to a business.

Defamation vs. Commercial Disparagement

Although defamation and CD are similar, they are separate torts. First, let's define defamation. Defamation occurs when a person publishes an untrue statement that causes injury. Examples of defamatory statements include:

  • Statements that reflect negatively on a person's integrity, morality, or character
  • Statements that suggest a person committed a serious crime
  • Statements about a person having a mental or physical defect that would discourage others from associating with them

Commercial disparagement is a tort exclusive to businesses, whereas anyone can file a defamation claim. A CD claim protects a business's property rights rather than its reputation. In contrast, a business defamation claim generally protects reputation. This difference is why a claim of business disparagement protects financial interests.

The Elements of Commercial Disparagement

To prevail in a disparagement case, a plaintiff must prove the following elements:

  1. A false and defamatory statement was made
  2. The statement was published to a third party
  3. The plaintiff's business suffered actual damages as a result
  4. The statement was made with actual malice or reckless disregard for the truth

It's essential to break down some elements to understand this tort type better. The statement must be a false statement of fact. This implies that the statement is presented as a fact rather than an opinion. If the statement is damaging but accurate, the defendant has an absolute defense to a business disparagement lawsuit.

In this context, "published" means the statement was communicated to a third party in writing or orally.

Proving financial harm from trade libel is often tricky because the damage to reputation is abstract. The plaintiff has to prove that the negative statements caused the business to lose money.

Small-business owners should consult a business attorney with expertise in defamation cases to evaluate the situation and provide appropriate legal advice. Prompt action is crucial. A statute of limitations restricts the time frame you have to file a lawsuit.

Steps to Protect Your Small Business

To strengthen their position, small-business owners can consider the following steps:

  • Monitor online presence: Watch social media, reviews, and other online channels to detect and address negative statements as soon as they arise.
  • Correct the record: Respond to false statements with accurate information to protect the business's reputation.
  • Gather evidence: Document instances of the disparaging statement, its dissemination, and any resulting financial harm. This evidence can be crucial in building a case.
  • Consult legal experts: Seek advice from business attorneys who can guide you through the legal process and help determine the best course of action.
  • Consider a disclaimer: Consider including disclaimers or terms applicable to your business. Use them on your website or promotional materials to clarify the accuracy of the information presented.
  • Evaluate special damages: Calculate the economic losses from the disparaging statement. This includes quantifiable financial harm, such as decreased sales or lost contracts.

Preventing Commercial Disparagement

CD poses a high risk to economic interests and damages small businesses' reputations. And prevention is often the best strategy.

Educate employees, partners, and stakeholders about the potential consequences of false statements. Establish clear communication guidelines, and ensure that marketing and promotional materials are factual.

In landmark decisions like New York Times Co. v. Sullivan and Gertz v. Robert Welch Inc., the U.S. Supreme Court noted the significance of protecting free speech. But these cases show that when false statements cause financial harm, people and businesses should be able to claim compensation.

Implications for Small-Business Owners

Small-business owners are particularly vulnerable to the effects of commercial disparagement. A damaging statement can reach a broad audience through social media. The resulting financial harm can be significant. Many small businesses may struggle to recover from the economic losses.

Business owners should be aware of these laws and the cause of action in cases of commercial disparagement.

Getting Legal Help

Commercial disparagement poses a financial risk and threatens small-business owners' reputations. Small-business owners can take several steps to ensure their ventures' continued success.

First, it's essential to understand the legal implications that false statements can have. Seeking proper legal advice is also essential. Proactive measures are essential to prevent and address CD situations. This comprehensive approach can significantly assist small-business owners in safeguarding their businesses.

Contact a nearby business attorney if you think your business suffered from commercial disparagement or in a business litigation matter. They can provide informed guidance and insights into the possible courses of action under disparagement laws. Starting a conversation with a legal professional can help you understand the remedies or strategies to help with your situation.

You can visit FindLaw's section on Business Torts for more information and resources related to this topic.

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