Legal Definitions - trade disparagement

Trade disparagement is a type of civil wrong (a "tort") that occurs when someone makes false or misleading statements about another business's products, services, or overall operations, leading to specific financial harm for that business. Unlike defamation, which primarily damages a person's or entity's reputation, trade disparagement specifically targets the economic value or marketability of a business's offerings.

To successfully prove a claim of trade disparagement, a business typically needs to demonstrate the following:

• A false or misleading statement was made about their products, services, or business.
• The person making the statement either knew it was false, acted with reckless disregard for the truth, or intended to cause harm to the business.
• The false statement directly resulted in specific, measurable financial losses for the business.

This legal concept is also sometimes referred to as commercial disparagement, product disparagement, or injurious falsehood.

Here are some examples to illustrate trade disparagement:

• Example 1: False Claims About Product Ingredients

  Imagine a new organic food company launches an advertising campaign falsely claiming that a long-established competitor's popular breakfast cereal contains "synthetic, unapproved chemicals that are harmful to children," even though the competitor's ingredients are all natural and FDA-approved. If the new company knew these claims were untrue or recklessly disregarded the truth, and the established cereal company could prove a significant drop in sales or canceled distribution contracts directly resulting from these false advertisements, this would be a case of trade disparagement.

  How it illustrates the term: The new company made a false and misleading statement about the competitor's product. If made with the requisite intent or disregard for truth, and if it caused specific financial losses (lost sales, canceled contracts), it fulfills the criteria for trade disparagement.

• Example 2: Misleading Statements About Service Quality

  Consider a rival plumbing service that starts telling potential customers that a highly-rated local plumber uses "substandard pipes that burst easily" and "employs unlicensed technicians," despite the reputable plumber having a long history of excellent service, using high-quality materials, and employing certified professionals. If these statements are made with the intent to divert customers or with knowledge of their falsity, and the reputable plumber can demonstrate a measurable decrease in new customer bookings or loss of repeat business directly attributable to these false claims, it would constitute trade disparagement.

  How it illustrates the term: The rival service made false statements about the quality and legality of a competitor's services. If these statements were made with malicious intent or reckless disregard for the truth, and led to quantifiable financial harm (lost customers, reduced revenue), it exemplifies trade disparagement.

• Example 3: Fabricated Allegations About Business Practices

  An online news blog, without proper investigation, publishes an article falsely alleging that a successful artisanal coffee brand sources its beans from "plantations that exploit child labor and destroy rainforests," when in reality, the brand has a rigorously audited, fair-trade, and environmentally sustainable supply chain. If the blog published this with reckless disregard for the truth or malicious intent, and the coffee brand suffered direct financial losses such as canceled orders from major grocery chains, a significant drop in online sales, or a decline in investor confidence, this could be a claim for trade disparagement.

  How it illustrates the term: This involves a false and damaging statement about the coffee brand's business practices. If the blog acted with the necessary intent or disregard for truth, and the brand suffered direct financial losses (lost contracts, reduced sales, investor withdrawal), it aligns with the definition of trade disparagement.