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What are Unfair Business Practices?

By M. Lupica
Updated Jan 28, 2024
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Unfair business practices occur when a business acts in a manner that breaches the general consumer trust in such businesses. They can apply to a number of industries — from the obvious in the purchase of various products and services to less obvious cases such as debt collection and tenancy matters. Generally, in order to qualify for an unfair business practice, the act taken by the business in question must have involved fraud, misrepresentation, or an act that by its commission alone implicates the business in having leveraged terms that are excessively unfair.

Most jurisdictions have unfair business practices laws in place to protect consumers from such practices. Generally, the statutes will outline the type of act that can give rise to an unfair business practices claim and state the remedy that will be granted in a given situation. Most commonly, the remedy is restitution, but where appropriate, the court will grant an injunction to cease the practice in question. If the circumstances are particularly egregious, the court may mandate punitive damages or an injunction to cease operations altogether. Many jurisdictions now have a requirement that anyone filing a claim for unfair business practices suffer some sort of tangible financial damage in order to collect an award.

One circumstance that could give rise to an unfair business practices claim is fraud or misrepresentation to consumers in the operation of the business. For example, a car dealership may advertise a used car for sale with an indication that the engine, brakes, or some other aspect of the vehicle has been replaced with brand new parts. If the vehicle in question has not, in fact, been maintained in the manner stated by the company in its advertising then it may constitute an unfair business practice by means of fraud. The purchaser of the vehicle would likely be entitled to restitution in the amount of the difference between the price paid and the car’s value without the misrepresented improvements.

Unconscionability — excessively unfair terms due to a large disparity in bargaining power — is something that is less easy to prove, but some circumstances nonetheless give rise to this kind of claim. A drug company that is offering an experimental cancer treatment drug on the market with the condition that anyone who purchases and uses the drug may not sue the company for any reason may give rise to an unfair business practices action due to unconscionability. The existence of a life threatening illness and the resulting desperation to find a cure creates a strong potential for a disparity in bargaining power. A clause that takes advantage of such desperation in that manner is likely to be held as unconscionable.

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Discussion Comments

By avatrx — On Jul 12, 2014

I recently sold an item online and was paid by the purchaser using paypal. Paypal is apparently the only way to get paid. I have positive feedback on the site.

The buyer paid me. Paypal took their commission and now they are holding my funds. They claim they can hold onto my money for 21 days.

I have spoken to the purchaser. They thought they had paid in good faith and expected the item to ship. I typically don't ship a $900 item before the funds clear my bank, but Paypal is not releasing the funds. The purchaser is OK with paying me. Paypal has already subtracted their funds from their account.

I communicated with the buyer, who is anxiously awaiting their item. I am holding off shipment until I’m paid.

This, in my opinion, is an unfair and perhaps even illegal business practice. I would like to know where the funds are while I am waiting to get paid? Does Paypal invest them or bank them and earn interest on them? If so, then I am entitled to that also. Meanwhile, I made a purchase locally and charged it on my credit card. My intention was to sell the item I did sell and use those funds to pay my credit card. I will be charged interest while waiting to get paid. Who covers that?

It’s time to look for another marketplace that is not controlled by Paypal. I have no issue with buyer protection, but this practice borders on fraud. Most credit card companies offer protection against unscrupulous sellers. They allow you to cancel payment.

By Inaventu — On May 04, 2014

I think it's important to realize there's a difference between illegal and unfair. Title loan and paycheck advance companies may use unfair business practices to get people to sign off on very high interest loans, but the interest rates and repayment conditions may not be illegal. Consumers have to prove that what a company did was fraudulent and deceptive. If the loan company mentioned the exorbitant interest rate or late fee penalty in writing, the consumer may not be able to claim fraud later.

The problem with deceptive business practices is that they almost always earn more money for the business. This means the fraudulent company is not likely to stop practicing them unless legal action is taken by consumers or government agencies.

By Phaedrus — On May 03, 2014

When I was in college, I really wanted a cheap but reliable car so I could get a part-time job and run errands. A local car dealership put up flyers all over campus, claiming they had reliable "beater" cars for $400 to $600. When I arrived at the dealership, however, the salesman said he had already sold the last car at those prices, but he had some that were only a little higher in price. He showed me a horrible green sedan that used diesel fuel. This was at a time when diesel pumps for passenger cars were practically non-existent.

I really thought the dealership was using deceptive business practices, because they knew a lot of young adults like me would be shopping for inexpensive transportation. They may not have had any "beater" cars for sale at all. It was just a gimmick to lure people into the dealership and pressure them into buying a more expensive car. I'd consider that "bait and switch".

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