CALIFORNIA UNFAIR COMPETITION LAW (UCL)

California’s Unfair Competition Law (California Business and Professions Code §§ 17200-17209 “UCL”) is an extremely broad civil statute designed to address all manner of unlawful, fraudulent and unfair business practices.[1] The statute has a long history, reaching back in its earliest forms to the 1800s, but was codified and moved to its current location in the Business and Professions Code in 1977.[2] The UCL is intended to promote fair competition for goods and services.[3]

 

What conduct is covered by the UCL?

 

The UCL prohibits "any unlawful, unfair or fraudulent business act or practice."[4] Since these prohibitions are written in the disjunctive, each of the three prongs supports a distinct theory of liability.[5]

 

Unlawful Conduct

 

The unlawful prong proscribes anything that can properly be called a business practice and is also forbidden by law.[6] Almost any law can serve as the predicate to a UCL action.[7] The Act “borrows” from state, federal and local laws, making them independently actionable.[8] Thus, the predicate law need not provide for a private right of action.[9]  

 

Fraudulent Conduct

 

The fraudulent prong of the UCL is aimed at deception or misleading conduct. However, the threshold for establishing liability under the UCL is lower than a standard fraud case, requiring only that the advertising or conduct complained of be “likely to deceive” members of the public.[10] Using a “reasonable consumer” test, relief is available without individualized proof of deception, reliance, and injury.[11]However, the misrepresentation at issue typically must concern a material fact; meaning one that a reasonable consumer would attach importance to in making a purchasing decision.  It does not have to be the only reason or even the primary reason for the purchase.[12]

 

Actionable misrepresentations can be affirmative (for ex., a claim stated or implied by advertising) or by omission (for ex., failing to include information that a reasonable consumer would likely factor into a purchasing decision.) Omission cases require that a plaintiff prove there was some duty to disclose the concealed fact, typically because a business had exclusive knowledge of the material fact, actively hid the material fact, owed a fiduciary duty to the plaintiff, or only relayed part of the information and thus left a misleading impression.[13]  

 

“Unfair” Conduct

 

The “unfair” prong was crafted to provide courts with maximum discretion to prohibit fraudulent schemes that “may run the gamut of human ingenuity and chicanery.”[14] There are several competing definitions of what constitutes an “unfair” practice under the Act. With respect to business competitors, the California Supreme Court in Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.,[15] articulated the test to be applied to determine if a business practice is unfair: 

 

When a plaintiff who claims to have suffered injury from a direct competitor's ‘unfair’ act or

practice invokes section 17200, the word ‘unfair’ in that section means conduct that threatens

an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws

because its effects are comparable to or the same as a violation of the law, or otherwise

significantly threatens or harms competition.

 

Unfortunately, in the consumer context, there is no single, settled definition of “unfairness.”[16] Some courts have relied on the Cel-Tech (or “tethering”) test developed for business competitors.[17] Some courts have relied on the FTC test for unfairness, found at 15 USC § 45(n) which has three requirements:  (1) the act or practice causes or is likely to cause substantial injury to consumers, (2) the injury is not reasonably avoidable by consumers themselves, and (3) the injury is not outweighed by the countervailing benefits to consumers or to competition.[18] Other courts rely on what has long been referred to as the “balancing test,” where the utility of the defendant’s conduct is weighed against the gravity of the harm to the alleged victim.[19] Lastly, the unfair prong has been defined simply as practices which offend public policy, are immoral or unethical, or are oppressive or substantially injurious to consumers.[20] The approaches are not mutually exclusive[21], and courts will regularly analyze UCL unfairness claims under more than one set of criteria.[22]  

 

Who must comply with the UCL?

 

Virtually all individuals and businesses operating in California must comply with Business and Professions Code § 17200.[23] “The UCL reaches any unlawful business act or practice committed in California."[24] This is by design, as Section 17203 provides that “any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction.”[25] Thus, nonprofit organizations have been found to be within the reach of the Act,[26]  as have businesses and individuals located out of State[27] (As long as they have “minimum contacts” with California such that having to defend against a UCL suit would not offend traditional notions of fair play and substantial justice).[28] However, governmental entities are outside of the UCL’s purview, regardless of the capacity in which they are operating.[29]  

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How is the UCL enforced?

 

Private Plaintiffs

 

For a private plaintiff to have standing to sue under the UCL, he or she must show a loss of money or property in some “nontrivial amount.”[30] A variety of different approaches are used to show this economic loss, for example, providing evidence that (1) the individual would not have paid as much for a product or service absent the unfair business practice, (2) the individual did not receive the her “benefit of the bargain” in the transaction, or (3) the individual was required to spend additional funds that would not have otherwise been necessary.[31] An organization also has standing under the UCL if it can demonstrate a loss of money or property. Recently, the California Supreme Court held that an organization can satisfy this requirement by showing that it incurred costs to respond to perceived unfair competition that threatens its preexisting mission, as long as those costs were incurred independent of preparation for, or in furtherance of, UCL litigation.[32]

 

A consumer can sue for violations of the UCL in his or her private capacity, or as the representative plaintiff in a class action on behalf other consumers that are similarly situated.[33] In the commercial context, competitors may also maintain a lawsuit in an individual or representative capacity, so long as they have lost money or property as a result of the defendants’ unfair competition.[34] It is not necessary in a commercial suit for the plaintiff to have been in direct business dealings with the defendant, so long as its alleged injuries are not conjectural or hypothetical.[35]

 

Consumers residing in California can bring enforcement actions for conduct occurring in-state and well as out-of-state where that conduct results in injury in California.[36] However, no UCL action will lie for claims affecting only non-California residents where the business activities occurred only outside of the state, even where the business is a California company.[37] Of course what is found by a court to have “occurred” in California when a defendant is based in California will likely be the subject of extensive discovery and lead to intensely fact-specific outcomes.[38]

 

Public Enforcers

 

Enforcement of California’s UCL is afforded to certain public officials (for example, the California Attorney General, a district attorney and certain city attorneys), and any private individual who “has suffered injury in fact and has lost money or property” as a result of unfair competition.[39] In addition to the authority to seek injunctive relief under § 17204, section 17206 of the UCL expressly provides that Attorney General and district attorneys, and other local prosecutors can seek penalties for UCL violations.[40]

 

Statute of Limitations

 

The statute of limitations for UCL actions is four years.[41] Thus, potential plaintiffs have 4 years from the occurrence of the complained-of business practice to file a lawsuit. However, that time limit may be extended pursuant to California’s delayed discovery rule, which causes the statute of limitations to be paused until a reasonable plaintiff discovers, or should have discovered, the facts giving rise to the claims at issue in a filed complaint.[42]  

 

UCL Remedies

 

Damages are not available as a form of relief under the UCL.[43] Injunctive relief, restitution and civil penalties are provided for by the Act.[44] The UCL provides: 

 

The court may make such orders or judgments ... as may be necessary to prevent the use

or employment by any person of any practice which constitutes unfair competition [. . . ] or

as may be necessary to restore to any person in interest any money or property, real or

personal, which may have been acquired by means of such unfair competition.[45]

 

While private parties and public enforcers are permitted to seek injunctive relief and restitution, only government prosecutors are permitted to seek civil penalties.[46]  

 

Injunctive Relief

            

Injunctive relief is the primary form of relief available under the UCL.[47] Courts have the equitable power to enjoin future business practices as necessary to protect consumers and competitors from the unlawful, unfair or fraudulent acts complained of by plaintiffs.[48]This prospective relief must have "the primary purpose and effect of" prohibiting unlawful acts that threaten future injury to the general public.[49] Thus, it is important to remember that, while a viable 17200 claim can be stated based solely on past acts, courts regularly analyze whether there is any threat of future injury to the public such that an injunction is warranted.[50] If no basis exists for belief that a private plaintiff will be harmed in a similar way in the future, a court will refuse to allow a claim for injunctive relief to proceed.[51]

 

Restitution

 

The only authorized form of monetary relief available under the UCL to private plaintiffs is restitution.[52] An order qualifies as one for restitution if it “[compels] a UCL defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken, that is, to persons who had an ownership interest in the property or those claiming through that person."[53]  “The object of restitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.”[54] Non-restitutionary disgorgement of profits is not an available remedy.[55] However courts have upheld the ability of plaintiffs to seek restitutionary disgorgement, that is, where a defendant’s profits can be traced back to a UCL violation that gives that plaintiffs an ownership interest in those profits.[56] "`[I]t is not essential that money be paid directly to the recipient by the party seeking restitution....'"[57] Thus, money paid by consumers to a retailer, for example, does not preclude those consumers from seeking restitution through the UCL from the manufacturer.[58] Restitution is often measured by the price paid by a consumer for a good or service minus any value actually received.[59] Typically a full refund is not available unless a consumer received no value from the purchase.[60]  

 

Civil Penalties

 

Public officials have the exclusive authority under the UCL to seek civil penalties for violations of the Act.[61] The statute provides that “any person who engages, has engaged, or proposes to engage in unfair competition shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation.”[62] If violations are found in a government enforcement action, imposition of penalties is mandatory.[63] While the imposition is mandatory, the amount is subject to court discretion.  In determining the appropriate penalty amount, the court must consider “any one or more of the relevant circumstances presented by any of the parties to the case, including, but not limited to, the following: the nature and seriousness of the misconduct, the number of violations, the persistence of the misconduct, the length of time over which the misconduct occurred, the willfulness of the defendant’s misconduct, and the defendant’s assets, liabilities, and net worth.”[64] This provides wide latitude for a court to consider a defendant’s circumstances and the underlying nature of the violation when fashioning a penalty amount. With an allowed assessment amount up to of $2,500 per violation, if liability is found in a UCL action, the potential exposure can be quite high. 

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[1] See Cel-Tech Comm. v. LA Cellular, 20 Cal.4th 163, 181(1999); Friedman v AARP, 855 F.3d 1047, 1051 (9th Cir. 2017).

[2] See Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal.4th 553, 570 (1998).  

[3] Kasky v. Nike, Inc., 27 Cal.4th 939, 949 (2002).

[4] Cal. Bus. & Prof. Code § 17200. 

[5] Rubio v. Capital One Bank, 613 F.3d 1195, 1203 (9th Cir. 2010).

[6] Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1143 (2003).  

[7] Friedman, 855 F.3d at 1052.  

[8] Korea Supply, 29 Cal.4th at 1143.  

[9] Rose v. Bank of Am., N.A., 57 Cal.4th 390, 396 (2013). However, if a statutory provision specifically bars use of a law as a predicate for an “unlawful” UCL claim, that intent is likely to be upheld by the courts. See, e.g., Civil Code § 1798.150(c) (‘Nothing in this title [the CCPA] shall be interpreted to serve as the basis for a private right of action under any other law.”), Silver v. Stripe Inc., No. 4:20-CV-08196-YGR, 2021 WL 3191752, at *6–7 (N.D. Cal. July 28, 2021) (dismissing a UCL claim based on the CCPA), and Gardiner v. Walmart Inc., No. 20-CV-04618-JSW, 2021 WL 2520103, at *8 (N.D. Cal. Mar. 5, 2021) (same).

[10] Williams v. Gerber Products Co., 552 F.3d 934, 938 (9th Cir. 2008).  

[11] Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1020 (9th Cir. 2011), certiorari denied 132 S.Ct. 1970.  

[12] In Re Tobacco II Cases, 46 Cal.4th 298, 326-327 (2009).

[13] Collins v. eMachines, Inc., 202 Cal.App.4th 249, 255 (2011).

[14] People ex rel Mosk v. National Research Co. of Cal., 201 Cal.App.2d 765, 772 (1962); Motors, Inc. v. Times Mirror Co., 102 Cal.App.3d 735, 740 (1980).

[15] Cel-Tech, 20 Cal.4th at 187.

[16] Moran v. Prime Healthcare Management, Inc., 3 Cal.App.5th 1131, 1147-48 (2016).

[17] Levitt v. Yelp! Inc., 765 F.3d 1123 (9th Cir. 2014).  

[18] See Camacho v. Automobile Club of S. Cal., 142 Cal.App.4th 1394, 1403 (2006).  But see Lozano v. AT&T Wireless Services, Inc., 504 F.3d 718, 736 (9th Cir. 2007) (rejecting the FTC test for unfairness).

[19] See South Bay Chevrolet v. Gen. Motors Acceptance Corp., 72 Cal.App.4th 861, 886-87 (1999).  See also Pirozzi v. Apple, Inc.,966 F.Supp.2d 909. 922 (N.D. Cal. 2013).  

[20] McKell v. Washington Mutual, Inc., 142 Cal.App.4th 1457, 1473 (2006).  

[21]  Lozano, 504 F.3d at 736.

[22] See, e.g., In re Anthem Data Breach Litig., 162 F.Supp.3d 953, 990 (N.D. Cal. 2016).

[23] Cal. Bus. & Prof. Code § 17203.

[24] Sullivan v. Oracle Corp., 51 Cal.4th 1191, 1208 (2011); Adobe Systems Inc. v. Blue Source Group, Inc., 125 F.Supp.3d 945, 972 (N.D. Cal. 2015).  

[25] Cal. Bus. & Prof. Code § 17203.

[26] See, e.g., Isuzu Motors, Ltd. v. Consumers Union of U.S., Inc.,12 F.Supp.2d 1035, 1048 (C.D. Cal. 1998); Pines v. Tomson,160 Cal.App.3d 370, 386 (1984).

[27] Yu v. Signet Bank/Virginia, 69 Cal.App.4th 1377, 1381-82 (1999); Speyer v. Avis Rent A Car System, Inc., 415 F.Supp.2d 1090, 1099 (S.D. Cal. 2005).

[28] CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1076 (9th Cir. 2011).

[29] PETA, Inc. v. California Milk Advisory Board, 125 Cal.App.4th 871, 905 (2005).

[30] Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (2011).  

[31] Id.

[32] California Medical Assn. v. Aetna Health of California Inc., 14 Cal.5th 1075, 1082 (2023).

[33] Cal. Bus. & Prof. Code § 17204. See also Fireside Bank v. Superior Court, 40 Cal.4th 1069, 1092, fn. 9 (interpreting Proposition 64 to require class action procedures in lieu of a representative action under the UCL).

[34] See Allergan, Inc. v. Athena Cosmetics, Inc., 640 F.3d 1377, 1382 (Fed. Cir. 2011).

[35] See Bower v. AT&T Mobility, LLC, 196 Cal.App.4th 1545, 1554 (2011).

[36] See Norwest Mortgage, Inc. v. Superior Court, 72 Cal.App.4th 214, 222 (1999); Yu, 69 Cal.App.4th at 1391-92.

[37] See Sullivan v. Oracle Corp., 51 Cal.4th 1191, 1206-09 (2011).  

[38] See, e.g., Ehret v. Uber Techs., Inc., 68 F.Supp.3d 1121, 1132 (N.D. Cal. 2014).

[39] Cal. Civ. Code § 17204.  

[40] Cal. Bus. & Prof. Code § 17206. See also Abbott Laboratories v. Sup. Ct., 9 Cal.5th 642, 658, 664-665 (2020). 

[41] Cal. Bus. & Prof. Code § 17208. 

[42] Aryeh v. Canon Bus. Solutions, Inc., 55 Cal.4th 1185, 1196-98 (2013).

[43] Korea Supply, 29 Cal.4th at 1144.  

[44] Cal. Bus. & Prof. Code, §§ 17203 & 17206.

[45] Cal. Bus. & Prof. Code, § 17203 (ellipsis mine).  

[46] Compare Bus. & Prof. Code § 17203 with §17206.

[47]  In re Tobacco II Cases, 46 Cal.4th 298, 319 (2009).  

[48] Cal. Bus. & Prof. Code § 17206.

[49] Broughton v. Cigna Healthplans, 21 Cal.4th 1066, 1077 (1999); McGill v. Citibank, NA, 2 Cal.5th 945, 955 (2017). 

[50] See Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 970 (9th Cir. 2018); Milan v. Clif Bar & Co., 489 F.Supp.3d 1004, 1007 (N.D. Cal. 2020).

[51] See, e.g., Gonzalez v. Chattem, Case. No. 23-cv-00102-HSG (N.D. Cal. Nov. 21, 2023); Yu v. Dr Pepper Snapple Group, Inc., Case No. 18-cv-06664-BLF (N.D. Cal. Oct. 6, 2020).

[52] Cal. Bus. & Prof. Code § 17203.  

[53] Kraus v. Trinity Management Services, Inc., 23 Cal.4th 116,126-127 (2000).

[54] Korea Supply, 29 Cal.4th at 1144 (2003).  

[55] Id. at 1140.

[56] Aguayo v. US Bank, 200 F.Supp.3d 1075, 1077 (S.D. Cal. 2016); Juarez v. Arcadia Fin., Ltd., 152 Cal.App.4th 889, 894 (2007). 

[57] Shersher v. Superior Court, 154 Cal.App.4th 1491, 1500 (2007).  

[58] See, e.g., Shersher, 154 Cal.App.4th 1491.

[59] In re Vioxx Class Cases, 180 Cal.App.4th 116, 131 (2009). 

[60] In re Tobacco Cases II, 240 Cal.App.4th 779, 800 (2015).

[61] Cal. Bus. & Prof. Code § 17206.  

[62] Cal. Bus. & Prof. Code § 17206(a).  

[63] Cal. Bus. & Prof. Code § 17206(b).  

[64] Cal. Bus. & Prof. Code § 17206(b).