ARTICLES

Defamation in the Blogosphere: An Unfair Competitive Advantage

Some competitors do anything to gain the upper hand. Certain competitors conspire together to set prices and block another from fairly competing for business, invoking anti-trust laws. Despite the devastating affects of monopolies, small to medium sized businesses face a much larger threat from the proliferation of misinformation about their services or products. As technology continues to grow and businesses develop and use internet media to advertise products and services, the use of negative and false comments about competitors has become a disturbing trend.

What constitutes defamation?

Defamation is a communication to a third party that is knowingly false and tends to harm the reputation of another so as to lower him or her in the estimation of his or her community or to deter others from associating or dealing with him or her. Generally, defamation has occurred if the person being defamed is able to demonstrate that special harm resulted. If, however, the defamatory communication is in regard to an individual’s business, trade or profession, liability may exist even though direct financial harm cannot be proven. A communication may be defamatory if it is written or spoken to a third party, and depends on the subject matter of the communication and the person or entity being defamed.

Are certain industries susceptible to blogging defamation?

One area experiencing a growth in defamatory communications between competitors is the real estate and mortgage industry. Unscrupulous real estate agents and mortgage brokers try to persuade a consumer to use their services by issuing negative comments about the services of competitors. With the growing number of consumers accusing the real estate and mortgage industry of engaging in fraud, it is not uncommon for businesses, agents and brokers to associate their competitors with such fraud (whether true or false) in attempt to persuade consumers not to use the services of those competitors. Such means of persuasion are more commonly being found where businesses, agents or brokers “warn” consumers through internet blogs that their competitors engage in fraud and, therefore, should not be used for real estate transactions. Unfortunately, a competitor may not be aware of such unfair competition until it is too late and legal action is necessary. The law pertaining to the relationship between blogs and defamation is rapidly developing in Minnesota and across the United States, and the attorneys at Skjold ▪ Barthel are closely monitoring these developments.

What role does defamation have in unfair competition?

A business making false statements about another’s business, profession or trade may also be subject to additional claims for liability other than defamation. Minnesota law highly favors competition. It is unlawful, however, to interfere with a contractual relationship or prospective business relationship of another without justification. For example, a person may be liable for intentionally and improperly interfering with the performance of a contract by inducing or causing the third person not to perform under the contract. Likewise, it is unlawful to interfere with another’s ability to obtain a prospective business relationship through the use of improper means such as defamation. Therefore, if a competitor has contacted your customers or potential customers, and made false statements to them regarding your business, profession or trade, a claim for tortious interference may exist if such defamation caused the customer not to honor his or her existing contract or not enter into a prospective business relationship. Notwithstanding certain recognized excuses for such conduct, the use of defamation to persuade a customer or third party from not honoring a contractual relationship may result in liability for the person engaged in such defamatory conduct.

What should I do if I have become the subject of defamation?

In the event you believe that someone is using defamation to gain an unfair competitive advantage, your first step should be to contact an attorney to evaluate your case and determine the best course of action. Under certain circumstances, a letter or telephone call may suffice and compel the wrongful party to cease the defamatory and unlawful conduct, without incurring any additional expenses or fees. Initiation of a lawsuit may be necessary in some circumstances, including a request for temporary relief restraining the wrongful party from engaging in any further defamation or otherwise communicating with your customers while the lawsuit is pending. Regardless of the best course of action, there are certain remedies available to stop the use of defamation to gain a competitive advantage under Minnesota law.

What preventative measures can I take?

Because of the potential exposure to liability, employers should carefully monitor blogs created by or in which their employees participate. Every employer should make its internet usage policies clear to its employees – including participation in blogging sites. These policies should be included in any employee handbook and a memorandum regarding the policy should be distributed to employees.