MCR Labs, Inc., a cannabis testing laboratory, sued Analytics Labs, LLC (and others) under Massachusetts General Laws Chapter 93A, Section 11 for allegedly falsely reporting elevated “THC Potency Levels” and lower cannabis contamination or “fail” rates to lure MCR's customers away. According to MCR, based on the defendants' unfair or deceptive practices, MCR's business was severely impacted when customers starting using the defendants' labs—as opposed to MCR's labs—to test cannabis products. Defendants moved to dismiss MCR's complaint, which the Superior Court denied as to MCR's Section 11 claims.
First, the court disagreed with defendants' assertion that MCR had not alleged facts that plausibly suggested a Section 11 violation. That was because MCR alleged that each defendant improperly inflated the THC levels of the products it tested and/or improperly deflated their contamination levels. This amounted to false advertising and ultimately inflated sales prices for products or enabled the sale of unsafe and potentially dangerous cannabis products to the public. If proven, such conduct (specifically cheating on state regulated laboratory tests to increase market share) might constitute “unfair methods of competition.” Notably, Section 11 governs not only unfair and deceptive acts and practices, but also unfair methods of competition.
Second, the court disagreed that MCR's claim had to be dismissed because it was not engaged in a business relationship with the defendants. Although the court acknowledged many cases requiring some “commercial transaction” between litigants under Section 11, the court concluded that those cases concerned unfair or deceptive conduct—not an unfair methods of competition. Therefore, MCR did not have to be in privity with defendants to maintain a Section 11 unfair competition claim.
Third, nor did the court agree with MCR's claim that “consumer confusion” was required to state an unfair competition claim under Section 11. Although the creation of consumer confusion may be one method of unfair competition, it is not the only method, according to the court. Rather, MCR's allegations that the defendants' falsified laboratory test results in violation of Massachusetts regulations, which adversely affected MCR's competitive position in the marketplace were sufficient under Rule 12(b)(6).
Finally, the court did not agree that Rule 9(b)'s pleading requirements were necessarily required for pleading unfair competition under Section 11.
This case demonstrates the distinction between conduct that is unfair and deceptive in the context of a transaction between the litigants and conduct that amounts to an unfair method of competition, which, according to the court in this case, does not require a specific commercial relationship between the parties under Section 11.
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