Your sales decrease as a result of a false advertising campaign by a manufacturer of a competing product. One avenue to remedy this unfair competition is a suit under Section 43(a) of the Lanham Act, right? Not according to the Third Circuit Court of Appeals.
Who has a right to sue for unfair competition under the Lanham Act? On its face, the statute appears to confer standing on virtually any person affected by a defendant's actions in violation of § 43(a). The Third Circuit concluded, however, that Congress really intended something different.
Conte Brothers Automotive Inc. vs. Quaker State — Slick 50, Inc., involved Slick 50®, an engine lubricant marketed as a motor oil substitute. Plaintiffs, retail sellers of regular motor oil, sued Quaker State, alleging that it falsely advertised that Slick 50 would reduce the friction of moving parts, decrease engine wear, and improve engine performance.
Quaker State convinced the district court to dismiss the complaint, and the Third Circuit Court of Appeals affirmed. The Court refined its previously stated "reasonable interest" standing test, and adopted the test for antitrust standing for § 43(a) claims. Under this test, a court should consider, among other factors: the nature of the alleged injury; the directness of the asserted injury; the proximity of remoteness of the party to the alleged injurious conduct; and the degree to which damages are speculative.
The Third Circuit applied these factors to the claim against Slick 50 and found it lacking. It reasoned that the Lanham Act protects "commercial interests" that have been harmed by a "competitor's false advertising" and secures to the business community the advantages of reputation and goodwill. In this case, the Third Circuit concluded that plaintiffs had alleged a commercial interest but not a competitive harm, and plaintiffs had not claimed that their goodwill or reputation had been harmed. Similarly, the Court ruled that the loss of sales at the retail level did not impact plaintiffs' ability to compete, did not detract from plaintiffs' reputation, and was not the type of harm Congress sought to redress.
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