California Unfair Practices Act
Under the California Unfair Practices Act, private parties may bring lawsuits against companies engaging in unlawful price discrimination, with fines as high as $2,500 per violation.
Prohibited Business Practices under the Unfair Practices Act
The California Unfair Practices Act prohibits price discrimination where the intent of the practice is to lessen competition. Those acts that are in an effort to compete legitimately with competitors are not prohibited. Prohibited activities include:
- Payments of commissions or rebates to some customers
Rebates, commissions, or other special services that are secretly offered to some customers but not others are unlawful when those payments lessen competition. An example of this practice is a company that sells a product to many distributors and offers a discount secretly to all except one, attempting to drive it out of business.
- Price discrimination between different cities or communities
Offering different prices for the same service can act to drive competitors out of business. For example, a cable company with a particular competitor in one region may lower its prices in that region to drive its competitor out of business.
- Selling a product or service below the sellers cost
Some companies sell products below their cost for the product in order to drive competitors out of business. By temporarily losing money, these companies can gain a long term market share increase.
- Selling “Loss Leaders”
“Loss leaders” are products that are sold below their cost to the seller. These products can are used to increase sales of other products or services. For example, a cell-phone company may sell phones below costs in order to increase sales of profitable service agreements.
Report a violation of the California Unfair Practices Act: