No State Consumer Protection Act Claim in Competitor False Advertising Case

The Lanham Act is not a "consumer protection act," and courts have recognized that the Lanham Act false advertising cases vindicate "competitive" injuries virtually without regard to "consumer" interests. A recent decision confirms a related principle: Lanham Act plaintiffs may not automatically tack on state consumer protection claims to their competitor cases. In a decision on May 26, 2011 involving competing tax services, Jackson Hewitt v. H&R Block, the Southern District of New York dismissed a New Jersey consumer protection act (CPA) claim from a lawsuit alleging competitive misconduct. In its complaint, Plaintiff Jackson Hewitt alleged that H&R Block, plaintiff's "direct competitor" in the tax preparation business, disparaged Jackson Hewitt by suggesting that 2 out of 3 tax returns prepared by Jackson Hewitt contained errors (see H&R Block's Second Look Review program here). The court noted that Jackson Hewitt's case alleged "unfair practices that have disadvantaged Jackson Hewitt in the marketplace." Significantly, however, the court found that "[n]owhere does Jackson Hewitt allege a harm associated with consuming H&R Block's services". While the allegations stated a claim under the Lanham Act, the court dismissed the New Jersey CPA claim because that statute remedies "consumer fraud," not competitive injuries. This is the outcome, even though the advertising at issue actually was directed to consumers, and, if the advertising is false, consumers could bring a separate lawsuit for the same conduct. But not in this lawsuit. The court concluded that "Jackson Hewitt has brought this lawsuit as a competitor of H&R Block, not a consumer of its services, and therefore cannot avail itself of the [consumer protection] Act." This will not be the result in all competitor cases because some state CPA statutes also reach competition injuries. – Randy Miller

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