Unfair business practices

Unfair business practices encompass fraud, misrepresentation, and oppressive or unconscionable acts or practices by business, often against consumers, and are prohibited by law in many countries. For instance, in the European Union, each member state must regulate unfair business practices in accordance with the Unfair Commercial Practices Directive, subject to transitional periods. Unfair business practices may arise in many areas, including:

• Tenancy matters
• Matters involving the advertising and sale of products and services to consumers
• Matters involving insurance claims and the settlement thereof
• Debt collection in cases of default

In addition to providing for the award of compensatory damages, laws may also provide for the award of punitive damages as well as the payment of the plaintiff's legal fees.

At common law, individuals were not entitled to attorney's fees or punitive damages for wrongful acts committed by businesses in most states. Most often, laws prohibiting unfair business practices require consumers to send a demand letter to the business prior to commencing a lawsuit. If the business fails to make a reasonable offer of settlement within a specified period of time, and is subsequently found liable in court, it may be liable for punitive damages and the injured party's reasonable attorney's fees under many statutes. In some instances, the statutes provide for prevailing plaintiffs to recover double or triple the actual damages against non-settling defendants.

When statutes prohibiting unfair and deceptive business practices provide for the award of punitive damages and attorney's fees to injured parties, they provide a powerful incentive for businesses to resolve the claim through the settlement process rather than risk a more costly judgment in court.