Defamation in a Business Setting: What Is It?
Defamation against a business is defined as the making of a false statement regarding a person that is damaging to that person’s business. In most cases, the statement must meet the legal definition that it must show intent to cause damage to the person’s reputation or to the person’s trade, business or occupation. This can be in the form of a spoken word, known as "slander", or in the form of an untrue written statement, known as "libel". Any defamatory statement made about a business is considered a personal injury to that business. Therefore, a corporation or other business is open to the possibilities of damages from such a personal injury. In order to sue for defamation of character, one must be able to prove that a false statement or rumor was made and published or communicated to some third party . In order for an allegation to be defamatory, it must be a statement that is not true (a lie) about a person’s business or personal reputation. For example, a businessman finds it difficult to prove damages to his reputation even if someone publishes a statement that the businessman’s products contain dangerous chemicals. If there is any truth to the allegation, then it cannot be considered defamation of character. There are many situations where people make false statements about a person’s business and are sued, because it impacts the business in a negative way. Examples of what are considered defamation of character include: If you own a business and there are false defamatory statements about your business, such as an unfounded rumor that your product or service is dangerous, or maybe something is wrong with your pricing structure, you have a right to protect your reputation.
Typical Scenarios of Business Defamation
From online reviews to social media allegations, there are several ways that your business may be defamed and attacked. Below are a few common examples:
False Reviews and Google or Yelp Reviews
The New York State Attorney General has actively prosecuted businesses for writing their own positive Yelp reviews. Using a false name, the business owner/employee would write an overly positive review about their own business in order to boost its ratings and mask any real negative reviews from customers. While this is done with the intent to make the business look good, it is illegal.
Google and Yelp have also been known to delete positive reviews that come from sources such as your employees, asking them to remove any review that could be considered self-promoting. A false review from your competitors is also considered defamation.
On some websites, there are companies that allow people to rank businesses by a variety of factors, including their perceived quality. In addition to providing users with the ability to rate and rank companies by a variety of factors, these sites, such as the Better Business Bureau, are deceptively transparent and thorough. As a result, not only can a company’s customers be able to provide reviews about the quality of services or products provided by the business, but so too can any member of the public. These sites tend to have a wide reach, and as a result, anyone with an Internet connection can take a look at the rating or ranking that the company in question received. If the rating or ranking is low, the visitors of these sites might be misled into thinking that the rating or ranking is reflective of the company’s actual ability to provide quality products or services. In regard to the example that we provided regarding Yelp and Google, if a company was linked to the low rating or ranking, they could sue anyone who helped get the company’s name on these sites, including their employees, for defamation.
Social Media Allegations
Some people resort to extortion strategies in which they ask a company to pay them a large amount of money to ensure that the defamer does not file a defamatory statement online. The Online Consumer Review Fairness Act, along with many states’ anti-SLAPP laws, makes it easier to litigate against anyone who uses fraudulent feedback or negates your liability for a review, so be sure to consult an attorney.
Competitor Falsehoods
As a competing business, there may be little that your neighbor across the street can do to prevent you from declaring an all-out assault on one another. If your competitor falsely declares that you perform substandard work, it can be difficult for you to bring a defamation suit if the local citizens know the real you.
These are just a few examples of how businesses can face defamation. When faced with such accusations, it’s important to do what you can to protect your business.
Remedies Available for Defamation
Regardless of whether the defamatory statement was made in written or spoken form, the first step in responding to defamation is to contact legal counsel. If the defamatory statement or statements occurred through the internet, the timeline for action is even tighter. The internet has become a first stop for many potential customers, and they will often immediately search for your business online. Unfortunately, this provides a window of opportunity for the defamatory content to become highly visible, especially if it is posted on a website that generates high traffic. It is crucial to act quickly to prevent damage to your business if the defamatory content can be removed from the internet.
Once legal counsel has been contacted, the next step is to review all of the content or communications for signs of potential legal liability on the part of the author. For example, there is a level of protected communications regarding complaints posted by customers on different websites. However, contacting the website operator who hosts the defamatory or false information and requesting that it be removed as defamatory may be appropriate.
If the defamatory statement does not fall under a category of protected communication (and most statements made outside of a personal circle of trust are not protected under some type of communication privilege), the next step is to review the damages that were caused and the person behind the defamatory content. Although it may be appropriate to file an informal report regarding the incident to local authorities if you suspect that the defamatory content has crossed the line into criminal conduct, in most cases, the next step is to assess whether a lawsuit is appropriate.
There are numerous causes of action that can be brought against an individual or company who posts defamatory content online. For example, traditional state-based tort claims that have been used to address defamatory content online include intentional torts, such as invasion of privacy and misappropriation of name or likeness. A business can also seek relief through the use of the federal Lanham Act, which provides a way to address misleading commercial use of a trademark or service mark.
If you believe that you have been the target of a malicious attack from a former employee or other party, legal counsel can evaluate the potential scope of damage to your reputation and the strategic options available to seeking justice.
Burden of Proof for Businesses Accused of Defamation
To successfully prove that a defamatory statement was made about a business, there are three essential elements:
- A false statement that causes harm – the false statement must injure the reputation of the company, but it doesn’t have to be a statement revealing some deep, dark secret. Generally, something that would lower a reasonable person’s good opinion about a business will be considered defamation. In other words, the statement should harm the company’s image in the "eyes of a substantial and respectable minority of the community."
- Publication to a third party – the defamatory statement must be made to a third party that has no relationship to the parties involved. This means that there must be proof that the statement was made to someone other than the company and the employee or individual who made it.
- Damages suffered – there must be physical proof that the company or its representative suffered harm. Specifically , that would include actual damages, lost business, injuries to reputation, loss of sales, etc.
In general, verbal statements made to a third party are required for defamation to be proven in a court of law. To say something that ruins a business’ reputation face-to-face is one thing, but posting it on the Internet is something else entirely. Because the web offers a digital footprint that can be saved, copied, shared, spread, and duplicated with relentless quality and speed, it is becoming more common for these types of statements to be disseminated worldwide.
Tactics to Avoid or Minimize Defamation Claims
To prevent defamation of your business, you should take the following steps:
Monitoring. Whether you monitor your business’ reputation online is up to you. There are a number of programs or services available that measure the frequency of certain words or phrases, both on the Internet and on social media. One of the most common monitoring services is Google Alerts, which sends you email whenever your business is mentioned specifically online. Internet monitoring is relatively inexpensive, so it may make sense for most businesses to use such a monitoring service.
Good PR. It goes without saying that good public relations can minimize the likelihood that a customer, competitor, or employee will say something bad about your business, or that you will need to have a response ready in case someone does. Make sure that your company’s professional identity – be it a logo, slogan, ad campaign, or other marketing material – is not ambiguous or offensive, since this is often the source of negative publicity. To avoid coming across as arrogant, make sure that your online presence is friendly, helpful, and informative, rather than overly self-promotional. Finally, your employees and your customers alike should always know how to contact you, with either a complaint or a suggestion, so that you can address issues before they are turned into complaints or lawsuits. One of the best ways to minimize the chances of something going wrong is to make sure that you establish and maintain an open line of communication with the world outside of your business.
Crisis Management Plan. You should have a crisis management plan in place before the day comes when you need it. If your business has something to defend itself from, such as a defamation lawsuit, it will be your lawyer’s job to make sure that your company’s response is legally appropriate and effective. But, if you’re simply dealing with criticism in the blogosphere or a bad restaurant review online, you will probably want to have a plan in place to deal with this kind of negative publicity before it happens. Certainly, a complex event – such as a gas leak or a plane crash – will require a far more detailed plan than you might be able to craft for a bad Yelp review. To some extent, your lawyers will need to help you with planning your response based on state law – but given the fact that there are numerous ways in which a company can publicly respond to a complaint or criticism in order to minimize damage, you should have a plan in place nonetheless.
Examples and Notable Defamation Cases
Successful defamation suits by businesses happen with surprising regularity. Defamation is costly to the target, and plaintiffs usually win. The facts below show how different types of statements fall into the category of actionable defamation.
Computer Associates (Securities fraud) This case isn’t a typical case of defamation against a business. Rather, the plaintiffs were three highly respectable business people. When Computer Associates International, Inc. – a $5 billion software company – committed securities fraud, the company was forced to restate its earnings for years past. No one was surprised. Securities fraud was rampant at the time. The plaintiffs, however, were surprised when the company’s founder, Charles Wang, published slanderous statements about them in a book he wrote in connection with that scandal. Mr. Wang accused the plaintiffs of conspiring against him in order to increase their bonuses. They sued him for defamation, and won their suit, garnering a total of $73 million in damages.
Cisco (UNIVIT Management Group) UNIVIT Management Group LLC was hired by Cisco to examine its key suppliers and the processes they used to manage inventory. UNIVIT accused Cisco employees of making defaming statements as to UNIVIT regarding its management and capabilities . The UNIVIT counter-sued Cisco for defamation and won a settlement out-of-court.
Everly Well Everly Well, a personal health testing company, sued Quest Diagnostics over "false and misleading" claims and disparagement of its services. Quest made statements to the press regarding a string of federal violations by Everlywell derived from an ongoing 2019 lawsuit. Everly Well alleged the statements were purposely designed to interfere with their business.
Harrison MUSA In Harrison v. Harrison-Getzen, the former president of a corporation filed suit against two former employees. The employees refused to sign a release from liability. So, the president filed suit. The trial court entered summary judgment for former employees, finding no basis for liability. The court of appeals reversed and remanded the case. A cause of action exists in Florida for slander per se in the type of communications to which the employees made statements. Applying the Supreme Court of Florida standards, the false statements of the employees clearly concerned a matter of a person’s business or profession. The court found that the statements implied a lack of knowledge of the subject matter and were untrue and malicious.