Let’s Sue!

One thing that is extremely rare in the broadband industry is lawsuits between ISPs concerning unfair trade practices. Big ISPs bully and compete unfairly against small ISPs all of the time, and yet you don’t hear of many cases where a small ISP sues the big ISP.

There are several reasons for this. One is simple to understand – the big ISPs have a flock of in-house lawyers who can overwhelm anybody who sues them. Little ISPs don’t generally have the deep pockets needed to last through a long, protracted lawsuit.

But the harder reason to understand is that the law is basically not on the side of the little guy in this kind of lawsuit. There are a series of laws associated with unfair competition. However, these laws are specific about the kinds of behaviors that would enable a suit based upon the claim of unfair competition. Unfair competition laws mostly have to do with practices like trademark infringement or selling counterfeit products. You can sue another company if they violate a non-compete clause or break a contract between the two parties. You can sue a competitor who steals trade secrets. A small ISP could sue a bigger ISP for trade libel/slander if the big ISP advertised in a way that ruins or harms the smaller company’s reputation.

Even if a competitor can prove these kinds of bad behavior, they have a secondary burden of proving that they suffered monetary harm from the behavior of their competitor. It’s incredibly hard to quantify things like sales never made, and so proving harm is difficult unless a big ISP were to somehow drive somebody completely out of business. This did occur a few times in the days when the big telcos purposefully tried to squash dial-up ISPs, but anything short of that makes for hard proof.

The fact is that ISPs don’t engage in the kind of behaviors that these laws are designed to prohibit. No small ISP ever tried to peddle their own broadband as coming from AT&T or Comcast. No small ISPs ever pretended to be a larger ISP to customers. The very idea of an ISP doing these sorts of things is hilarious to contemplate.

Interestingly, big ISPs make quiet legal threats against small ISPs all of the time. I’ve had many clients who got a letter from the legal department of a big ISP telling them to cease false advertising against the big ISP. This normally comes from advertising that says that the small ISP has faster broadband, a higher quality connection on fiber, or some claim that distinguishes the small company broadband from the big ISP products.

Most of my clients who get such letters back off on the tone of their advertising. They are cowed from the threat of an expensive legal fight, even when there doesn’t seem to be anything untruthful in their advertising. However, I’ve had a few who ignored such warnings, and I can’t recall that the big ISPs ever took any further action. I had one feisty client who sent back a letter and said he invited a jury trial to debate in public who had the better broadband product.

Big ISPs attack each other all of the time over the issue of false advertising. They constantly challenge the ads of competitors, who are often forced to change untrue claims. However, this isn’t done in the courts. The big ISPs have voluntarily joined the National Advertising Division (NAD), which arbitrates disputes between large companies. A lot of the largest corporations have agreed to this process because they realize that voluntary arbitration is a lot less expensive than actual lawsuits. ISPs almost always comply with recommendations made by the NAD.

While the idea of a small ISP taking a big ISP to court to win a big settlement sounds appealing, the reality of winning such a suit is remote. The big guys have monopoly market power, and small ISPs have to accept that as part of competing against them.