Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.

KENNARD, J.,

Concurring and Dissenting.—Plaintiffs, a group of cellular telephone and cellular service retailers, sued defendant Los Angeles Cellular Telephone Company. (L.A. Cellular), alleging that defendant’s practice of selling cellular telephones below cost violated the unfair competition law (Bus. & Prof. Code, § 17200 et seq.), the Unfair Practices Act (Bus. & Prof. Code, §§ 17043, 17044), and, not at issue before this court, the Cartwright Act antitrust law (Bus. & Prof. Code, § 16720 et seq.). I concur in the majority opinion to the extent it concludes that defendant’s conduct does not violate the Unfair Practices Act. I also agree that defendant’s compliance with the Unfair Practices Act does not immunize its conduct from scrutiny under the unfair competition law.

I disagree, however, with the majority’s novel and unsupported conclusion that under the unfair competition law, an “unfair . . . business act or practice” is one that threatens an “incipient violation” of “an antitrust law,” one that violates the “policy or spirit” of an antitrust law, or one that “significantly threatens or harms competition”—conduct that collectively might be described as falling within the penumbra of antitrust law. The *192 purpose of antitrust law is to prevent monopoly power or agreements restraining trade from destroying the consumer benefits provided by competition. The purpose of the legal prohibitions against unfair business acts and practices, by contrast, is to prevent deceptive conduct that injures a particular competitor. By recasting the statutory prohibition of unfair business acts and practices as an extension of antitrust law, the majority misinterprets the history and purpose of the unfair competition law. Moreover, the vagueness inherent in the majority’s formulation of its standard will magnify the uncertainty that businesses face in trying to comply with the unfair competition law.

I

Section 17200 of the Business and Professions Code, part of the unfair competition law, defines “unfair competition” as follows: “As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code [addressing various forms of false advertising].” Because here defendant’s below-cost sales are not unlawful (the trial court held they did not violate state antitrust law or the Unfair Practices Act), are not fraudulent or deceptive, and are not advertising, the issue presented is whether they are an “unfair . . . business act or practice.”

A. Common Law Unfair Competition

Unfair competition originated as a common law tort. At common law, before the enactment of any statutory prohibition against unfair competition, “unfair competition” had a stable and relatively narrow meaning that focused on business practices that harmed competitors by deceiving customers. (Dunston v. Los Angeles Van etc. Co. (1913) 165 Cal. 89, 94 [ 131 P. 115 ] [“relief in such cases really rests upon the deceit or fraud which the later comer into the business field is practicing upon the earlier comer and upon the public”].) Originally, it was the deceptive “passing off’ of one’s goods or services as those of another, commonly accomplished by appropriating the trade name of another. “The fundamental principle underlying this entire branch of the law is, that no man has the right to sell his goods as the goods of a rival trader.” (Weinstock, Lubin & Co. v. Marks (1895) 109 Cal. 529 , 539 [ 42 P. 142 ]; see also Lutz v. Western Iron & Metal Co. (1923) 190 Cal. 554, 561 [ 213 P. 962 ]; Banzhaf. Chase (1907) 150 Cal. 180, 183 [ 88 P. 704 ]; Pierce v. Guittard (1885) 68 Cal. 68, 71-72 [ 8 P. 645 ].)

*193 Even though the tort has been extended to situations other than classic “passing off,” deceptive conduct has remained at the heart of unfair competition. 1 As we said in Weinstock, Lubin & Co. v. Marks, supra, 109 Cal. 529 , 541, the principles of unfair competition “apply to all cases where fraud is practiced by one in securing the trade of a rival dealer; and these ways are as many and as various as the ingenuity of the dishonest schemer can invent.” (See also Schecter Corp. v. United States (1935) 295 U.S. 495, 531-532 [ 55 S.Ct. 837, 843-844 , 79 L.Ed. 1570 , 97 A.L.R. 974 ] [“ ‘Unfair competition,’ as known to the common law, is a limited concept. . . . Unfairness in competition has been predicated of acts which lie outside the ordinary course of business and are tainted by fraud, or coercion, or conduct otherwise prohibited by law.” (Fn. omitted.)].) For example, in American Philatelic Soc. v. Claibourne (1935) 3 Cal.2d 689 [ 46 P.2d 135 ], the defendant was a stamp dealer with a stock of a stamp rare in perforated form but common in unperforated form. The defendant’s stock was in the unperforated form; he perforated the stamps and offered them for sale to other dealers, disclosing that the perforations were unofficial but suggesting that they could be resold to collectors as genuine. Even though the defendant’s sales to other dealers were not deceptive, this court had no trouble concluding that his sales were ultimately grounded in the deception of the collectors who were the end purchasers and that this injured the plaintiffs, dealers and collectors of genuine stamps: “[T]he conduct of [defendant] in offering for sale these privately perforated stamps will inevitably result in severe pecuniary injury to the [plaintiffs], and the gaining by [defendant] of an advantage arising out of, in the final analysis, duplicity and dishonesty.” (Id. at p. 696.)

*194 B. Statutory Unfair Competition

Our Legislature first recognized unfair competition in 1933 when it amended Civil Code former section 3369 (hereafter section 3369), which had addressed the availability of injunctive relief in general. The 1933 amendment had three aspects: It authorized injunctions in cases of “unfair competition”; it authorized the Attorney General, district attorneys, and private persons to seek such injunctions; and it defined “unfair competition” as any “unfair or fraudulent business practice and unfair, untrue or misleading advertising and any act denounced by Penal Code sections 654a, 654b or 654c.” (Stats. 1933, ch. 953, § 1, p. 2482.)

In amending section 3369 in 1933, the Legislature provided statutory authorization of injunctive relief for unfair competition and broad standing to seek that remedy; there is no evidence, however, that the Legislature in addition intended to expand the meaning of unfair business practices beyond the type of deceptive practices recognized at common law.

This court concluded as much when, not long after section 3369’s amendment, it had occasion to consider the meaning of “unfair or fraudulent business practice” and concluded the term was limited to common law unfair competition. As we explained in International etc. Workers v. Landowitz (1942) 20 Cal.2d 418 [ 126 P.2d 609 ] (hereafter Landowitz): “[T]he statutory definition of ‘unfair competition’ thus incorporated in Civil Code, § 3369, is not essentially different from that which has historically furnished the basis for equity injunctions against unfair competition.” (Id. at p. 422.) We concluded that, because of the potential vagueness of the term “unfair competition” outside its traditional common law definition, section 3369 did not authorize injunctive relief against other business practices that might be termed unfair, even those which were violations of other business regulation statutes.

We said: “The phrase ‘unfair competition’ when carried beyond its traditional scope in equitable actions, however, does not have a fixed meaning in the absence of statutory definition. Courts of equity, therefore, are loath to enjoin conduct on that ground in the absence of specific authorization therefor. . . . Civil Code, section 3369, contains no broader a definition of the term ‘unfair competition’ than existed at common law and in itself furnishes no basis for an injunction against the violation of the penal ordinance [regulating competition] involved in this case.” ( Landowitz, supra, 20 Cal.2d 418, 422 , italics added.)

Subsequent decisions have continued to view the unfair competition law’s prohibition of any unfair business practice as a prohibition against deceptive *195 conduct. (See, e.g., Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267 [ 10 Cal.Rptr.2d 538 , 833 P.2d 545 ] [under the unfair competition law, “one need only show that ‘members of the public are likely to be deceived’ ”]; Schwartz v. Slenderella Systems of Calif. (1954) 43 Cal.2d 107 [ 271 P.2d 857 ]; Don Alvarado Co. v. Porganan (1962) 203 Cal.App.2d 377 [ 21 Cal.Rptr. 495 ]; People ex rel. Mosk v. National Research Co. of Cal. (1962) 201 Cal.App.2d 765, 772 [ 20 Cal.Rptr. 516 ] [“What constitutes ‘unfair competition’ or ‘unfair or fraudulent business practice’ under any given set of circumstances is a question of fact [citation], the essential test being whether the public is likely to be deceived [citation].”]; Wood v. Peffer (1942) 55 Cal.App.2d 116, 123-124 [ 130 P.2d 220 ].)

In 1963, the Legislature again amended section 3369 to add “unlawful” business practices to the list of proscribed conduct. In doing so, it expanded the definition of unfair competition with respect to conduct violating statutory prohibitions, for now any business practice that violated an independent statutory duty was an instance of unfair competition that could be enjoined even if the underlying statute did not specifically authorize injunctive relief. (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 112-113 [ 101 Cal.Rptr. 745 , 496 P.2d 817 ] [section 3369 extended to “ ‘anything that can properly be called a business practice and that at the same time is forbidden by law’ ”].) For those business practices that were not statutory violations, however, the Legislature made no change to the definition of “unfair . . . business practice,” implicitly accepting our interpretation in Landowitz, supra, 20 Cal.2d 418 . (See People v. Ledesma (1997) 16 Cal.4th 90, 100-101 [ 65 Cal.Rptr.2d 610 , 939 P.2d 1310 ].) In 1977 the Legislature reenacted, without substantive change, the unfair competition portion of section 3369 as Business and Professions Code sections 17200, 17201, 17202, 17203, and 17204. (Stats. 1977, ch. 299, § 1, p. 1202.) In 1992, the Legislature expanded the scope of the unfair competition law to include unfair business acts as well as practices', the operative language now reads in full: “As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.” (Bus. & Prof. Code, § 17200.) This change also did not alter the meaning of “unfair . . . business practice” but merely extended it to include single instances of conduct.

Thus, the term “unfair . . . business act or practice” continues to mean deceptive conduct that injures consumers and competitors. Because there is no allegation of deceptive conduct by defendant here, the trial court’s *196 judgment for defendant on plaintiffs’ unfair competition law cause of action was proper.

II

The majority nevertheless holds to the contrary that the term “unfair . . . business act or practice” does not at all encompass common law unfair competition or even deceptive conduct in general. Rather, the majority creates out of whole cloth a new and amorphous definition of unfair business act or practice: conduct that threatens an “incipient violation” of “an antitrust law,” that violates the “policy or spirit” of an antitrust law, or that “significantly threatens or harms competition.” (Maj. opn., ante, at pp. 186-187.) Because none of this conduct amounts to an actual violation of antitrust law, I shall refer to these forms of conduct as penumbral antitrust threats. The majority never identifies what body of antitrust law it supposes the Legislature intended to incorporate in section 3369: Federal antitrust law? State antitrust law? Some amalgamation of the two?

Until today, no case has held or even suggested that the unfair competition law’s prohibition of “any unfair . . . business act or practice” was a prohibition of penumbral antitrust threats, or that it was not a prohibition of deceptive conduct that harms competitors. Without citing any evidence of legislative intent, the majority insists nonetheless that its definition of unfair business practices is correct because in its view section 3369 as amended by our Legislature in 1933 was intended to “parallel” section 5 of the Federal Trade Commission Act ( 15 U.S.C. § 45 ; hereafter the FTC Act), the federal statute that created the Federal Trade Commission (hereafter FTC). (Maj. opn., ante, at p. 185.) Section 5 of the FTC Act as enacted in 1914 originally prohibited “unfair methods of competition” ( 38 Stat. 719 ). In 1938, Congress amended section 5 to include “unfair or deceptive acts or practices” in order to expand the FTC’s jurisdiction to encompass deceptive and unfair conduct that injured consumers without harming competitors. (The Wheeler-Lea Act of 1938, 52 Statutes at Large 111; see also FTC v. Sperry & Hutchinson Co. (1972) 405 U.S. 233, 244 [ 92 S.Ct. 898, 905 , 31 L.Ed.2d 170 ].) The FTC’s jurisdiction under section 5 extends both to antitrust threats to competition and to deceptive business practices that injure competitors or consumers. (FTC v. Sperry & Hutchinson Co., supra, 405 U.S. 233 , 239-246 & fn. 5 [ 92 S.Ct. 898, 903-906 ].) There is not a shred of evidence, however, that California’s section 3369 is patterned after section 5 of the FTC Act, and in Landowitz, supra, 20 Cal.2d 418 , we reached the quite different conclusion that section 3369’s prohibition of any “unfair . . . *197 business practice” was intended to incorporate common law unfair competition. 2

The majority’s reliance on this court’s statement in Barquis v. Merchants Collection Assn., supra, 7 Cal.3d 94, 110 , characterizing the unfair competition law’s prohibition of any “unlawful [or] unfair . . . business practice” and section 5 of the FTC Act as “parallel broad proscriptionfs]” is misplaced. The parallelism to which Barquis referred was the fact that section 5 of the FTC Act and our unfair competition law both protect consumers as *198 well as competitors, not that both prohibited penumbral antitrust threats. (See 7 Cal.3d at pp. 109-110.)

Nothing in Barquis v. Merchants Collection Assn., supra, 7 Cal.3d 94 , even hinted that unfair business practices, however broad a concept, were to be equated with penumbral antitrust threats. To the extent Barquis might be read to suggest that the term “unfair . . . business practice” has an amorphous meaning extending in some undefined fashion beyond deceptive conduct, that suggestion is entirely dictum, for the issue decided in that case was whether the business practice in question was unlawful, not whether it was unfair. The suggestion is also unsound. Not only is it contrary to the historical development of the unfair competition law explained above, but it is based on Barquis's misquotation of the unfair competition law. In substituting the word “deceptive” for the word “fraudulent,” Barquis suggested that unfair practices were a category distinct from deceptive practices. (Compare section 3369 [prohibiting any “unlawful, unfair or fraudulent business practice”] with Barquis, supra, at p. Ill [quoting section 3369 as prohibiting any “ ‘unlawful, unfair or deceptive business practice’ ” (italics omitted)].) 3

Moreover, the majority misunderstands the term “unfair methods of competition” in section 5 of the FTC Act to mean only penumbral antitrust threats. (See maj. opn., ante, at p. 186, fn. 11; id. at p. 187.) As interpreted by the FTC and the federal courts, that phrase covers not only the penumbral antitrust threats the majority focuses on but also actual violations of the antitrust law and in addition acts of unfair competition having nothing to do *199 with antitrust law, including passing off and other forms of common law unfair competition and consumer deception. (See, e.g., FTC v. Sperry & Hutchinson Co., supra, 405 U.S. 233, 243, 244 [ 92 S.Ct. 898, 904-905 ] [“unfair competitive practices were not limited to those likely to have anticompetitive consequences after the manner of the antitrust laws”]; Sears, Roebuck & Co. v. Federal Trade Commission (7th Cir. 1919) 258 F. 307, 311 [the first FTC enforcement action to be judicially reviewed, a case of deceptive advertising; “The commissioners, representing the government as parens patriae, are to exercise their common sense, as informed by their knowledge of the general idea of unfair trade at common law, and stop all those trade practices that have a capacity or a tendency to injure competitors directly or through deception of purchasers . . . .”]; FTC, Ann. Rep. (1935) 67-71 [Listing 27 “unfair methods of competition” prohibited by the FTC: “9. Passing off goods or articles for well and favorably known products of competitors through appropriation or simulation of such competitors’ trade names, labels, dress of goods, etc. . . .”], quoted in Handler, Unfair Competition (1936) 21 Iowa L.Rev. 175, 244-248; Bailey & Pertschuk, The Law of Deception: The Past as Prologue, supra, 33 Am. U. L.Rev. 849.)

Nor is there any other sound reason for presuming that our Legislature intended section 3369 to incorporate the antitrust portion of section 5 of the FTC Act. In amending section 3369 in 1933 to authorize injunctive relief against “[a]ny person performing or proposing to perform an act of unfair competition,” the Legislature was acting in a field already well established by the common law. There is no reason to suppose that, without any express statement, the Legislature implicitly intended to reject the common law definition of unfair competition and adopt instead antitrust law as the definition of unfair competition. The majority offers no explanation why, if the Legislature in 1933 had wished to expand the scope of the antitrust laws to reach penumbral antitrust threats, it would have chosen the roundabout method of using a term—“unfair competition”—with an established meaning independent of antitrust law and amending a Civil Code provision relating to the general availability of injunctive relief, rather than directly amending California’s antitrust law, the Cartwright Act, in terms that clearly evidenced its intent to broaden the scope of antitrust law. This is especially so if by its reference to “the antitrust laws” the majority includes federal antitrust law. It would be most implausible for the Legislature, if it intended to incorporate the entire body of federal antitrust law, the law of another sovereign, to seek to do so implicitly simply by using the term “unfair . . . business practice” without any reference to federal law. Given the absence of any evidence that the Legislature intended to vary or reject that common law understanding of unfair business practices as practices that harm competitors by deceiving *200 customers, the only reasonable conclusion is that the Legislature intended to adopt that understanding. This is the conclusion our court reached in Landowitz, supra, 20 Cal.2d 418 .

m

In addition to being unfounded, the majority’s definition will not solve the problem it identifies: the costs imposed on businesses by a vague and overbroad definition of unfair business practice. I can imagine no greater recipe for confusion and uncertainty than the majority’s penumbral antitrust threat standard. It is difficult enough for courts and businesses alike to determine whether a business practice amounts to an actual violation of the antitrust laws prohibiting restraint of trade or exclusionary monopolistic conduct. A business seeking to guide its competitive conduct by the majority’s standard will be put to the impossible task of deciding whether its conduct, even though not a violation of the antitrust laws, violates the “spirit” of the antitrust laws or is an “incipient” violation of those laws or is a threat to competition. A prominent antitrust treatise has criticized the FTC for enforcing section 5 of the FTC Act in cases of incipient antitrust violations or violations of the spirit of the antitrust laws, and it has argued that only actual violations of federal antitrust law should be actionable under section 5. (2 Areeda & Hovenkamp, Antitrust Law (1995 rev. ed.) H 307, pp. 21-28.) There is no reason or need to import the uncertainty of section 5 into California law.

Even more significantly, the majority ignores two crucial distinctions that make the standard of section 5 of the FTC Act an inappropriate standard for private civil litigation:

First, the interpretation of section 5 that the FTC has developed is an administrative standard, whose enforcement is subject to the informed discretion of an administrative agency with considerable economic expertise and regulatory experience. When questions arise as to the anticompetitive impact of a particular business practice, the FTC and its professional staff are able to investigate and analyze that practice not only for its impact on the consumers and competitors most immediately affected by the practice but for its potential to disrupt competition in the economy as a whole. The FTC can then use this broad base of data to exercise its discretion in determining whether the practice in question truly threatens competition to a degree that justifies the costs of suppressing the practice. By contrast, a court has no similar resources or competence for deciding wide-ranging questions of economic policy. “Unlike the courts, the Commission is not one or a few *201 judges acting solely on a record made by plaintiff and defendant. It is an elaborate institution of many lawyers, economists, researchers, and other professionals. Its facilities for gathering facts about a particular respondent and a segment of the economy are vastly superior to those of a court. Its specialized personnel provide a capacity for in-depth probes far beyond that of the courts.” (2 Areeda & Hovenkamp, Antitrust Law, supra, H 307, p. 26.) These justifications for having an administrative agency search out incipient antitrust violations and threats to competition before they have ripened into actual antitrust violations do not support permitting private plaintiffs to do so in a judicial forum.

Second, if the FTC does find a business’s practice to be an incipient antitrust violation or a threat to competition and decides that it should be suppressed, it is limited to awarding only prospective relief in the form of a “cease-and-desist order” instructing the business to modify its future conduct. ( 15 U.S.C. § 45 .) A business subject to an FTC cease-and-desist order does not face any civil or criminal penalties or monetary liability for its past conduct. By contrast, a defendant in an unfair competition law action may face massive restitutionary liability to the plaintiff and to others similarly situated. The majority proposes to use the FTC’s section 5 standard to impose retrospective monetary liability for conduct that does not violate any antitrust law but that in the opinion of one judge may, if continued, threaten to violate an antitrust law in the future. This grossly distorts the purpose of that standard, which was to terminate present conduct not in violation of any law that, if unchecked, would ripen into unlawful anticompetitive conduct, not to impose liability for past lawful conduct.

IV

Even if the majority were correct that an “unfair . . . business act or practice” is properly defined as one that threatens an “incipient violation” of the state antitrust laws, one that violates the “policy or spirit” of the state antitrust laws, or one that “significantly threatens or harms competition,” there is no basis for a retrial here. A defendant’s motion for judgment in a bench trial occurs at the close of the plaintiff’s case. (Code Civ. Proc., § 631.8.) Its premise is that, even without the presentation of any opposing evidence by the defendant, the plaintiff’s evidence is insufficient to prove its claims by a preponderance of the evidence.

Here, to defeat defendant’s motion for judgment, it was plaintiffs’ burden to present all their evidence on their unfair competition cause of action and to prove by a preponderance of the evidence that defendant’s price cutting *202 was unfair competition. In addition, both as part of its Unfair Practices Act cause of action and as part of its Cartwright Act antitrust action, plaintiffs presented evidence attempting to prove that defendant’s price cutting had injured competition. They failed to prove this.

A plaintiff attempting to show that price cutting is an incipient violation of the antitrust laws, a violation of their policy or spirit, or a substantial threat or harm to competition faces a heavy burden. Ordinarily, price cutting is the essence of competition, not a substantial threat to it. Prices are the primary medium through which business entities compete. “ ‘Low prices benefit consumers regardless of how those prices are set . . . .’” (Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. (1993) 509 U.S. 209, 223 [ 113 S.Ct. 2578, 2588 , 125 L.Ed.2d 168 ].) Here, the consumer is interested only in the total price of a telephone plus service. As plaintiffs admit in their brief: “What matters to the consumer is the total cost of a telephone and service . . . .” It is not disputed that defendant’s price discounting has reduced the total cost of a telephone and service, making the cellular telephone and cellular service more affordable to greater numbers of consumers, thereby increasing consumer welfáre.

Price discounting is only a threat to competition in very narrow circumstances, when it becomes “predatory.” In predatory pricing, a firm “invests” in below-cost pricing to drive its competitors out of the market, with the expectation that it will then be able to raise its prices to supracompetitive levels and earn monopoly profits to recoup its investment in below-cost sales. (Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., supra, 509 U.S. 209, 224 [ 113 S.Ct. 2578, 2588-2589 ]; 3 Areeda & Turner, Antitrust Law (1978) Ƣ 711b, p. 151 [“predation in any meaningful sense cannot exist unless there is a temporary sacrifice of net revenues in the expectation of greater future gains”].) Predatory pricing only makes economic sense to the predator if it has a substantial expectation of recouping its costs by raising its prices to “supracompetitive” levels once competitors are eliminated. (Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., supra, 509 U.S. 209, 224 [ 113 S.Ct. 2578, 2588-2589 ]; 3 Areeda & Turner, Antitrust Law, supra, Ƣ 711b, p. 151.) “Without [recoupment], [below-cost] pricing produces lower aggregate prices in the market, and consumer welfare is enhanced.” (Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., supra, 509 U.S. at p. 224 [ 113 S.Ct. at p. 2588 ].)

For supracompetitive pricing and recoupment to occur, however, the predator must acquire not only market share but market power by creating conditions that would prevent new competitors from reentering the market *203 once the predator raises prices to supracompetitive levels. (Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., supra, 509 U.S. at pp. 225-226 [113 S.Ct. at pp. 2589-2590]; Matsushita Elec. Industrial Co. v. Zenith Radio (1986) 475 U.S. 574, 590-591 [ 106 S.Ct. 1348, 1358 , 89 L.Ed.2d 538 ] [“In order to recoup their losses, [predators] must obtain enough market power to set higher than competitive prices, and then must sustain those prices long enough to earn in excess profits what they earlier gave up in below-cost prices.”]; 3 Areeda & Turner, Antitrust Law, supra, H 711b, pp. 151-152.) Because such barriers to entry rarely exist, “proven cases of predatory pricing have been extremely rare.” (3 Areeda & Turner, Antitrust Law, supra, H 711b, p. 152.)

As the trial court here found, defendant L.A. Cellular’s purpose in making below-cost sales of cellular telephones was not to drive plaintiffs out of the telephone sales business or even to divert business from them but to compete with AirTouch Cellular (the other cellular service provider in Los Angeles) for customers in the cellular service market. Thus, defendant did not have a predatory intent to drive competitors out of business.

Nor did defendant’s conduct have a predatory effect. Plaintiffs presented no evidence that the exit of these plaintiffs, or all independent telephone hardware sellers, from the cellular telephone market would injure competition by permitting defendant to raise its prices at all, much less raise them to supracompetitive levels. Nor did plaintiffs present evidence of substantial barriers to entry that would preclude others such as consumer electronics retailers from entering the cellular telephone market should defendant raise prices supracompetitively. “[Unsuccessful predation is in general a boon to consumers. [^] That below-cost pricing may impose painful losses on its target is of no moment to the antitrust laws if competition is not injured: It is axiomatic that the antitrust laws were passed for ‘the protection of competition, not competitors.’ ” (Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., supra, 509 U.S. 209, 224 [ 113 S.Ct. 2578, 2588 ], original italics.)

The majority speculates nonetheless that plaintiffs might be able to show that defendant harmed competition by its price discounting. (Maj. opn., ante, at pp. 187-188.) It rests this theory on the premise that defendant is a duopolist in the cellular service market and that plaintiffs are legally precluded from competing with defendant by selling phones below cost and offsetting those losses with profits from cellular service sales.

The majority’s premise is false, as the trial record created by plaintiffs shows. Plaintiffs’ economics expert testified that defendant L.A. Cellular *204 and its service competitor AirTouch Cellular are required by the California Public Utilities Commission to wholesale cellular airtime to independent resellers at 77 percent of retail cost. Thus, they are not a true duopoly, and others compete with them for the retail sale of cellular service. Some of the plaintiffs are retailers of cellular service, and it appears the rest could be. Plaintiffs offered no evidence that they could not have competed with defendant by selling telephones for similar below-cost prices and recouping their losses through profits on accompanying sales of service. If plaintiffs’ argument is that the harm to competition rests on defendant’s cross-subsidization of telephone sales by service profits that plaintiffs could not have earned, they bore, but did not meet, the burden of showing they could not have earned similar profits.

If on remand the trial court enjoins defendant L.A. Cellular under the unfair competition law from making below-cost sales of its cellular telephones, defendant will then undoubtedly seek to enjoin its service competitor AirTouch Cellular from making similar below-cost telephone sales. The result will be judicially imposed price fixing of minimum retail prices, establishing the sort of retail price maintenance that the antitrust laws condemn when resulting from agreements among market participants. Price fixing by litigation will replace price reduction by competition, and the ultimate loser will be the consuming public.

The majority’s theory will also subject businesses owning patents and copyrights to unfair competition liability in many instances. Like defendant L.A. Cellular’s cellular service license, a patent or copyright for a successful product is a government-granted franchise from which competitors are excluded. A business using revenue from its patents or copyrights to fund operations in another line of business is no different from defendant’s use of its cellular service revenues to subsidize sales of cellular telephones. In doing so, the patent or copyright owner would be subsidizing that other line of business with patent or copyright revenue that its competitors in that line of business are legally precluded from earning, just as a cellular service licensee making below-cost telephone sales subsidizes those sales with cellular service profits that its competitors are legally precluded from earning. Thus, in these circumstances patent and copyright owners too will be subject to liability under the majority’s theory.

If cross-subsidization between the regulated market for cellular service and the unregulated market for cellular telephones is a problem, there is no need to distort the unfair competition law to address it. There are both state and federal regulatory bodies charged with protecting consumer welfare *205 against injurious practices in the cellular marketplace (the Federal Communications Commission and the California Public Utilities Commission). They are far better equipped than a court of equity to determine whether cross-subsidization is causing consumer injury and, if so, what remedy should be imposed. How would a court determine the proper minimum resale price for cellular telephones? The cost of the telephones to defendant? That cost plus some fixed markup? Or the marginal cost of the telephones to defendant plus all the other expenses of selling the telephones? Or the average variable cost? Even telephone sales by a cellular carrier at or above the cost of the telephones themselves may be “subsidized” by service revenues if those revenues are used to pay for the other expenses incurred in making telephone sales (e.g., a newspaper ad by defendant for cellular service may also advertise a cellular phone; subsidization is occurring if these advertising costs, or any overhead or other indirect sales costs, are paid for by cellular service revenue). How would a court take these subsidies into account? The majority provides no answer to these difficult questions.

In sum, I doubt whether price discounting that is not predatory, is not done with the intent to injure competition, does not violate the Unfair Practices Act or other statutes, is not fraudulent, and increases consumer welfare by making more goods or services available to more people at lower prices can ever be an unfair business practice, even under the majority’s standard. It certainly is not on the record that plaintiffs have presented. 4

Conclusion

The majority’s amorphous definition of an “unfair . . . business act or practice” as one that threatens an “incipient violation” of the antitrust laws, one that violates the “policy or spirit” of the antitrust laws, or one that “significantly threatens competition” is at once too narrow and too broad. It is too narrow to the extent that it reduces the prohibition against unfair business practices to nothing more than an appendage of antitrust law. Doing so ignores the distinct history and purpose of the unfair competition law’s prohibition of unfair business practices, which was to protect consumers and individual competitors against injuries caused by consumer deception, not to protect or advance competition. Antitrust law, by contrast, is not concerned with protecting individual competitors, nor with preventing acts of deception, but rather with the threats to competition and consumer welfare posed by monopoly power and agreements restraining trade. There is no evidence our Legislature intended the unfair competition law to be an antitrust law.

*206 The majority’s definition is too broad to the extent that it encompasses not violations of antitrust law but what might be called “antitrust lite”: such vague and dubious metaphysical entities as incipient violations, violations of policies and spirits, and anything that might be characterized as a significant threat or harm to competition. That definition will provide no certainty to businesses seeking to know what conduct the unfair competition law prohibits, given the inherent vagueness of the majority’s concepts of an “incipient violation” of an antitrust law, violations of the “policy or spirit” of an antitrust law, and “significant” threats or harms to competition.

I would instead adhere to our historical understanding that the core of an unfair business practice is conduct that deceives consumers. As there is no allegation or evidence of deceptive conduct by defendant, plaintiffs’ unfair competition claim fails.

Even if I were to apply the majority’s definition here, however, I would conclude that plaintiffs have failed to show that defendant’s price cutting is predatory and harmful to competition. The purpose of competition is to drive prices down. Although the unfair competition law protects competitors, even under the majority’s definition it does not protect competitors at the expense of competition. That is, the unfair competition law does not authorize injunctive relief that harms consumer welfare by setting minimum prices that increase the prices consumers pay.

To claim, as the majority does, that the unfair competition law is an antitrust law aimed at maximizing consumer welfare and yet conclude, as the majority also does, that on this record a court could determine that consumer welfare would be enhanced by raising the prices of cellular telephones is an exercise in contradiction. Because price discounting is the primary medium of competition, to prohibit it here would elevate the interests of plaintiffs far above those of consumers. Competitors that sell below-cost phones may hurt plaintiffs, but they help consumers by making cellular telephones more affordable.

For the reasons discussed above, I dissent from the majority’s analysis of the meaning of unfair business practice under the unfair competition law, and I would affirm the trial court’s judgment in favor of defendant L.A. Cellular.

In the prestatutory period, the one use of the term “unfair competition” in the common law that developed outside the area of consumer deception was trade secret misappropriation. (Scavengers’ P. Assn. v. Serv-U-Garbage Co. (1933) 218 Cal. 568 [ 24 P.2d 489 ]; Pasadena Ice Co. v. Reeder (1929) 206 Cal. 697, 703 [ 275 P. 944 , 276 P. 995 ]; New Method Laundry Co. v. MacCann (1916) 174 Cal. 26, 30 [ 161 P. 990 ].) Economically, however, there is a strong similarity between the deceptive misappropriation of a trade name and the form of trade secret misappropriation most common in this court’s cases of that period, namely, use of a competitor’s customer lists. This becomes apparent when one considers that for a transaction to occur it is not enough for a business to offer a desirable product at a competitive price. Every business also faces the problem, and expense, of searching out customers to inform them of its product and to persuade them to purchase it. In a trade name misappropriation case, the plaintiff has done so by incurring the cost of establishing a valuable trade name that serves as an efficient vehicle for disseminating information about its product to its customers. In a customer list misappropriation case, the plaintiff has done so by identifying individual customers and their needs, incurring the cost of acquiring that information. In both trade name and customer list misappropriation cases, the defendant is able to reduce its search costs incurred in obtaining new customers by free-riding on the investments of the plaintiff in searching out customers. It may have been an intuitive recognition of this similarity that led courts of the prestatutory period to extend the rubric of unfair competition to trade secret misappropriation.

In looking to section 5 of the FTC Act, the majority may have been misled by this court’s previous statement that the unfair competition law had “its origin as one of the so-called ‘little FTC Acts’ of the 1930’s, enacted by many states in the wake of amendments to the Federal Trade Commission Act [i.e., the Wheeler-Lea Act of 1938, 52 Statutes at Large 111, which added the phrase ‘unfair or deceptive acts or practices’ to the ‘unfair methods of competition’ prohibited by section 5 of the FTC Act] enlarging the commission’s regulatory jurisdiction to include unfair business practices that harmed, not merely the interests of business competitors, but of the general public as well.” (Rubin v. Green (1993) 4 Cal.4th 1187, 1200 [ 17 Cal.Rptr.2d 828 , 847 P.2d 1044 ].) Contrary to the assertion in Rubin v. Green, supra, 4 Cal.4th 1187, 1200 , there were no “ ‘little FTC Acts’ of the 1930’s.” The term “little FTC Act” instead denotes a group of state statutes enacted in the 1960’s and 1970’s; these statutes, promoted by the FTC among others, were meant to complement the deceptive practices jurisdiction of the FTC, not its antitrust jurisdiction, and they address deceptive trade practices, not antitrust threats to competition. (See, e.g., Karns, State Regulation of Deceptive Trade Practices Under “Little FTC Acts": Should Federal Standards Control? (1990) 94 Dick. L.Rev. 373, 373-376; Bailey & Pertschuk, The Law of Deception: The Past as Prologue (1984) 33 Am. U. L.Rev. 849, 861 fn. 63 [authored by two FTC commissioners]; Comment, Consumer Protection: The Practical Effectiveness of State Deceptive Trade Practices Legislation (1984) 59 Tul. L.Rev. 427, 428; Note, Toward Greater Equality in Business Transactions: A Proposal to Extend the Little FTC Acts to Small Businesses (1983) 96 Harv. L.Rev. 1621, 1621-1624; Lovett, State Deceptive Trade Practice Legislation (1972) 46 Tul. L.Rev. 724, 730, fn. 14.) California has such a “little FTC Act” incorporating verbatim the language of section 5 of the FTC Act, but it is not Business and Professions Code section 17200 et seq., the unfair competition law, and it does not prohibit penumbral antitrust threats. Rather, it is Civil Code sections 1750-1784, the Consumers Legal Remedies Act, which was enacted in 1970. The act lists certain prohibited “unfair methods of competition and unfair or deceptive acts or practices” (the language of section 5 of the FTC Act), beginning with “passing off,” and it provides various remedies to injured consumers. (Civ. Code, § 1770; see also Reed, Legislating for the Consumer: An Insider’s Analysis of the Consumers Legal Remedies Act (1971) 2 Pacific L.J. 1.) In addition to misunderstanding the term “little FTC Act,” Rubin v. Green, supra, 4 Cal.4th 1187, 1200, mixes up its chronology; because section 3369 was enacted in 1933, five years before the 1938 amendment expanding the FTC’s jurisdiction, it obviously was not enacted in the “wake” of that amendment. The sole authority Rubin cites on this point, Bank of the West v. Superior Court, supra, 2 Cal.4th 1254, 1264 , is equally confused: “A host of so-called ‘little FTC Acts’ followed [the 1938 amendment of the FTC Act] including California’s Unfair Business Practices Act. (§ 17200 et seq.; see also Civ. Code, former § 3369.)” It is worth noting that in each of these cases the question of the historical origins of the unfair competition law was not at issue and was not dispositive of any issue. Each decision discussed the point only in passing by way of background.

The majority also misunderstands the significance of Barquis’s statement that “section 3369 indicates that ‘unfair competition’ as used in the section cannot be equated with the common law definition of ‘unfair competition,’ but instead specifies that, for the purposes of its provisions, unfair competition ‘shall mean and include unlawful, unfair or fraudulent business practice ....’” (Barquis v. Merchants Collection Assn., supra, 7 Cal.3d at p. 109, italics original; see maj. opn., ante, at p. 181, fn. 9.) Our point was that the unfair competition law expanded beyond the limits of common law unfair competition along two dimensions: First, because the unfair competition law provided relief for injury to consumers even absent any showing of injury to a competitor, it “extended to the entire consuming public the protection once afforded only to business competitors.” (Barquis v. Merchants Collection Assn., supra, 7 Cal.3d at p. 109 ; see also id. at p. 110 [“the courts, in interpreting the section, have long declared that the provision is at least as equally directed toward ‘the right of the public to protection from fraud and deceit[,]’ as toward the preservation of fair business competition” (italics original)].) Second, because the unfair competition law included unlawful as well as unfair business practices, it prohibited a broader range of conduct than did common law unfair competition. (Id. at pp. 112-113.) Specifically, the unfair competition law prohibited not only the deceptive conduct that was an “unfair . . . business practice” but also, as an “unlawful . . . business practice,” “ ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ” (Id. at p. 113.) Nothing in Barquis suggested, however, that the term “unfair . . . business practice” meant penumbral antitrust threats, or that it did not mean deceptive conduct.

I note that the FTC has taken no reported action anywhere in the United States to oppose the below-cost distribution of cellular telephones by cellular service providers. Apparently, unlike the majority, it sees no significant threat to competition from this widespread practice.