Existing law generally regulates false advertising and makes it a crime for a person or a firm, corporation, or association, or any employee thereof, to engage in specified false or misleading advertising practices. Also, existing unfair competition laws make various unfair competition practices unlawful, including any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising.

Until the Governor signed AB 1366 on October 10, 2023, the Attorney General, was authorized to obtain specific relief, however, monetary recovery from a person who engages or proposes to engage in unfair competition was limited to a civil penalty of not more than $2,500, per violation, that could be assessed and recovered in an action brought by certain public officials, including the Attorney General.

AB 1366 now authorizes in an action brought by the Attorney General under specified false advertising and unfair competition laws, to obtain an award of disgorgement, in addition to all other remedies provided by law. The funds recovered by the Attorney General are to be deposited into the Victims of Consumer Fraud Restitution Fund, which AB 1366 establishes in the State Treasury. The funds, upon appropriation by the Legislature, may be made available to the Attorney General to provide restitution to victims of acts or practices for which consumer restitution has been ordered but not paid in an action brought by the Attorney General.

Disgorgement is a potent new remedy that will be wielded by the State to enforce false and misleading advertising and unfair business practices laws. To ensure your advertising is neither false nor misleading, and that your contracts and business tactics do not give rise to claims of unfair business practices, you may want to call your business attorney, and get a legal audit to determine your exposure and actions you can take to mitigate it.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.