Unfair competition and restrictive employment covenants are two concerns top of mind for dealers these days, according to Greg Goldberg, who serves as general counsel for the nearly 500-member Business Technology Association (BTA).
“One topic that keeps coming up is unfair competition,” Goldberg shared. “The scenario goes like this: A sales rep from Dealer A spreads false information about Dealer B.” They might say that Dealer B is going out of business, for example, that Dealer B’s customers are leaving in droves, or that Dealer B just lost its top technician.
“Dealer B finds out from a customer—often in writing—and writes to me to put a stop to it,” Goldberg continued. “The legal issue is defamation. If Dealer A’s rep is spreading false information intentionally, and it harms Dealer B’s reputation, there could be serious repercussions.” Often in such examples, both Dealer A and Dealer B are members of BTA, so Goldberg is only willing to get involved as a neutral party.
“Oddly enough, there is an AI component to this,” he pointed out. “When I’ve spoken with business owners, some reps claim the defamatory emails were generated by AI, as if that’s an excuse. It isn’t.”
Speaking of AI technology, we asked Goldberg about legal ramifications surrounding artificial intelligence. “Right now, there is no comprehensive federal law governing the use of AI. There are, however, federal agencies policing misuse of AI—the FTC regulates AI to prevent unfair business practices; the EEOC enforces anti-discrimination; the FCC focuses on telecommunications, such as robocalls and caller ID spoofing; and the SEC monitors AI-related securities fraud,” he stated. “Nevertheless, in the absence of federal laws, AI regulation is currently left to the states, which effectively means there are 50 different sets of rules.
“California, where I live, has more than 20 different AI laws on the books,” noted Goldberg. “Other states have none. Colorado has the first comprehensive AI law. There are, at this point, too many ramifications to count. There is also an endless supply of information going into large language models (LLMs) that is, for all intents and purposes, irretrievable.
The point, for BTA members and for all office technology dealers, is that AI intersects with law in profound ways, “many of which we are not yet aware of,” Goldberg concluded. He warns that salespeople feeding confidential information, such as customer lists, into LLMs “is a huge risk,” while adding three more recent AI examples:
- S. v. Heppner – The U.S. District Court for the Southern District of New York has held (consistent with many other courts) that information provided to an LLM by a party in a case is not protected by attorney-client privilege or the work product doctrine. (This will be the subject of an upcoming column.)
- AI-powered pricing algorithms are under scrutiny from federal agencies (i.e., DOJ & FTC) to prevent anticompetitive behavior, such as price fixing.
- Some jurisdictions are enforcing contracts formed by AI—specifically, price quotes generated by AI.
HR may call, warns the BTA
Another evergreen topic, he observed, is employment restrictive covenants (i.e., non-compete, non-solicitation, non-disclosure agreements). Goldberg often receives copies of cease-and-desist letters from dealers that have hired sales reps or techs who lied when asked if they were subject to non-compete/non-solicitation.
We also asked about human-resource laws having to do with hiring or/and compliance/printing security issues. Data security and governance are increasingly common subjects for BTA’s Goldberg, and he shared one particularly interesting anecdote. “I worked on a case where a technician for a managed IT provider was assigned to support a law firm,” he recounted. “It turned out the law firm was representing his soon-to-be ex-wife in their divorce, and the technician used his access to review emails between his wife and her attorneys. The legal question was whether the incident was characterized as a data breach. The case was ultimately resolved, but it was an important reminder to maintain robust disclosure policies for employees whenever conflicts of interest arise.”
A tense subject that seems to be resurfacing is direct sales competing with resellers, Goldberg said. In some cases, OEM direct-selling organizations appear to be competing directly with authorized dealers in the same market territories. “But I am also seeing this occur with smaller/specialty manufacturers,” he noted. “The legal issues are similar to employment restrictive covenants—meaning, non-solicitation of customers and non-disclosure of confidential information. It’s a jungle out there, and competition is fierce.”
Learn more about BTA.
