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I've heard rumors that, if a company finds you suspicious or costly as a customer, their support agents might deliberately give you the runaround until you stop trying to do business with them.

That does not seem to be illegal in and of itself. But are there limits on how they are allowed to do this? For example, if you try to make an online purchase, and the company's system blocks it because the transaction has too high a chance of being fraudulent (new account, new payment method, not coming from your home state, etc.), and then you call in to support to find out what went wrong, they don't have to explain themselves. But can they lie to you and claim that some other particular problem was the cause of your rejected transaction? Or would that be fraud?

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    Nobody is obliged to trade with you, and lying as to why isn't illegal. As long as they aren't discriminating unlawfully against you by religion, race, etc. How could it be fraud? They are not obtaining anything from you at all, let alone fraudulently. Dec 23, 2023 at 23:37
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    @WeatherVane "Nobody is obliged to trade with you" is strongly dependent on the jurisdiction. Several countries have laws that explicitly say "if you're publicly selling an item or service, then you cannot refuse to serve a customer".
    – Stef
    Dec 24, 2023 at 12:09
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    @WeatherVane the question more or less presupposes that the company is within its rights to refuse doing business with the customer. The question is whether lying about their reason for refusing to do business with the customer is illegal. Fraud is under discussion because dishonesty is an element of fraud. If other elements are absent, it could still be illegal for some other reason.
    – phoog
    Dec 24, 2023 at 13:06
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    In my experience with these types of fraud signaling systems, the employees neither know nor care the actual cause; the system is rarely set up to supply it and theoretically, telling the customer could help them evade the system in the future if they really are fraudulent. What you tend to get instead is a canned reply about what might have been the cause, which neither is, nor purports to be, necessarily accurate in that specific case.
    – Cadence
    Dec 24, 2023 at 20:15
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    @TylerDurden For instance France has refus de vente (literally "refusal of sale"). There is kind of a shortlist of circumstances that allow you to refuse selling, and if you can't justify your refusal by a bulletpoint in that shortlist then you're pretty much obligated to sell. Note that "refus de vente" is the most basic offense; if in addition there is evidence of discrimination or something else, then it becomes a more serious offense.
    – Stef
    Dec 25, 2023 at 18:16

3 Answers 3

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Can a company lie to a person in the course of a business relationship?

It is possible for a company lie to a person in a business relationship.

The consequences for the business for doing so, if caught, vary and can be quite fact specific (different kinds of statements in different contexts can be subject to different rules and there is no one general rule) and quite jurisdiction specific (i.e. it can depend upon which state or locality this happens in).

Outside the fact pattern of the question, for example, it would be perfectly legal for a business employee in a business transaction to lie and say that you are good looking, or smart, or funny, or that they enjoy spending time working with you, or that their business was located in Mongolia when you were sitting in their office in Chicago.

I've heard rumors that, if a company finds you suspicious or costly as a customer, their support agents might deliberately give you the runaround until you stop trying to do business with them.

This is true.

That does not seem to be illegal in and of itself. But are there limits on how they are allowed to do this? For example, if you try to make an online purchase, and the company's system blocks it because the transaction has too high a chance of being fraudulent (new account, new payment method, not coming from your home state, etc.), and then you call in to support to find out what went wrong, they don't have to explain themselves.

But can they lie to you and claim that some other particular problem was the cause of your rejected transaction? Or would that be fraud?

It is possible for them to lie to you. This often wouldn't meet the legal definition of fraud, although it might sometimes in particular sets of facts. There could also be other legal consequences for the business for a misstatement like this one.

Civil Fraud

To be actionable in a civil lawsuit for common law fraud it is not enough that the person sued makes a false statement regarding a presently existing fact, as the business in your fact pattern does.

In addition:

  • The false statement must be about a material fact. Whether the reason that you were denied service is material or not is a close call, when you would be denied service anyway.

  • The person making the statement must have intended that you believe that the statement is true. This is probably met in your fact pattern.

  • The person hearing the statement must have actually relied upon the fact being true. This could be hard to establish. What would the customer have done in differently had they not believed that the fact was true?

  • The person hearing the statement must have been justified in believing what the customer was told. This is probably met in your fact pattern.

  • The person hearing the statement must have suffered economic harm as a result of their reliance on the false statement. Again, this would be hard to established.

Criminal Fraud Prosecutions

Some jurisdictions also have criminal fraud statutes, enforced in the discretion of a prosecutor, which dispense with the reliance and damages elements of a civil lawsuit for fraud. Even then, however, there is a materiality element which somewhat makes up for the lack of reliance and damages elements.

A Key Fact That Isn't Available Re Materiality and Reliance

In the question's fact pattern, one of the key issues would be whether the false reason for rejecting your transaction (if there was another legally justifiable reason) prevented the customer, for example, from accessing the services from another vendor because the customer might end up thinking it was futile to do so.

Likewise, it would matter if the customer spent money to remedy the false problem you identified (e.g., paying for a software upgrade that wasn't actually the problem).

Deceptive Trade Practices

Some jurisdictions have consumer protection statutes that punish misleading conduct that would not constitute fraud at common law, or that would be harder to prove fraudulent at common law. These offenses are often called "deceptive trade practices" and vary quite a bit from jurisdiction to jurisdiction, and also vary from being quite vague to being very specific (e.g. "not representing that a hearing aid has a rating of more than 10dB than it actually does").

In California, many kinds of deceptive advertising can be enforced with class action lawsuits without the need to show a specific instance of economic harm, because statutory damages can be awarded.

Legal v. Illegal Discrimination

Often the reason that a business doesn't want to do business with someone could arguably be either a legal one (e.g. a poor credit score) or an illegal one (e.g. race). Lying about the true reason for rejecting a transaction would make the business extremely vulnerable to the inference in a discrimination trial that it gave a false reason to cover up an illegal reason, rather than a legal reason, for rejecting a transaction.

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No

It is unlawful to engage in “deceptive or misleading conduct in trade or commerce” - knowingly telling an untruth (i.e. lying) is both deceptive and misleading.

Advertising puffery (“whiter than white”, or “best pies in the world”) and other statements that while untrue would not mislead or deceive a reasonable person don’t count.

Outside trade or commerce - personal relationships, politics etc. - you are free to mislead or deceive as much as you can get away with.

So, if your transaction is blocked because they suspect fraud, they don’t have to tell you that (although, why wouldn’t they?), but they can’t tell you something misleading or deceptive.

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  • "The sky is green" is a lie, but not deceptive or misleading.
    – Trish
    Dec 24, 2023 at 11:41
  • @Trish that depends on how you define "lie." I would argue that someone who says "the sky is green" in a context where it is not deceptive or misleading is not lying and the statement (in that context) therefore is not a lie.
    – phoog
    Dec 24, 2023 at 13:09
  • A reason why they wouldn't tell you (aside from the simple burden of keeping that information if they have a lot of customers) is that it may give a real fraudster an idea how to refine their approach.
    – Cadence
    Dec 27, 2023 at 9:21
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Can a company lie to a person in the course of a business relationship?

No because there was, is, and will be insufficient evidence to the contrary.

Insufficient evidence to the contrary, such as...

  1. All individuals (from a compatibilist perspective) completely tell the truth without any ability to hide anything, such as via libertarian free will.
  2. That something is obscured from viewing via analytical methods is different from a lie being observed.

Note: I don't think individuals actually exist but maybe from a quantum mechanical perspective they do...

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    In the law, many things can proven up to the requisite level of intent by circumstantial evidence, without a direct confession. The philosophical or natural philosophy gloss that you provide is not recognized for purposes of legal matters.
    – ohwilleke
    Dec 26, 2023 at 23:35
  • And yet I'm not persuaded by your argument. Also, it seems to be common rhetoric to suggest improvements for answers rather than criticize them. Please do such. Dec 28, 2023 at 17:32

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