Unfair competition

Acts of unfair competition in the Polish legal system

Pursuant to the general clause contained in article 3 sec. 1 of the Polish Act on combating unfair competition, an act of unfair competition is an act contrary to the law or decency if it threatens or jeopardizes the interest of another entrepreneur or customer.

In addition, the law points to separate types of acts which are regarded as a violation of the rules of fair competition. However, it is not an exhaustive regulation for also other acts may be considered a tort if they meet the conditions referred to above.

Examples of acts of unfair competition:

Misleading designation of a company

Article 5 of the Act on combating unfair competition prohibits to designate a company in a way that may mislead a customer by using company name, brand, emblem, abbreviation or another characteristic sign previously used to designate another company.

As stated by the Supreme Court, “the use of even one of the elements of a company designation may lead to an act of unfair competition since it may be a sufficient condition for misleading customers” (cf judgment of the SC of 23 March 2005, in case No. I CK 621/04).

Product marking

In the light of regulations on combating unfair competition, an unlawful act may also be unsuitable marking of products which mislead as to origin thereof, quantity, quality, make, usefulness, applicability, repair, maintenance as well as any other essential feature (article 7 of the Act).

It is also unlawful to falsely or fraudulently provide goods with geographic labels or protected regional names if special features or properties of a product are associated with a given area or place from which it originates.

In this respect, the Polish Act is quite restrictive and prohibits marketing such products even with added “sort”, “type” or “method”.

Disclosure of a trade secret

A trade secret is the information which meets the following conditions:

• it refers to technical, technological, organizational issues of a company or other issues if these are of economic value;

• it has not fallen into the public domain;

• an entrepreneur has taken necessary action to maintain confidentiality thereof.

An act of unfair competition may be communication as well as disclosure, use of the aforementioned information in someone’s own activity and obtaining it from an unauthorized person. Such conduct must threaten or jeopardize the interest of an entrepreneur.

The obligation to keep a trade secret applies also to employees employed with a given employer under an employment contract or other legal relationship. They may bear responsibility for an act of unfair competition within 3 years after finishing work with an employer.

Imitation of products

Within the meaning of article 13 of the Act on combating unfair competition, an act of unfair competition is imitation of a finished product consisting in copying by technical means of reproduction the appearance of such product if it can mislead customers as to identity of a manufacturer or product.

According to the Supreme Court judicature, “within the meaning of the cited regulation, copying does not consist in accurate reproduction of all features and parameters of a product but in imitation thereof practically not involving any changes as compared to the original and making it possible to mislead customers as to identity of manufacturer and product” (cf judgment of the SC of 10 July 2002, file ref II CKN 9696/00).

However, an act of unfair competition is not imitation of functional features of a product, i.e. properties of a product which only ensure its usefulness.

Circulation of untrue or misleading information

An act of unfair competition is circulation of untrue or misleading information about one’s own or other entity’s company in order to bring benefits or do damage.

Pursuant to article 14 of the Polish Act on combating unfair competition circulated information may refer to persons running a company, goods manufactured, prices offered, economic and legal situation.

Moreover, it is unlawful to use titles, ranks or other information about qualifications of employees to, which they are not entitled or are inaccurate, as well as false certificates, unreliable test results or information about commendations or markings of products or services.

Hindrance to access to the market

An act of unfair competition, provided for in article 15 of the Act on combating unfair competition, is an act of making access to the market difficult for other entrepreneurs.

The Act provides examples of conduct which may be considered a hindrance to access to the market. These include:

• sale of goods or services at prices below the cost of manufacture or provision thereof or resale at prices below the cost of purchase in order to eliminate other entrepreneurs;

• encouraging third parties not to sell to other entrepreneurs or not to purchase goods or services from other entrepreneurs,

• objectively unjustified, unequal treatment of some customers;

• charging fees other than margin for acceptance of goods for sale;

• activity aimed at forcing customers to choose a particular entrepreneur as a contractor or creation of conditions enabling third parties to force customers to purchase goods or service from a particular entrepreneur.

Unfair advertising

In article 16, the Polish Act on combating unfair competition provides for a number of actions involved in advertising goods and services which may represent an act of unfair competition.

The following may be cited as examples of advertising contrary to the rules of fair competition:

• advertising contrary to the provisions of law, decency or beneath dignity of a human being;

• advertising misleading a customer and thus capable of influencing such customer’s decision about a purchase of goods or service;

• advertising appealing to feeling of customers by causing fear, making use of superstitions or gullibility of children;

• statements which while encouraging to buy goods or services appear to be neutral information;

• advertising which represents undue interference in the sphere of privacy, in particular by tiresome for customers bothering in public places, dispatching not ordered goods at a customer’s expense or abusing technical means of communication.

The essence of the law on suppression of unfair competition

The main objective of the law on suppression of unfair competition is to prevent and suppress unfair competition in business activities. The subject of protection is the public interest in maintaining fair competition on the one hand, and interest of other entrepreneurs as participants in the market game on the other. The interest is also important of customers and contractors staying in business contact with entrepreneurs.

Competition is in principle a positive and desirable phenomenon in business since usually it motivates entrepreneurs to improve attractiveness of goods and services offered, at the same time playing a part in lowering their prices.T

Only unfair competition is forbidden consisting in activity against the law or decency and thus threatening or jeopardizing the interest of another entrepreneur or customer.

The Polish act introduces a two-stage definition of an act of unfair competition citing, in article 3 section 2, examples of separate acts such as: misleading company name, false or fraudulent designation of geographic origin of goods or services, misleading marking of goods or services, betrayal of a company secret, encouraging to terminate or refrain to execute a contract, imitation of products, urging or unfair recommendation, hindering access to the market, corruption of a person carrying out a public function as well as unfair or prohibited advertising, organization of rapid sales and carrying out or organizing activity under a consortium system.

First of all it should be determined whether a given conduct can be classified as one of the specified acts of unfair competition regulated in more detail in Chapter 2 of the Act. However, the absence of a special regulation does not stand in the way of finding that the act meets the conditions of a general clause contained in article 3 section 1 of the Act, i.e.:

• It is against the law or decency;

• It threatens or jeopardizes the interest of another entrepreneur or customer.

The Act is applicable to entrepreneurs, that is natural persons, legal entities and unincorporated organizational units who carrying out, if only incidentally, gainful or professional activity participate in business activities.

The definition of an entrepreneur contained in the act on suppression of unfair competition is broad and relates to all entities participating in business transactions regardless of the form of activity they carry out and whether they operate lawfully or have been entered in the companies register or the Central Register of Business Activities.

An act of unfair competition being committed by an entrepreneur may result in civil and criminal liability.

Civil law claims:

In case an act of unfair competition is committed, the entrepreneur whose interest has been threatened or violated may demand that:

1) unlawful actions be stopped;

2) effects of unlawful actions be offset:

3) a single or repeated statement be made with a suitable content and in proper form;

4) damage caused be repaired in accordance with general principles;

5) wrongfully obtained benefits be made available in accordance with general principles;

6) suitable sum of money be adjudged for a specified social purpose.

Additionally, a court may decide about products, wrappings thereof, advertising materials and other items directly connected with an act of unfair competition. In particular, it may issue a ruling to destroy them or recognize against compensation.

Claims on account of acts of unfair competition fall under a three-year statute of limitations. The period of limitation begins separately for each violation (cf article 20 of the act on combating of unfair competition).

Criminal liability

The Polish act on combating of unfair competition contains a special regulation providing for criminal liability for commission of acts of unfair competition and stipulates what penalties a perpetrator of acts of unfair competition is subject to (cf table below).

Crimes are prosecuted on application of the aggrieved party, and offences at the request of the aggrieved party.

Additionally, in case of an act consisting in incorrect marking of goods or services (article 2 of the act on combating of unfair competition) a national or regional organization whose statutory objective is to protect interests of entrepreneurs shall be entitled to file a petition for prosecution.

Unfair business practices

Business activity closely involves an obligation to adhere to established rules in relation to consumers who considering their weak position on the market are subject to special protection against unfair business practices.

At the EU level, for this purpose the Directive 2005/29/EC of the European Parliament and the Council of 11 May 2005 was issued on unfair business practices used by companies towards consumers on the internal market.

The Directive forbids unfair business practices, that is those which:

• are contrary to the requirements of professional diligence;

• substantially warp or may substantially warp the behaviour of an average consumer or a group of consumers towards a product received or offered.

In particular, unfair practices are those which are misleading or aggressive.

Misleading business practices involve false information and as a result are untrue or mislead or may in any way mislead an average consumer.

The omission of significant information necessary for an average consumer to make an informed decision about a transaction may be also regarded as a misleading business practice.

Aggressive business practices are characterized by harassment, compulsion (including physical force) or unlawful pressure being applied by an entrepreneur. Such practices significantly restrict or may restrict the freedom of choice of an average consumer or such consumer’s behaviour towards a product and thus make or can make the consumer take a decision about a transaction which otherwise he/she would not have taken.

The Directive 2005/29/EC is In the first place intended for protection of economic interests of consumers who, within the meaning of the Directive, are natural persons and who with respect to practices covered by the Directive act with the purpose unrelated to commercial, business, craft activity or freelance occupations.

Unfair business practices indirectly do damage also to the interests of other business entities carrying out their activity in accordance with the law.

The European legislator has allowed the Member States latitude in introduction of suitable measures guaranteeing effective protection against unfair practices and imposing sanctions for infringement of national regulations issued to implement the Directive.

The Polish law concerning the protection against unfair business practices

In order to implement European Parliament and Council Directive 2005/29/WE of 11th May 2005 on unfair commercial practices, the Polish legislature has decided to introduce a separate act of law to prevent unfair trade practices on 23rd August 2007. The indicated regulation concerns only the relations between businessmen and consumers (so-called B2C – business to consumer). In Polish legal system exists a strict division of the law concerning combating unfair competition into regulations concerning relations B2B (law against unfair competition) and B2C (law against unfair business practices).

The Polish act reflects the content of the EU Directive 2005/29/WE and describes what unfair business practices (misleading and aggressive practices) are. The Directive also states the standard of the average consumer and determines what kind of business practices can be interpreted as unfair by enumerating such business practices on the black list, which is placed in the Appendix no. 1 to the Directive.

It is remarkable ,that in contrast to e.g. German law, the Polish law provides right for action for individual consumers and in that way it guarantees them the possibility to pursue their rights in front of the court personally and not through consumer organizations. The consumer, whose interest were threatened or infringed, may demand illegal actions to be stopped, effects of unlawful actions to be offset, a single or repeated statement to be made (with a suitable content and in proper form), damages caused to be repaired in accordance with general principles, in particular to cancel the contract with the obligation of mutual reimbursement of performances, especially of the costs associated with the acquisition of the product. A consumer can also demand a suitable sum of money to be adjudged for a specified social purpose related to the social promotion of culture, the protection of Polish national heritage or consumer protection.

The Ombudsman, the Polish Insurance Ombudsman as well as national or local organizations, which act with the aim of protecting consumer rights are also allowed to assert the claims mentioned above.

The act provides criminal penalties for aggressive commercial practices, as well as for using property which was acquired by the group with consumer participation in order to finance acquisition of the product in consortium system.

Acts of unfair competition in the German law

The German act on combating unfair competition (UWG) distinguishes the acts of unfair competition which are in any case prohibited from those which become prohibited after exceeding the de minimis limit.

According to the general clause contained in § 3 sections 1 and 2 of UWG, those activities are prohibited which are capable of substantially jeopardize the interests of competitors, consumers or other participants in the market, and in case of activities undertaken towards consumers, they do not meet the standards of care required of professional entities and is capable of substantially restricting the ability of a consumer to make decisions based on matter-of-fact information only and as a result inducing him/her to take a decision which he/she would not have otherwise taken.

In addition, the annex to the act contains the so called “per-se” prohibitions concerning the acts which are always considered impermissible. And on the other hand, §§ 4, 5, 5a, 6 and 7 of UWG refer to the acts which may be impermissible if exceeding the de minimis limits provided for in § 3 sections 1 and 2 of UWG. This is the case when a given act actually and potentially is capable of producing a result which is considered impermissible.

Examples of the acts of unfair competition:

I. Annex to the Act

The so called “black list” containing enumeration of unfair business practices was included in the act for the purpose of implementing the Directive 2005/29/EC on unfair business practices into national law. The acts referred to therein are considered as the acts of unfair competition regardless of the facts of a case and forbidden by operation of the law. These include:

• the untrue statement by an entrepreneur to be a signatory of a code of conduct;

• the use of certification, quality or similar marks without the necessary permission;

• the untrue declaration that a code of conduct has been approved by a public or other body;

• the untrue declaration or creation of an unfounded impression that the sale of a product or service is legal;

• the untrue declaration or creation of an unfounded impression that consumers’ rights guaranteed by law constitute a special feature of an offer;

• the untrue declaration that an entrepreneur is going to give up his business or to transfer his business premises in near future;

• the declaration that certain goods or services can increase the chances to win in competitions;

• the untrue declaration that a product could heal illnesses, disorders or birth defects.

II. Specific acts of unfair competition under §§ 4, 5, 5a, 6, 7 of UWG

The following acts are considered to be unlawful if the de minimis limit is overstepped:

a) Undue influence

§ 4 section 1 of UWG forbids the acts of competition which are may affect the freedom of decision of customers or other participants in the market by exerting pressure, acting in the manner being an affront to human dignity or otherwise disproportionate and senseless.

Under this clause, an act of unfair competition is existent when an addressee of the commercial activity is induced to make a decision which he/she would not have otherwise presumably taken. The pressure is understood as both mental and physical pressure. An inhuman act hurts the dignity of people.

b) Exploitation of persons in need of protection

The act of unfair competition under § 4 section 2 of UWG includes activities which are capable of capitalizing on the mental or physical disability, age, inexperience, credulousness, fear or plight of consumers.

The provisions of this clause are geared towards those participants in the market who are particularly in need of protection on account of their inferior position and inexperience.

c) Libel

Under § 4 section 7 of UWG, the entrepreneur is also acting dishonestly who discredits distinguishing marks, goods, services, activities, personal or business contacts of a competitor or defames the latter.

This provision serves the protection of business interests of competitors.

d) Denigration

§ 4 section 8 of UWG forbids the disclosure or dissemination of information about the goods, services, business or members of management of a competitor which may do damage to or undermine trust in a given entrepreneur to the extent that such information is not demonstrably true. In case of confidential information or when the person giving or receiving information has a legitimate interest therein, the dissemination of such information shall only be unfair where it is contrary to the truth.

This provision applies only to mutual relations between competitors.

e) Imitation of products

Pursuant to § 4 section 9 of UWG, an entrepreneur is acting dishonestly if he/she offers goods or services being an imitation of goods or services of a competitor, and at the same time:

a) misleads purchasers about the origin of goods;

b) unacceptably exploits or impairs the reputation of the original product or service; or

c) dishonestly acquired the knowledge or documents needed for imitation of products.

In the German law, the above regulation is crucial for the protection of products. It should be emphasized that the prohibition applies to offering and distribution of such goods, and not to the manufacturing thereof itself.

f) Deliberate obstruction

Pursuant to § 4 section 10 of UWG, the entrepreneur who deliberately obstructs activity of a competitor is acting unlawfully.

According to §§ 3, 4 section 10 of UWG, deliberate obstruction of a competitor prevents the latter from developing his market activities. In addition, for an act to be considered as an act of unfair competition, it is necessary that it goes beyond the behaviour characteristic of normal relations between competitors (cf BGH, Urt. v. 7.10.2009, I ZR 150/07, Tz. 12 – Rufumleitung). Therefore, the circumstances of an individual case must be examined.

g) Misleading commercial practices

In the light of § 5 of UWG, it is unlawful to undertake misleading activities, i.e. such as those that involve the information false or misleading other participants in the market about the circumstances provided for in this regulation.

In judicature, it is assumed that an advertisement is misleading if it is capable of imposing on addressees thereof an erroneous idea of an offered product or service and significantly for the competition influence a specific decision taken by offerees (cf BGH, Urt. v. 18.1.2012, I ZR 104/10, Tz. 11 – Neurologisch/Vaskuläres Zentrum).

h) Misleading by omission

In assessing whether the concealment of a fact is misleading within the meaning of § 5a section 1 UWG, consideration shall be given in particular to its significance for the transactional decision according to prevailing public opinion, as well as to the possibility of the concealment influencing the decision.

The sections 2 to 4 of the regulation define compulsory obligations of the entrepreneur to inform consumers about certain matters.

i) Comparative advertising

Comparative advertising shall be deemed to be any advertising which explicitly or by implication identifies a competitor, or goods or services offered by a competitor. It is allowed if it fulfills the criteria enumerated in § 6 section 2 of UWG.

j) Unconscionable pestering

A commercial activity is forbidden under § 7 of UWG if any other entity is unacceptably pestered. This shall particularly apply to advertising in cases where it is apparent that the offeree does not wish such advertising.

§ 7 section 2 sets out 4 types of behaviour constituting unconscionable pestering which are prohibited in any case, i.e. if conditions of § 7 section 2 subsections 1 to 4 are met, the relevant act prohibited without examination of the facts of a given case (cf OLG Stuttgart, Urt. v. 25.7.2013, 2 U 9/13, I.B.1).

The essence of the law on unfair competition in Germany

It should be emphasized that competition is basically an important element of the free market economy and only some commercial activities, which are regarded as condemnable and therefore unfair, are prohibited by the legislator.

Forbidden are those activities which are capable of substantially jeopardizing the interests of competitors, consumers or other participants in the market.

Commercial activities towards consumers are in any case forbidden if they do not meet the standards of care required of professional entities and are capable of substantially restricting the ability of a consumer to make decisions based on matter-of-fact information and, as a result, induce a consumer to take a commercial decision which he/she would not have otherwise taken.

The German act provides for a multi-level examination scheme for the assessment if a given act of an entrepreneur may be recognized as an act of unfair competition within the meaning of the Act. § 3 section 3 refers to the annex to the Act which contains a detailed list of activities vis-à-vis consumers which are in any case recognized as unacceptable. In addition, in §§ 4, 5, 5a, 6, 7 of the Act, specific examples of unacceptable behaviour are cited which define the general clause of § 3 of the Act in more detail and should be taken into account after checking if the given behaviour has not been mentioned on the so called “black list” in the annex to the Act. Among the specified acts of unfair competition there are inter alia undue influence on decisions of other entities, exploitation of entities of inferior market position, surreptitious advertising, the use of certain forms of merchandising, competitions or lotteries, defamation, denigration of competitors, imitation of products or services, hindering access to the market, encouraging to break off a contract, misleading advertising, misleading, comparative or provocative advertising.

It cannot be always assumed that activities which are not mentioned on the “black list” in the annex to the Act or are not cited among the examples of acts of unfair competition will be automatically permissible. Therefore, it must be checked if a given act could come under the general provisions of § 3 sections 1 and 2 of the Act.

The German act is applicable to all entrepreneurs who engage in business activities. The only requirement is that the business activity within the meaning of § 2 section 1 subsection 1 is actually existent.

The commission of an act of unfair competition can entail civil and criminal liability.

Civil liability

The aggrieved entrepreneur and other entities referred to in the act are entitled to the following claims:

1) Claim of default (§ 8 section 1 of UWG);

2) Claim for redressing damage (§ 8 section 1 of UWG);

3) Claim for damages (§ 9 sentence 1 of UWG);

4) Claim for restitution of profits (§ 10 section 1 of UWG)

5) Claim for restitution of unjust enrichment (§ 812 section 1 sentence 1 2. alternative BGB)

1) Claim for default (§ 8 section 1 of UWG)

Whoever undertakes an unfair commercial activity can be sued, in the event of the risk of recurrence, for default (§ 8 section 1 sentence 1 of UWG). In the event that a claim for default is admitted, a competitor shall be obligated to refrain from unlawful activity for the future. A claim for default can be enforced first by a call to stop being in default. If an entrepreneur refuses to make a relevant statement competitor refuses to release a punishment-armored statement of cessation, the cessation claim can be enforced by way of seeking an interim injunction.

2) Claim for redressing damage (§ 8 section 1 of UWG)

The entrepreneur who committed an act of unfair competition may be obligated to redress damage (§ 8 section 1 sentence 1 of UWG). The claim for redressing damage may only be asserted when the default continues. Because of the unfair commercial activity an illegal situation has occurred which has to be cured. An example of a claim for redressing damage is a disclaimer of statements being an infringement of the rules of fair competition. Moreover, taking account of a claim for redressing damage, the court may additionally obligate a party to publish its judgement.

3) Claim for damages (§ 9 sentence 1 UWG)

Whoever, while acting deliberately or through negligence, commits an act of unfair competition, shall be obligated to compensate another entity for damage caused to it (§ 9 sentence 1 of UWG). A claim for for damages under the act on combating unfair competition is assessed in accordance with the same legal rules as in general civil law. An aggrieved party has also the right to information enabling it to assert a claim for damages. A prerequisite of liability for damages is unlawful activity, fault and damage caused by such activity.

4) Claim for restitution of profits (§ 10 section 1 of UWG)

Whoever, while acting deliberately, commits an act of unfair and thereby makes a profit to the detriment of numerous purchasers, can be sued for surrender of such profits to the Federal budget by those entitled (§ 10 section 1 UWG). The claim for restitution of profits may be enforced only by certain organizations engaged in the promotion of commercial or autonomous occupational interests, organizations guarding the interests of consumers as well as chambers of industry, commerce or crafts and only in favor of the Budget. A prerequisite for liability is deliberate commission of an act of unfair competition while a conceivable intent shall be enough. A person is acting with conceivable intent if he/she continues to carry out a competitive activity, although knowing the existing circumstances is aware that the activity is unfair (cf OLG Schleswig – 2 U 7/12, judgment of 26.3.2013).

5) Claim for restitution of unjustified enrichment (§ 812 Abs. 1 sentence 1 2. alternative BGB)

Claims for restitution of unjustified enrichment (§ 812 BGB) are exceptional in unfair competition law. That is why it won’t be further explained herein.

Statute of limitations for claims

Claims for default, redressing damage and damages fall under the statute of limitations after six months. The period of limitation starts when a claim arises and when an aggrieved party receives information about the circumstances of the default and the person responsible for it or with due care it should informed thereof.

Claims for damages come under a 10-year statute of limitations regardless of knowledge or ignorance resulting from gross negligence, however within 30 years at the latest of the occurrence that caused damage. Other claims come under a 3-year statute of limitations regardless of knowledge or ignorance resulting from due to gross negligence of the aggrieved party.

Criminal liability

In §§ sections 16 to 20, the German act on combating unfair competition specifies the offences against fair competition together with punishment for specific acts (see the table below). Unless the regulation provides otherwise, such offences are prosecuted ex officio. Some offences are only prosecuted on application unless there is a special public interest in prosecution. Moreover, it should be stressed that fines provided for in § 20 of UWG are of administrative and penal nature. If the provisions of the Act do not stipulate criminal sanctions, the provision of § 40 section 1 of the German penal code is applicable. This provision imposes a punishment of at least five to a maximum of 360 daily rates. The amount of a daily rate shall be fixed considering the personal and economic situation of an offender.

Unfair Business Practices in the EU law

Business activities involve the obligation to observe the set rules in relation to consumers who considering their inferior market position are specially protected against .

For this reason, on the EU level the directive 2005/29/EG of the European Parliament and the Council of 11 May 2005 was passed concerning unfair business practices used in the internal market vis-à-vis consumers. Through the publication of the new UWG on 03.03.2010, the directive was implemented into the German national law. The directive also serves the purpose of avoiding insecurities in trans border transactions.

The Directive forbids unfair business practices, i.e. such as:

• are contrary to the requirements of professional diligence, and

• materially distort or are likely to materially distort the economic behavior with regard to the product of an average consumer whom it reaches or to whom it is addressed, or of the average member of the group when a commercial practice is directed to a particular group of consumers

Unfair business practices are particularly those which are misleading or aggressive.

A business practice shall be regarded as misleading if it contains false information and is therefore untruthful or in anyway, including overall presentation, deceives or is likely to deceive an average consumer, even if the information is factually correct, in relation to one or more of the elements mentioned In the directive, and in either case causes or is likely to cause him to take a transactional decision that he would not have taken otherwise.

Furthermore a business practice shall be regarded as misleading if, in its factual context, taking account of all its features and circumstances and the limitations of the communication medium, it omits material information that the average consumer needs, according to the context, to take an informed transactional decision and thereby causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise. A commercial practice shall be regarded as aggressive if, in its factual context, taking account of all its features and circumstances, by harassment, coercion, including the use of physical force, or undue influence, it significantly impairs or is likely to significantly impair the average consumer’s freedom of choice or conduct with regard to the product and thereby causes him or is likely to cause him to take a transactional decision that he would not have taken otherwise.

The directive 2005/29/EG foremost serves the protection of the economic interests of consumers, which are defined in the directive as every natural person who, in business practices covered by this Directive, are acting for purposes which are outside their trade, business, craft or profession.

Unfair business practices indirectly do damage also to the interests of other business entities carrying out their activity in accordance with the law.

Implementation of the directive 2005/29/EC in Germany

For the implementation of directives the member states are guaranteed a scope. They can freely choose the necessary means for the implementation in due time. However the member states are bound by the requirements of the directive. The scope of the member states decreases the more detailed the regulations of the directive are formulated.

In Germany, the directive has been implemented inter alia through the attachment of an annex to the UWG. This catalogue, which includes 30 offences, the per-se prohibitions of the directive have been absorbed. The practices provided for in the annex are always forbidden. They apply in the B2C area, which means that only business practices from entrepreneurs towards consumers are captured.

The regulations which have been introduced for the implementation of the directive must be interpreted in accordance with the directive. That means, that a court has to apply national regulations in the light of the directive if the wording of the regulation is unclear.

Only the offences named in the directive are per-se prohibitions. For all other practices provided for in the UWG the court has to evaluate if the de minimis limit has been exceeded and cannot directly emanate from a violation. A member state is not allowed to issue other per-se prohibitions. The offences in question have already been defined closer in the chapter concerning particular unfair practices.

Acts of unfair competition in France

The French law distinguishes among four main types of acts of unfair competition. These include: disparagement, disorganisation of an enterprise, misleading and parasitism.

Disparagement

This term as it is interpreted by the courts means harmful criticism of a competing enterprise, rules of its operation, financial condition, working conditions, goods manufactured thereby or its management, etc.

In practice, an act of unfair competition consisting in disparagement includes the conduct of media campaigns, dispatch of letters addressed to the key clients or partners of a competing enterprise (e.g. main suppliers or bank establishments).

Disparagement includes also comparative advertisement.

The decisions of French courts in this respect are quite restrictive, because courts adjudicate that disparagement is in place even if the facts disclosed by the perpetrator are true.

Disorganisation of an enterprise

Disorganisation of the business of a competing enterprise takes place when a competitor acquires and employs persons which have been employed by its direct competitor. The goal of such activity is to use their knowledge and skills gained with the previous employer, who trained them and entrusted them with specific business duties. Such employees are tempted by the new employer e.g. with the prospect of a higher salary or shares in a competing company in exchange for disclosing to the competitor the clients’ data, software regarding enterprise management or information regarding production processes of the previous employer.

Misleading

Misleading regarding the information on products or on another enterprise is often considered by courts as an act of unfair competition. The above activity consists in the fact that a competitor exactly copies or is clearly inspired by a trademark, trade name or commercial documents of a company, such as catalogues, invoices or order forms.

Similarities in this respect often pose a risk of misleading an average attentive client.

Parasitism

Parasitism takes place when an enterprise illegally derives profits from good reputation or results of a competitor’s work and thus, using the results of someone else’s work, illegally ensures itself a financial advantage. A competitor saves on the costs of designing or developing a product or on investment or promotional expenses.

Owing to such activities, a competing enterprise has a lower production cost which enables it to offer lower prices than the prices of the enterprise which made an investment and has to recover the costs thereof.

The prerequisites of existence of such type of an act of unfair competition may be different and depend on the circumstances of the factual situation. However, French courts often refer to behaviours constituting acts of unfair competition as to parasitism.

Unfair Competition in French law

An act of unfair competition may be defined as illegal action aimed to take over the clients of a direct competitor. This may include, for instance, recruitment of the competitor’s employees, disparagement or sale of goods at a loss.

An act of unfair competition may also result from an infringement of a non-competition clause: ascertainment of the infringement of such clause (if legal) itself is sufficient to award compensation against the defendant for committing an act of unfair competition, without the necessity to prove additional prerequisites.

There are many lawsuits regarding unfair competition, especially in small and concentrated branches. They are often accompanied by lawsuits for infringement of trademark rights.

Sources of the law on unfair competition:

In the French law, there is no general definition of unfair competition or an act on combating unfair competition. The rules governing the law on combating unfair competition result mainly from courts’ judicial decisions. The courts’ decisions in cases for unfair competition are based on Articles 1382 and 1383 of the French Civil Code.

Civil law claims

In order to pursue civil-law claims which are available in case that an act of unfair competition is committed, a significant instrument includes the so-called searching in a civil procedure or “security pursuant to Article 145″, which, in accordance with Article 145 of the French Code of Civil Procedure, may be used in different factual situations.

The above measure is particularly useful in a situation where an enterprise wants to prove that a competitor committed an act of unfair competition, because this way it may gain evidence regarding the events suspected thereby which will be necessary for the purposes of a lawsuit, if any. Article 145 stipulates that “if there is a justified reason to obtain or secure, as soon as before the institution of the procedure, the evidence with respect to an act which may be decisive for a lawsuit, legally available security measures may be ordered at the request of the party concerned”. This provision, to which practitioners do not sufficiently refer to yet, renders it possible for a judge to authorise an entrepreneur to address a bailiff to go to the “suspect’s” offices to seize any documents (invoices, letters, agreements, etc) which will make it possible to prove an unfair business behaviour towards the entrepreneur who makes the request. This procedure is used increasingly more often in the branches with strong competitive pressure and the entrepreneurs have an increasingly more aggressive attitude towards competitors. Regardless of whether you are a plaintiff or defendant, it is worth knowing how it works.

It is notable that a search in the course of a civil procedure may be also demanded by an entrepreneur who suspects that one of the authorised representatives sells its products outside the selective distribution chain. In such case, the entrepreneur may, pursuant to Article 145 of the French Code of Civil Procedure, apply for an authorisation to request a bailiff to secure all documents and invoices enabling a precise check of sale agreements the subject matter of which includes specific goods. The secured correspondence and agreements may be used as evidence before the court, which will decide on whether an act of unfair competition was committed or contractual provisions infringed.

Penal sanctions

The French law provides, for instance, for a penalty for an offence of forgery as defined by the Intellectual Property Code, which is subject to a fine of up to EUR 500,000.00 and penalty of imprisonment for of up to 5 years.

It is notable that in the case of recidivism, the above penalties are imposed in double the amount. Forged goods are seized by the competent public authorities.

Unfair business practices in the EU-law

Business activity closely involves an obligation to adhere to established rules in relation to consumers who considering their weak position on the market are subject to special protection against unfair business practices.

At the EU level, for this purpose the Directive 2005/29/EC of the European Parliament and the Council of 11 May 2005 was issued on unfair business practices used by companies towards consumers on the internal market.

The Directive forbids unfair business practices, that is those which:

• are contrary to the requirements of professional diligence;

• substantially warp or may substantially warp the behaviour of an average consumer or a group of consumers towards a product received or offered.

In particular, unfair practices are those which are misleading or aggressive.

Misleading business practices involve false information and as a result are untrue or mislead or may in any way mislead an average consumer.

The omission of significant information necessary for an average consumer to make an informed decision about a transaction may be also regarded as a misleading business practice.

Aggressive business practices are characterized by harassment, compulsion (including physical force) or unlawful pressure being applied by an entrepreneur. Such practices significantly restrict or may restrict the freedom of choice of an average consumer or such consumer’s behaviour towards a product and thus make or can make the consumer take a decision about a transaction which otherwise he/she would not have taken.

The Directive 2005/29/EC is In the first place intended for protection of economic interests of consumers who, within the meaning of the Directive, are natural persons and who with respect to practices covered by the Directive act with the purpose unrelated to commercial, business, craft activity or freelance occupations.

Unfair business practices indirectly do damage also to the interests of other business entities carrying out their activity in accordance with the law.

The European legislator has allowed the Member States latitude in introduction of suitable measures guaranteeing effective protection against unfair practices and imposing sanctions for infringement of national regulations issued to implement the Directive.