What is unfair competition?

Competencia desleal
Published on: 12 February 2022

Table of contents

Unfair competition, also known as unlawful competition, is one of the most complex issues in the field of commercial law. Because it can occur in an infinite number of different ways, some of which are really diffuse, it is difficult to elucidate whether or not it has been committed on many occasions. Here we will try to explain what Law 3/1991, of 10 January, which in turn was amended by Law 29/2009, which is responsible for governing it, has to say about it.

What is unfair competition?

Unlawful or unfair competition is understood as all behaviour that can be framed, using objective elements of analysis, as contrary to the requirements of good faith in trade with the purpose of inciting the purchase of a product in an enclave, thus negatively affecting and undermining the free decision and choice of the buyer.

The legal texts discussed above, in which this definition appears, are responsible for protecting all market agents, i.e. both consumers and traders, from actions that may be understood as unlawful competition. In fact, it also covers unfair advertising, although this is represented in the General Advertising Act.

It should never be confused with free competition, which is one of the foundations on which commercial traffic is based. Moreover, in order to be considered as such, two requirements must be met: the action must take place "within the market" and therefore have external significance, and it must have "competitive purposes", i.e. it must seek to ensure or promote the dissemination of its own or another's services.

Acts of deception and confusion

Deception will always lead to competition being considered unfair. The law does not contemplate in any way that there may be commercial practices based on false information or that, although truthful, are intended to mislead those who receive them in order to obtain an economic benefit.

Any action, within the scope of free competition, which has the purpose of creating confusion in the services, activity or establishment of a third party commercial entity, will also be considered unfair.

Is over-aggressiveness understood as disloyalty in competition?

The answer is yes. In fact, this is one of the most common cases and, at the same time, one of the most controversial. The laws cited above specify that any behaviour that can be considered as coercion or harassment is unfair regardless of whether or not force or undue influence is used for the purpose of affecting the recipient's freedom of action. It is sufficient to interpret it as pursuing the objective of altering his economic behaviour for it to be considered as such.

In this respect, it is necessary to make a point that is as important as it is subtle. For the purposes of unlawful or unfair competition, commercial law interprets that when an entity uses its position of predominant force over another to exert pressure of any kind, regardless of whether or not there is force or threats, this punishable conduct occurs.

Acts of denigration and imitation of competition

You may recall advertisements claiming that the brand being promoted contained more natural fruit juice than another particular brand, the brand of which was specified in detail. Is this unlawful or unfair competition? The answer is no, because if the information provided is understood to be true, relevant and accurate, it can compete in this way.

The problem comes when the information used to undermine the credibility of another product or company in the market is not absolutely true or is subject to interpretation. Moreover, the law also does not allow elements related to beliefs, religion, ideology, private life or any other personal circumstance to be used to compete freely within the market.

And what about imitations? After all, the same product can be manufactured and marketed by different companies as long as there is no legally recognised exclusive right to it.

The fact is that the laws we have mentioned allow imitations within the scope of free competition as long as they are not used for the purpose of undermining another's effort or reputation.

Direct consumer deception

Law 29/2009, which amends Law 3/1991, of 10 January, also looks at misleading practices aimed at confusing consumers and establishes them as unfair. This includes all commercial behaviour that lies directly or that makes associations between brands and products that are not real, as long as they affect the purchasing decision.

The special case of pyramid selling

Pyramid selling, within the scope of unlawful or unfair competition, has a special consideration as it is considered to be misleading in all cases. In fact, they are based on convincing a consumer to make a financial payment in exchange for the promise of a certain degree of profitability in exchange for the entry of other subjects like him, not for the receipt of a good or service.

Other cases and scenarios

On the other hand, competition of this type is also understood as that in which minors and children are used to promote a product in a way that encourages them to convince their parents to buy the product. In addition, this section can also include the use of the tactic of threatening to close the business to the consumer if the consumer does not contract its services, for example.

What actions are taken against those who engage in unlawful competition?

The first step is to bring an action for a declaration of unfairness and, subsequently, a request to cease the conduct that has given rise to it. Likewise, an attempt must be made to reverse the effects generated by this by rectifying any false, incorrect or misleading information that was issued. It will also be necessary to compensate the affected party for damages.

What is legal standing in unlawful competition?

Legal standing is understood as the capacity that the law grants to those affected, threatened or harmed by unfair practices and conduct within the market to apply the actions that are appropriate and that are reflected in article 32.1 of Law 3/1991, of 10 January. With regard to compensation for damages, it is essential to take into account the provisions of article 11.2 of Law 1/2000 of 7 January, on Civil Procedure.

All that remains to be said is that unfair competition, within the scope of commercial law, is subject to the statute of limitations of one year from the time when it begins to be exercised or from the time when the affected party became aware that it was taking place. Furthermore, the statute of limitations also expires 3 years after the end of the conduct, if this has occurred.

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