The “unnamed”: the last group of cases of unfair competition
In previous articles we have analyzed the conditions of unfair competition (click here to read the article) and the two groups of “named” cases:
- the first, which concerns the confusion between the products or services of two competitors (click here to read the article);
- the second, in which a company aims to appropriate the merits of the competitor’s products/services or to denigrate them (click here to read the article).
Here, however, we will deal with the second group of cases that characterize unfair competition, the “innominate“, provided for by art. 2598, n. 3, of the italian civil code.
They include a plurality of commercial practices that do not comply with the principles of professional correctness and are capable of damaging competitors.
Acts that alter the market or against a specific competitor
In order not to risk creating confusion, we will divide them into two groups:
1. unfair competition activities that alter the market:
- misleading communications: that is any message addressed to potential consumers or users of services, which does not correspond to the truth (for example, regarding the characteristics, nature, quantity or results promised) and, above all, is suitable for deceiving the recipients and change their behavior. According to case law, only if the message meets these requirements is it capable of causing competitive damage. It follows that, using the standard of judgment of the “inexperienced consumer“, ambiguous messages or omissions are among the prohibited communications; while harmless lies are not considered deceptive, unsuitable for misleading the recipient.
- Price maneuvers: a very aggressive decline could alter the market and lead to a race to the bottom by competitors. However, art. 2, paragraph 2, lett. A) of Law No. 287/1990, prohibits agreements between entrepreneurs who fix “directly or indirectly the purchase or sale prices” (the so-called price list to which resellers must comply).
- Selling below cost, ie below the average market price: this practice is generally considered anti-competitive (also for public enterprises), as it is capable of determining monopolistic effects on the market. The Italian DPR. n°218/2001 dictates a detailed discipline of below cost sales, deeming them lawful in cases of:
- perishable, defective or obsolete or end-of-season products.
- anniversaries or holidays;
- temporary promotional initiatives.
- The violation of public law rules (eg: the rules for the protection of working conditions or health and hygiene): compliance with these rules entails limits, burdens and costs for entrepreneurs; while their violation often leads to significant savings. The jurisprudence maintains that not all violations represent acts of unfair competition, but only those that, in practice, constitute acts of competition. With this in mind, the violated rules can be divided into three types: those that require entrepreneurial activity:
- limits (eg: the opening of the shop beyond the established hours);
- costs (eg: non-payment of VAT; failure to issue the receipt; illegal work, etc.): these, in themselves, do not cause competitive damage for competitors, which materializes, on the other hand, when this advantage is exploited to lower sales prices;
- charges (eg: the obligation to obtain authorization to exercise one’s business): in these cases the author does not obtain any advantage to the detriment of competitors.
2. Acts directed against a particular competitor, divided into two subclasses:
- the acts that affect the latter in its organizational and tecnica:
- the cancellation of employees. There is a conflict between two opposing interests, both deserving of protection: that of the entrepreneur to the integrity of his company and that of the workers to freedom of choice. According to the majority jurisprudence, the cancellation of employees is considered illegal when the entrepreneur recognizes the animus nocendi, that is, the intention to steal the employees of a competitor with the intent of damaging him.
- Theft of business secrets: according to arts. 98 and 99 of the Industrial Property Code (IPC) and the dominant jurisprudential orientation, all information of a technical or commercial nature belonging to the company, which has economic value (as secret), is not easily accessible and are subject to control.
- The concurrence in the non-fulfillment of obligations: for example, the violation, by a supplier, of the exclusive relationship with an entrepreneur, at the instigation of a competitor of the latter. In these cases, there will be both a contractual (by the supplier) and an extra-contractual (unfair competition by the competitor) violation.
- Acts affecting the competitor’s market situation:
- competition from the former employee: in the absence of a non-competition agreement, with the termination of the employment relationship, the obligation of loyalty of the former employee also ends, who can legitimately use the know-how acquired in previous work experience. However, the case law has held that the use of secret information acquired due to the position held in the former company constitutes an act of unfair competition.
- Parasitic competition: means a hypothesis of systematic (not confusing) imitation of the competitor’s business initiatives (eg: the imitation of products, advertising methods, commercial techniques, etc.). Therefore, activities which are in themselves lawful (since they are not confusing), consist of acts of unfair competition when they concern imitations of the competitor’s activities, carried out at a short distance from the latter.
- The boycott, that is the refusal to entertain commercial relations with a third party, which prevents the latter from accessing the market. It is divided in turn into primary boycott (i.e. refusal to contract) – which is considered illegal if it violates antitrust rules – and secondary (consisting of economic pressures, carried out by a competitor against a third party, not to negotiate with boycotted company), always considered illegal.
- Tracing imitation (or pantograph): concerns cases where there is imitation of every detail of the competitor’s product. It is considered an illegal practice, unless it is justified by the need to guarantee the compatibility of one’s own product with those of third parties (e.g. spare parts).