In a society where free trade is a pillar of the economy, we had to address the issue of how to protect businesses. If competition is essential to the free market, it must still be regulated to a certain extent.
Indeed, some actions, which qualify as acts of unfair competition, are detailed in and punished by law, while others are defined by precedent and are not necessarily conceived as competitive relationships. We will examine an example from case law, a judgment issued on March 23, 2010 by the Commercial Chamber of the Court of Appeals concerning unfair competition and parasitism.
Consequences for engaging in unfair competition
To understand the March 23, 2010 ruling we have to take into account certain provisions in the Commercial Code.
“Make the author accept responsibility, force him to repair and remedy damage caused by any producer, trader, manufacturer, or person…”
“Participating directly or indirectly in breaching a prohibition of resale outside the network to which the distributor is bound, by a selective or exclusive agreement exempted from rules governing competition law. “
It is with these clauses, among others, that Chanel decided to act and on which the trade of commerce was obliged to make a decision.
The Court’s Ruling on March 23, 2010
“The Chanel company, owner of various brands, has pursued legal action against a company for illegal use of their trademarks as well as parasitic and unfair competitive practices, after which the accused company proposed selling cosmetics and perfumes purchased at a public auction when an authorized dealer liquidated their stock.
The judgment holds that if resale occurs under poor conditions, are conducted by an unauthorized distributor, are destined to be sold in a distribution network that is legally airtight and lawful according to competition regulations, this constitutes an act of unfair competition and parasitism that obliges the perpetrator to consequences found in the Commerce code. The damage alleged by the head of Chanel is indistinguishable from that which caused the illicit used of the mark, in as much as it finds the cause of the same facts of resale outside of a network by an unauthorized dealer, which characterizes this usage as illicit.
The Court of Appeals took into consideration the conditions of presentation by a company and has retained, in an exercise of sovereign appreciative power, that the Chanel Company did not suffer damage distinct from that which resulted from the illicit use of the mark, and legally justified its decision.
This is a case of unfair competition and parasitism. It means preserving loyalty and fairness in competitive relationships.
Acts of unfair competition and parasitism
There are different types of actions that constitute unfair competition and that are identified on a case by case basis. In this case, retailers takes advantage of a brand like Chanel by reselling its product, but intent of harm is of no importance and it is not taken into account.
According to a 1985 judgment issued by the Court of Appeals, “If free customer choice is the essence of trade, abuse of freedom of trade, voluntarily or involuntarily, causing commercial disorder constitutes an act of unfair competition.”
There are other cases of unfair competition, including cases of defamation (which devalues a competitor’s reputation) through comparative advertising (which must be accurate and limited to an objective comparison that only discusses the essential characteristics of the goods or services that are similar). Moreover, this includes confusion that consists of confusing a product with another product of the same nature such that a client would mistakenly choose the other.
Moreover, the ruling also remarks on parasitism: parasitism differs somewhat from unfair competition in that it can occur in a situation that is not necessarily competitive.
According to a ruling issued on January 26, 1999 by the Commercial Chamber, economic parasitism is the “set of behaviors by which an economic agent interferes with another’s profits without using their efforts or expertise.”
This is what qualifies an act as parasitism, the fact of taking advantage of another’s reputation, taking advantage of another’s expertise. The fact that this might not occur in a competitive relationship, that one is in a totally different sector, is not at all taken into consideration for this type of action.
There is also parasitic competition, which occurs in a similar fashion. One benefits from a competitor’s reputation or investments, and one nearly commits plagiarism, but not to the extent as to cause consumer confusion. This is what distinguished parasitism from unfair competition.
If you think you are a victim of unfair competitive action, seek legal counsel. A good lawyer will help you develop the best strategy to assert and protect your rights. Picovschi lawyers are there to defend you.