What is unfair competition?

Unfair competition is illegal behavior by which a company, professional or natural person distorts or may distort the behavior of the consumer or of a specific market. Unfair competition is normally defined as the act that seeks to obtain a competitive advantage through irregular behavior that does not meet the general criteria of good faith.

The Law 3/1991, of January 10, on Unfair Competition (hereinafter, LCD) regulates its scope of application and defines the different acts that can be considered unfair competition. In this article, we will elaborate a study of the essential issues contained in the aforementioned standard.

Acts of deception

They are included in article 5 of the LCD, and are considered those that introducing untrue information are likely to mislead consumers.

The LCD expressly mentions the aspects on which false information must fall in order to incur unfair competition due to an act of deception. Specifically, they are the following:

1. The nature of the product or service.
2. Its most relevant characteristics, such as the reality of its benefits or associated risks.
3. After-sale service.
4. The commitments of the person who provides the service or sells the product.
5. The price.
6. That the product actually needs subsequent service or the replacement of a part.
7. Real identity of the seller or service provider, as well as their qualification, solvency or other aspects that affect the consumer to provide their trust.
8. Consumer rights and risks.

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Acts of confusion

It is regulated in article 6 of the LCD.

The law prevents any behavior that is likely to cause confusion in the consumer, so that he identifies the product or service with an establishment other than the one who actually sells or provides it.< /p>

The act is not required to be consummated, so the mere risk of association with an outside company is considered unfair competition.

Misleading omissions

Regulated in article 7 of the LCD.

It will be considered unfair to hide information from the consumer, preventing them from making their decision with all the prior knowledge considered necessary to form a sufficient criterion.

For the same reason, information that is not sufficiently clear and transparent will have the same rating.

Aggressive practices

Provided for in article 8 of the LCD.

Refers to those practices that through harassment, coercion or force are intended to induce consumer choice, affecting their free judgment. Overtly violent behavior is not required, the exercise of undue influence from a position of power being sufficient.

The law mentions the following as relevant elements for determining these aggressive practices:

1. Time, place and context.
2. Use of threatening or denigrating expressions or attitudes.
3. Use of the consumer’s misfortune, or any relevant circumstance, to influence his decision to take advantage of a situation of special vulnerability.
4. Imposing unlawful obstacles when the affected party intends to exercise their legal or contractual rights. The typical example being the consumer’s willingness to terminate the contract or change provider.
5. Communicate actions that legally cannot be exercised.

Acts of denigration

Article 9 of the LCD prevents disparaging a competitor or third party through statements that are not exact, true and pertinent.

In any case, those statements related to nationality, belief, ideology or any other personal aspect will be considered irrelevant.

Acts of comparison

Collected in article 10 of the LCD.

Comparative advertising will only be considered permitted under the following prerogatives:

1. The products or services being compared must have the same use and be intended for the same needs.
2. It must be an objective comparison of relevant aspects of the product or service. The law expressly contemplates that the price must be considered an essential and pertinent element.
3. In the case of products with a certain denomination of origin, the comparison must be made with others that share the same denomination.
4. Comparison of imitations and replicas is prevented.

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Acts of imitation

Considered in article 11 of the LCD.

Imitations that are likely to create confusion in the consumer about the true manufacturer are prevented, so that the imitator appropriates the reputation of others.

Acts of imitation that do not meet this requirement must be admitted as lawful behaviour.

Exploiting another’s reputation

Article 12 of the LCD prevents someone from obtaining a benefit by appropriating the reputation of a third party. Specifically, the article refers to the use of distinctive signs.

Breach of secrets

The exploitation or communication of business secrets to a third party is prohibited, even if the information had been obtained lawfully, as long as authorization to do so was not obtained from the owner of the secret business. The definition of the violation of secrets and its regulation has been included in Law 1/2019, of February 20, on Business Secrets. Article 13 of the LCD directly refers to the content of said standard.

Detailed information on acts of breach of secrets can be found in our articles Revealing company secrets by ex-employees and Can the law shield a business secret? published in the written press.

Induction to breach of contract

Article 14 of the LCD considers unfair behavior to induce workers, customers, suppliers or any other subject to unfair competition rules, to carry out illegal behaviors that contravene the provisions of this law.

Rule violation

According to article 15 of the LCD, the competitive advantage obtained by violation of rules will be deserving of unfair qualification, as long as said advantage can be considered relevant, with a certain entity.

Although unfair competition is possible due to violation of any rule, it expressly mentions art. 15 LCD the hiring of foreigners without a work permit.

Discrimination and economic dependency

It consists of price discrimination with respect to some consumers over others, and is included in article 16 LCD. In the same way, behavior that abuses a situation of economic dependence by clients or suppliers will have the same consideration.

Loss sale

Sale at a loss is prohibited, under the terms set forth in article 17 LCD, when:

1. A price below the cost of acquisition leads to misunderstandings regarding the prices of other products or services in the same establishment.
2. The discredit of a competitor is pursued.
3. The elimination of a competitor is pursued.

Illegal advertising

Comparative advertising between products or services is allowed as long as other unfair acts are not incurred as explained above. In any case, the comparison between products that do not belong to the same sector, or whose information lacks veracity or cannot be verifiable, may be considered illegal.

Article 18 of the LCD on illicit advertising refers to the prohibitions of the General Advertising Law.

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José Luis Casajuana Ortiz
Partner of J. L. Casajuana and head of the international area< /a>

03/03/2020