UNFAIR COMPETITION UC

1
UNFAIR COMPETITION (UC) CONSUMER PROTECTION
(CP) Diversity or Uniformity of Standards of
Unfairness?

• International Report on Question B
• Frauke Henning-Bodewig Jan Kabel

2
Survey

• The issue
• National Reports and other Materials
• State of affairs in LIDCs Member Countries and
  the European Union
• Some points of the Resolution

3
The issue

• Should the objectives of the rules on unfair
  competition be the protection of competitors, of
  consumers, or of other interests?
• How should any conflict beween these objectives
  be resolved?

4
Hansel and Gretel (Arthur Rackham 1909)
THE ISSUE UC only serves interests of
competitors Schwarzwald, 1738
Unfair Competition Pirating of Know How (Cookies
Recipe) Easier distribution-point for the
consumer
Inventor of the recipe
The Pirates, Employees of competitor from the
neighbouring town
5
The issue conflicts between UC and CP

• Discrediting competitors on the basis of
  truthful information (e.g. KPN-UPC)
• Passing off, accompagnied by disclaimers
  recognized as such by the informed consumer
  (e.g. Unilever-Albert Heijn)

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KPN/UPC discrediting (?)
7
Confusion (?)
8
The issue UC serves CP

• UC as a powerful means to serve consumer
  interests
• because of the UC-Category breach of (consumer
  protection) law whereby competitors gain undue
  advantage, if and only if breach of the law is
  the only condition for unfairness (e.g. Belgium)

9
Cause for the Issue

• Directive 2005/29 EC on unfair commercial
  practises, restricted to the relationship between
  BussinessConsumers (B-C)
• Regulation (EC) No 2006/2004 on cooperation
  between national authorities responsible for the
  enforcement of consumer protection laws (Consumer
  Protection Cooperation Regulation)

10
Importance of the Issue

• An end to the EU harmonisation of Unfair
  Competition?
• B to B versus B to C standards for the
  assessement of confusion, misleading, passing of,
  disparagement, law infringement, underbidding,
  dumping, etc..?
• More Surveillance Agencies/Unfair Competition
  Law goes Public?

11
UC Art. 10bis Paris Conv. 1883

• 1900 Protection against Unfair Competition
  inserted
• 1925 definition added (Frenche influcence) any
  act contrary to the honest practises in
  industrial or commercial matters
• Examples added (US/UK influence) confusion/
  false allegations of such a nature as to
  discredit competitors
• 1958 example added (Austrian influence)
  misleading designations, indications or
  allegations about ones own goods

12
UC WIPO Principles of Unfair Competition (1996)

• 1. Any act or practice, in the course of
  industrial or commercial activities, that is
  contrary to honest practices
• 2. Causing Confusion with Respect to Another's
  Enterprise or Its Activities
• 3. Damaging Another's Goodwill or Reputation
• 4. Misleading the Public
• 5. Discrediting Another's Enterprise or Its
  Activities
• 6. Disclosure of Secret Information without
  consent of the rightful holder

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UC Background of the Principles

• Leistungsschutz
• Avoidance of Confusion
• Unjustified Enrichment
• Misleading of the consumer to the detriment of
  the competitor

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CP Principles of EU Consumer Protection (2004)

• 1. Buy what you want, where you want
• 2. If it doesnt work, send it back
• 3. High safety standards for food and other
  consumer goods
• 4. Know what you are eating
• 5. Contracts should be fair to consumers
• 6. Sometimes consumers can change their mind
• 7. Making it easier to compare prices
• 8. Consumer should not be misled
• 9. Protection while you are on holiday
• 10. Effective redress for cross-border disputes

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CP Background, Rights of Consumers

• Right to Safety
• Right to be Informed
• Right to Choose
• Right to be Heard
• Right to Seek Redressal
• Right to Consumer Education

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CP Directive 2005/29 EC

• A commercial practice shall be unfair (to
  consumers) if (a) it is contrary to the
  requirements of professional diligence, and (b)
  it materially distorts or is likely to materially
  distort the economic behaviour with regard to the
  product of the 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.

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Twelve National Reports

• Belgium Aimé de Caluwé, Alex Tallon Brasil
  João Marcelo, Lima Assafim, José Carlos Dias
  Czech Republic Petr Hajn France Pascal
  Wilhelm, Céline Cohen Germany Frauke
  Henning-Bodewig Hungary Gusztáv Bacher, Vilmos
  Bacher, János Stadler, Pál Szigaly, Sándor Vida,
  Judith Zsolnay Italy Marco Francetti
  Netherlands Bernadien Trompenaars, Minos van
  Joolingen, Rogier de Vreij Spain Enrique
  Armijo Sweden Anna-Karin Holland Switserland
  Amédée Kasser United Kingdom Nick Saunders

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Recent Literature

• Unfair Competition Law in the EU and its Member
  States by Frauke Henning-Bodewig (2006)
• Articles by Christopher Wadlow in EIPR 2006,
  issue 8 9 and by Jules Stuyck in Liber
  Amicorum Bernd Stauder (2006)

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Former related LIDC Resolutions

• 1994 Harmonisation of Unfair Competition does not
  seem achievable nevertheless no piecemeal
  legislation
• 1995 Concept of the consumer critical and
  reasonable
• 1995 Relationship between competition law and
  unfair competition law different aims
• 2004 ECs restriction to B-C practises leads to
  legal uncertainty and will harm consumer interests

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The Questionaire

• Law sources
• List of unfair commercial practises
• Black lists
• Different standards
• Definition of consumer
• Non-economic aspects
• Enforcement

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Law Sources divergent picture

• One Single Statute on market practises (UC CP)
• Belgium, Germany, Czech Republic, Sweden,
  Switserland
• Different Statutes (UC CP)
• Spain, Hungary
• Combinations of case law (UC) and Statutory Acts
  (CP)
• France, Italy, The Netherlands
• Combinations of case law (UC) and Statutory Acts
  (UC CP)
• Brasil, UK

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List of unfair commercial practises Directive
2005/29

• Misleading commercial actions and omissions that
  cause or are likely to cause the average consumer
  to take a transactional decision that he would
  not have taken otherwise
• Agressive commercial practises that impair or are
  likely to impair the average consumers freedom
  of choice and thereby causes him or are likely to
  casuse him to take a transactional decision that
  he would not have taken otherwise

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Some other unfair commercial practises National
Reports

• Bribery, acquire clientele based upon
  non-payment of taxes (Brasil)
• Unfair terms in consumer contracts (UK, France,
  The Netherlands, a.o.)
• Discrimination with respect to the conditions of
  sale, disproportional advantages, dumping
  (France)
• Call for boycot, interfere with the integrity
  and fairness of a bidding process (Hungary)

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Black Lists

• EU 31 Misleading and aggressive commercial
  practises that are declared by law unfair under
  all circumstances ,
• E.g. bait advertising, bait and switch,
  artificial product diffentiation as to consumers
  rights, advertorials, inertia selling, unwanted
  sollicitations by phone, fax or e-mail,
  sweepstakes subject to costs
• National reports most countries none

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Different standards UC CP (1)

• All circumstances of the case (most countries)

• Not possible to compare benchmarks for unfair
  practises (UK)
• UC-rules apply only to competitors consumers
  perspective never taken into consideration
  (Italy)
• Different benchmarks during the nineties (Sweden)

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Different standards UC CP (2)

• All circumstances of the case (most countries)

• exclusive CP factors risk to health, sellers
  position in the market place, profit obtained,
  intention, social impact of the violation, first
  offender (Spain)

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Non-economic aspects

• Non-economic
• UC No likelihood of material damages for
  competitors
• CP No material distortion of the economic
  behaviour with regard to the product of the
  average consumer
• UC contrary to honest practices
• CP mostly advertising rules like indecent
  advertising, use of religious symbols,
  discrimination, use of human suffering, etc

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Consumer actions in UC-Law

• Definition of consumer non-existant in UC-law
  (all reports)
• UC-Law actions not provided for individual
  consumers Germany, Italy, Spain
• UC-Law actions not provided for consumer
  organisations Italy
• UC-Law actions by individual consumers unusual
  in all countries

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Competitors actions in CP-Law

• Violation of CP-Law sufficient Belgium, Germany,
  Italy?, Switserland (general interest)

• Extra conditions required (specific harm, CP-Law
  should directly or indirectly serve also
  competitors interests) The Netherlands, France,
  Hungary, Brasil, Sweden, Spain
• EU-Directive
• Not possible at all UK

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National Authorities UC CP

• UC CP Consumer Ombudsman (Sweden) Competition
  Authority (Hungary, UK), Only with respect to
  Advertising Autorita Garante (Italy)
• CP only ConsumentenAutoriteit (Netherlands) DG
  de la Concurrence en de la Repression des Fraudes
  (France)
• No central authority Germany, Belgium, Czech
  Republic, Spain, Switserland
• Consumer Protection Cooperation Regulation
  obligation to establish a National CP Authority

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Opinions standards

• Different (B-B, B-C)
• Belgium two general clauses
• France special clauses for vulnerable consumers
• UK business ethics differ from adequate
  protection of consumers extremely difficult to
  provide a set of coherent rules

• Uniform
• Focus on the behaviour as such (Brasil, Germany,
  Italy, The Netherlands, Spain, Czech Republic,
  Sweden, Hungary)

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Opinions enforcement

• Directive 2004/48/EC on the Enforcement of IP
  Rights contains an option to include UC-acts
• In favour but not neccessary France, Chech
  Republic, Italy, Spain, Switserland and UK
• Some of the Enforcement rules Hungary, The
  Netherlands
• Difficult Belgium, Brasil, Switserland

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Some points of a Resolution

• Object all unfair commercial practises?
• Standard the practise as such?
• No black lists?
• In favour of private enforcement of UC-Law?