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Unfair Competition: A Wave Of Threat

With the growing digitization process, the infringements of the intellectual property is become a common phenomenon in this modern era. And among them the concept of Unfair Competition is one of the most debated one. Many of us already experience these type of misleading IP violation whether consciously or unconsciously, like example: in open market we have seen the abibas, hoodies which try to replicate the adidas products is example of unfair competition.

Beside these there are tons of examples are available in the world regarding these malpractices. That's why not only the international bodies but also the local governments are introduce specific strict laws to protect the originality from these malpractices.

What is unfair competition?
There are many definitions available regarding the term unfair competition, but the most accepted definition define unfair competition as a method where a company or an entity use modes like illegal, deceptive and fraudulent selling practices which harms the other businesses or the end users in order to gain competitive advantage in the business market.
If we look into the international statutory, we can find that in Article 10bis (2) & (3) of the Paris Convention defines the Unfair Competition in details. In Article 10bis (2) defines the term unfair competition as, any act of competition contrary to practice in individual or commercial matter

Whereas Article 10bis (3) defines all the acts, which are prohibited under the unfair competition, are as follow:
  • All acts which made confusion among the end users in terms in terms of establishment, products, services, or the industrial or commercial activities of a competitors.
  • Made false allegations against competitor's products, services, or the industrial or commercial activities in order to discredit or defame them.
  • Made false allegation against the competitor's products, services, or the industrial or commercial activities, in order to mislead the end users, during the course of trade.
Based on above discussion it clear that the term unfair competition is a wide and vast term, which cannot define only based on simple dishonest concept. That's why most experts' voice for country based laws and regulation for this matter. It is the responsibility of the state to define the term descriptively and precisely in their state law in order to save the business originality and stop such malpractices.

Why there is need of laws against the unfair trade practices:
There are mainly five main reasons are there which primarily defines why there is need laws against the unfair trade practices:
  1. Help to prevent infringements of Economic, Intellectual and creative rights of any individual or any business entities
  2. Help to protect the goodwill which are developed in between the businesses and the end-users,
  3. Increase clarity regarding the product to the end-users,
  4. Helps to prevent other competitors to steal any individuals or any businesses ideas or goodwill,
  5. Helps to create better competitive market which ultimately helps to grow the market and improve the end users experience and offers the best quality possible.
These are the main five reasons why a country should introduce strict laws against such unfair trades, but besides that there are other reasons are there that why should a state need a law on it , like, to protect the brand loyalty, to protect the brand value and its customers integration and goodwill etc.

Anti-trust law and Unfair competition:
Both of these two are interlinked with each other, as the basic ideal behind these two laws are same to promote free and honest trade practices. Both of these two laws are responsible for smooth and efficient operation business in the market and the economy. But there work of enforcement is quite different from each other,

In one hand The Anti-Trust law which are responsible for prevention of restriction in trade and abuse of dominance economic power, and ensure a free competitive market. That's why we can say that the Anti-Trust laws are responsible for free market entry and boosts the economic efficiency in the market. It is also responsible for prevention of cartels, price-fixing, or any kind of unfair mergers and acquisitions.

On the other hand the Unfair Competition law is responsible to ensure fairness among market competitors, by complying same rule among them. Initially these laws only focus to prevent any businesses from dishonest trade against them, but now days its focuses not only in that point but also ensure the consumer protection and transparency in the advertising, marketing and business practices.

Thus based on this we can say that although the implementation and work process of both these two laws are different but the concept and purpose of these two are same, that's why we can say that both these two laws are supplement to each other.

Types of Unfair Competition:
Although there are many types of unfair trade practices are there which are harm the competitors and disrupts the end-users experiences, but there are some common practices are there as follow:
  • Creating Confusion
  • Misleading,
  • Defaming or discredit the products, services, or the industrial or commercial activities of the competitors,
  • Disclosure of information related to the competitors' products, services, or the industrial or commercial activities
  • Free riding or taking advantages of the another businesses or individuals achievements
  • Creating comparative advertising,

Creating Confusion:
It is one of the most commonly used Unfair competition method. According to the Paris Convention's Article 10 bis(3), clearly compels its member states to prevent all the acts which are , of such a nature as to create confusion by any means whatever with the establishment, the goods or the industrial or commercial activities of a competitor.

The scope and the implementation of these Article is wide and broad that it includes all the trade related acts such as marks, label, sign, packaging, slogan, shape and color of the good or any other distinctive nature of the product used by the business entity or individuals etc.

Misleading:
Misleading is the only single most prevalent form of Unfair Competition, where a business or an individual create a false impression against products, services, or the industrial or commercial activities of its competitor or competitors. Although misleading is single most prevalent form but in long term the long run it has some serious consequences. This concept of misleading is vary countries to countries, in country like Germany where concept of misleading is treated strictly on the other hand countries like USA are not as strict as Germany in this concept of Unfair Competition.

Defaming or discredit the products, services, or the industrial or commercial activities of the competitors:
It is simply defined as fake allegation against the products, services, or the industrial or commercial activities of the concerning competitors, in order to defame or discredit there products, services, or the industrial or commercial activities as well as their goodwill. It is not necessary to defame only the products of the concern business entity, but there are some incidents also seen where there are direct attack or defame made on the particular business owner and the category businessman.

Disclosure of information related to the competitors' products, services, or the industrial or commercial activities:
It is another example of unfair competition. In this process one can disclose all the crucial trade related confidential files, like trade secrets, future deals, company's future planning or any others trade related confidential files of its competitors, in order to defame or take undue advantages over its competitors. This concept is not only protect under unfair competition regulation, but also protected under Art.39(2) of TRIPS Agreements 1994, which defines the disclosure of information is also fall under the category of Unfair competition and all the member states are abide by this rule to protect the honest business practices.

Free riding or taking advantages of another businesses or individuals achievement:
It is another type of unfair competition, in this method the business entity tries to copy the products or services of its competitors who is established in the market and has a loyal customer base. The main purpose behind this method is to use the competitors or individuals success or achievements in order to gain unfair advantages.

Creating comparative advertising:
In the modern digitization era, the advertisement of a company play a huge role not only to succeeded to its products or services but also play an important role to build an image or brand value for a company. Thus, we many a time have seen that one brand use other brands tag lines or any other indirect comparisons, in order to prove that their product is best from that competitors. However when this comparative advertising are made unauthorized or create such impression which may affects its competitors and may provide an unfair advantages to the company, in that scenario it is considered as a unfair competition.

The comparative advertising further divided into two parts one is positive reference and the other one negative reference

How India counter the concepts of Unfair Competition:
India is very much serious about the honest trade practice concept. The country joins the Paris convention on dec.7, 1998 and adopts all the important points which a member state should abide by. But the country is serious about this concept since its independence, India indirectly secure this problem while drafting the constitution. Art. 38 and 39 of the Indian constitution under the part of Directive Principles of State policy it is mandate that the state should protect/secure the true ownership.

The main focus of the government at that time was into equal distribution of wealth among all, and they frame legal system according to that. But after 1960 India change a drastic change in its approach by appointing the Committee on Distribution of Income and Levels of Living (Mahalanobis Committee) . Based upon this committee's recommendations the government of India appointments the Monopolies Inquiry Commission (MIC) in April 1964 and this laid down the first bricks to India's strong root to enforce the fair trade practices.
Based upon this recommendations there are several acts were passed in order to protect the fair trade and free market to boost the economy of the state.

Unfair competition is also being strictly dealt and prevent in Indian market through various legislations. At beginning this concept is only dealt with the fair ownership rights. But with the growing economic scenario India also change its stance regarding this concept. Now this concept is multi-dimensional where it is not only dealt as ownership rights perspectives but also dealt in order to prevent customer harassments or any acts affects the end users experience or any other advertisement which affects the fair trade practices.
Although there is indirect security is provided for the true ownership

Definition of Unfair Trade Practice:
The concept of Unfair Competition or Unfair Trade Practices are defined in various legislations such as Consumer Protection Act, MRTP Act ( replaced by Competition Act, 2002).

Here some of them as follows:
Under Consumer Protection Act 1986:
Unfair trade practice means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:
  1. The practice of making any statement, whether orally or in writing or by visible representation which:
    1. falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;
    2. falsely represents that the services are of a particular standard, quality or grade;
    3. falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;
    4. represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;
    5. represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;
    6. makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
    7. gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof.

Under Consumer Protection Act, 2019:
Sec. 2(47) "unfair trade practice" means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:
  1. making any statement, whether orally or in writing or by visible representation including by means of electronic record, which:
    1. falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;
    2. falsely represents that the services are of a particular standard, quality or grade;
    3. falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;
    4. represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;
    5. represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;
    6. makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
    7. gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof:
      Provided that where a defence is raised to the effect that such warranty or guarantee is based on adequate or proper test, the burden of proof of such defence shall lie on the person raising such defence;
    8. makes to the public a representation in a form that purports to be:
      1. a warranty or guarantee of a product or of any goods or services; or
      2. a promise to replace, maintain or repair an article or any part thereof or to repeat or continue a service until it has achieved a specified result, if such purported warranty or guarantee or promise is materially misleading or if there is no reasonable prospect that such warranty, guarantee or promise will be carried out;

       
    9. materially misleads the public concerning the price at which a product or like products or goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market unless it is clearly specified to be the price at which the product has been sold or services have been provided by the person by whom or on whose behalf the representation is made;
       
    10. gives false or misleading facts disparaging the goods, services or trade of another person.

Under MRTP Act (replaced by Competition Act, 2002):
Section 36A of this act defines the unfair trade practices, this section has further 5 sub clauses which lists the types of Unfair Trade Practices:
  • 36A(1): False or Misrepresentation about the products and services, which can misleads. This includes false guarantee or warranty on that product or services, false description about the same, etc.
  • 36A(2): advertisement of false bargain price,
  • 36A(3): falsely represents any re-built, second-hand, renovated, re-conditioned or old goods as new good
  • 36A(4): goods that were sold, not compelled with the safety guidelines or rules defined by the law.
  • 36A(5): falsely represent any re-built, second-hand, renovated, re-conditined or old goods as new good.

Definition under Competition Act, 2002:
According to Section 6(1) of the Act, No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall be void.

Famous case laws:
re Lekhanpal National Ltd. V. MRTP Commission:
In this case the appellant who was the manufacturer of the NOVINO batteries (dry cell) in India were represent that these batteries are manufactured in collaboration with the National Panasonic in a joint venture, which is false. Originally they made this in collaboration with M/S Mitsushita Electric Industrial Company of Japan, not with the National Panasonic of Japan.

That's why back in then the MRTP Commission held this representation is False and Misleading. But the Hon'ble Supreme Court of India reversed this decision on the ground that there is no company with the name 'national' or 'panasonic', that's why there is no opportunity or scope of misleading there to gain an advantage, further the appellant give the facts that the product they are made with collaboration of M/S Mitsushita Electric Industrial Company of Japan is known as 'national' and 'panasonic'.

re Bombay Tyres International Limited:

The respondent company is one of the main tyres supplying company for TELCO, under the brand identity called, Modipuram. But the tyres were not manufactured by them instead of that the tyres were made by Modi Rubber Ltd. From Modipuram. Thus, it attract the unfair trade practices under the clause of (i) of Section 36A(1).

But The commission held that after the enquiry, the unfair trade practices under section 36A(1)(i) only attract when the supply of goods of respondent purposely misrepresent the facts or mislead.

re Glaxo Ltd. and Capsulation Services Ltd.
In this case, the allegation were made upon the Glaxo Ltd. that they were misrepresent the fact that they manufactured the drug called 'phexin'. In the reality the drug were made by the company called, 'capsulization', and distributed by the Glaxo Ltd. The allegation were frame against Glaxo was that they print their company name in big size whereas the name of Capsulation were printed in small form, which give an impression in the customer's mind that the drug were made by the Glaxo Ltd.

But the Commission held that, although this practice attract some clauses under sec.36A of the MRTP Act, but due to it doesn't incurred any loss or damages in doesn't count as a unfair trade practice.

Conclusion:
Unfair competition is one of headache that not only businesses but the Governments from all across the globe are facing the same problem to tackle. There are guidelines mentioned by the Paris Convention but with the growing trend of emerging business, the type of Unfair Competition is also get changing.

Although these under the Indian legislations are well versed and define the subject matter at its best but with the growing scale of market and its diversity, there is a significant change in the pattern of unfair competition. For this we need more detailed and specific definition with detailed definition of each one.

Reference:
Articles:
  • Patricia V. Norton, The Effect of Article 10bis of the Paris Convention on American Unfair Competition Law, 68 Fordham L. Rev. 225 (1999). Available at: https://ir.lawnet.fordham.edu/flr/vol68/iss1/7
  • Lawnn.com, https://www.google.com/amp/s/www.lawnn.com/legal-protection-unfair-competition-india/amp/ (last visited 24/08/21, 20:32).
  • Upcounsel, https://www.upcounsel.com/unfair-competition (last visited 24/08/21, 20:32).
  • Competition Law Regime in India: Evolution, Experience and Challenges Pradeep S. Mehta, Secretary General, CUTS International, India
  • Tara, The 5 Main Types of Unfair Competition, retrieved from https://primumlaw.com/2017/10/20/5-main-types-unfair-competition/
  • Lydia Kerketta, Unfair Trade Practice in India, retrieved from, http://www.legalservicesindia.com/article/1861/Unfair-Trade-Practice-in-India.html
Statues:
  • Paris Convention, 1883
  • Consumer Protection Act, 1986,
  • Consumer Protection Act, 2019,
  • Monopolies and Restrictive Trade Practices Act, 1969,
  • Competition Act, 2002,
  • Constitution of India,1950

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