Unfair competition: the 5 main prohibited business strategies

Unfair competition law protects you from your competitors

Everyone has the right to enter the market and start their own business. Free enterprise and individual fulfilment through work – “the pursuit of happiness”, dear to the Americans – are fundamental rights of the individual.

However, not all business strategies are permitted. Unfair competition law (also known as “fair trading law”) sets a number of limits on permissible market behaviour.

The following is an overview of the main trade prohibitions. (Like all rules, however, there are exceptions).

Unfair competition: 5 prohibited practices

The law does not clearly define what constitutes unfair commercial behaviour. The terms of the law are general and abstract:

“Any act contrary to market practices by which an enterprise harms or may harm the business interests of one or more other enterprises is prohibited” (Code of Economic Law, Article VI.104).

In very general terms, a principle can be identified: it is always lawful to take market share from competitors by developing an efficient business, but it is forbidden to deploy strategies aimed at maliciously disrupting the business of a particular competitor.

More precisely, it can be said that the following five practices constitute acts of unfair competition. They are therefore prohibited.

1. It is prohibited to impersonate a competitor (“free riding”)

• It is forbidden to engage in manoeuvres intended to cause confusion on the part of the consumer. The use of similar letterheads or impersonating an employee of the competitor can be given as examples of parasitic strategies.
• Creating a likelihood of confusion may also constitute an infringement of a competitor’s trade mark or trade name (“sign”).

2. It is prohibited to denigrate a competitor

• It is forbidden to denigrate a competitor by spreading rumours, slander or criticising a competitor by name – for example, by claiming that he or she lacks competence or defaults on payment.
• This does not prevent comparative advertising, provided that it is carried out in a neutral and objective manner and relates to the respective qualities of the products and services.

3. It is prohibited to disrupt the trade of a competitor

• It is forbidden to stifle the advertising communication of a competitor.
• It is prohibited to systematically divert staff or to poach staff in violation of a non-competition clause.
• A collective resignation of employees with a view to establishing a competing business may be unlawful if it is sufficiently characterised and has the effect of paralysing their former employer.

4. It is prohibited to use competitors’ business secrets – including, in particular, the highly strategic “customer file” – when these have been obtained unfairly

Unfair” or “improper” obtaining of this type of information takes place in particular:

• when a worker uses his position of trust to obtain and misuse data made available to him by his employer;
• where the information is obtained in breach of a contractual obligation of confidentiality;
• where the information is obtained as a result of a breach in the competitor’s computer system.

Because the employee is subject to an obligation of loyalty towards his employer (which also includes an obligation of discretion), the employee’s competition is always “unfair competition” during the employment contract. As such, it is always prohibited.

5. In general, it is prohibited to compete in violation of the law or regulations

Whenever a company has evidence that its competitors are not complying with the law and are taking advantage of it in the course of business, unfair competition law allows it to intervene.

Unfair competition law makes it possible to prohibit all activities that are contrary to public regulation. In particular, it is possible to prohibit :

• selling products below the minimum price imposed by the state;
• trade in products that do not meet the quality or safety requirements set by the public authorities.

There are many sanctions for unfair competition practices

Violation of the rules of loyalty can be sanctioned by :

• the immediate dismissal of the worker,
• damages,
• or even – in extreme cases – by criminal sanctions.

It is therefore important to remain vigilant and to seek advice from a lawyer if necessary. This is all the more important as other, more “atypical” (or “inventive”, depending on your point of view) unfair competition practices exist and are occasionally brought to light by case law [1] (see for example here with regard to the taxi sector).

 

As can be seen, unfair competition law sanctions a certain number of strategies deemed to be “unfair” or “immoral” and damaging to one or more specific competitors.

In this respect, it differs from “antitrust” competition law, which sanctions practices deemed inefficient for the functioning of the market as a whole.

However, unfair competition law and antitrust competition law meet and sometimes reinforce each other in order to sanction immoral behaviour. Antitrust law can be invoked in particular to combat :

• boycott practices whereby several companies join together to isolate and exclude a competitor from the market;
• non-competition clauses between companies designed to establish a so-called “peace of the braves” to the detriment of the consumer;
• public procurement manipulation practices where several companies coordinate to submit their price offers to the administration.

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[1] If you want to know more about unfair competition – that is, beyond the posts on yours truly’s excellent blog – there are many good resources available.

Resources available online include

• The excellent and very educational book by our colleagues from the University of Liège: T. DELVAUX, A. FAYT, D. GOL, D. PASTEGER, M. SIMONIS, N. THIRION, Droit de l’entreprise, Larcier, 2013 ;
• An interesting overview of the different European laws E.. TERRYN, D. VOINOT, Droit européen des pratiques commerciales déloyales: Evolution et perspectives, Larcier, 2012.
• The very classic work by D. GILLARDIN, D. PUTZEYS, Les Pratiques du commerce autour et alentour, FUSL, 1997.

Resources available in hard copy include

• O. BATTARD, J. LIGOT, F. VANDOSSELE, Les pratiques loyales, Larcier, 2^ème éd., 2012;
• I. FERRANT, Les Pratiques du marché (depuis les lois du 6 avril 2010), Kluwer, 2011 ;
• E. BALATE, I. FERRANT, H. JACQUEMIN, J. LAFFINEUR, J. STUYCK, La protection du consommateur après les lois du 6 avril 2010, Anthémis, 2010.