Unfair Competition: dishonest competitors and their most common business-practices
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Due to economics rapid growth, the market is flooded with constantly growing number of economic entities which try to obtain competitive advantages by unfair methods. Such business entities use unfair competition in order to promote their goods (services). By definition, the unfair competition is any actions which are contrary to commercial and other honest customs in business.
To understand whether your business is threatened by unfair competitor, first of all, it is necessary to make sure that it is a competitor you are dealing with. A competitor is a juridical person, individual entrepreneur, or a group of connected business entities, that is characterized by the following: а) carries out the same activity as you do (produces same products or provides same services); b) carries out activity at the same market as you do (e.g. at the market of textile, vinegar products, transportation, etc.); c) is focused on the same circle of customers as you are; d) competes with you for the place on the market.
The competitor is considered to provide unfair business practice if its actions are illegal under the Law of Ukraine “On Protection Against Unfair Competition”.
The law of Ukraine clearly define which actions are considered to be unfair competition. Depending on the type, such actions may be divided into the following categories: misrepresenting goods or services as being the goods and services of another, dissemination of misleading information, creation of obstacles for competitors, achieving inappropriate advantages in competition.
Misrepresenting Goods or Services as being the Goods and Services of AnotherQuite often, unfair competitors try to give their products such an appearance to make the customer believe that these are the products of another well-known manufacturer or related to such manufacturer. In order to make the customer believe that he/she buys the product of another manufacturer, unfair competitors resort to such methods as the use of another manufacturer’s name, trademark, promotional materials, or even imitation of product packaging design.
An example of such misrepresentation can be the case when the business entity which has nothing in common with the producer of “Mars” chocolate bar – Mars Incorporated - starts to produce chocolate bars with a similar taste, in same black packaging with the name, let’s say “Mapc”, using the same font and color as the original “Mars” bar. Moreover, it may be considered misrepresentation when the packaging contains the trademark which is different from that of the competitor, but the general appearance of a product makes the customer associate the product with the similar product of another manufacturer. The most popular areas where the competitors use this type of unfair competition are the markets of food, alcohol and pharmaceutical products .
Dissemination of Misleading InformationOne of the most popular unfair method of products “promotion” is the dissemination of misleading information.
Misleading information may be disseminated in different ways: for example, producers often attribute to their products (services) the characteristics they do not possess. For instance, the producer writes “Vinegar” with capital letters on the acetic acid, although vinegar and acetic acid are different products with different composition, manufacturing technology, and properties. Moreover, the insufficiently treated acetic acid may contain harmful aldehydes and salts of heavy metals. Thus, the producer, producing acetic acid (which is cheaper than vinegar) and marking it as “vinegar”, makes the customers believe that it is vinegar in front of them.
The attention should be also drawn to such method of dissemination as marking products with misleading information in relation to origin thereof. Very often, Ukrainian manufacturers of alcohol products who produce wine in Ukraine, using Ukrainian technologies and Ukrainian raw materials, indicate on their products misleading information, for example, “French wine”, put the French flag (or the flag of any other country) on the label, use French language or create an impression that the wine is related to France. Thus, it is reasonable to believe that the customer, who is used to the fact that France produces worldwide known wines, when making choice between the wine “Product of France “SAVEURE DE PRUNE” and the wine “Wine “Plum Bouquet”, taking into consideration that both wines are within the same price range, will choose the wine “Product of France “SAVEURE DE PRUNE” thinking that the wine has been produced in France or is, at least, related to this country.
Very often, the misleading information is disseminated by inclusion of false or unconfirmed data in product advertising. For instance, it is unfair competition when the advertisement of a financial company says “The most favorable interest rates” if at least one financial company on the same market offers better interest rates. Another example is the simple phrase “Every second of Ukrainians chooses “Romashka” bagels”. Unless the producer of Romashka” bagels has the documentary proof that it has asked all the Ukrainians in the world whether they actually prefer “Romashka” to other bagels, and the half of them answered “Yes”, such advertising is considered to be unfair competition under the law of Ukraine.
Creating Obstacles to CompetitorsAnother way to obtain the better position on the market is unlawful deterioration of the competitor’s position. Defamation of the competitor (distribution of untrue, inaccurate or incomplete information about the competitor), inclination to boycott the services or products of the competitor, various methods of influence on the common supplier in order to create worse conditions for the competitor – all these stand for unfair competition. Moreover, according to the Ukrainian law, any actions connected with illegal collection, disclosure or use of the competitor’s trade secrets are considered to be unfair competition.
Achieving Inappropriate Advantages in CompetitionAlso, it is necessary to distinct the cases when dishonest competitors “make things easier” on the market for themselves by obtaining unfair advantages which are inaccessible for fair market players. According to the Law “On Protection of Economic Competition”, obtaining unfair competitive advantages is defined as obtaining advantages over other business entities by violating the law.
For example, according to the Ukrainian law, it is forbidden to use doctors and other medical professionals as well as people whose appearance copies the appearance of doctors for advertisement of drugs (article 21 of the Law of Ukraine “On Advertising”). If the drug manufacturer, in violation of the Law of Ukraine “On Advertising”, uses the image of a doctor or even a person wearing the doctor’s white coat in advertisement of its drug, it will be considered as if it has obtained unfair competitive advantages. The advantage in such case is that the customer will think that since there is a doctor in the advertisement, the advertised product has been approved by medical specialists and deserves more trust (is more efficient). Thus, violating the advertising law, the producer obtains unfair advantage which, in its turn, leads to unfair competition in relation to other producers. Another example is the case when the competitor decorates its place (shop) with violation of standards for outdoor advertising established by local authorities. Of course, big and bright signs may increase the number of customers, but their use is not only a minor violation of the regulatory act, but is also an unfair competition in relation to other owners of public places (shops) in the given territory, and may lead to serious consequences.
Therefore, any advantages the competitor obtains in violation of laws and regulations of local authorities are illegal and their use is an unfair competition.
It is obvious that under our economic circumstances every entrepreneur uses all possible ways to occupy the favorable position on the market and to receive high profits. Unfortunately, there are such business entities that believe that marketing tricks and unfair competition will bring them greater success and popularity than hard work. The activity of such “inventive” competitors may irreparably damage the reputation and business of a fair and honest entrepreneur.
No business entity is guaranteed against unfair competitors, therefore, the market should be analyzed for any unfair competitors, and acts against unfair competition should be taken.