Unfair competition in the free market takes many forms. Each of these is expressed in a different aspect of the supply of a product or service. The focus may be on appearance, imitating a competitor or misleading the consumer about essential features. Another manifestation is unfair behaviour with regard to advertising and the advertising process. However, the practice of unfair attraction of customers is a rather particular case.
This brief overview aims to shed light on the process for identifying unfair attraction of customers. A dispute between two competing property management companies resulted in a recent decision by the Commission for Protection of Competition (CPC). In short, one company used a Cyrillic domain name that was identical to the legal name of the other company. The ruling addresses, among other grounds, the provision of the Protection of Competition Act (PCA) on unfair attraction of customers: Article 36 (1).
As in the case of any form of unfair competition, the provisions on unfair attraction of customers also need to be specified and clear criteria for establishing the existence, or the absence, of the prohibited practice must be set. In its ruling, the CPC outlines the three criteria that must be cumulatively present for the unfair customer attraction provision of the PCA to apply. These are:
Unfair competitive behaviour
In other words, it is necessary first of all to objectively detect and prove unfair conduct on the part of a competitor in the field. This is the basis of the logical integrity of Article 36 (1) as it constitutes the essence of the norm – this type of conduct to be limited.
Termination or breach of contracts already concluded or prevention of contracts with competitors
This element is key and at the same time unique in its nature compared to other provisions of the PCA relating to unfair competition. As the Commission unequivocally emphasises, it is the only provision that requires an actual and objectively demonstrated harmful result. Furthermore, it is a specific, exhaustively described one (termination/breach of the concluded contract(s) or prevention of the conclusion). The other unfair competition hypotheses also include an already occurring harmful result as a condition, but alternatively include the mere potential for such a result in their formulation.
This is undeniably difficult to prove. It is here that part of the argumentation of the company that submitted the request to the CPC ‘fell through’. Although already analysed in detail in the preceding paragraph of the Commission’s legal reasoning, the undisputed potential for misleading consumers as a result of the domain used appears to be an insufficient circumstance. Therefore, having found that no evidence for the objective existence of a harmful result that has already occurred, the Commission terminated the investigation in the context of Article 36(1) of the PCA due to the absence of one of the three cumulative prerequisites.
Direct causal link
Or, more precisely: a direct causal link must be established between the bad faith conduct and the harmful result. A truly intuitive and expected third and final step, but a necessary one, nonetheless. Without it, the mere existence of an unfair act on the one hand and the objectively harmful result on the other hand are merely two independent unrelated circumstances. The causal link is the thing that unites them to form a coherent whole.
The sequence in which the presence (or absence) of the three elements is analysed is not clarified. If there is evidence of each of the three elements, logic suggests that they should be considered in the order: bad faith conduct – harmful result – causal link. In any event, causation must be established last, since the other two elements necessarily precede it. If, however, there is a clear absence of evidence of one of the elements, the examination would probably start with that element (as in the present ruling), since the rejection of one of the elements renders the analysis of the other two cumulative elements meaningless.