Protection of consumers’ interests in the context of unfair competition

Abstract

Consumer protection is one of the fundamental aims and objectives of competition law. Moreover, according to the provisions of art. 1 para. (2) of the Law on competition no. 183 of 11.07.2012, the purpose of the normative act in question consists in regulating the relations related to the protection, maintenance and stimulation of competition in order to promote the legitimate interests of consumers. Contextually, it is worth mentioning the fact that in the definition of the term “competition” in the text of art. 4 in the Law on competition, there also prefigures the term “consumer”, or competition is defined as an economic rivalry, existing or potential, between two or more independent undertakings on a relevant market, when their actions effectively limit the possibilities of each of them to unilaterally influence the general conditions of circulation of the products on the respective market, stimulates the technical-scientific progress and the increase of the well-being of the consumers. At the same time, in accordance with the provisions of art. 3 para. (2) of the same normative act, “It is forbidden for companies to exercise their rights in order to restrict competition and harm the legitimate interests of the consumer”. One of the competition forms is unfair competition, which involves any action taken by companies in the competition process, which is contrary to honest practices in economic activity. In that regard, the question that arises is whether the protection of consumers in unfair competition is a direct objective or whether that protection is subsequently achieved as a result of the protection of undertakings whose legitimate interests are harmed by unfair competitors in the course of their economic activity. At the same time, regardless of the identified answer, it is also interesting how the rights of consumers affected by unfair competition actions can be protected.

I. THE NEED TO APPROACH THE SUBJECT

Relating the communitarian way of regulating unfair competition to the national way of regulating the respective institution, a fundamental problem emerges: the way in which the interests of consumers are protected in the context of unfair competition, or analyzing the related communitarian legislation, there can be inffered the fact that the protection of the interests of competing undertakings is realised by protecting the interests of consumers against unfair commercial practices, while at national level the protection of consumers’ interests is realised separately from the protection of the rights of competing undertakings. Thus, there is a need to clarify the issues given through a complex analysis.

II. COMMUNITARIAN LEGISLATIVE ASPECTS

At European Union level, Directive 2005/29 / EC of the European Parliament and of the Council („Unfair Commercial Practices Directive”) is currently in force.

The Directive states that its purpose is to approximate the laws of the Member States relating to unfair commercial practices, including unfair advertising, which directly harm the economic interests of consumers and therefore indirectly harm the economic interests of legitimate competitors.

In accordance with the principle of proportionality, this Directive protects consumers from the consequences of such unfair commercial practices where they are significant, but recognizes that in some cases the impact on consumers may be negligible. This legislation does not regulate and does not affect national laws on unfair commercial practices which harm only the economic interests of competitors or which are linked to a transaction between traders; in order to take full account of the principle of subsidiarity, Member States will retain, if they so wish, the possibility of regulating such practices, in accordance with the provisions of Communitarian law.

The Directive also does not affect permitted advertising and commercial practices, such as the lawful placing on the market of the product, brand differentiation or incentives for consumers, which may significantly affect consumers’ perceptions of a particular product and influence their behavior., without affecting their ability to make an informed decision. Therefore, this Directive directly protects the economic interests of consumers against unfair business-to-consumer commercial practices.

Apart from that, the Directive also indirectly protects legitimate undertakings against competitors who do not comply with the rules laid down by it, thus guaranteeing fair competition in the areas it coordinates. It goes without saying that there are other commercial practices which, although not harmful to consumers, may affect competitors and customers of companies.

In the same sense, it is reiterated that the Commission has carefully examined the need for Community action in the field of unfair competition beyond the scope of this Directive and, if necessary, to make a legislative proposal to regulate other forms of unfair competition.

In other words, even the European legislator does not deny the existence of certain points of interference between the protection of consumers against unfair commercial practices and unfair competition, although the primary purpose of these areas is distinct. In the case of unfair commercial practices, the primary purpose is to protect the interests of consumers, and in the case of unfair competition the primary purpose is to protect competitors.

At the same time, it should be noted that business-to-business (‘B2B’) practices do not fall within the scope of the Directive. They are partly covered by the Misleading and Comparative Advertising Directive. However, Member States may also extend in their national law the protection granted under this Directive between undertakings. At present, seven EU Member States apply this Directive to business relations: Austria, Germany, France, Sweden, Belgium, Denmark and Italy.

Measures which exclusively protect the interests of competitors do not fall within the scope of the Unfair Commercial Practices Directive. Where national measures govern a practice with a dual purpose of protecting consumers and competitors, such national measures fall within the scope of the DPCN.

In that context, the relevant case-law of the CJEU established that: 39. […] As is evident from recital 6 in the preamble to [the UCPD], only national legislation relating to unfair commercial practices which harm ‘only’ competitors’ economic interests or which relate to a transaction between traders is thus excluded from that scope. 40. […] that is quite clearly not the case with the national provisions [that] refer expressly to the protection of consumers and not only to that of competitors and other market participants.’ (Case C-304/08).

III. NATIONAL CONTEXT

At national level, unfair competition implies a distinct regulation from the norms related to consumer protection from Law no. 105 of 13.03.2003 on consumer protection. However, according to the provisions of art. 14 par. (4) of the nominated normative act, “Competitive traders may inform the Competition Council about incorrect commercial practices or may initiate lawsuits against traders who have committed or are likely to engage in unfair commercial practices”. Therefore, the legislation in question provides for the protection of competitors against unfair commercial practices in an inclusive manner. The existence of the respective norm at the current stage, however, is useless on the grounds that the Law on competition no. 183 of 11.07.2012, to the text of art. 15-19, expressly and limitingly provides for unfair competition actions that can be notified to the national competition authority. (Gorincioi, 2019) However, through the same rule in the Law on Consumer Protection no. 105 of 13.03.2003 is provided the possibility for the competitors of the author of the incorrect commercial practices of addressing in court in the sense of protecting their interests/rights. In the same context, in the text of art. 14 para. (6) of the Law on competition no. 183 of 11.07.2012, it is ordered that “The expiration of the term of 6 months provided in par. (5) constitutes the ground for refusal by the Competition Council to examine the complaint, but does not constitute an impediment for addressing it in court within the general limitation period”. Therefore, both competition and consumer protection law give competitors the right to go to court in order to protect their rights and interests.

IV. ALTERNATIVES OF PROTECTION

The competing undertakings of the unfair competition authors have a dual protection alternative: the administrative alternative (before the national competition authority) and the judicial alternative (before the courts). This fact results from the provisions of art. 14 para. (6) of the Law on competition no. 183 of 11. 07. 2012 corroborated with the provisions of art. 80 para. (5) of the same normative act. At the same time, according to the provisions of art. 2019 para. (1) of the Civil Code of the Republic of Moldova, „Whoever illegally prevents or disturbs the activity of the professional is obliged to repair the damage caused in this way.” The primary distinction between the provisions of Law on competition and those nominated in the Civil Code lies in the fact that Law on competition grants the benefit of judicial protection to the competitor injured in rights or interests regardless of the existence of economic or non-economic damage caused by unfair competition, while the Civil Code grants the right respectively only in the conditions of the existence of a damge, or the damage constitutes one of the 4 conditions of the tortious civil liability in terms of unfair competition as a whole with the damaging action, the causal link between the damaging action and the actual damage suffered and the guilt of the author of unfair competition action.

Consumers, however, as subjects harmed or likely to be harmed through unfair competition actions, although explicitly protected through the provisions of Law on competition no. 183 of 11.07.2012, can effectively benefit from protection only through the addressing in the courts and only in the hypothesis of the existence of a damage caused to them as a result of unfair competition actions, or according to the provisions of art. 2019 paragraph (2) of the Civil Code of the Republic of Moldova, „The consumer has the right to compensation for damage caused as a result of unfair competition in cases provided by law on competition.” Thus, civil law establishes tortious civil liability for unfair competition actions when harmed by such actions consumers address for repairing the damages in the cases provided for by Law on competition. However, the Law on competition does not contain provisions relevant to the reparation of the damage caused by unfair competition actions by the undertakings concerned. In this sense, it would be welcome to include a normative provision in the Law on competition no. 183 of 11.07.2012 which would indicate on the situations and conditions in which consumers can claim compensation for the damage caused by unfair competition actions. At the current stage, in accordance with the provisions of art. 14 para. (2) of the Law on competition, “Unfair competition actions prohibited by the provisions of art. 15–19 is examined by the Competition Council, at the complaint regarding the alleged unfair competition actions filed by the undertaking whose legitimate interests have been harmed”. At the same time, according to the provisions of art. 80 para. (5) of the same normative act, “The right to action in unfair competition belongs to natural and legal persons who practice entrepreneurial activity, provided that there is a competitive relationship between them and the author of unfair competition actions, by exercising an identical type of activity or similar one”. Therefore, the Law on competition establishes administrative and civil liability only as a result of affecting the rights and interests of competing undertakings, not those of consumers.

V. WAYS TO AFFECT RIGHTS/INTERESTS OF CONSUMERS

In the spirit of unfair competition law at national level, the ways in which consumers’ interests may be affected differ according to the degree of consumer involvement in unfair competition relations. Thus, corresponding to the normative provisions from art. 15-19 of the Law on competition no. 183 of 11.07.2012, the interests/rights of consumers may be directly or subsequently affected.

5.1  Direct harm to consumers’ rights/interests

The respective way of affecting the consumer rights / interests is specific first of all to the unfair competition action of misappropriation of the competitor’s clientele, provided in the text of art. 18 of the Law on competition no. 183 of 11.07.2012. Thus, according to the provisions in question, ‘It is prohibited to divert the competitors’ customers by misleading the consumer as to the nature, manner and place of manufacture, the main characteristics, including use, quantity of products, price or price calculation of the product ”.

The way in which that rule is worded clearly shows that the interests of consumers are directly affected in the context of the named act of unfair competition, or that its primary purpose is to protect the competitor’s customers and, consequently, the competitor. A relevant contextual case in which the misappropriation of the competitor’s clientele was found, including the one concluded through the Decision of the Plenum of the Competition Council no. CN-40 / 19-65 of 03.12.2020 („Vinăria Purcari” S.R.L. against „Timbrus Purcari Estate” S.R.L.). Thus, the Competition Council noted the following:

„There is therefore a clear difference in approach between the respondent undertaking and other undertakings on the same market as regards the manner in which the information relating to the identification of the wine producer and trader is disclosed, or the claimed undertaking fails to indicate the place of production of the wines bottled, indicating only the legal address of the producer, bottler and packer of wines marked with the sign „Timbrus Purcari Estate”, which indicates a certain degree of bad faith on the part of the respondent and generates the risk of misleading consumers…The information presented shows that as the costs of promoting the products in question decreased, the applicant’s sales were constantly positive, which would indicate the effect of the defendant’s actions of misleading consumers as to the place of manufacture of its products, in the consumer’s perception being generated an erroneous association of the respective bottled wines with the products of the undertaking “Vinăria Purcari” SRL, the clientele considering the identical commercial origin of the given products… So, the qualifying elements of art. 18 of the Law on competition at all levels of the probation standard for such an infringement: the initial existence of the risk of misleading consumers; the actual diversion of the competitor’s client by associating by consumers the products of the complained company with the products of the plaintiff company, in the context in which the latter produces, manufactures and bottles wines in the same place (Purcari village, Ștefan-Vodă district), and the former has a different industrial location (Sălcuța village, Căușeni district) from the place of cultivation and growth of vine plantations; the obvious effect of the bad faith actions of the company “Timbrus Purcari Estate” S.R.L. lies in the gradual positive evolution of the sales of bottled wines of the respondent ”.

Another act of unfair competition in which the primary affected party is the consumer is the confusion. Thus, according to the provisions of art. 19 para. (1) of the Law on competition no. 183 of 11.07.2012, “Any actions or facts that are likely to create, by any means, a confusion with the undertaking, products or economic activity of a competitor, manifested by:

a) illegal, full or partial use of a trademark, service emblems, company names, an industrial design or other objects of industrial property likely to create confusion with those legally used by another undertaking;
b) illegal copying of the shape, packaging and / or external appearance of an undertaking’s product and placing the product on the market, illegal copying of an undertaking’s advertising, if it has harmed or may harm the legitimate interests of the competitor.

Specific to this rule is the fact that the effect of confusion is generally specific to consumer perception. In this respect, it is the consumer who is primarily affected and, consequently, the undertaking which is the victim of the unfair competition is also affected. In the given circumstances, the findings of the Competition Council made by the same Decision of the Plenum of the Competition Council no. CN-40 / 19-65 of 03.12.2020, which also established the unfair competition action of confusion creation. Thus, the national competition authority noted the following:

„Regarding the existence of signs of violation of the provisions of art. 19 para. (1) lit. a) of the Law on competition, we mention the following: (i) the use of the individual verbal element “Purcari”, which coincides with the toponym that constitutes the name of the respective locality on the product label of the company “Timbrus Purcari Estate” S.R.L. constitutes in itself a risk of creating confusion among consumers in the conditions in which the undertaking “Vinăria Purcari” S.R.L. is the first producer of bottled wines in the respective wine region with related marketing activity dating from 2007, and the company „Timbrus Purcari Estate” S.R.L. is a vine grower in the same wine region, with related marketing activity dating back to 2016…the general results of the opinion polls carried out at the request of both the applicant and the applicant show that there is a certain degree of association by the consumers concerned of the applicant’s economic activity with the applicant undertaking and, accordingly, the latter’s economic activity. , about 58% of respondents consider that the name „Purcari Estate” is associated with the wine producer „Purcari Winery” SRL, and about 55% – believe that „Purcari Estate” translates / means „Purcari Winery” – according to the first survey and 27.7% of those surveyed in the second survey claimed that the wines were produced by a single producer and 8.4% could not answer, which indicates a degree of confusion among consumers regarding the commercial affiliation of the wine. those productsâ…Thus, the considerable financial effort regarding the promotion of its products by the applicant in relation to the sales made may constitute an effect of the actions of the company „Timbrus Purcari Estate” S.R.L. Therefore, the use of the name ‘Purcari’ on the label of the products marketed by the defendant is a sufficient precondition for creating a likelihood of confusion among consumers as to the origin of the products in question. A market launch difference of 9 years is a sufficient period of time for the average consumer to adapt to the commercial activity of the applicant company, and following the launch of the respondent with the respective products, rooting the concept of considering the company „Vinăria Purcari” S.R.L., as the only large producer of bottled wines in the given area, does not allow the average consumer to react promptly and make an appropriate distinction between the products marketed by the two undertakings…At the same time, the results of the opinion poll suggest a certain degree of actual confusion among consumers”.

In the same context, the findings of the Plenum of the Competition Council made through Decision no. CN-20/20-69 of 17.12.2020 (case of „Orhei-Vit” S.R.L. against „Natur Bravo” S.A.). Thus, the following were retained:

„…Based on the materials of the case, the fact of production and placing on the market of juices in similar packaging by Î.C.S. „Natur-Bravo” SA, constitutes a risk of creating confusion among consumers, due to the similarity of the concept of the respective packaging, or the use of the same distinctive elements, regardless of the approach, may create a false impression in the consumer’s perception of the commercial origin of the products. data”.

5.2  Subsequent damage of consumers’ rights/interests

The respective way of affecting the rights interests of consumers is specific to the other 3 actions of unfair competition.

In this sense, according to the provisions of art. 15 of the Law on competition no. 183 of 11.07.2012, “It is forbidden to discredit competitors, ie to defame or endanger their reputation or credibility by:

a) the dissemination by an undertaking of false information about its activity, about its products, meant to create a favorable situation in relation to some competitors;
b) the dissemination by an enterprise of false statements about the activity of a competitor or about its products, statements that harm the activity of the competitor.”

In the spirit of the cited norm, competing undertakings are affected primarily and consumers secondarily. A hypothetical example in this regard would be the following:

Undertaking X disseminates false information about the competing product of undertaking Y, thus causing the latter’s customers to migrate to undertaking X. Thus, consumers are subsequently affected by undertaking Y in the context in which they are misled as to the product of the undertaking whose customers they are (undertaking Y).

According to the provisions of art. 16 of the Law on competition no. 183 of 11.07.2012, “It is forbidden to instigate, in interest or in the interest of third parties, the unfounded termination of the contract with the competitor of another undertaking, the non-fulfillment or improper fulfillment of the contractual obligations towards the respective competitor by granting or offering, mediated or directly, material rewards, compensations or other benefits to the undertaking party to the contract”.

Therefore, the purpose of the instigating subject lies in causing the loss of the clientele of the victim company of the action of unfair competition of instigation to termination of the contract with the competitor. A hypothetical example in this sense could be the following:

Undertaking X encourages consumers (customers) of undertaking Y to terminate the contract with the latter by offering certain additional benefits to them in relation to the services provided by the latter. Thus, the consumers (customers) of undertaking Y are likely to be affected by the fact that undertaking X, for example, subsequently waives the benefits offered at the stage of instigating to the termination of the contract with undertaking Y or provides services of a lower quality than those provided by the undertaking Y.

According to the provisions of art. 17 of the Law on competition no. 183 of 11.07.2012, „It is prohibited to obtain and/or use by an enterprise the information that constitutes a trade secret of the competitor, without his consent, if they have brought or may harm the legitimate interests of the competitor.”

Therefore, the competitor of the undertaking which has obtained and/or used the trade secret of the latter is primarily affected by the fact that another undertaking secures certain advantages over consumers which it could have obtained only by obtaining that trade secret, and the consumer is subsequently affected by the fact that it may be misled as to the lawfulness of obtaining and/or using the trade secret by the unfair competitor. A hypothetical example in this regard could be the following:

Undertaking X obtains and uses the trade secret of undertaking Y, at the same time diverting the latter’s customers and causing it to migrate and subsequently providing certain inappropriate services by using the obtained trade secret. Thus, subsequently, the consumer is affected.

In practical terms, there may exist different situations in which consumers are affected either primarily or subsequently. However, by relating these situations to the unfair competition actions regulated in the Law on competition no. 183 of 11.07.2012, the consequence should always remain the same.

VI. CONCLUSIONS

In conclusion, it is worth mentioning the following ideas: (i) the European Union concept on unfair competition is different from the one in Republic of Moldova; (ii) the consumers’ interests in the context of unfair competition may be affected primarily or subsequently; (iii) the way in which the consumers’ interests are affected depends on the type of unfair competition actions realized by the competitors.

References

1. C-304/08, Plus Warenhandelsgesellschaft, 14 January 2010;
2. Civil Code of Republic of Moldova no. 1107 of 06.06.2002;
3. Decision of the Competition Council Plenum no. CN-40/19-65 of 03.12.2020
4. Decision of the Competition Council Plenum no. CN-20/20-69 of 17.12.2020;
5. Directive 2005/29/EC on unfair commercial practices;
6. Gorincioi, C., (2019). Cercetarea instrumentelor juridice de contracarare a actelor de concurență neloală. Teză de doctor în drept. Chișinău, 2019, 208 p.;
7. Guidance on the implementation/application of Directive 2005/29/EC on unfair commercial practices;
8. Law on competition no. 183 of 11.07.2012;
9. Law on consumer protection no. 105 of 12.03.2003.