Marketing communication and unfair competition

1. Marketing communication and unfair competition Iveta Chadimová Ph.D. student Metropolitan University Prague

2. Theaimofthepresentation • Theaimofthepresentationis to seekconnectionsbetween marketing communications and the unfair competition. • Wewillnotewhich marketing communications are ormaybedeemed to be fair or unfair.

3. Definitionsof marketing, marketing communication and basic typesofcompetitivebehaviourpunishable by unfair competitionlaw • Marketing is a business strategy, whichaims to sell as many goods as possibleatpremiumprices. • Marketing communications are signals by whichthecompetitoristrying to influence thebehaviourofconsumers, rival companies and other market participants. • Competitivebehaviourispossible to divide as fair or unfair. Theextremepolesof fair and unfair behaviour are: • LURING versus DECEPTION, INITIATIVE versus AGGRESSION, SYMBIOSIS versus PARASITISM Wecanfind marketing communications, betwentheextremepoles, whichfairnessis not clear. Wesaythatthey are in greyzones. Theirfairnessorunfairnesscanbejudged by court.

4. Privatelawlegislationof unfair competition in the Czech Republic under New Civil Code • The unfair competitionisincluded in theAct 89/2012 Coll. (called New Civil Code) fromthe 1th ofJanuary 2014. • TheActprovidesustheconditionsunderwhich marketing communicationcouldbedescribed as fair or unfair. • The unfair competitionlawisbased on generalclause (§2976 (1) NCC) and on theillustrative list ofspeciallegalclassifications (§ 2976 (2) NCC). • The list isonlyillustrative , whichmeansthat, theothercompetitiveactivitiesof unfair competitioncanoccurin practice. • Speciallegalclassifications are the most commoncompetitiveconductsof unfair competition, which are conceived more specifically in theprovisions §§ 2977 – 2987 NCC. • Meansoflegalprotectionagainst unfair competitionand thepersonsentitled to requestapplication in thecourt, are governed in provisions§§ 2988 and 2989 NCC.

5. General clause and judge made (judicial) legalclassificationof unfair competition – parasitismor „free - riding“ • General clause in provision § 2976 (1) NCC containsthe basic conditions to be done forthe Unfair competition: • Actingin theeconomiccontact, • Theconductiscontrary to goodmoralsofthecompetition, • Theconductiscapableofcausinginjury to othercompetitorsorothercustomers. • The basic conditionsofthegeneralclausemustbe met cumulatively – they are necessary and sufficient. • The unfair competitiveconductsundergeneralclausewhichrepeatedoften in thepractice are called „judge made legalclassifications“. • Judge made legalclassifications are not expresslygoverned in NCC, but theycanbeinferred on thebasisofthethreeconditionsofthegeneralclause. • Theexampleofoneofthejudiciallegalclassificationsofthe unfair competitionisparasitismor„free – riding“.

6. Judiciallegalclassification: „Free - riding“ – takeapartlorryand slavishimitation • OriginalSlavishimitation • Child´stoy – takeapartlorryChild´stoy – takeapartlorry • Producer: DETOA Albrechtice s.r.o. Producer: WOODYLAND s.r.o.

7. Judicial legal classification: „Free - riding“ – take apart lorry and slavish imitation • Theparasiticcompetitormade its toys in China. The price at the Czech market was much lower than oftheoriginal toy. • The parasitic competitor imitated full details, including colours, so thatboth oftheproducts were completely identical. • Marketing communication, in this case unfair, was the attractive appearance of the product (its design), combined with interesting functional principle of the toy. • The slavish imitation is clear parasitismor "Free-riding" on the work of theoriginal producer. • It's anexploitation of development, testing at the market, finances and mental effort of the original producer.

8. Speciallegalclassificationsof unfair competitionwherewecanfinddeception • Deception: it´sthe unfair competitiveconduct, when a competitoristrying by different marketing communications to misleadaconsumerabouttheproduct, serviceorthe rival company, thereforetheconsumerwould make a buyingdecision, whichwould not make otherwise. • Theoppositeofdeceptionisluring (e.g. advertisingexagerationwhichisallowed). • Themarketing communicationsthatmisleadare: • Misleadingadvertising (§ 2977 NCC) • Misleadingdesignationofgoodsorservice (§ 2978 NCC) • Commonprovision on misleadingadvertising and misleadingdesignationofgoodsorservice (§2979 NCC) – sometimesit´sevenpossibleto misleadwithtrueinformation. • Comparativeadvertising, whichis not allowed by law (§ 2980 NCC) – explicitlyor by implicationidentifiesa competitoror his goodsorservice (therecanbeeitherdeception, orparasitismoraggression). • Likelihoodofconfusion (§ 2981 NCC) - providedthatthisconductislikely to cause confusionorfalse idea ofconnectionwiththecompetitor´sundertaking, tradename, trademark, registered design, artisticperformance, appearanceoftheproductordomainnameetc.

9. Speciallegalclassificationsof unfair competitionwherewecanfindparasitism • Parasitismor „Free – riding“ differsfromdeception. Thereis not made theimpressionaboutdifferent entity ordifferentproductorservice. • Thecompetitorispresentedundertherealname, but he oftenclaimsthat his product has thesamecharacteristics as thebrandedproductofthe rival competitor, but it´scheaper. • Theoppositeofparasitismissymbiosis. • Symbiosismeansthat not always, theparasiticconductisdetrimental to thecompetitor, whosereputationisriding on. Some sort ofsymbiosisis in accordancewithlaw ( e.g. the case „Champomy“ in the case lawoftheCourtof Appeal of Paris 2007) • Champomywas a sparkling apple drink. The word was derived from the French word "Pomme" - an apple. • The court concluded that children who have accustomed to drink Champomy during their birthday parties, would be more likely to consume Champagne in their adulthood. • The rival'scompany conduct could be to the benefit of producers of Champagne.

10. Special legal classifications of unfair competition where we can find parasitism • The marketing communications that are parasitic are: • Free - riding on reputation of the undertaking, product or service (§ 2982 NCC) • Commercial Bribery (§ 2983 NCC) – a special sort of parasitism

11. Speciallegalclassificationsof unfair competitionwherewecanfindaggression • Aggressionisan unfair actofcompetitortowardsconsumers, or rival competitors, thatis not expresselygoverned in New Civil Code, but itcouldbeinferredunder lines ofspecialprovisionsofthe unfair competition: • Denigration (§ 2984 NCC) – theexampleofdenigrationisdamagingofthe goodwill ofanothercompetitor by untrueortrueinformation. Itmustbecapable to cause him a damage. Denigrationisoften a marketing communication. • In somecaseseven„Violationoftradesecret“ (§ 2985 NCC) canbejudged as aggression– thereis a double protectionoftradesecret in the Czech law – as a right in rem (§ 504 NCC) and also as thespeciallegalclassificationofthe unfair competition. • Unacceptablenuisances (§ 2986 NCC) – newspeciallegalclassification, whichwasinsertedinto NCC due to thedevelopmentofelectronicmeansofcommunications and unfair tradepracticesthatappearedwiththem. • Threat to humanhealthortheenvironment (§ 2987 NCC) – e.g.thetoyatthe market, whichisdangerousforthehealthofthechild. In this case itis not directly marketing communication , but theproductitself, whichoccursatthe market and itisdangerous. • Theoppositeofaggressionisinitiative. Theabstractmeasure are goodmoralsofcompetition.

12. Meansoflegalprotectionand thepersonsentitled to requestapplication. • Meansoflegalprotectionagainst unfair competitioninclude: • Cease and desistorder (e.g. refrainfromspecificadvertising) • Order to withdraworrecall (e.g. Changeofthetradename and registeringofthenewtradename in theCommercialRegister) • Compensation as a remedyofthe non-pecuniarydamage (e.g. anapology in thepress, orpayment in cash, ifthere are reasonablegrounds). • Damages(ifthepropertyof a specificcompetitordiminished, becauseofthe unfair competitivepracticeofanothercompetitor) • Unjustenrichment (e.g.illegal profit by a specificcompetitorwhoenrichedhimself by copyinganotherimaginativeproduct) • Person whoisactivelyentitled(locusstandi) to requestapplication in thecourt (e.g. Not onlya competitorora customer, but alsoa natural person, whosenamewasunfairlyused in advertising). • Person (passively) entitled to requestapplication in thecourt (e.g. a competitorwhocommittedthe unfair competitionoranauxiliary person whomade a contributionto thedisclosureoftradesecretorbribery)

13. Conclusion • The most importantprivate standard in the Czech Republic, whichregulatestheprotectionagainst unfair competitionfromthe 1 thJanuary 2014 is Civil Code no. 89/2012 Coll. (New Civil Code) • NCC alsoregulatesthearea of fair use of marketing communications. Crucialpart isthatone, whichcontainslegislationprotectingagainst unfair competition. • Thelawagainst unfair competition in the NCC doesn‘tdiffersignificantlyfromthepreviouslegislationfor unfair competition. • As forlegislation and practical use, NCC isbuilt on thephilosophyof natural law.

14. ThankYouforyourattention Iveta Chadimová