Fair play

Market participants must adhere to laws and good business practices. This is what many legal provisions and logic tell us—a healthy market cannot exist without fair competition. Sometimes, businesses behave in ways that endanger other entities, which constitutes unfair competition. 

Unfair competition is regulated by legal norms, with basic provisions found in our Trade Act. At the European level, the EU issued the Unfair Commercial Practices Directive 2005/29/EC in 2005 to harmonize laws regarding unfair competition. 

Unfair competition according to the Trade Act 

Article 41 of the Trade Act defines unfair competition as actions of a trader or service provider aimed against a market competitor, violating business ethics and good business practices, causing or potentially causing harm. Unfair competition is prohibited. 

This article lists actions characteristic of unfair competition, such as making false and offensive claims about a competitor, disclosing data about a competitor or their goods/services aimed at damaging their reputation, acquiring, using, and disclosing trade secrets without consent, selling goods with misleading labels, unauthorized use of quality marks, and giving significant gifts or benefits to secure an advantage over competitors.  

Recognizing unfair competition requires expert knowledge. 

What if you suffer damages due to unfair commercial practices? 

If you suffer damages from an act of unfair competition, you are entitled to compensation. You need to file a lawsuit for unfair competition, demanding the determination of the act, prohibition of its continuation, remedying the consequences, and compensation (both material and immaterial for business reputation damage). 

Remember, there are two deadlines for filing a lawsuit—six months from discovering the damage and the offender (subjective deadline) and three years from the act’s end (objective deadline). Missing these deadlines means losing the right to file a lawsuit. The Trade Act states that proceedings for unfair competition are urgent. 

Case law

In the Commercial Appellate Court’s ruling Pž. 5288/22, it was stated that responsibility for unfair competition can only be determined in each specific case, considering harmful actions of each market competitor. This shows that civil liability is individual and assessed separately for each offender. The same principle applies regardless of whether the legal entities are connected by status. In this case, the plaintiff did not specify actions by the first defendant that could qualify as unfair competition under the Trade Act. 

In ruling Pž. 3533/20, the Commercial Appellate Court established that the subjective deadline for filing a lawsuit began when the plaintiff filed a proposal with the Intellectual Property Office to invalidate a competitor’s trademark, as they knew of the damage then, not from the day they received notification of their trademark registration rejection. 

In ruling Pž. 2731/20, it was stated that the condition for establishing unfair competition is proving the existence of damage caused or that could be caused, even if the damage amount cannot be proven. Another condition is that the act must cause or could cause damage to the competitor for the lawsuit to be valid. 

Lastly, in ruling Pž. 9422/04, it was established that there is no unfair competition in the case of specialized magazines that do not represent daily newspapers and are directed at a specialized audience capable of choosing their desired magazine without confusion. Although the defendant in the first issue of their magazine made a disloyal and false statement towards the plaintiff and its users, the court found that the consequences were not drastic enough to permanently prohibit the defendant from publishing under the contested name. Since the defendant did not copy the plaintiff’s content, the court stated that it is up to the users and market to determine which magazine has better success and that this competition does not cause confusion among users. 

Breach of trade secrets as unfair competition 

As mentioned in Article 41 of the Trade Act, disclosing trade secrets is one form of unfair competition. 

Illegal acquisition, use, and disclosure of trade secrets are also regulated by the Trade Secrets Act. Acquiring trade secrets without consent is illegal if done in one of the ways prescribed by this Act. The use or disclosure of trade secrets is illegal if done without consent by a person who acquired the secrets unlawfully or breached a confidentiality agreement or contractual obligation. 

Our legislation also imposes a duty to protect trade secrets under the Companies Act, stating that persons with special duties to the company, such as significant shareholders, directors, board members, and proxies, must protect them. 

Be aware that the Trade Secrets Act also lists lawful ways to acquire trade secrets. 

What to do in case of illegal breach of trade secrets? 

If a trade secret is breached, the holder can file a lawsuit to determine the breach, stop the breach or prohibit the use/disclosure of the secret, prohibit the production, offering, marketing, or use of goods involving the breach, destroy documents, materials, substances, or electronic documents containing the secret, and impose appropriate measures on the goods involved in the breach. 

Against a person whose unauthorized actions pose an immediate threat of illegally acquiring, using, or disclosing a trade secret, the holder can file a lawsuit to stop such actions and prohibit illegal acquisition, use, or disclosure. 

This lawsuit can be filed within one year from when the holder discovered the breach and the person suspected of the breach (subjective deadline), but no later than five years from the breach or last breach (objective deadline). The procedure is urgent. 

Against a person who breached a trade secret, the holder or licensee can claim damages under general rules on compensation and the Trade Secrets Act. The court will consider all case circumstances, such as negative economic consequences. These persons are also entitled to compensation for non-material damage. 

Additional information 

Many businesses face situations where competitors’ actions in the relevant market are unfair. Besides harming competitors, unfair practices also affect consumers and the market as a whole. 

Common examples of unfair competition are violations of intellectual property (e.g., trademarks) as market participants acting unethically seek profit and consumer trust at the expense of others’ reputations, innovative solutions, and popularity. 

Unfair competition also occurs when registering business names, a crucial step in establishing a company. Despite the legal rules and practices of the Business Registers Agency (names must differ from existing ones by several criteria), it can happen that a business name is registered similarly to another’s with unethical intent. 

As mentioned twice, unfair competition has many forms, so it is advisable to hire a lawyer for legal protection against unfair competition, intellectual property protection, and advice when founding a company and choosing a business name. 

Note: This text does not constitute legal advice but reflects the author’s personal opinion.