Legal news | 9 de Enero del 2008

THE NEW ERA AND UNFAIR COMPETITION

The New Era and Unfair Competition

Along with new ways of doing business, there have also arisen new methods of competition with respect to goods and services offered by the market. For this reason, legislators across the world have attempted to prevent these new methods of competition from damaging the image, the industrial sectors, and the credibility which the competitors in the market have achieved in creating vis-à-vis certain goods and services.

On the other hand, not only have there been attempts to protect the producers and providers of goods and services, but also to protect the consumers. This is by virtue of the fact that the consumers are the most likely to be mistakenly involved in the acquisition of goods or services which they intend to acquire.

In Mexico, protection against unfair competition is regulated by the Industrial Property Law, demonstrating that one of the principal objects of the law is to “prevent acts against industrial property or that constitute unfair competition vis-à-vis the said industrial property, and to establish sanctions and penalties with respect thereof”. There is also the fact that the various International Treaties enacted by Mexico directly regulate unfair competition in our country, by virtue of being accords which exist solely within the Constitution, as interpreted by the National Supreme Court of Justice.

Similarly, the Federal Consumer Protection Agency (PROFECO) in Mexico is charged with prevention, in practice, of misleading advertising that may arise in business and which directly affects consumers or end-users of the goods or services offered. In this régime, PROFECO has worked along side OECD member countries in the creation of guidelines such as the Consumer Transnational Fraudulent and Dishonest Trade Protection Directives, a document which seeks for member countries to search effective measures to slow providers and individuals who undertake fraudulent and dishonest commercial practices, as well as seek measures to repair the damage caused to consumers by said practices.

With respect to Treaties and International Conventions enacted by Mexico and observance of which are obligatory in order to prevent acts of unfair competition, we have the North American Free Trade Agreement (NAFTA), and the Paris Convention, and it is of extreme importance to highlight that which is in effect outlined by point 2 of Article 1721 in principia of the NAFTA agreement:
“Article 1721. Definitions
1:. …
2. For purposes of this Agreement:
in a manner contrary to honest commercial practices means at least practices such as breach of contract, breach of confidence and inducement to breach, and includes the acquisition of undisclosed information by other persons who knew, or were grossly negligent in failing to know, that such practices were involved in the acquisition;”

For its part, Article 10bis of the Paris Convention establishes the following on the subject of Unfair Competition:
(1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition.
(2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.
(3) The following in particular shall be prohibited:
(i) all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor;
(ii) false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor;
(iii) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.
Considering all the above, we must, by use of the tools made available within the Treaties and Conventions in which Mexico participates protect, as applicable Mexican Legislation on the subject evidences the existence of and the need for protection against various types of Unfair Competition which exist. Of principle notability, there exist the following types of Unfair Competition.

I. Non-fulfillment of Contracts as long as there is a market benefit derived from the non-fulfillment of the obligations, and one of the counterparties is intentionally harmed.

II. Abuse of Confidence undertaken by a worker or a person, corporation, or legal entity who has had access to information classified as “confidential” or to know-how belonging to another person, corporation, or legal entity, and has used this to create direct competition to the owner of said information.

III. Creation of Confusion with respect to whether the product is sponsored by another brand, the use identical or similar brands in order to identify different products, et cetera.

IV. Discrediting of a product or service with intent to undermine its reputation in the market.

V. Induction of error in terms of the exploitation of the creativity of another producer, inventor, or service provider, thereby leading the consumer into an error vis-à-vis the product or service that the consumer is actually acquiring.

VI. Comparative Advertising referring to a reduction in the credibility of a good or service, leading one to believe that one product is as good as or better than another.

VII. Dumping, which consists of selling a good or service at a cost less than the cost of production with the objective of taking over the market.

In light of everything enunciated above, we consider it adequate to conclude that new legislations which operate under the auspices of neoliberalism seek to protect each participating element in the market, given that an economy of this nature can only function optimally when property rights are respected. This is the case not only for tangible assets, but also for intangible assets. The development of the later is of primary importance given that global economic development depends on this. We have seen such to be the case above all in wake of the technology boom in 1995 and its influence on the stock market. By the same token, our firm projects itself in this global environment in order to facilitate information and necessary legal defense for our clients in order to facilitate our clients’ participation in this game which we call globalization.

Manuel Giménez Martínez, Esq.
Israel Cedillo Lazcano, Esq.