Act of Unfair Competition – What are Acts of Unfair Competition?

Act of Unfair Competition – What are Acts of Unfair Competition?
Jakub Chajdas

Jakub Chajdas

Partner / Attorney-at-law

Competition is an integral part of business activity. Unfortunately, not all entrepreneurs play fair. What are acts of unfair competition and how can you protect yourself against them? Let’s find out!

What is an Act of Unfair Competition?

An act of unfair competition is an operation of an entrepreneur that:

  • is undertaken as part of business activity,
  • is contrary to law or good practices,
  • and threatens or infringes the interests of another entrepreneur or customer.

The Act on Fighting Unfair Competition contains a detailed list of prohibited actions. It also specifies the penalties for committing acts of unfair competition.

Types of Acts of Unfair Competition

Based on the Unfair Competition Law, two types of acts can be distinguished:

Named Acts of Unfair CompetitionThese are actions specifically defined in the Law, such as: -product imitation, -service imitation, -bribery, -hindering access to the market -unfair advertising.
The General Clause of an Act of Unfair CompetitionIt includes any action that meets the three conditions outlined in the Law. It helps identify an act of unfair competition even if the action is not explicitly listed in the Law.
Types of acts of unfair competition
Act of Unfair Competition

Acts of Unfair Competition – Overview of Examples

The Law contains an open-ended list of acts of unfair competition. In the table below, we have presented the most common ones in business relations.

Act of Unfair CompetitionDescriptionExample
Misleading company designation– involves the use of a name, emblem, abbreviation, or other characteristic symbol that has been previously registered by another company;
– any form of another entrepreneur’s designation is protected,
– the mere possibility of confusion is enough
A company operates under the name “Ażury&Abażury” but uses the abbreviation “A&A” in its advertising. The designation “A&A” belongs to the jeweller based in Łódź
Breach of business confidentialityOccurs especially when:
The secret is disclosed without the consent of the authorised party. It results from unauthorized access, appropriation, copying of documents, etc.
The information is used or disclosed without the consent of the authorised party. At the same time, it violates the obligation to limit its use or disclosure, – The information was acquired dishonestly and then disclosed, used, or acquired,
The person knew or with due diligence could have known that the information was acquired dishonestly.
A former employee of company X knows confidential information about a new product. He discloses it to Company Y. Company Y uses the information to develop and launch a product before Company X.
  Hindering access to the market– The Act defines a range of actions that hinder access to the market to other entrepreneurs.Selling below cost; customer discrimination; charging excessive fees.
Prohibited or misleading advertisingAdvertising contrary to law, good practices, or human dignity. For example illegal, offensive, or discriminatory advertising, – Misleading advertising. It can include false information or information that deceives through incompleteness, ambiguity, or difficulty in verification. – Advertising abusing customers’ emotions. Especially those appealing to fear, prejudices, or gullibility, especially of children. – Advertising that impersonates neutral information. It encourages purchase under the guise of reliable information – Privacy-infringing advertising. It includes persistent importunity in public places, sending unwanted goods, or misuse of media.Company X produces and sells a face cream that supposedly removes wrinkles and smooths skin within a week. In its TV ad, women with youthful skin claim they’ve been using the cream for a week and are thrilled with the results.
Unfair competition by discount stores– Involves a ban on selling private-label products by discount chains in quantities exceeding 20% of those brands’ sales value.If discount chain X reaches 100 million PLN in monthly sales, private-label goods can account for up to 20 million PLN. This means 20% of 100 million.
Unjustified extension of payment terms– This can negatively affect the financial liquidity of suppliers and contractors. It can also hinder conducting their business.Company X provides IT services to Company Y. The contract between X and Y specifies a 30-day payment term. Yet, company Y regularly delays payments, paying even 90 days later.
Examples of Acts of Unfair Competition

Consequences of Committing an Act of Unfair Competition

An entrepreneur who commits an act of unfair competition may face:

  • civil liability,
  • criminal liability,
  • administrative liability.

Examples of consequences include:

  • an order to refrain from the act of unfair competition,
  • an order to remove the effects of the act of unfair competition,
  • payment of compensation to the injured party,
  • imposing a financial penalty.
Act of Unfair Competition

Protection Against Acts of Unfair Competition

The Unfair Competition Act offers various tools to protect the injured party from competitors’ unfair practices.

Possible Demands:
abandonment of prohibited actions,
removal of the effects of prohibited actions,
statement with appropriate content and form,
compensation for the damage caused,
return of unjustly obtained benefits,
awarding an appropriate sum of money for a social cause,
destruction of products, packaging, advertising materials, etc., related to the act of unfair competition.
Protection Against Acts of Unfair Competition

Act of Unfair Competition – Court Proceedings

Unfair competition cases are handled in the district court with jurisdiction over the defendant’s registered office.

Claims for an act of unfair competition become time-barred after 3 years. The limitation period begins separately for each violation.

The court may:

  • apply one of the protection measures listed in the Act,
  • include the value of destroyed items in the compensation amount.

Violation of trade secrets – specific claims of unfair competition

The Act on Combating Unfair Competition provides for additional claims. They may be pursued in cases of violation of trade secrets.

Disclosure of information about the judgment to the publicCompensation instead of other claims
At the injured entrepreneur’s request, the court may require the defendant to disclose the judgment or its content to the public. However, this possibility is subject to certain limitations:
-The disclosure must be justified by the circumstances of the case. For example by the manner in which the act of unfair competition was committed. The value of the disclosed information also matters. The consequences of the violation and the likelihood of committing similar acts in the future are yet another factor.
– If a defendant is a natural person, the disclosure must not conflict with his justified interest. This concerns particularly the protection of personal rights.
– The disclosure of information must not lead to the disclosure of the trade secret itself.
Instead of demanding to stop the infringement, remove its effects, issue a judgment regarding the products, etc., the court may choose another measure. At the request of defendant, it can oblige him to pay compensation to the injured party. Its amount cannot exceed the amount that the injured party could obtain by granting consent to use the trade secret. Compensation may be awarded only after meeting the following conditions:
– The defendant didn’t know or, while exercising due diligence, could not have known that the information was a trade secret. He was not aware that it was obtained illegally.
– The disclosure of information violated the obligation to limit its use or disclosure.
– Refraining from infringement would cause disproportionate damage to the defendant.
– Payment of compensation does not violate the legitimate interest of the injured party.
Special claims of an act of unfair competition
Act of Unfair Competition

Criminal Liability for Acts of Unfair Competition

In addition to civil law protection, the Act on Combating Unfair Competition and the Penal Code provide for criminal sanctions for acts of unfair competition.

Type of crimeDescriptionSanction for an act of unfair competition
Violation of trade secrets (Article 264 of the Penal Code)Whoever, contrary to the obligation, discloses or uses information being a trade secret, thus causing serious damage to it. This concerns e.g. former employees disclosing company secrets.

A person who illegally obtained information about a trade secret and disclosed or used it is also subject to punishment.

Criminal liability is also imposed on a person who disclosed or used information being a trade secret, which he or she became aware of during court proceedings concerning the infringement of a trade secret.
Fine, restriction of freedom or imprisonment for up to 2 years.
Disclosure of confidential information (Article 266 of the Penal Code)It applies to individuals who have disclosed confidential information obtained through their work or activities. For example public, social, economic or scientific activity. Unlike Art. 264 of the Penal Code, it does not require causing significant damage to the entrepreneur. Attempting to commit this crime is also punishable.  Fine, restriction of freedom or imprisonment for up to 2 years.
Copying the external appearance of a product or introducing it into circulation. It concerns e.g. packaging.To deceive customers about the manufacturer or product, causing significant harm.A fine, restriction of freedom or imprisonment for up to 2 years.
Avalanche SellingOrganizing or directing an avalanche selling system.Imprisonment from 6 months to 8 years.
Deceiving Customers through Failure to identify Goods or ServicesFailure to label goods or services. Misleading customers about origin, quantity, quality, ingredients, production method, suitability, application, repair, maintenance, or other key characteristics. Additionally, failing to disclose risks of use, thereby endangering customers.Arrest or fine.
An act of unfair competition concerning sales or advertisingCommitting an act of unfair competition in the field of advertising or sales.Arrest or fine.
Misleading customers about company nameSpreading false or misleading information about a company in order to damage it.Arrest or fine.
Criminal sanctions for acts of unfair competition

An Act of Unfair Competition. Summary

The fight against unfair competition is a challenge for all market participants. Entrepreneurs, consumers and supervisory authorities. It is important that we are all aware of the risks associated with acts of unfair competition.

Do you want to learn more about the act of unfair competition? Our experts are ready to help you. Feel free to contact us!

FAQ – Questions and Answers about Act of Unfair Competition

What is an act of unfair competition?

It is an action contrary to the law and good practices. It threatens or violates the interest of another entrepreneur. It involves deceiving customers about the origin of goods, imitation of products. It also concerns spreading false information about competitors. Unauthorized disclosure or use of trade secrets belonging to others qualifies too.

What are examples of acts of unfair competition?

The Act on Combating Unfair Competition lists examples of acts, they include:
unfair advertising,
deceiving as to the origin of goods,
imitating products,
disseminating false information about the competition,
bribing competitors’ employees,
disclosing or using someone else’s trade secrets.

What claims does an entrepreneur have in cases of unfair competition?

You may demand the stop of unlawful actions or the removal of their effects. Moreover, you can claim an issuance of an apology statement. Compensation for damages or return of unjustly gained benefits is also possible. Furthermore, you can acquire awarding an appropriate sum for a social purpose related to culture or national heritage. This applies if the act was culpable.

Does an act of unfair competition involve criminal liability?

Yes. In some cases, the perpetrator of an act of unfair competition may face criminal liability. For example for disclosure of trade secrets or other economic crimes.

What is a trade secret and how is it protected?

A trade secret is information of economic value that is confidential. The entrepreneur has taken steps to keep it confidential. Unauthorized disclosure, use, or acquisition of such information is an act of unfair competition.

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