While a free economy is what most countries work towards, ensuring an adequate amount of fairness in a free economy is where the challenge lies. An environment which is conducive to competition sometimes unknowingly breeds the worst forms of unfair practices. The law on unfair competition is where safeguards for such practices can be found.
Although there is no statute on unfair competition in India, the principles and remedies in relation to such a wrong have been derived largely from tort law. Article 10bis of the Paris Convention for the Protection of Industrial Property, to which India is a signatory, has also thrown some light on the said concept. Article 10bis reads as follows:
(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 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 as 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 name, as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity of the goods.
With time, the term ‘unfair competition’ in commercial law has evolved to include a whole spectrum of wrongs. Examples of unfair competition include infringement of a trademark or service mark, passing off, false representations, false advertising, dilution of goodwill in trademarks, derogatory comparative advertising, theft of trade secrets, etc.
The Courts in India have also not hesitated in accepting such acts as being forms of unfair competition. The Supreme Court once held that when by lapse of time a business carried on under a particular trading name is associated with one person and that person acquires reputation and goodwill therein, then such business becomes property of that person and is protected by Courts. If a competitor subsequently initiates business under the same trading name, injury will be caused to the earlier proprietor and in which case it is not required to prove that the adoption of the trading name of the subsequent adopter was fraudulent.
The Supreme Court also observed that honesty and fair play should be the basic policies in the world of business. It was also observed that law on this matter is designed to protect traders against that form of unfair competition which consists in acquiring for oneself, by means of false or misleading devices, the benefit which has already been achieved by rival traders.
Free competition helps bring about equilibrium between demand and supply and fair competition protects the interests of the consumers and the industry as a whole. The Indian Government has also put in place the Competition Act, 2000 which prohibits certain anti-competitive agreements which are likely to have an appreciable adverse effect on competition. The said Act also prohibits abuse of dominant position of entities in the economy. According to the Act, agreements in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which cause or are likely to cause an appreciable adverse effect on competition within India cannot be entered into. However, the Act carves out an exception for intellectual property right holders to impose reasonable restrictions in order to restrain infringement of its rights. The Act further provides that an abuse of dominant position occurs in circumstances when an enterprise or a group:
(1) imposes unfair or discriminatory conditions in purchase or sale of goods or service or price in purchase or sale (including predatory price) of goods or services;
(2) Limits or restricts –
(a) production of goods or provision of services or their market; or
(b) technical or scientific development relating to goods or services to the prejudice of consumers; or
(3) indulges in practice or practices resulting in denial of market access;
(4) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts;
(5) uses its dominant position in one relevant market to enter into, or protect, other relevant market.
The Act lays down certain factors for determining an appreciable adverse effect on competition and abuse of dominant position by persons, enterprises or groups of enterprises.
As a result of a free and fair competition culture prevailing in the country, India has become one of the most preferred destinations for foreign investment in most liberalized sectors of industry in the economy.
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