Latest Practice in Protection against Unfair Competition

Any highly competitive market always faces a problem of unfair competition as each player seeks to distinguish itself from others by its own positioning on the market. Such distinguishing is often connected with the company’s reputation as it significantly and directly affects the perception of products by consumers.

Basic regulation which establishes the protection against unfair competition consists of the On Protection of Economic Competition Act of Ukraine, which established the procedural order of consideration of statements and case proceedings, and On Protection Against Unfair Competition Act of Ukraine, which established the basic principles of legal regulation of these relations, including the types of misconduct, are the main regulations in the sphere of protection against unfair competition.

Traditionally, the main types of unfair competition are:

• improper use of name, commercial (brand) name, trademarks etc.;
• copying the appearance of someone else’s product;
• misleading information (particularly in advertisements) regarding goods and services.

In recent years the last violation became the biggest concern for the Antimonopoly Committee of Ukraine both due to the number of violations and the comparatively easy case consideration and proof. In 2024 about three quarters of all unfair competition cases reviewed by the AMCU were about misleading information.

It should be noted that the fine for the spreading of misleading information is the same as for other cases of unfair competition and amounts up to 5% of the total sales of the goods (services) of the company (company group) for the year prior to the year in which the company is fined. And the AMCU has long stopped the practice of imposing the formal small fines for such violation, so the actual numbers usually reach up to several million hryvnyas for any usual active business and can reach to dozens of millions for big companies.

Those matters only emphasize the requirement for strict control over the company’s information and advertising policies as during the need to attract the consumer’s attention it is very easy to cross the invisible line between focusing on the positive quality of the product and providing misleading information on the quality of the product.

So what is considered misleading information?

According to Article 15-1 of the Law of Ukraine On Protection Against Unfair Competition spreading of misleading information means providing information by business entity directly or through another person to one, or several, or indefinite number of persons, including in advertising, incomplete, inaccurate or false statements, in particular, at the result of chosen method of their presentation, certain facts concealment, or indistinct formulations that have affected or shall affect these persons to purchase, to order, or to realize (to sell, to deliver, to execute, to supply) products, works, services of such a business entity.

Misleading information includes statements that:

• contain incomplete, inaccurate or false data related to the origin of the product, manufacturer, seller, manufacture method, source and method of purchasing, realization, quantity, consumer values, quality, package contents, validity, standards, specifications, features of the sale of products, operations, services, price and promotional events on them, as well as the essential terms of agreement;
• contain incomplete, inaccurate or false data related to the financial standing of the entity or its economic activity;
• refer to authorities and rights that are not enjoyed, or relationships that are not involved in;
• refer to production output, purchase, sale or supply of products, works and services that were not performed on the day of dissemination of information.

Unfortunately, the provisions contained in Article 151 of the Law of Ukraine On Protection Against Unfair Competition are fairly subjective, which is why usually in practice, especially while creating promotional material, the question is related to whether the advertising video, announcement or other types of advertisements correspond to the legislation on protection against unfair competition.

It should be noted that the Antimonopoly Committee of Ukraine takes up a strict position related to the interpretation of the provisions of the said article. In particular, the Committee assumes that any promotional information shall be absolutely true (the specifications of good listed on it shall correspond to reality), accurate (exaggeration, or using other artistic device are allowed in the advertising only if the consumers do not experience misunderstandings related to the characteristics of the good or terms for providing the services) and full (advertising shall not generate misunderstandings related to the specification of goods or terms for provision of the services through concealment of information, or failure to provide the consumer with important information).

But all the above, nevertheless, does not provide clear guidelines on what can be considered as a violation. Thus, the ACMU case practice becomes critically important to distinguish possible cases of violation.

It should be noted that in 2024 the practice of the Antimonopoly Committee of Ukraine in misleading information cases was substantially focused on pharmacy and adjacent markets.

A number of cases reviewed by the AMCU were about spreading misleading information about dietary supplements and cosmetic creams. An interesting thing in those cases was a new approach to the proof of the violation used by the AMCU.

For example, several cosmetic creams claimed that they have medical properties and can be for different kinds of pain, have an anti-edematous, anti-inflammatory and analgesic effect etc.

Similarly, dietary supplements had claims to have some kind of medical effect: antitussive effect, positive effect on veins and arteries, normalization of sugar levels, antiviral effect, etc.

In those cases, the AMCU not only focused on the matter of absence of any kind of scientific confirmation of creams and dietary supplements had stated the medical effect, but also stated that the method of presenting such misleading information had a sign of describing a pharmacological effect, which can be used only for medicinal products. Creams and dietary supplements are not medicinal products and, therefore, such descriptions cannot be used.

Other interesting cases of 2024 were cases about mineral water. Two Ukrainian producers of mineral water were fined for spreading misleading information about the positive effects of their products. Claims included that it speeds up the metabolism, cleanses the body of toxins, gives the skin a glow, has a powerful antioxidant effect and strengthens a person’s immunity. In both cases mentioned the producers as expected were not able to provide any confirmation that the mineral water did actually have the declared effect.

It should be noted that in all of the above-mentioned cases the AMCU not only considered the misleading information contained in advertisements or print on the packaging of the products, but also in information disseminated on the Internet. What is most interesting is that the Committee has also taken into account the information placed in various social networks like Facebook, Instagram, etc.

In this regard, another very distinct and interesting case should be noted. The violator was accused of spreading misleading information about their experience, which is somewhat an usual occurrence in this type of unfair competition. What is interesting about this case is how misleading the information presented was. The violator has placed several photos of its “finished” construction projects on its website. During consideration of the case it was, however, established that the provided photos were not taken on any company which had dealings with the violator. Therefore, the actual completed construction works had no connection with the violator’s own activity.

The violation was not that the company had provided false descriptions on its website but provided photos which had no relation to the company’s activity. It is important to note that the actual description of the experience provided on the website was, in fact, truthful, so the violation was only the actual photos.

Therefore, in Internet advertisement it is equally important to not only use trustful statements about the product, but also all other information regarding the product (including photos) shall be correct.

Another conclusion that can be drawn based on the AMCU’s practice in 2024 is that a considerable number of cases were opened on the basis of submitted claims and not at the AMCU’s own initiative. Taking into consideration that the maximum fine imposed by AMCU was 17.7 million UAH, it proves that submitting a claim to the AMCU can be used as an effective method of limiting unlawful “creativity” in an advert made by a competitor.