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- Dr Oleksiy Kot
Partner, ANTIKA Law Firm
- Alexander Tretiakov
Senior Associate, ANTIKA Law Firm
Latest Practice in Protection against Unfair Competition
Unfair competition is a standard problem which businesses face on any developing market.
Basic regulation, which establishes protection against unfair competition, consists of the Law of Ukraine On Protection of Economic Competition, which established the procedural order for consideration of statements and case proceedings, and the Law of Ukraine On Protection Against Unfair Competition, which established the basic principles of legal regulation of these relations, including types of misconduct, are the main regulations in the sphere of protection against unfair competition.
The legislation defines the following types of unfair competition (formal composition of misconducts):
- improper use of name, commercial (brand) name, trademark (a trademark for goods and services), advertising materials, product packaging design and periodicals, other indications or use of similar designations;
- introduction of another entity’s goods under one’s own trademark into commercial circulation;
- reproduction of appearance of another entity’s product and its introduction into commercial circulation without explicit indication from the manufacturer of the copies;
- dissemination of misleading information (particularly in advertisements) regarding goods and services;
- comparative advertising;
- inducing a boycott of an entity;
- inducing a supplier to discriminate against a buyer (customer);
- bribing an employee or an officer of an entity, a buyer;
- holding an improper gathering, usage or disclosure of trade secrets.
While the company may submit a claim to a court to stop illegal practices of the violator, the Antimonopoly Committee of Ukraine has long established itself as a fast and effective alternative.
Most important for a company which faces unfair competition is to stop the violation as soon as possible and prevent further actions by the violator. While obtaining compensation is useful it is rarely the main concern of the company.
The Antimonopoly Committee of Ukraine enables the said result to be attained. Submitting the claim to the AMCU will not enable any kind of compensation for damages, but it’s a much faster and easier way than going to court. In addition, the fines for violating laws on unfair competition is substantial and can reach up to 5% of the revenues earned for the financial year preceding the year when such decision is made.
In addition, submitting the application to Antimonopoly Committee of Ukraine does not require any fee. And while preparing the application may require some preliminary expenses, they are in most cases still cheaper than going to court.
According to Article 27 of the Law of Ukraine On Protection against Unfair Competition any person whose rights were violated in result of a misconduct is entitled to turn to the Antimonopoly Committee of Ukraine for protection of his/her rights within a 6-month period from the time when he/she became aware of such breach. In case of omission of this term the Committee shall refuse to accept the statement, unless such person proves that such omission occurred due to a reasonable cause.
The Rules of consideration of statements and cases regarding violation of legislation on protection of economic competition (the Rules of proceedings) adopted by the Antimonopoly Committee of Ukraine of 19 April 1994, №5, established a number of mandatory requirements for information to be contained in the statement. Thus, during preparation of a statement it is necessary to specify:
- The name of the public authority, to which the statement is being filed to (the Committee or a relevant regional office of the Committee);
- name of the legal entity or name of the individual (surname, name and patronymic), who are the parties to the case (applicant and respondent), their location (for legal entities) or place of residence (for individuals), other details of the parties, including mailing address and, if available, phone number (fax number, etc.), e-mail;
- contact name (for legal entities), phone number (fax number, etc.) and, if available, email;
- content of claims, including that anticipated by the applicant’s decision of the Committee;
- circumstances in which an applicant justifies his/her claims, justification of violation of an applicant’s rights in result of acts or omission of the respondent, stipulated by legislation as violation of legislation on protection of economic competition;
- information regarding appeals to any other government authorities, including courts, concerning the issues mentioned in the statement;
- a list of documents and other materials attached to the application.
It should be noted that in practice to apply to the AMCU the applicant should be considered as a competitor to the violator. While usually this is not a problem as the nature of unfair competition does imply that there is a competition between the applicant and violator, in some cases this should be considered. For example, if the case if connected to the illegal use of designations or copying of the appearance of a product, the actual holder of the trademark or producer of the goods should appeal to the AMCU and not a local representative office or branch company.
The nature of the applicant is important because while the AMCU may open a case based only on the fact of the violation, the applicant will not obtain the status of the claimant and will not take part in consideration of the case.
The practice of the Antimonopoly Committee of Ukraine in unfair competition cases in 2021 usually consisted of dissemination of misleading information and use of designations or copying the appearance of a product.
This is quite traditional for the Antimonopoly Committee of Ukraine, as most cases on dissemination of misleading information are opened at its own initiative, while other cases usually require submitting an application from the affected company.
At the same time, last year also brought some innovation to the already established practice.
In particular, a first case on discrediting a competitor by publishing information in the ProZorro public procurement electronic system has been completed and the corresponding decision against violator has been made. Thus, this decision may be the start to a new part of the practice.
Another particular resolved case is connected to the dissemination of misleading information. An important distinction from normal types of such cases is the fact that the advertisement materials were recognized as misleading information based on the overall feeling which they induce to the consumers rather than particular statements which may be untrue.
In this case the advertisement materials for a pâté disseminated by TV, package and website created an impression in consumers that the pâté was produced in France. In particular, the packaging had pictures of the Eiffel Tower and Paris streets, TV video advertisement used French traditional baked goods, French music, voiceover implied other connections with France.
The AMCU decided that such combination of the elements in advertising created an impression in the consumers that the pâté was from France while, in fact, it was produced in Ukraine and had no connection with France (i.e., recipe, ingredients, trademark etc.).
The most important change in 2021 was adoption by AMCU of the Recommendations On Application of the Provisions of Article 151 of the Law of Ukraine On Protection from Unfair Competition in relation to the advertising of medicinal products” dated March 16, 2021 No. 13.
These Recommendations are based on substantial AMCU cases from 2020, which due to the pandemic situation mostly focused on medicines and establish a list of most common cases of advertisement and other information materials which are considered to be, according to the Committee, misleading.
While Recommendations in the main describe cases of advertising of medicinal products, they are nevertheless important to understand the general approach of the AMCU towards the dissemination of misleading information.
The Recommendations describe the following main types of misleading information:
- inaccurate information about the speed of medicines;
- inaccurate information regarding quality and/or price;
- inaccurate information about leadership;
- false information about the properties of medicinal products.
Let’s analyze all of these types in details.
Inaccurate information about the speed of medicines mostly consists of accentuated information in advertisements regarding the fast effect of the medicine after taking it (i.e., phrases like “fast action”, “immediate effect”, “quick relief of symptoms”, etc.). At the same time, in most cases this information is inaccurate due to the time of a medicine’s effect may vary according to dosages, specific cases and other circumstances. In addition, any information about the medicine should correspond to information in the instructions.
Thus, AMCU states that using above-mentioned phrases in cases when instructions for the medicine contains information regarding long absorption of the medicine, long period when medicine should be taken for effective treatment etc. should be considered as misleading information. Similarly, using phrases like “from the first time of taking”, “within few seconds” etc., may be only allowed in cases when the instructions contain relevant information on the fast pharmacological effect of the medicine or full relief of the symptoms from taking the first dosage.
Inaccurate information regarding quality and/or price is connected to the use of phrases like “high quality”, “best quality” and “affordable price”. With regard to quality, the AMCU states that using these phrases may lead to the impression that medicines of different quality are actually on the market. At the same time, all medical products which are permitted in Ukraine are subject to registration, testing and quality control according to state standards. Therefore, there are no such things as “low quality” medicine and information about quality may, therefore, be misleading unless duly confirmed and proved. The remark about price is justified by the fact that affordability is a subjective category and depends on the income of consumers. Therefore, using similar phrases should also be confirmed (for example by market study which proves that the medicine has the lowest price among competitors).
Inaccurate information about leadership is connected to using phrases like “No. 1 in the world/country”, “leader”, etc. The AMCU states that such phrases may be used only if they are confirmed by corresponding studies or market analytics. In addition, they must also be true and correct. For example, it is misleading to use a phrase like that in 2022 based on a study done in 2000, or use “No. 1 in the world” if the study was done only in a limited number of countries.
False information about the properties of medicinal products is the most concerning kind of misleading information. Most cases reviewed by the AMCU were connected to the statements that the medicine is effective against COVID-19 while the instructions for the medicine did not contain any information on the effectiveness of the medicine against this virus. The AMCU notes that any information regarding the effectiveness or usefulness of a product against particular illnesses should correspond with the information available in the instruction and be proven by proper clinical trials or stated according to the official recommendations of Ministry of Health of Ukraine or other proper authorities on the use of a particular medicine.