Unfair Trade Practices

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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

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AT A GLANCE:

Unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. The essential elements of unfair competition are:

(1) confusing similarity in the general appearance of the goods; and,

(2) intent to deceive the public and defraud a competitor

(Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises LTD. and Sports Concept & Distributor, Inc., G.R. No. 169974, April 20, 2010)

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The Philippines has a dynamic business landscape with various industries and sectors experiencing skin tight competition. As a result, proprietors are compelled to adjust their approaches in order to gain an edge over their competitors. Like in many other places, businesses need to adopt strategic approaches to stay ahead of other players and ensure their business success. With that in mind, there are businesses that opt to employ unfair trade practices even when they are fully cognizant of the unethical and illegal nature of such actions. What is even more concerning is that these unfair trade practices have a detrimental impact on both consumers and the overall market. This underscores the necessity of having laws and regulations in place to govern these behaviors and hold businesses accountable.

What is unfair trade practice or unfair competition?

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. The essential elements of unfair competition are:

(1) confusing similarity in the general appearance of the goods; and,

(2) intent to deceive the public and defraud a competitor.

Jurisprudence also formulated the following “true test” of unfair competition: whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer into making his purchases under the ordinary conditions of the particular trade to which the controversy relates. One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive, actual or probable must be shown before the right to recover can exist. (Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises LTD. and Sports Concept & Distributor, Inc., G.R. No. 169974, April 20, 2010)

 

What laws regulate and govern unfair trade practices?

Adhering to ethical and responsible business practices holds significant importance in building sustainable relationships and connections with customers, competitors, and the broader market. As such, regulatory authorities and consumer protection agencies have a role to play in recognizing and imposing penalties on businesses involved in unjust practices.

The Intellectual Property Code provides for the instances where a person may be considered guilty of doing unfair competition practices.

 

The Intellectual Property Code of the Philippines (Republic Act No. 8293) says:

Section 168. Unfair Competition, Rights, Regulation and Remedies. –

168.1. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights.

168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.

168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.

Meanwhile, the Consumer Act of the Philippines (Republic Act No. 7394) enumerates prohibited acts tantamount to unfair competition/trade practices, to wit:

Article 18. Prohibited Acts. – It shall be unlawful for any person to:

1. Manufacture for sale, offer for sale, distribute in commerce, or import into the Philippines any consumer product which is not in conformity with an applicable consumer product quality or safety standard promulgated in this Act;
2. Manufacture for sale, offer for sale, distribute in commerce, or import into the Philippines any consumer product which has been declared as banned consumer product by a rule in this Act;
3. Refuse access to or copying of pertinent records or fail or refuse to permit entry of or inspection by authorized officers or employees of the department;
4. Fail to comply with an order issued under Article II relating to notifications of substantial product hazards and to recall, repair, replacement or refund of unsafe products;
5. Fail to comply with the rule prohibiting stockpiling.

Article 40. Prohibited Acts. – The following acts and the causing thereof are hereby prohibited:

1. The manufacture, importation, exportation, sale, offering for sale, distribution or transfer of any food, drug, device or cosmetic that is adulterated or mislabeled;
2. The adulteration or misbranding of any food, drug, device or cosmetic;
3. The refusal to permit entry or inspection as authorized by Article 36 to allow samples to be collected;
4. The giving of a guaranty or undertaking referred to in Article 41 (b) hereof which guaranty or undertaking is false, except by a person who relied upon a guaranty or undertaking to the same effect signed by, and containing the name and address of, the person residing in the Philippines from whom he received in good faith the food, drug, device, or cosmetic or the giving of a guaranty or undertaking referred to in Article 41 (b) which guaranty or undertaking is false;
5. Forging, counterfeiting, simulating, or falsely representing or without proper authority using any mark, stamp, tag, label, or other identification device authorized or required by regulations promulgated under the provisions of this Act;
6. The using by any person to his own advantage, or revealing, other than to the Department or to the courts when relevant in any judicial proceeding under this Act, any information concerning any method or process which as a trade secret is entitled to protection;
7. The alteration, mutilation, destruction, obliteration, or removal of the whole or any part of the labeling of, or the doing of any other act with respect to a food, drug, device, or cosmetic, if such act is done while such product is held for sale (whether or not the first sale) and results in such product being adulterated or mislabeled;
8. The use, on the labeling of any drug or in any advertising relating to such drug, of any representation or suggestion that an application with respect to such drug is effective under Article 31 hereof, or that such drug complies with the provisions of such articles;
9. The use, in labeling, advertising or other sales promotion, of any reference to any report or analysis furnished in compliance with Section 19 of Executive Order 175, series of 1987;
10. The manufacture, importation, exportation, sale, offering for sale, distribution, or transfer of any drug or device which is not registered with the Department pursuant to this Act;
11. The manufacture, importation, exportation, sale, offering for sale, distribution, or transfer of any drug or device by any person without the license from the Department required in this Act;
12. The sale or offering for sale of any drug or device beyond its expiration or expiry date;
13. The release for sale or distribution of a batch of drugs without batch certification when required under Article 34 hereof.

Article 46. Prohibited Acts. – It shall be unlawful for any person to:

1. Introduce or deliver for introduction into commerce of any mislabeled hazardous substance or banned hazardous substance;
2. Alter, mutilate, destroy, obliterate or remove the whole or any part of the label of a mislabeled hazardous substance, or banned hazardous substance, if such act is done while the substance is in commerce or while the substance is held for sale, whether or not it is the first sale;
3. Receive in commerce any mislabeled hazardous substance or banned hazardous substance and the delivery or preferred delivery thereof at cost or otherwise;
4. Give the guaranty or undertaking referred to in paragraph (b) of Article 93 and paragraph (b) of Article 45 if such guaranty or undertaking if false except by a person who relied upon a guaranty or undertaking which he received in good faith;
5. Introduce or deliver for introduction into commerce or receive in commerce and subsequently deliver or preferred at cost or otherwise, or a hazardous substance in a refused food, drug, cosmetic or device container or in a container which, though not a reused container, is identifiable as a food, drug, cosmetic or device container by its labeling or by other identification. The use of a used food, drug, cosmetic or device container for a hazardous substance does not diminish the danger posed by the hazardous substance involved, therefore, such substance shall be deemed a mislabeled hazardous substance.

Conducting a business with fairness and ethics holds immense importance for various reasons. Steering away from unfair competition practices is vital in upholding a strong and sustainable business relationship with consumers, suppliers, and in the general market. Ultimately, it creates an environment that nurtures the development of all involved parties, guaranteeing that customers, employees, and partners can have confidence in a dependable business.

 

Read also: Infringement vs. Unfair Competition 

 

Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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