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Law on competition

Where is law on competition regulated?

The right to take judicial action against competition infringement ensues from the Act against Unfair Competition.

The most relevant right relating to the law on competition is the right to require somebody to refrain from action. Further rights include claims for damages and the right to be informed.

The right to require somebody to refrain from action does not require the existence of fault. The injuring party cannot be successfully freed from fault and liability by maintaining that it was not aware of the unlawfulness of a certain advertisement and that was not intended.

Often a completely “different” breach of law is reprehended by means of the law on competition, e.g. a breach of the Telecommunications Act (e.g. the obligation to publish an imprint), Foodstuffs Act, the Regulations relating to the Indication of Prices, etc.

What violates law on competition?

German competition law is – similar to the Anglo-Saxon law – greatly influenced by court decisions in individual cases. Some generalisations are still possible, though. Marketing measures cannot be misleading. Comparative advertising is in principle permitted, but only as long as it meets numerous requirements. Moreover, anybody who exerts direct or indirect compulsion on the clients/who directly or indirectly forces his clients to buy products violates competition law; the client purchases the product not as a result of uncontrolled discretion but due to the pressure exerted upon him. Obstructive competitive practices, enticing the competitor’s clients or personnel away as well as calling a boycott of competitors are generally inadmissible, either. Taking advantage of clients’ lack of experience may also be regarded as unfair competition. Since the Act on Discounts and the Regulation concerning Free Gifts were abolished numerous discount systems, free gifts and other client loyalty programmes have been held by courts to constitute permitted advertising practices. Exploitation of accomplishments of others constitutes an exception to the rule. A mere imitation of unprotected services as such is by no means unlawful; it is only a slavish imitation, an exploitation of advertising practices of another or an exploitation of the reputation of another that violate competition law. Even the so-called “lead by means of a breach of law” (Vorsprung durch Rechtsbruch), i.e. infringement of other provisions, can result in a breach of competition law. Although violating provisions which are free of any value judgement is usually not sufficient, “lead by means of a breach of law” constitutes one of the most common/widespread infringements of competition law.

What can a competitor do against an unfair advertisement?

Usually, the first step constitutes an admonishment containing a claim to submit a cease-and-desist letter with a penalty clause. A competitive relation and acting for competitive purposes are required prerequisites for a claim to refrain from acting. However, these obstacles are of little relevance; since it is enough if a competitor does not really compete but merely potentially.

What is the significance of a cease-and-desist letter?

By submitting a cease-and-desist letter with a penalty clause, the injuring party commits itself to refrain from acts violating the law on competition in the future in order to avoid a conventional penalty. The amount of the penalty depends on the gravity of the breach. It is often more than € 5,200. It does not suffice to hand in a cease-and-desist letter without an appropriate contractual assumpsit to meet the need for legal protection of competition (it does not seriously eliminate the danger of recurrence). It is not sufficient to refrain from the breaches reprehended in the future in the admonishment. After submitting a cease-and-desist letter all required and reasonable measures must be met to refrain immediately from unlawful actions.

Submitting a cease-and-desist letter and accepting it regulates the competitive relation within contractual periods of limitation, while there is a six months’ period of limitation for claims relating to law on competition. Therefore, it is necessary to consider carefully if a cease-and-desist letter should be submitted and what exactly it should contain – letters demanded by competitors often go too far.

What can happen if no cease-and-desist letter is submitted?

If the contents of a cease-and-desist letter submitted are insufficient, the competitor can consider legal aid. If an often short-termed period demanded in an admonishment expires, usually an interim injunction procedure takes place. Only a few weeks may pass from when the breach is noticed to filing of the application, since an application for issuing an interim injunction is permitted by law only if the applicant has handled the matter “urgently”. A court can decide upon the case in a few days’ time without a trial and adjudge the injuring party by order to refrain from action. The injuring party must cover the ensuing additional expenses.

What follows an interim injunction?

An interim injunction is only “temporary”, i.e. neither final nor suspending the period of limitation. Therefore, it is followed by a petition to submit a final declaration (also liable to charges). The opponent of the petition accepts an interim injunction as the final regulation and abstains from the principal proceedings. If the latter is not the case, the injuring party might have to bear further costs ensuing from the principal proceedings.

In addition, it is possible to file an objection against an interim injunction or its costs, so that an oral trial is conducted and the court decides upon “its” disposition again.

What do we need to handle your legal question concerning the law on competition?

If you wish to have your advertising effort checked, we need the advertisement in question, as well as information on its circulation and distribution area, etc. Furthermore, we need the admonishment, should you have received such.

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© Attorney at law Michael Horak 2002-2016

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