Law(s) against Unfair Competition: the Legitimacy of the Uk Approach

The UK lacks a unified legal basis for the prevention of unfair competition. There is no single statutory point of reference, nor a discrete tort of unfair competition. This has led to assertions that ‘there is no English law of unfair competition’¹ or that in the UK, this field ‘must, to a great extent, be considered “terra incognita”’.² While there is admittedly no single source in tort or legislation, the UK offers up an unfair competition menu consisting of individual torts or equitable wrongs (primarily passing off, injurious falsehood, defamation and the breach of confidence), the prohibition of misleading practices under consumer protection law, trade mark law and codes of advertising regulation.³ In terms of their cumulative coverage, these regimes overlap considerably with the protection available under civilian unfair competition regimes.It is therefore more accurate to say that the UK has laws against unfair competition. But are they cumulatively sufficient? This article evaluates one important facet of this question—whether the UK approach complies with relevant international treaty obligations—concluding that it does.

It is first necessary to explain why this seemingly defensive posture has been adopted. When compared with many of its European neighbours, the UK approach to unfair competition differs in two significant ways. First, it lacks an open-ended general clause, compendious enough to encompass all acts of unfair competition as they emerge in an evolving marketplace.⁴ The obvious comparator here would be the formulation in the German Act against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb or UWG). In its present formulation, section 3(1) states: ‘Unfair commercial practices are illegal’.⁵ The original formulation in the UWG 1909 famously prohibited all acts of competition that were contra bonos mores (or gutte Sitten).⁶ More pertinently, Article 10bis(2) of the Paris Convention⁷ requires all member states, including the UK, to provide effective protection against any ‘act of competition contrary to honest practices in industrial or commercial matters’. Article 2(1) of the TRIPS Agreement now incorporates Article 10bis, by requiring that its membership ‘shall comply with Articles 1 through 12, and Article 19, of the Paris Convention (1967)’. Consequently, is there a reinforced obligation to transpose such a general clause into domestic law?

The second difference flows from the first. Unfair competition has also been treated synonymously with misappropriation in the past.⁸ Strictly speaking, this equivalence is inaccurate; misappropriation is a species within the genus of unfair competition. Nevertheless, this usage is intended to point out a gap. While British courts have creatively adapted the tort of passing off, with its key requirement of misrepresentation, to a range of new commercial contexts over time, a tort of misappropriation has never taken root. As Adams has argued:

The action has been described as the legal response to a widely held gut feeling, shared by the judiciary, that there must be a remedy against free riding, as a form of ‘unjust enrichment’ or taking without recompense, even in the absence of any misrepresentation.¹⁰ By contrast, a rule against free riding or taking unfair advantage—in other words misappropriation per se—is recognized in UK trade mark law, as influenced by EU legislation.¹¹ It should also be noted that there are important reasons to challenge this gut feeling, if we reframe ‘taking without paying’ as learning, inspiration for further creativity, the basis for desirable competition or associative cross-referencing, as an integral part of language and cognition.¹²

From the 1960s, there have been periodic attempts to expand passing off beyond the limitations of a tort anchored in misrepresentation into a broader tort of misappropriation.¹³ The alternative is an appeal to the judiciary (or legislature) to embrace an entirely new tort. The most recent such attempt in the UK was in L’Oréal.¹⁴ Here the defendants manufactured smell-alike perfumes and signalled their equivalence to famous perfume brands in various ways, including comparison lists (if you want the fragrance of A, buy B) and allusive product packaging evoking the originals. However, the considerable price difference between the fine fragrances and replicas, as well as very different retail channels, ensured there was no actionable misrepresentation. Since passing off was unsuccessful, the claimants argued that ‘the historic fundamental requirement in a passing off action, that there be some sort of misrepresentation… is now outdated… [The] common law should move on and embrace a tort of “unfair competition” which requires no misrepresentation’.¹⁵ The argument seemingly ran that Article 10bis(2) of the Paris Convention is broadly worded, requiring more than just legal norms against misrepresentation. That is, it was argued that this broad formulation includes misappropriation per se, and in not providing for a standalone misappropriation prevention action in domestic law, the UK is in breach of the general clause in Article 10bis(2).¹⁶ Rejecting this argument, Jacob LJ concluded that ‘even if the UK is in derogation, it has been so for over 80 years without complaint. It is not a matter for the judges’.¹⁷

In the absence of a general clause, it ‘has long been a matter of debate amongst legal scholars as to whether these miscellaneous mechanisms do enable the United Kingdom to comply with its obligations under Article 10bis of the Paris Convention’.¹⁸ Or, as another experienced commentator puts it, the UK approach ‘has long raised the question of whether [it] is significantly out of step with international norms, perhaps even to the extent of being in breach of its obligations in public international law, by failing to have a more comprehensive law of unfair competition’.¹⁹ Today the argument for non-compliance seems unconvincing, in light of the persuasive reasoning in the WTO Dispute Settlement Body’s Panel Report in Australia—Tobacco Plain Packaging.²⁰ This decision confirms that the content of an ‘act of competition contrary to honest practices in industrial or commercial matters’ is to be determined at the domestic level. Besides the mandatory obligations set out in Article 10bis(3), there is no autonomous definitional content for Article 10bis(2) that the UK falls short of. Stated simply, the UK is not in derogation. This conclusion has wider significance because several other (predominantly common law) jurisdictions also lack a general clause or else have no tort of misappropriation.²¹

This paper proceeds by first reviewing the current landscape of unfair competition prevention in the UK (Section 2); then drawing on the WTO Panel Report to establish that the obligation in Article 10bis(2) leaves considerable room for determining at the domestic level what counts as unfair competition (Section 3); followed by a brief conclusion (Section 4).

Since the UK has no single source of unfair competition law, it lacks a general prohibition against competitive acts ‘contrary to honest practices in industrial or commercial matters’. There is a clear preference for defined causes of action, with their own qualifying criteria and limits.²² The UK’s past membership of the EU did not alter this situation, since only selective aspects of business-to-consumer relations (prioritizing unfair commercial practices) and business-to-business relations (prioritizing misleading and comparative advertising) were harmonized.²³ In relation to civil claims, discrete torts have been the preferred option:

This suite includes the torts of inducing breach of contract, causing loss by unlawful means, intimidation, lawful means conspiracy (where defendants combine to perform harmful but otherwise lawful acts), unlawful means conspiracy (where defendants combine to perform unlawful acts), deceit and malicious falsehood, as well as passing off. A historical sensibility also reveals that the UK had opted for criminal law sanctions as the principal means of ‘effective protection’ against unfair competition for several decades. This was notably given effect by the Merchandise Marks Act 1862, followed by periodically updated legislation between 1887 and 1953.²⁵ This regime inter alia allowed government departments or local authorities to prosecute false and misleading trade descriptions on goods and the wrongful application of trade marks. Prosecutions were also possible on the receipt of complaints from legitimate traders or consumers.²⁶ The absence of a system of local courts able to provide affordable and speedy access to civil justice and the belief that effectively stamping out fraud required criminal liability have been offered as explanations for this approach.²⁷ It serves as a reminder that penal sanctions have formed part of the mix of unfair competition measures, alongside civil proceedings, administrative measures and self-regulation codes.²⁸

Against this backdrop, it is therefore unsurprising that there is no overarching theoretical framework for unfair competition...