UNFAIR COMPETITION AND THE MISAPPROPRIATION OF A COMPETITOR'S TRADE VALUES
| Author | Andrew Terry |
| DOI | http://doi.org/10.1111/j.1468-2230.1988.tb01758.x |
| Date | 01 May 1988 |
| Published date | 01 May 1988 |
UNFAIR COMPETITION AND THE MISAPPROPRI-
ATION
OF
A COMPETITOR’S TRADE VALUES
A
FREE
enterprise economy implies competition. Competition is the
“great regulative force which establishes control over economic
activities”: it ensures the “economic salvation”2 of society. While
this presumption has not stood unchallenged-Schumpeter in
particular has been influential in the argument that competition
through innovation is more important than price competition in
promoting economic growth, and that competition through
innovation will not occur in perfectly competitive industries3-it is
nevertheless true that “in their search for a safer principle,
economists tend to hold to a presumption of c~mpetition.”~
However a free enterprise economy does not imply unrestrained
competition. The extreme laissez-faire approach
of
a self-regulating
system has been replaced by a recognition that to achieve a
substantially more competitive market reliance must be placed on
legal regulation although the scope of regulation is of course a
matter for debate as the term “competition” is itself vague and its
goals diverse and sometimes conflicting.’ In the more euphemistic
language of the Australian Trade Practices Tribunal, competition is
a “very rich concept containing within it a number
of
ideas” and
“may be valued for many reasons as serving economic, social and
political goals.”6
In a definitive article published in
1940,’
Rudolf Callmann
developed the metaphor
of
competition as an “order of struggle.”
The antitrust laws are concerned with defining the fundamentals of
the competitive order and preventing “peace” in the competitive
process:
“. .
.
just as the law of the order of peace is violated by
struggle
so
the law of struggle is violated by peace.”’ Competition
policy as laid down in antitrust legislation is concerned with the
maintenance of open competition as a fundamental principle of the
Slichter,
Modern Economic Society
(2nd, ed., 1929) p.45, cited by Callmann, “What
is Unfair Competition” (1940) 28 Georgetown L.J. 585, at p.595.
Callmann, “He Who Reaps Where He Has Not Sown: Unjust Enrichment in the
Law of Unfair Competition”, (1942)
55
Harvard L.R. 595.
Capitalism, Socialism and Democracy
(1947), Chaps. 7 and 8.
For
a recent discussion
see
Lunn, “The Roles of Property Rights and Market Power in Appropriating Innovative
Output” (1985)
XIV
Journal of Legal Studies
423.
See generally Bork,
The Antitrust Paradox
(1978); Harding, “Lawyers and the
Regulation
of
Economic Activities” in Hambly and Goldring (eds.),
Australian Lawyers
and Social Change
(1976); and McCarthy, “Intellectual Property and Trade Practices
Policy: Coexistence
or
Confict? The American Overview” (1985) 13 A.B.L.R. 198 who
examines the tension between the neo-classical Chicago school with a
laissez-faire
Libertarian orientation and the traditionalists with more socially oriented goals as to the
proper role
of
the antitrust laws in the U.S.A.
‘
Hunter,
Monopoly and Competition
(1969), p.69.
Re Queensland Co-operative Milling Association
(1975) 8 A.L.R. 481, at 514.
’
“What is Unfair Competition” (1940) 28 Georgetown L.J. 585.
*
Ibid.,
at p.604.
296
19881
MISAPPROPRIATION
OF A
COMPEZITOR’S
TRADE
VALUES
297
economic order as a wh01e.~ The rules are imposed to uphold the
integrity
of
competition and any restraints imposed on competition
are in fact pro-competitive as they ensure the order of struggle.
However there is another dimension to Callmann’s order of
struggle: competition in business life comprises
“. . .
struggle
according to game-like rules by means of constructive effort subject
to the natural conditions of the market.”” This dimension of
competition comprises the “book of rules of the business game.””
Competition embracing non-constructive effort violates the “rules
of the ‘game’ competition.”12 This dimension of competition is
referred to as “unfair competition”. The practices falling under this
head do not amount to a violation
of
the competitive order by
contravening its very fundamentals but in Callmann’s view should
nevertheless be forbidden on the grounds of unfairness of
competition. Unfair competition is a tort
sui
generk-an “injury to
the interest of the rivals that all of them act in harmony with the
rules
of
~ompetition.”’~ It is in the nature of competition as an
order
of
struggle that there is rivalry, and that individual competitors
may be hurt or even eliminated. Although society cannot afford to
stifle
competition by “undue solicitude for the society
nevertheless has a legitimate interest in ensuring that competition
embraces constructive effort. The obvious example of restraining
unbridled competition in the interests
of
the competitive process as
well as individual competitors is the regime of intellectual property
law. Limited statutory monopolies preventing “unfair competition”
through copying are conferred to encourage innovation which in
turn creates benefits through better and more efficient utilisation of
re~ources.’~ Although competition policy which is concerned with
preserving competition and unfair competition which is concerned
with preserving competitors appear to conflict they in fact constitute
“opposite and complementary phases of the over-all public policy
of
fostering a competitive order”.16
With the increasing sophistication of the market-place, questions
relating to the order of struggle assume increasing importance and
bring into sharper focus the apparent conflict between the public
interest in full and free competition and the private interest in
See generally Fortman,
Theory of Competition Policy
(1966),
Chaps.
4
and
5.
Callmann,
op.
cit.
n.7 at p.604.
Nims,
The Law
of
Unfair Competition and Trademarks
(3rd ed.
1929)
viii, cited by
l2
Callmann,
op.
cit.,
n.7 at p.604.
I3
Callmann,
op. cit.,
n.7 at p.
599.
I‘
Riesenfeld, “Law
of
Trade-marks and Unfair Competition in the United States” in
Thompson (ed),
Unfair Competition
(1966),
p.16. “Competition, like other therapeutic
forms of hardship, is by wide and age-long consent, high beneficial to society when
imposed upon other people”: Stigler
&
Cohen,
Can Regulatory Agencies Protect
Consumers?
(1971), p.9.
Oppenheim,
Unfair Practices
(1950)
p.2; and see generally Davidow, “The
Ill-
defined Relationship. Unfair Competition and Antitrust Law in the U.S.”
(1980)
E.I.P.R.
317.
Callmann op.
cir.,
at p.596.
’’
See generally Kingston,
The Political Economy of Innovation
(1984).
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