Competition among companies is well known. Every manufacturing and service-providing company vies for potential customers. This is also called competition. Today's products are numerous and within the same product categories there is a multitude of sellers. This competition between sellers is one of the most important elements of the market economy. This competition sometimes has very positive characteristics. Among these are, above all, technical progress for new high quality products and the striving of the productions to become more and more efficient. The result of this competition is also that only those companies or enterprises remain established on the market that produce competitively in the long term.
Competition itself is defined here as an event between companies to achieve the best performance or the greatest success possible within the framework of a free market economy. This (peaceful) competition is fought out via advertising, prices, conditions and service. The real winner of the competition is therefore the end consumer, because he or she can choose the best company for him or her from all these aspects. Specifically, competition has three main functions. The first is the allocation function. This is understood to be a controlling effect of competition. The goal is a resource-saving shift to growth markets.
Thus, one task of marketing is to recognize quickly when and where such a growth market will establish itself. The second task is the innovation function already briefly alluded to. Competition is thus the engine of technical progress. In order to win and retain customers, a future-oriented product is therefore necessary to achieve this goal. As a result, the pressure among competing companies increases and everyone wants to be the first. If one misses this step, then it can happen quickly with the stability on the market.
The third function of competition is the distribution function. This function is referred to when the aim is to prevent the monopoly of one company. The greatest disadvantage of a monopoly is the dependence of customers on a single supplier. Due to the monopoly structure, this supplier can set its prices and the customer would still be obligated to buy, simply for the reason that there is no other supplier.
Unfair competition is a special feature of competition law. Specifically, it is a form of breach of law. By way of example, unfair competition occurs when the actions of companies are contrary to public morality. By using unlawful means, the infringer hopes to gain an advantage over his competitors. The Unfair Competition Act (UWG) was drafted to deal with this breach of law. The aim of this law is to achieve regulated behavior of companies in business transactions. It is also intended to protect the end consumer from possible deception. Anyone who violates morality in competition can be sued for injunctive relief and damages.
There is no common definition of unfair competition. Rather, there are synonyms that can clarify the whole thing a bit more. Unfair competition can therefore be understood as something that is contrary to "good morals". The act must therefore be contrary to a person's sense of decency. Another way of defining unfair competition in more detail is a violation of "decent market practices".
Probably the greatest principle of the UWG is the prohibition of unfair commercial acts. This principle is set out in Section 3 of the UWG. It states:
§3 - Prohibition of unfair commercial practices
(1) Unfair business acts are prohibited.
(2) Business acts directed at or reaching consumers shall be unfair if they do not comply with the entrepreneurial due diligence and are capable of significantly influencing the consumer's economic behavior.
(3) [...] → See table below.
(4) When assessing commercial acts towards consumers, the average consumer or, if the commercial act is addressed to a certain group of consumers, an average member of this group shall be taken into account. [...]
There is an appendix to this §3 UWG in the law, in which the always inadmissible business actions towards consumers are further explained and elaborated. These are, among others, the following:
Untrue information about signing a code of conduct | Unauthorized use of quality marks and the like | Untrue statements about the endorsement of a code of conduct | Untrue information about recognition by third parties |
Decoy offers without reference to the actual stock | Decoy offers for the sale of other goods or services | Untrue information about the time limit of the offer | Change of language in a contract negotiation conducted in a foreign language |
Untrue information about marketability | Presentation of legal obligations as a special feature | Advertising disguised as information | Hidden advertising in search results |
Untrue information about the dangers for personal safety | Deception about operational origin | Snowball or pyramid system | Untrue information about a business closure |
Information on increasing the chances of winning at games of chance | Untrue statements about the cure of diseases | Untrue statement about market conditions or sources of supply | Failure to award prizes |
Untrue application as free of charge | Misleading about the existence of an order | Misleading about entrepreneurial properties | Misleading about customer service in other member states of the European Union |
Resale of tickets for events | Misleading about the authenticity of consumer ratings | Fake consumer reviews | Spatial detention of the consumer |
Failure to leave the consumer's home despite request | Unacceptable persistent targeting via remote means of sale | Purchase demand to children | Request for payment for goods or services not ordered |
Information about the threat to the job or livelihood | Misleading about price and profit | Request for payment unsolicited visits to the home of a consumer on the day of conclusion of the contract. |
It should be noted that this excerpt does not reflect the complete appendix, but only the headings of the individual numberings.
The relationship between Sec. 3 II and Sec. 5 and Sec. 5a UWG should be examined in more detail. §§ Sections 5 and 5a have priority over Section 3 II UWG in the context of consumer protection. Thus, recourse to § 3 II UWG is only possible if the business act cannot be judged under §§ 4, 5 and 5a UWG. Section 3 II UWG is then a catch-all provision in relation to the other standards.
The purpose of the standard is to ensure an even greater Legal certainty to ensure that this is the case. For this reason, a large number of possible case examples have also been included in the annex to the UCA (see above). These case examples in the form of the enumeration can be seen as a "black list". Thus, each of these business acts is to be considered unfair under all circumstances and thus prohibited.
Accordingly, in assessing whether a commercial act is an unfair commercial act, the annex under § 3 III UWG to be evaluated. This in turn means that the respective facts are also to be evaluated very closely against the examples from the Annex. Thus, there is no analogous application. If the facts or circumstances are only very similar or even comparable to those in the Annex, this may or may not necessarily constitute an unfair business practice.
As a result, the legislator has drawn up a very detailed list. Likewise, an analogous application of the standard to other similar situations is ruled out for the reason that the standard can and must be applied in the same way in the member states. In the case of a different application, circumstances could be handled differently in one member state than in another. This must therefore be prevented.
It is not always immediately clear whether the action of a company is really unfair or not. These business actions towards consumers and not entrepreneurs or service providers must therefore also be assessed separately. The so-called average consumer serves as further insight. In the case of such a consumer, the expected economic behavior from the group of all consumers is examined. After finding out how this average consumer will or will not behave, the result of unfair competition or even the permitted action of the company is then created.
However, there is one exception. If a business act is directed at a particularly identifiable group of persons in need of protection, then it is also examined from this perspective. Thus, an average consumer is formed as a member of this group and he is authoritative from then on. These particularly vulnerable groups include, for example, children or senior citizens. Other groups are of course conceivable.
Another principle in the context of unfair competition is the prohibition of misleading and bait-and-switch offers under Section 5 UWG and the omission of information duties under Section 5a UWG. Section 5 UWG states:
§ 5 - Misleading commercial acts
(1) Any person who engages in misleading commercial conduct which is likely to cause the consumer or other market participant to take a transactional decision which he would not otherwise have taken shall be deemed to have acted unfairly.
(2) A commercial act shall be misleading if it contains untrue statements or other statements likely to deceive concerning the following circumstances:[...}
In the numbers following after paragraph 2 come the business acts that are misleading. This includes, for example, deceptive or untrue statements about: essential Features of the product or service with respect to the availability, nature, design, benefits and risks, composition, accessories, process or timing of manufacture, quantity or condition, source or expected results of the product or service.
Likewise, no misleading commercial acts may be made which are aimed at the non-existence of a special price advantage, the price or the manner. Also, a commercial act is misleading if, in the context of the marketing of goods or services, including, comparative advertising, it has a Risk of confusion with another good or service or with a Brand of another Competitor causes. Lowering a price and advertising with it, provided the price is only valid for an unreasonably short time, is considered misleading.
These regulations refer to active business actions. However, misleading by omission is also conceivable. This is regulated by Section 5a UWG. It states:
§ 5a - Misleading by omission
(1) Any person who misleads a consumer or other market participant by withholding material information shall also be deemed to have acted unfairly,
1. which the consumer or other market participant requires, according to the respective circumstances, in order to make an informed business decision, and
2. the withholding of which is likely to induce the consumer or other market participant to take a transactional decision which he would not otherwise have taken. [...]
Logically, the prerequisite is that the trader also has a duty to inform. This always exists if it is ordered by a special court or if the market participant may expect this in good faith or in accordance with honest market practices. In this case, the entrepreneur or service provider must thoroughly weigh the importance of the information for the market participant. The greater the importance of the information for the business decision, the more it is reasonable for the entrepreneur or service provider to pass on this information.
The question to be asked is therefore always, is the withholding of the information the reason for the entrepreneur or service provider to have made a business decision or not? If this is the case, then there is the possibility of an unfair act according to § 5a UWG. However, it always remains a case-by-case decision.
But what actually happens to companies or service providers if they violate the UWG? In the first instance, the provisions on penalties and fines are also found in the UWG. These can be found in Sections 16, 19 and 20 UWG. In case of doubt, misconduct under the UWG may result in a fine or even imprisonment. Among other things, punishable is:
Anyone who acts in breach of the regulations pursuant to Section 7 of the German Unfair Competition Act (UWG) will also be punished. This applies both intentionally and negligently. § Section 7 UWG deals, among other things, with telephone calls without the prior express consent of the called party. It states:
§7 - Unacceptable harassment
(1) A commercial act which unreasonably harasses a market participant shall be impermissible. This applies in particular to advertising, although it is recognizable that the addressed market participant does not want this advertising.
(2) Unreasonable harassment shall always be presumed to have occurred
1. in the case of advertising by means of a telephone call to a consumer without the consumer's prior express consent or to another market participant without the consumer's at least presumed consent,
2. in the case of advertising using an automatic calling machine, fax or electronic mail without the prior express consent of the addressee, or [...].
If a case pursuant to Section 7 (1) sentence 1 in conjunction with (2) number 1 or 2 exists, then the acting party may be fined up to € 300,000.
The purpose of this standard is, among other things, to protect the private and business sphere of market participants vis-à-vis companies and service providers. This protection is no longer guaranteed if you have to deal with someone acting on business without or even against your will. One is thus disturbed in one's rest or other occupations. The protection of the private and business sphere therefore has a higher priority than the economic profit motive of the entrepreneur or service provider.
In particular, harassment is deemed to occur if a business act, especially an advertising measure, is imposed on the recipient against his or her apparent or presumed will and can be perceived as annoying, regardless of its content. This is the case if the market participant's attention is drawn away from other matters or if its facilities or resources are tied up. It does not constitute harassment simply because the recipient cannot relate to the advertising. Therefore, if the advertising violates moral, religious, ideological or political views, it is not always necessarily a case of § 7 UWG. § Section 7 I UWG is therefore not an instrument for controlling the content of an advertisement.
Whether such an element of § 7 UWG exists is also assessed here in the same way for an average market participant. Thus, in the specific case, it is not a question of the subjective perception of the potentially disturbed, but of the (similar to misleading or aggressive commercial acts) normally informed, attentive but critical average consumer. Another similarity is, if the measure of the entrepreneur or service provider is directed at a certain group such as children, senior citizens or foreigners, then the average consumer or average market participant is also to be formed from this group.
It is also possible to issue a warning to an entrepreneur or service provider. A warning is possible if the person being warned behaves incorrectly. This may be the case, for example, if he has placed misleading advertisements. However, this warning is bound to entrepreneurs. This means that only entrepreneurs or service providers may issue warnings to each other. This is called active legitimation. This is missing for a private person. The person giving the warning and the person being warned must therefore be competitors, which is the case if they have a concrete competitive relationship. This can be affirmed if both companies offer identical goods or services. In addition to companies, the possibility of issuing a warning notice is also open to certain associations. These include, for example, the consumer center or the competition center.
Such a warning must address certain points in order to be legally secure. These include the facts of the case, an authorization with reasons, the cease-and-desist request with the threat of legal action, the request for reimbursement of the costs of the Legal fees and a power of attorney. The aim of this warning is, in the first place, to cease and desist the action of the entrepreneur or service provider. Should the warning opponent not sign the cease-and-desist declaration with penalty clause, there still remains the Legal action open.
Should you need an experienced Lawyer If you have a problem with a warning letter or a competitor, or if you need advice in the context of the Unfair Competition Act, we would be pleased to be your suitable and competent contact partner for your respective concerns in advertising law.
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