What is Unfair Competition? Legal remedies that can be applied under the TCC
Competition, which is the cornerstone of a free market economy, has the potential to provide consumers with better quality products at more affordable prices, while at the same time creating a driving force for businesses to improve themselves. However, this competition must be “fair” and “honest”. In order to protect the interests of all actors in the market, the Turkish Commercial Code (TCC) defines behaviours that violate the rule of honesty and distort competition as “unfair competition” and provides for legal and criminal sanctions against such acts. Unfair competition is not only a problem between competitors, but also a phenomenon that misleads consumers and disrupts the market order. In this article, we will examine in detail what unfair competition means under the TCC, the main unfair competition cases listed as examples in the law, and the legal remedies you can apply when you encounter such behaviour.
Definition and Purpose of Unfair Competition (Art. 54 TCC): According to Article 54 of the TCC, unfair competition is defined as “deceptive or otherwise dishonest behaviour and commercial practices affecting the relations between competitors or between suppliers and customers”. The purpose of the Law is “to ensure honest and undistorted competition for the benefit of all participants.” As can be understood from this definition, unfair competition aims to protect not only competitors, but also suppliers, customers (consumers) and therefore the market in general.
Main Unfair Competition Cases (Art. 55 TCC): Article 55 of the TCC lists the behaviours that may be deemed unfair competition by way of example. This list is not limited; any behaviour contrary to the rule of honesty may be considered unfair competition. The most common cases are as follows:
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Denigration and Giving Untrue Information:
- Denigrating others or their goods, business products, prices or commercial activities with untrue, misleading or unnecessarily hurtful statements (for example, spreading an unfounded claim such as “The competitor’s products contain carcinogenic substances”).
- Making false or misleading statements about its own status, goods or business products (for example, claiming to have a quality certificate that it does not have).
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Deceptive and Comparative Advertisements:
- Advertising in a way that misleads the consumer.
- Making advertisements that compare competitors, their goods or prices in a derogatory or mocking manner.
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Causing Confusion:
- Using promotional tools such as someone else’s name, title, brand, sign, etc., to cause confusion of its own product or business with someone else’s.
- Causing the consumer to be misled by imitating someone else’s goods or work products (packaging, design, etc.). This may constitute unfair competition even if there is no trademark and design registration.
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Unlawfully Obtaining and Disclosing Trade Secrets:
- A person who uses or discloses to others production or business secrets (customer list, formula, pricing strategy, etc.) obtained secretly or in another unlawful manner engages in unfair competition.
- Luring employees to obtain the secrets of a competitor.
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Failure to Comply with Terms of Business:
- Gaining an unfair advantage for oneself by acting contrary to the terms and conditions of employment applicable in the sector (e.g. collective bargaining agreement provisions).
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Using General Transaction Terms Contrary to the Rule of Honesty:
- Using contract terms that deceptively create an imbalance between rights and obligations, especially against consumers, in violation of the rule of honesty.
Lawsuits Against Unfair Competition (Legal Remedies – Art. 56 TCC): The person who has suffered damage due to the act of unfair competition or who is faced with such a danger may file the following lawsuits before the commercial court of first instance:
- Determination Action: Requesting the court to determine whether the act committed is unfair competition.
- Prevention Case:
- Request for Prohibition: Requesting the cessation of an ongoing act of unfair competition.
- Request for Prevention: Requesting the prevention of an act of unfair competition that has not yet occurred but is in danger of occurring.
- Correction (Reinstatement) Case: Requesting the elimination of the material situation that is the result of unfair competition, if the unfair competition has been made with false or misleading statements, to correct these statements or to declare that the act is unfair competition.
- Compensation Litigation:
- Material Damages: If the person who committed the act of unfair competition is at fault, requesting compensation for the damage suffered and the profit deprived due to this act.
- Moral Damages: In certain circumstances (e.g. damage to business reputation), a claim for non-pecuniary damage.
Criminal Liability (Art. 62 TCC): Persons who intentionally commit certain acts of unfair competition listed in Article 55 of the TCC (e.g. providing misleading information about their own products, defaming their competitors, disclosing trade secrets) are liable to imprisonment for up to two years or a judicial fine upon complaint. This shows that unfair competition may not only be a legal dispute, but also a criminal offence.
Who can file a lawsuit?
- Anyone whose customers, credit, professional reputation, commercial activities or other economic interests have been damaged or may face such a danger due to unfair competition.
- Non-governmental organisations that protect the economic interests of customers (e.g. consumer associations).
- Professional and economic associations (e.g. chambers of commerce).
- Organisations of a public nature.
Statute of limitations: Claims arising out of unfair competition are time-barred after one year from the date on which the claimant learnt of their existence, and in any case after three years from the date on which they arose.
Unfair competition is a cancer of the free and fair market order. The Turkish Commercial Code provides a wide range of legal protection mechanisms against such dishonest behaviour to both the competitors and consumers. When a business is confronted with a competitor’s actions such as defamation, imitation, disclosure of secrets, it should not remain silent and should immediately take legal action. Actions for declaratory, injunctive, rectification and damages are effective means of redressing this injustice. Likewise, while determining its marketing and sales strategies, it is of vital importance for an enterprise to pay utmost care to stay within the limits of honesty and fairness set by the TCC in order to be protected from possible future legal and criminal sanctions.