Unlawful Competition

Overview

Unlawful competition is not limited to any specific kind of unlawful action and is not covered by any legislation. South Africa’s common law in respect of unlawful competition has been developed by the courts.  Over the years, the courts have indicated which type of actions can be regarded as unlawful.

Unlawful competition affords any person, irrespective of the existence of any intellectual property, the right to stop third party from conducting business or other activities in a manner that is regarded as unlawful.

Some types of conduct go beyond the bounds of free trade and competition. The courts apply general principles of the law of delict to such conduct and grant orders preventing such conduct.

For conduct to constitute unlawful competition, 3 basic elements must be present:

• the act must be unlawful;
• there must be actual damage or the likelihood of damage to the person affected by the unlawful conduct; and
• the conduct must interfere with the right or legal entitlement of the person affected.

Passing-off is an established category of unlawful competition.  Passing-off is a misrepresentation by one person that his goods or services are those of another person. The misrepresentation may arise through the use of a trademark or get-up (general appearance, packaging, manner of presentation, etc.) identical to or confusingly similar to that of someone else. The misrepresentation may also be as a consequence of false impressions created by advertising and the like. The wronged party must have a reputation and goodwill in his own trademark or get-up as a consequence of extensive use. The repute must exist in South Africa. The existence or otherwise of a reputation as a question of fact. The misrepresentation must result in harm or the likelihood of harm to the wronged party.

Another established category of unlawful competition includes the misuse or disclosure of confidential or secret information.  It is unlawful to use a competitor’s confidential information with a view to gaining a trade advantage. Instances of misuse of such information are most frequently encountered in cases where a person has left an employer to start his own business, taking with them the secret information of his ex-employer such as customer lists, recipes, business schemes, secret know-how (trade secrets) and other confidential information. This type of conduct has been found to be unlawful in that it provides an unfair springboard from which to launch a new business or to compete with a competitor.

A misrepresentation about your own product may also amount to unlawful competition. Statements made about your own product which go beyond “puffery” (laudatory or extravagant statements which may not strictly speaking be true, but which are not unlawful) includes statements such as “the finest computer in the world” or “the best wine in South Africa”.

Finally, a misrepresentation about a competitor’s product or business may also amount to unlawful competition. Spreading of untrue or malicious rumours and statements which may lead to damage to a competitor’s business, may be regarded as unlawful.