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When does robust competition between businesses overstep the mark and become unlawful?

by , 25 June 2013
The Hawks made a major breakthrough in their investigation into the so-called 'bread mafia' last week when they arrested three suspects during a raid on Super Harvest, an industrial bakery in southern Johannesburg, reports eNCA.com. According to the police, the bread mafia, a syndicate accused of attempted murder, has been threatening to kill their competitors in the bread industry. The incident has certainly highlighted the issue of competition between businesses. Read on to discover four established forms of unlawful competition so you can ensure your business doesn't overstep the mark.

It's alleged two competing bakeries Super Harvest and Morning Bread are feuding as competition in the bread industry has gotten tighter over the past two years.

The situation has gotten so ugly that, over the past six months, three delivery drivers from a rival independent bakery, Morning Bread, were killed and last week the bakery owner's house was robbed. Police were investigating the possibility of it being a failed assassination attempt. They're still looking for four other suspects, including the bread-mafia kingpin, eNCA.com reports.

While you might not be in the bread industry, you have the right to compete with your business rivals. This freedom is protected by the Constitution and the Competition Act.

But it's not a free for all! Competition must be lawful!

Here are four established forms of unlawful competition

According to The Labour Law for Managers Loose Leaf Service, there are four forms of competition that over the years have come to be recognised as unlawful by the courts:

#1: Your rival encourages your employees to break their contracts with you: Your rival may not persuade your employees or suppliers to break their contracts with you. However, he may encourage them to end their contracts lawfully by giving the required notice.

Keep in mind that this conduct isn't unlawful unless it's accompanied by an improper motive, such as when he persuades employees to leave simply to cripple your business.

#2: Your rival misleads customers into thinking that his product is your more famous product (also known as 'passing off'): A competitor may not attempt to steal trade from you, after you have acquired a reputation in the market for your goods or services, by imitating your name, marks or devices. If he does, you can take him to court.

If you do, you'll have to prove that:

  • Your mark, get-up, trade name etc has become distinctive and that
  • His conduct is likely to deceive the public.

You wouldn't have to prove that he actually intended to deceive the public.

#3: Your rival markets his product as similar to, or as good as, yours (known as  'leaning on'): Not only may your rival not pass his goods off as yours, he may also not 'lean on' or exploit the reputation you have built up for your product, by intimating that his own product is similar to, or as good as yours.

For example, it would be unlawful to advertise your motor car as being 'as reliable as a Mercedes Benz'.

#4: Your rival spreads false information about your goods or services (injurious falsehood): This occurs when your rival disparages your goods, services or business by deliberately spreading false information that's damaging.

This could amount to defamation, since South African law recognises that an artificial person such as a trading corporation can be defamed. Even if the false statement isn't technically defamatory, however, it may still cause serious harm and be unlawful.

So there you have it! By understanding what the courts will deem unlawful competition, you'll know when rival oversteps the mark and can ensure you don't do the same.

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