Articles

Are your competitors taking the gloves off?

by Steve - Posted 02 March 2007

SA like other capitalist societies thrives on healthy competition between businesses. The idea being that in the pursuit of the same customer, some may lag behind and disappear while others prosper. Competition based on merit, i.e. the loser is the one who delivered the weakest performance based on price and quality, is allowed but unlawful competition is not. But what is regarded as unlawful?

Basically any conduct by a competitor which unreasonably or wrongfully interferes with or infringes your ability to attract customers to your business will be unlawful. There is no closed list of situations, but the following examples of what the courts have frowned upon in the past will give you some idea:

Cashing in on brand reputation (Passing off)     

Your competitor passes off their goods or services as being yours or connected to yours. Piggy backing on the blood sweat and tears that you put into marketing and building up a reputation around your business, your competitor uses or copies your trade marks, logos or the distinctive get-up of your goods or services.

Telling BIG white lies about their own goods and services   

We have all been known to sell-up our wares a little from time to time, but when your competitors are selling their Fiat Uno’s as Hummers, you know something is up.

Stealing trade secrets

Industrial espionage is not something restricted to Bond movies. Where your competitor obtains information from you which he knows to be secret and confidential and which has been developed by your own skill and industry, he commits a wrongful act if he uses that information to your detriment.

Courting your employees, suppliers or other contractual partners

Influencing an employee to leave is not unlawful in principle. However, if the competitor’s aim is to cripple your business rather than to benefit themselves from that employee’s services, it may be unlawful.

Strong arming or psyching out your customers or employees

Think Godfather. Think horse’s head.

Dragging your name through the mud

Your competitor’s potty mouth is spreading falsehoods about your business, products or services to your clients and prospects. Mere comparison of your goods and services with their own is not actionable. Only when the comparison contains untruths which amount to disparagement is it unlawful. 

So what can you do about unlawful competition? If it is ongoing conduct that you need to prevent, you can approach the court for an interdict. If the damage is already done, you can claim compensation for the loss suffered.  

Unfortunately both involve relatively expensive legal costs and time consuming court action if the competitor defends the matter. You may also need to rely on a client to give evidence about the unlawful ways in which your competitor tried to entice their business away from you. Having a client sit in the witness box and be cross examined by some aggressive advocate may not be the best form of client relationship management.

As with all things, you need to weigh up the pros and cons of taking a legal stick to a business problem. If the risk or damage is minimal, put your pride in your pocket and double your constructive efforts to banish the competitor from your market space. However if your sales figures are dipping faster than Britney’s sanity, you will need to take action.

I leave you with the words of AJ Foyt: “You get out in front -- you stay out in front.”