INSIGHTS

CORONAVIRUS & UNFAIR COMPETITION

Mar 29, 2020

By:
Ahmed Ali Dayhom, Of Counsel.
Nourhan Abdel-Moniem, Junior Associate.

 

Over the past few days, Coronavirus ( now known as COVID-19 ) suddenly and quickly spread over almost all the world and became a pandemic, leading all countries to take precautionary measures to protect their citizens from being exposed to this kind of fatal virus. The measures too the form of preventing gatherings, suspending education, cancelling all air flights, and other restrictive measures.

The World Health Organization (WHO) defined the COVID-19, as follows:

“The COVID-19 are a large family of viruses that cause illness ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). They are zoonotic, meaning they are transmitted between animals and people. COVID-19 is a new strain that was discovered in 2019 and has not been previously identified in humans ([1]).”

Yet, this crisis witnesses the appearance of unethical behaviour from some certain merchants who tend to misuse the actual situation to realize an illegitimate profit or to manipulate the market prices. One of these illegal activities is spreading some merchants’ rumours about the virus in order to ruin the reputation of their competitors.

Hereunder we shall deal with the aforesaid phenomenon from a legal perspective.

Article 66/1 of the Egyptian Commercial Law states that:

“All act contravening the customs and norms observed in commercial dealing, shall be considered an illegal competition. In that shall be included in particular, the encroachment on a third party’s trademarks, his commercial name, the letters patent, or his industrial secrets which he/she possesses the right to invest, and instigating the workers in his trading store to divulge his secrets, or quit working for him, and also all act or claim that results in causing confusion to the trading store or his products, or in weakening the confidence in its – owner or those in charge of its management, or in his products.”.

According to the aforementioned article we draw see that the definition of the unfair competition is every act contravening the customs and norms observed in commercial dealing, and shall be considered an illegal competition. The said definition was adopted by the Egyptian Court of Cassation ([2]).

The scholars defined unfair competition as follows:

“the unfair competition, in general, is using a person of ways contrary to law, customs and honor. So, if someone did a certain act, which is not contrary to law and customs, and this act leads to competing other traders, moreover, harm them, this act is not an unfair competition act and the one who did that act is not a wrongdoer. ([3])

FORMS OF UNFAIR COMPETITION

Before mentioning the forms of unfair competition, the scholars assert that unfair competition is only between persons engaged in an identical or at least similar activity. It is worth noting that it is up to the judge to make such a determination.([4])

Article 66/1 of the Egyptian Trade Law states that:

“All act contravening the customs and norms observed in commercial dealing, shall he/she consider an illegal competition. In that shall be included in particular, the encroachment on a third party’s trademarks, his commercial name, the letters patent, or his industrial secrets which he/she possesses the right to invest, and instigating the workers in his trading store to divulge his secrets, or quit working for him, and also all act or claim that results in causing confusion to the trading store or his products, or in weakening the confidence in its – owner or those in charge of its management, or in his products.”. 

It shall be noted that the aforementioned article 66 sets out an exhaustive list of  the different forms of unfair competition. Some of these forms stated in this list will be discussed as follows:

Defame the Trader’s Reputation

This form of unfair competition is illustrated in many ways, including but not limited to, defaming the competing merchant’s reputation and spreading wrong information about him, assaulting the trade name, assaulting the trademark, spreading wrong commercial information, and imitating a competitor’s advertising methods.

Incitement of Workers

The incitement of workers could be done through inducing workers to leave their work or encourage them to conduct a strike, or disclosing the commercial secrets of competitors or their customer’s information.

The Unfair Competition Through Reducing the Prices

This form does not cover cases of normal discounts on prices during normal sale season, but the difference between the prices should be considered within the fair and legal competition.

The Egyptian Court of Cassation cited in one of its judgments regarding the forms of the unfair competition, the ability of the judge to apply the unfair competition to other unmentioned forms stating:

“The Court is vested the right to include in that enumeration other acts which is considered to be unfair competition and which could resort to the logic of measurement or free diligence in the context of the general definition set out at the beginning of the Para. 2 of article 66. ([5])

The COVID-19 & Unfair Competition

To determine the relationship between the misuse of the situation of the spread of COVID-19 & the unfair competition, we will discuss two case scenarios:

The First Case Scenario, if (X) and (Y) are traders, then (X) spreads a rumour that some of (Y)’s employees are COVID-19’s patients, according to the Egyptian Laws what is the legal basis that the trader should rely on?

Article 66/2 grants (Y) the right to file a case against (X) based on the unfair competition states:

“All illegal competition shall force its perpetrator to compensate for the harm ensuing therefrom. The Court shall, besides the compensation, have the power to pronounce a ruling ordering the removal of the harm and the publication of a summary of the sentence at the expense of the judgment debtor in a daily newspaper.”

So, (Y) has the right to seek compensation regarding the damage he suffered from this rumour and the judge has the authority to determine the amount of the claimed compensation.

Furthermore, the Egyptian Court of Cassation cited that:

“the unfair competition is a form of the tort fault which requires compensation for that fault regarding article 163 of the Civil Law. The extraction of that fault is one of the judicial authorities as long as such extraction is made up of elements leading thereto from the facts of the case. ([6])” 

It is also worth mentioning that Article 163 of the Civil Law states:

“Every fault which causes injury to another, imposes an obligation to make reparation upon the person by whom it is committed.”

To claim compensation under the tort liability, according to the aforementioned Article, three conditions must be fulfilled, which are: fault, injury, and causal relation between the fault and the injury.

Hence, the damage here is potentially massive where the merchant will face a material and financial injury. The financial injury is represented in losing clients and workers, and moreover, the material injury is represented in spreading harmful rumours about the trader and his business. This will also lead to losing clients, workers, and consequently money.

Applying the aforementioned Article to the case scenario, the fault is represented in error in estimating the disease, and this fault led to injury represented in moral and material injuries; the material damage to the merchant’s financial position and the moral damage to the trader’s reputation, and by linking the fault and the injure it is evident that there is a causation relationship between them which, at the end, will lead to the merchant’s right to be compensated.

Moreover, the scholars adopted that:

“It does not require to consider the act formed the competition an unfair competition to mention that the one who committed that act’s done it with deliberate or bad faith. It is sufficient to consider availability of fault if the person commits it, even in good faith. It is not necessary for the aggressor to be ill-intentioned, but only to deviate from the normal behavior of the normal person so that it is considered a reasonable fault of responsibility ([7]).”

The Second Case Scenario, if (X) is a civilian and (Y) is a merchant, then (X) spread a rumour that some of (Y)’s employees are COVID-19’s patients, according to the Egyptian Laws what is the legal basis that the merchant should rely on?

We should also initiate a differentiation whether the reason behind this rumour is based on an error in estimating the disease or it was spread on purpose to deliberately cause harm to the trader’s reputation.

If the rumour was based on an error in estimating the disease, whether it was a COVID-19, Flu or Allergy, the merchant may file a case against (x) based on the tort liability, the same as if it were spread by a merchant according to Article 163 of the Egyptian Civil Law which states:

“Every fault which causes injury to other, shall imposes an obligation to make reparation upon the person by whom it is committed.”

Furthermore, if the rumour was spread on purpose so as to cause harm to the merchant’s reputation, the Egyptian Penal Law stipulates under Article 345 that:

“ people who cause the rise or drop of prices of cereals, merchandise, coupons, or finance debentures provided for circulation, higher or lower than the value prescribed therefor in trade dealings, by deliberately spreading among people false or malicious news or announcements, or by giving the seller a higher price than what he/she requires, or conniving with the famous traders holding one item of goods or cereals on non-selling it, or on preventing its sale at a lower price than that agreed upon among them, or in any other fraudulent way, shall be punished with detention for a period not exceeding one year and a fine not exceeding five hundred Egyptian pounds or one of these two penalties.” 

To pursue such a claim under the aforementioned Article, two conditions must be fulfilled, which are:

  1. raising or reducing the prices of certain products which are determined therefor in trade dealings.
  2. said raise or reduction shall be through spreading rumour, or selling the items on a higher price than the real price, or conniving with the famous merchant holding one item of goods or cereals on non-selling it, or on preventing its sale at a lower price than that agreed upon among them, or in any other fraudulent way.

Applying the aforementioned article to the case scenario, where all conditions are fulfilled, the civilian here is liable to imprisonment for a period not exceeding one year and subject to a fine of not less than five hundred pounds and not exceeding twenty thousand pounds or one of these two penalties.

CONCLUSION

To conclude, there are different venues for merchants to seek legal protection against false rumours of COVID-19 that might be used by a competitor. These measures vary according to the source of the rumours. In case a rumour comes from another competition, the unfair competitor is the natural action in other scenarios where the rumour comes from a non-competitor, the tort action would be available as well as the criminal protection by virtue of Article 345 of the Egyptian Penal Law.


[1]           https://www.who.int/health-topics/coronavirus please state the date of last visit 25-3-2020.

[2]           Court of Cassation – Challenge No. 4536 for the 80th Judicial Year – 27/3/2012.

[3]           Dr. Sameha AL-Kalioby – AL-Waseet on discussing the Egyptian Trade Law – Dar El Nahda Al Arabiya – 2017 edition – Vol.1 – P. 596.

[4]           Economic Court – Challenge No. 3591 for 2010 judicial year – 31/1/2015.

[5] Court of Cassation – Challenge No. 4536 for the 80 judicial year – 27/3/2012.

[6] Court of Cassation – Challenge no. 9560 – for the 82 judicial year – 11/6/2013.

[7] Dr. Sameha EL-Kalioby – “Explaining the Egyptian Trade Law” – Vol.1 – 2007 edition – Dar El Nahda Al Arabiya – P 622.

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