Unfair Competition Cases and Rights Aimed at the Protection of Businesses

UNFAIR COMPETITION CASES AND RIGHTS AIMED AT THE PROTECTION OF BUSINESSES

Introduction

The healthy functioning of the modern commercial structure depends on the existence of a free and fair competitive environment. Today’s market conditions are also built upon the existence and protection of free competition conditions. While competition among businesses increases market efficiency, it is an activity defined by certain limits set by the legal order. Indeed, ensuring that competition in a market is fair is at least as important as ensuring that it is free, in terms of maintaining sustainability and efficiency in the relevant market. Therefore, in order to protect fair competition, the legislator has introduced certain limitations on free competition. One of the most important of these limitations is the prohibition of unfair competition, which is the reflection of the principle of good faith—one of the fundamental principles of commercial law—into commercial life, and which is regulated under Article 54 et seq. of the Turkish Commercial Code (“TCC”).

Unfair competition is a situation that negatively affects the economic activities and market positions of market operators and may disrupt the commercial order. The TCC grants certain legal rights to operators in order to prevent such damages and to protect fair competition. Unfair competition regulations are among the fundamental rules serving the protection of trust, honesty, and transparency in commercial life. While these rules protect the economic interests of competing businesses, they also safeguard consumers’ right to be accurately informed and support public order regarding the functioning of the market.

What Is Unfair Competition?

A free competition environment in commercial life is of great importance for business operators. It refers to the economic sphere in which businesses can freely offer their goods and services and compete with one another based on criteria such as price, quality, and innovation. Free competition, as one of the fundamental elements of the market economy, ensures the efficient allocation of resources, increases production and service efficiency, and maximizes consumer benefit.

However, the healthy functioning of this environment requires business operators to conduct their activities in compliance with the rules of good faith and legal regulations. Otherwise, unfair practices such as misleading advertisements, counterfeit products, defamation campaigns, and the unlawful acquisition of trade secrets may arise. Therefore, the proper functioning of free competition in the market and the realization of social benefit are only possible if fair competition is also protected.

In this context, unfair competition can be defined by the following basic elements: the commission of an unfair and unlawful act in a market, the abuse of economic competition, and, within this framework, the exposure of other businesses operating in the market and/or consumers to damage or the risk of damage. It should also be noted that the existence of a competitive relationship between the perpetrator and the victim of the act giving rise to unfair competition is not mandatory.

The institution of unfair competition is a very important regulation in commercial life and aims to protect the economic interests of businesses and the market order. The act giving rise to unfair competition must inherently carry an economic value. Acts that do not aim at generating income cannot constitute unfair competition. For unfair competition to occur, an economic interest must have been violated or there must be a risk of such violation. The situations giving rise to unfair competition are enumerated in our legislation.

Cases of Unfair Competition

Article 55 of the Turkish Commercial Code regulates acts constituting unfair competition by way of exemplification and lists the main situations that may be encountered in commercial life. To explain the principal cases of unfair competition;

• Engaging in advertisements, sales methods, and other unlawful acts contrary to the rule of good faith:
  • Disparaging others or their goods, work products, prices, activities, or commercial affairs through false, misleading, or unnecessarily offensive statements.
  • Making false or misleading statements regarding one’s own business, goods, work products, prices, stocks, sales campaigns, or business relations.
  • Acting as if one possesses qualifications such as diplomas, awards, or titles that one does not actually have.
  • Causing confusion with the goods, work products, activities, or commercial affairs of others.
  • Making misleading or unfair comparative advertisements or announcements.
  • Presenting the real value of a product or service in a misleading manner by offering additional benefits to customers.
  • Misleading customers by concealing the characteristics, quantity, purpose of use, benefits, or risks of goods, work products, or activities.
  • Restricting the customer’s freedom of decision through aggressive sales methods.
  • Failing to clearly indicate the trade name in public announcements regarding installment sales or similar legal transactions or consumer credits, or failing to show the cash or total sales price and additional costs in TL and on an annual basis.
  • Providing incomplete or incorrect information regarding installment sale or consumer credit agreements.
• Inducing the breach or termination of contracts:
  • Encouraging customers to act contrary to their existing contracts by entering directly into contracts with oneself.
  • Encouraging employees or agents of third parties to act against their employer or principal by offering benefits.
  • Inducing employees, agents, or assistants to disclose or obtain their employers’ or principals’ production and trade secrets.
• Unauthorized exploitation of others’ work products; in particular,
  • Unauthorized use of work products such as offers, calculations, or plans entrusted to oneself.
  • Knowingly benefiting from work products belonging to third parties that have been unlawfully provided.
  • Unauthorized reproduction and use of ready-made work products belonging to others.
• Unlawfully obtaining, disclosing, or communicating production and trade secrets to others
• Failure to comply with business conditions

Rights of Business Operators Against Unfair Competition

As business operators are adversely affected in their economic activities and market positions by unfair competition, the Turkish Commercial Code grants various rights to operators against such situations. These rights aim both to prevent acts of unfair competition and to compensate for the damage suffered. The rights of business operators in this context can generally be classified as: (i) prevention of unfair competition, (ii) right to compensation, (iii) legal measures, and (iv) claims for cancellation/destruction.

Right of Business Operators to Request the Determination of Unfair Competition:

• The right to request the determination of unfair competition is one of the most fundamental legal protection mechanisms for business operators. This right enables the court to determine that the act subject to unfair competition has occurred, is unlawful, and violates the rules of good faith.

Right to Request the Cessation and Prevention of the Act of Unfair Competition:

• If the act of unfair competition is ongoing, affected business operators may request the court to immediately stop such activities. With the court’s cessation decision, the act of unfair competition is immediately terminated.
• Even if the act of unfair competition has not yet occurred, but poses an imminent danger, business operators may request the prevention of unfair competition. Requests for the cessation and prevention of unfair competition are often evaluated together with requests for preliminary injunctions.

Right to Request the Restoration of the Situation Prior to Unfair Competition:

• The business may request the elimination of the situation that caused unfair competition. Restoration of the previous state is a right regulated not only in material terms but also for restoring the business operator’s commercial reputation and re-establishing the disrupted market balance.
• Requests for restoration of the previous state aim at situations such as the correction of misleading advertisements, the recall or destruction of counterfeit products, the correction of statements damaging reputation, and the elimination of unjust gains.

Right to Claim Material and Moral Compensation:

• The business operator may claim material and moral compensation in order to compensate for the damages suffered.

Right of the Business Operator to Request the Transfer of Unjust Gain:

• If an unjust gain has been obtained due to unfair competition, the aggrieved business operator may request that such gain be transferred to itself.

Right of the Business Operator to Resort to Criminal Sanctions:

• Pursuant to Article 62 of the TCC, prosecution of this offense is subject to complaint. Persons or institutions that have suffered damage or are under the threat of damage may file a complaint within the general complaint period, namely within 6 months.
• In cases of unfair competition, pursuant to Article 62 of the TCC, the sanction for natural persons is imprisonment for up to two years or a judicial fine. This is an alternative sanction, and the court applies the sanction it deems appropriate.
• Security measures shall be imposed on legal entities. It should be noted that, pursuant to Article 60 of the Turkish Penal Code, the legal entities envisaged to be subject to sanctions in the nature of security measures are private law legal entities. Accordingly, public law legal entities are not covered under this provision.

Conclusion and Evaluation

Unfair competition is an institution regulated under Articles 54–63 of the TCC, aiming to ensure the healthy functioning of the competitive order by preventing conduct contrary to the rule of good faith in commercial life. In this context, the legal remedies granted to aggrieved businesses aim to eliminate the existing effects of unfair competition and to prevent potential damages. The criminal sanctions in the TCC enhance deterrence and strengthen the competitive environment. The effective implementation of unfair competition provisions not only protects the rights and interests of businesses but also contributes to the reliable and sustainable functioning of the economic order. Therefore, it is important for businesses to act in accordance with the principles of fair competition and to use the remedies granted to them in a timely and informed manner against acts constituting unfair competition.

Sincerely,
Atabay Law Office