Unfair Competition Practices and Rights Aimed at the Protection of Businesses

UNFAIR COMPETITION PRACTICES AND RIGHTS AIMED AT THE PROTECTION OF BUSINESSES

Introduction

The proper functioning of modern commercial structures depends on the existence of a free and fair competitive environment.
Today’s market conditions are built upon the presence and protection of free competition. While competition among businesses
enhances market efficiency, it is an activity that is defined by certain limits imposed 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 protecting sustainability
and efficiency in the relevant market. Therefore, in order to safeguard fair competition, the legislator has introduced certain
limitations on free competition. One of the most significant of these limitations is the prohibition of unfair competition,
which reflects the principle of good faith—one of the fundamental principles of commercial law—into commercial life and 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 businesses and may
disrupt commercial order. The TCC grants businesses certain legal rights in order to prevent such damages and to protect fair
competition. Regulations on unfair competition serve as fundamental rules aimed at preserving trust, honesty, and transparency
in commercial life. These rules not only protect the economic interests of competing businesses but also secure consumers’
right to be accurately informed and support public order regarding the functioning of the market.

What Is Unfair Competition?

A free competition environment is of great importance for businesses in commercial life. It refers to the economic space in
which businesses can freely offer goods and services and compete with each other based on criteria such as price, quality,
and innovation. Free competition, as one of the fundamental elements of a 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 businesses to conduct their activities in compliance with the
principle of good faith and legal regulations. Otherwise, unfair practices such as misleading advertisements, counterfeit
products, defamation campaigns, and unlawful acquisition of trade secrets may arise. Therefore, the functioning of free
competition and the protection of public interest can only be achieved by simultaneously safeguarding fair competition.

In this context, unfair competition may be defined by the following core elements: the commission of an unfair and unlawful
act in a market, the abuse of economic competition, and the exposure of other businesses and/or consumers operating in the
market 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 causing unfair competition is not mandatory.

The institution of unfair competition is a highly significant regulation in commercial life, aimed at protecting businesses’
economic interests and market order. The act giving rise to unfair competition must inherently carry an economic value. Acts
that do not aim to generate income cannot constitute unfair competition. For unfair competition to occur, an economic
interest must have been violated or exposed to a risk of violation. Situations giving rise to unfair competition are listed
under the law.

Forms of Unfair Competition

Article 55 of the Turkish Commercial Code regulates acts constituting unfair competition by way of examples and lists the
principal situations that may be encountered in commercial life. The main forms of unfair competition include:

Engaging in advertisements, sales methods, or other unlawful conduct contrary to the principle of good faith:
Making false, misleading, or unnecessarily offensive statements to disparage others or their goods, services,
prices, activities, or commercial affairs.
Making false or misleading statements about one’s own business, goods, services, prices, stocks, sales campaigns,
or business relationships.
Creating the impression of possessing qualifications such as diplomas, awards, or titles that do not actually exist.
Creating confusion with the goods, services, activities, or commercial affairs of others.
Making misleading or unfair comparative advertisements or announcements.
Presenting products or services to customers in a misleading manner by means of additional benefits that distort
their actual value.
Misleading customers by concealing the characteristics, quantity, intended use, benefits, or risks of goods,
services, or activities.
Restricting customers’ freedom of decision through aggressive sales methods.
Failing to clearly indicate the trade name, cash or total sales price, and additional costs in public announcements
regarding installment sales or consumer loans.
Providing incomplete or incorrect information in installment sale or consumer loan agreements.

Inducing breach or termination of contracts:
Encouraging customers to breach their existing contracts and enter into contracts directly with oneself.
Inducing employees or agents of third parties to act against their employers or principals by offering benefits.
Encouraging employees, agents, or assistants to disclose or obtain their employers’ or principals’ production or
trade secrets.

Unauthorized exploitation of others’ work products, in particular:
Using entrusted offers, calculations, or plans without authorization.
Using third parties’ work products while knowing that they were provided without authorization.
Unauthorized reproduction and use of others’ ready-made works.

Unlawfully obtaining, disclosing, or communicating production and trade secrets.
Non-compliance with business conditions.

Rights of Businesses Against Unfair Competition

Since unfair competition negatively affects businesses’ economic activities and market positions, the Turkish Commercial
Code grants businesses various rights against such situations. These rights aim both to prevent unfair competition and to
remedy damages suffered. Generally, these rights may be classified as: (i) prevention of unfair competition, (ii) the right
to compensation, (iii) legal measures, and (iv) annulment/destruction claims.

Right to Request Determination of Unfair Competition:

The right to request the determination of unfair competition is one of the most fundamental legal protection mechanisms
for businesses. This right enables a court to determine that the act constituting unfair competition has occurred, is
unlawful, and violates the principle of good faith.

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

If the unfair competition act is ongoing, affected businesses may request the court to immediately cease such activities.
With the court’s cessation decision, the unfair competition act is terminated without delay.
Even if the unfair competition act has not yet occurred but poses an imminent risk, businesses may request its
prevention. Requests for cessation and prevention are often evaluated together with requests for interim injunctions.

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

A business may request the elimination of the circumstances that caused unfair competition. Restoration to the former
state is not limited to material aspects but is also intended to restore the business’s commercial reputation and re-
establish disrupted market balance.
Such requests may include correction of misleading advertisements, recall or destruction of counterfeit products,
rectification of statements damaging reputation, and elimination of unjust gains.

Right to Claim Material and Moral Damages:

A business may claim material and moral compensation to recover damages suffered due to unfair competition.

Right to Request Transfer of Unjust Gains:

If unjust gains have been obtained as a result of unfair competition, the injured business may request that such gains
be transferred to itself.

Right to Pursue Criminal Sanctions:

Pursuant to Article 62 of the TCC, prosecution of this offense is subject to complaint. Persons or entities that have
suffered damage or are under the risk of damage may file a complaint within the general complaint period of six months.
In cases of unfair competition, Article 62 of the TCC provides that natural persons may be subject to up to two years
of imprisonment or a judicial fine. These sanctions are alternative, and the court applies the one it deems appropriate.
Security measures shall be imposed on legal entities. It should be noted that, pursuant to Article 60 of the Turkish
Criminal Code, such security measures apply only to private law legal entities; public law legal entities are excluded
from this scope.

Conclusion and Evaluation

Unfair competition is an institution regulated under Articles 54–63 of the Turkish Commercial Code, aiming to ensure the
healthy functioning of the competitive order by preventing conduct contrary to the principle of good faith in commercial
life. The legal remedies granted to affected businesses aim to eliminate the existing effects of unfair competition and
prevent potential damages. Criminal sanctions under the TCC enhance deterrence and strengthen the competitive
environment. The effective application 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 compliance with the principles of fair competition and to timely and consciously
exercise the remedies granted to them in the face of unfair competition.

Saygılarımızla,

Atabay Law Office