ACC 2204-COMMERCIAL LAW

FEDERAL UNIVERSITY OF KASHERE, GOMBE STATE.

P.M.B 0182
FACULTY OF MANAGEMENT SCIENCES
DEPARTMENT OF ACCOUNTING

GROUP ASSIGNMENT

TOPIC: UNFAIR COMPETITON

COURSE LECTUERE: BARRISTER
REGISTRATION NUMBERS
FUKU/HMSS/19/ACC/0149 FUKU/HMSS/19/ACC/0170 FUKU/HMSS/19/ACC/0188
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FUKU/HMSS/19/ACC/0207 FUKU/HMSS/19/ACC/0208 FUKU/HMSS/19/ACC/0209
FUKU/HMSS/19/ACC/0210 FUKU/HMSS/19/ACC/0211 FUKU/HMSS/19/ACC/0214

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UNFAIR COMPETITION
INTRODUCTION:
In today‟s business world, especially with the abundance of online and self-owned
enterprises, competition can be fierce. With hundreds or thousands of people vying for the
attention of the same marketplace demographic, keeping your goods and services in front of
your prospective customers is key. Since the very beginning, businesses have found ways to
beat out the competition, but as time went on, those tactics have become more varied and
some, less legal. When you are doing your best and trying to grow your company, the last
thing you should have to worry about is someone else stealing your business away from you
using unsavory methods. Thankfully, the law is on your side, and if you suspect that
someone isn‟t playing by the rules, you have the right to consult with an unfair competition
attorney in Nigeria.
MEANING:
Unfair competition is conduct by a market participant which gains or seeks to gain an
advantage over its rivals through misleading, deceptive, dishonest, fraudulent, coercive or
unconscionable conduct in trade or commerce.
Unfair competition addresses circumstances where consumers have been misled, or
deceptive trade practices, as well as practices designed to restrict or alter a company‟s
revenue. In all cases, the activity can legally give rise to a tort action. That is, the wrongful
act is such that the perpetrator can and should be held civilly liable in a court of law. Some
forms of unfair competition are crimes, as well.
Unfair doesn‟t mean the same thing in every situation. It can have different connotations in
various business settings and depending upon the nature of commerce. For example, unfair
competition in a retail store setting can be a far different practice than what a pharmaceutical
company might engage in.
CONSUMER PROTECTION FROM UNFAIR TRADING REGULATIONS 2008
The act of doing commercial unfair practice can be cube by, the Consumer Protection from
Unfair Trading Regulations 2008 (known as the CPRs) control unfair practices used by
traders when dealing with consumers, and create criminal offences for traders that breach
them.
The Regulations prohibit 31 specific practices that are always considered to be unfair, and
create further offences for aggressive practices. They prohibit 'misleading actions' and
'misleading omissions' that cause, or are likely to cause, the average consumer to take a
'transactional decision' they would not have taken otherwise. They apply to commercial
practices relating to products (which includes goods, services and digital content) before,
during and after a contract is made.
They provide consumers with rights to redress in respect of misleading and aggressive
commercial practices, and set out the remedies available to them.

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PROHIBITION AGAINST UNFAIR COMMERCIAL PRACTICE

Effectively the CPRs prohibit trading practices that are unfair to consumers. There are four
different types of practices to consider:
i. Practices prohibited in all circumstances
ii. Misleading actions and omissions
iii. Aggressive practices
iv. General duty not to trade unfairly
For the last three practice types above it is necessary to show that the action of the trader has
an effect (or is likely to have an effect) on the actions of the consumer. The test looks at the
effect (or likely effect) on the average consumer, which means there is no need for evidence
about how any particular individual was affected.
The Regulations recognize that different types of consumers may react to a practice in
different ways, and identify three different types of consumer:
i. Average consumer: (reasonably well informed, reasonably observant and
circumspect)
ii. Targeted consumer: (where the practice is directed to a particular group of
consumers)
iii. Vulnerable consumer: (where a group of consumers is particularly vulnerable to the
practice or product because of their mental or physical disability, or age)

ELEMENTS OF UNFAIR COMPETITION

Generally, unfair competition consists of two elements:

1. There is some sort of economic injury to a business, such as loss of sales or consumer
goodwill.
2. This economic injury is the result of deceptive or otherwise wrongful business
practice.

However, because unfair competition can refer to a variety of different economic torts, each
tort will have its own test that must be met before a plaintiff can succeed in his or her case,
although elements may overlap.

For example, if the unfair competition consists of false advertising, the plaintiff would
need to prove:

 The defendant made a false or misleading statement of fact,

 The statement was used in an advertisement,
 The statement deceived or is likely to deceive customers in a material way, and
 The statement caused or is likely to cause injury to the plaintiff.
If the unfair competition consists of some element of fraud, the plaintiff would have to
prove:
 The defendant made a false statement of material fact

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 The defendant knew the statement was false

 The defendant intended to deceive
 The victim relied on the statement, and
 The victim suffered injury as a result of their reliance.

Generally, the different economic torts involve some level of intentional deception of
consumers, whether as to price, quality, or origin of the goods or services.

Acts that constitute unfair competition may be different across industries, so inquiries into
the existence of unfair competition typically require a fact-heavy analysis. However, the
underlying action giving rise to this cause of action typically involves some level of fraud,
deception, or bad faith.

Types of Unfair Competition

 Trademark infringement

If someone else steals your intellectual property and uses it to gain revenue or market share,
you may be eligible to file a suit. An example of this is when a competitor uses your logo or
slogan in their own advertising. This involves one business using another‟s trademarked
property without permission. An example of trademark infringement would be using the
Coca-Cola trademark on a soda container manufactured by a competing beverage maker.

 False advertising

When a competitor makes an unfair or untrue statement about their products or services, you
should talk to a lawyer right away. This type of misleading business practice can cut into
your customer base and profits over time. False advertising involves making claims that are
misleading or untrue, such as a company making false claims about a drug‟s abilities to
promote weight loss when such claims had never been proven.

 Unauthorized substitution

Unauthorized substitution is when a seller replaces one brand of goods with another without
authorization. This could involve substituting a low-cost handbag for a designer handbag. It
could also mean false advertising or false representation of products or services, such as
exaggerating a software program‟s spell-check capabilities. In either case, consumers are not
getting what they thought they were paying for.

Sometimes called the “bait and switch,” this illegal method involves someone
misrepresenting a product, and after the sale, substituting the product with a version
(“knockoff”) of lesser quality. This tactic often goes hand in hand with trademark
infringement.

Bait-and-switch tactics are another example of an unfair competition practice that directly
affects consumers. Say that a product in high demand is advertised at a very reasonable price.
Shoppers flock into the store to purchase the item only to be told that it‟s now sold out. But

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the shopper can purchase a similar model for just a few dollars more—and unsuspecting
consumers will often do so. Bait and switch is a crime in some states, particularly when the
advertised item was never in stock in the first place.

 Misappropriation of trade secrets

Your company‟s internal knowledge, including your formulas, recipes, strategies, and more,
are protected under intellectual property laws. If a competitor gets their hands on your intel,
and uses it for their own monetary gain, you can bring legal charges against them.
Misappropriation of trade secrets is another common instance of unfair competition, such as
stealing a competitor‟s proprietary formula. Consider an employee who is entrusted with or
stumbles upon the exact recipe for KFC‟s chicken batter. They then rent a fast food
restaurant establishment and begin selling chicken on their own using that same recipe.

Some of these examples, such as making false claims about a drug‟s abilities, technically fall
under the umbrella of unfair trade practices, which is a component of unfair competition law.

 False representation

If a competitor gets ahead in the marketplace by making false claims or offering faulty
guarantees, you may be able to get justice. This type of unfair competition often includes
product warranties, satisfaction guarantees, and other commercial policies.

 Below-Cost Selling

Below-cost selling occurs when a company intentionally and willingly sells a product or
service to consumers for less than the market rate. A retail seller might actually charge
consumers less than what it paid for an item, taking a loss. Another company might sell one
or more of its services at a rate that virtually ensures it cannot make money.

This type of situation is often temporary and is done with the intention of snagging business
away from competitors who can't or who are unwilling to compete. The reward comes down
the road when the company selling below cost increases its market share.

 Dumping
Dumping is a similar concept. It involves selling products abroad for far less than what they
would fetch in a local market. Why? Importing governments often offer several enticements
including subsidies and cash incentives.

 Rumor Mongering
Rumor mongering is exactly what it sounds like—maligning a competitor through written or
oral communications, often placed strategically with the press and other outlets.

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FEDERAL COMPETITION AND CONSUMER PROTECTION ACT 2019

The Act aims at promoting a competitive market and protecting consumer rights in Nigeria.
Prior to the enactment of the Act, there was no single piece of legislation regulating
competition in Nigeria. Thus provisions of laws regulating competition were found in
various legislation such as the ISA; the Nigerian Communications Act 2003; the Electric
Power Sector Reform Act 2005 amongst other laws. However, the new Act applies to all
businesses in Nigeria and supersedes all laws on competition and consumer protection,
except the Constitution of the Federal Republic of Nigeria 1999.

The Act prohibits unfair business practices or abuse of dominant market position by any
company, as well as any agreement to restrain competition such as agreements for price
fixing, price rigging, collusive tendering etc. To regulate and facilitate competition, the
President may from time to time, by order published in the Federal Gazette, declare that
prices for goods and services specified in the order shall be controlled in accordance with the
provisions of the Act.

In addition, the Act mandates the Commission to administer the provisions of the Act as well
as set up the Competition and Consumer Protection Tribunal to adjudicate over conducts
prohibited by the Act and exercise jurisdiction in accordance with the Act.

Although unfair competition is typically governed by civil law, federal and state
governments do have the ability to bring criminal sanctions against certain offenders.

There are a number of public policies that unfair competition laws are meant to address.
1. These types of laws protect business owners who invest time and money on
improving their goods and services, as well as on distinguishing themselves from
their competitors. Without these laws, businesses would have greater difficulty
surviving among competitors selling sub-par products, designed to look like authentic
items.
2. Businesses are able to create goodwill among their customers and consumers of their
products because consumers are able to make informed decisions about the goods and
services they purchase. This ability to make informed decisions encourages
consumers to spend money confidently.
3. These laws encourage honest competition among businesses to provide goods and
services at a price appropriate to their quality. Healthy competition keeps prices in
balance and avoids monopolies in certain markets. Because prices are kept in check,
these laws protect consumers.
4. Unfair competition laws are designed to punish bad actors. By making deceptive
statements or creating confusingly similar products, people and companies that
engage in unfair competition are not profiting honestly. Our laws are designed to
discourage and prohibit such behavior. Although the ultimate goal is prevention,
states and the federal government have the ability to bring criminal actions against
particularly bad actors.

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Regulation 3 is called "Prohibition of unfair commercial practices", which effectively means

failing to act in accordance with reasonable expectations of acceptable trading practice.
The regulation prohibits practices that:
I. Contravene the requirements of professional diligence (defined as the standard of special
skill and care that a trader may reasonably be expected to exercise towards consumers,
which is commensurate with either honest market practice in the trader's field of activity
or the general principle of good faith in the trader's field of activity)

II. Materially distort the economic behavior of the average consumer (or are likely to) with
regard to the product - that is, appreciably to impair the average consumer's ability to
make an informed decision, thereby causing them to take a transactional decision that
they would not have taken otherwise

CONSUMERS' RIGHTS TO REDRESS OR OFFENCES

In addition to the criminal offences created by a breach of the provisions described above,
the Regulations also provide consumers with rights to redress enforceable through the civil
courts. For a consumer to have these rights to redress certain conditions must be met.
The first condition is that the consumer does one of the following:
i. Enters into a contract to buy a product (goods, services, digital content, etc.) from a trader
(a business-to-consumer contract)
ii. Enters into a contract to sell goods to a trader (a consumer-to-business contract)
iii. Makes a payment to a trader for supply of a product (consumer-payment contract)
What remedies are available to a consumer?
There are three main remedies available to a consumer: the right to unwind, the right to a
discount, and the right to damages.
1. Right to unwind: The right to unwind allows the consumer to undo the contract and be
put back into the position they were in before it was made
2. Right to a discount: This right applies where the right to unwind has been lost. This may
be because of a delay in complaining or because the goods have been fully consumed
3. Damage: Consumers can claim damages if they have suffered reasonably foreseeable
losses that exceed the price paid for goods, digital content and services. These damages can
cover alarm, distress, physical inconvenience or discomfort as well as economic losses
suffered as a result of the prohibited practice
It is important to remember that often, unfair competition laws are an important source of
economic protection for small businesses, which may not see a profit for several years, or
may have tight profit margins. These regulations give business owners an opportunity to
participate in a level playing field.

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CONCLUSION
In Nigeria, most forms of unfair competition are generally governed at the state level,
although the federal Act, which regulates trademark infringement, is often invoked in false
advertising claims. Additionally, the Federal Trade Commission (FTC) was established to
protect consumers from this sort of deceptive trade practice. If state and federal laws or
regulations conflict, federal laws will generally preempt the conflicting state laws.

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REFERENCES
Department for Business, Enterprise and Regulatory Reform Explanatory Memorandum to
the Consumer Protection from Unfair Trading Regulations 2008 and the Business Protection
from Misleading Marketing Regulations 2008 (London, 2008) Pricing Practices Guide:
Guidance for Traders on Good Practice in Giving Information about Prices. (London, 2008)

Department of Trade and Industry The Unfair Commercial Practices Directive, Consultation
on a Draft EU Directive COM(2003)356 (London, 2002) The Unfair Commercial Practices
Directive, Consultation on Framing and Enforcing Criminal Sanctions in the Regulations
Implementing the Unfair Commercial Practices Directive (London, 2006)

Implementation of the Unfair Commercial Practices Directive. Consultation on the Draft

Consumer Protection from Unfair Trading Regulations 2007 (London, 2007) Griffiths, M.
„Unfair commercial practices: a new regime‟ (2007) 12 Communications Law 194

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