Could it be unfair competition to give notice of impending closure of business?

The First Division of the Supreme Court applies its doctrine on the purpose of competition under article 2 of Act 3/1991, of January 10, on Unfair Competition (“the Spanish Unfair Competition Act”) in judgment 59/2019, of January 29.

The dispute arose from allegedly unfair acts by one of the respondents, who had started eviction proceedings against the claimant, by warning customers and suppliers of the restaurant’s impending closure, sending debt collectors to the restaurant to collect amounts owed and soliciting employees to terminate their employment with the claimant.

The claim was dismissed at first instance and on appeal due to lack of evidence of the acts of which the respondent was accused. The claimant then filed a final stage appeal before the Supreme Court, citing the incorrect interpretation of the purpose of competition under article 2 of the Spanish Unfair Competition Act, and that there was no need for the two parties to be in direct competition.

The court considered that, regarding the purpose of competition, the subjective motivation of the parties is not relevant; all that is relevant is to determine whether the acts under scrutiny could possibly enable the trading of one’s own or a third party’s goods and services in the market. In other words, it is not relevant to decide whether the respondent’s intention was to promote its own services or those of third parties, but whether its acts objectively could affect the market, making the claimant less competitive, whether for the benefit of the respondent or for someone else.

The court also reminded the parties that, under article 3 of the Spanish Unfair Competition Act, there is no need for the perpetrator of the unfair act and the affected party to be competitors. The court indicated that “it is irrelevant that neither of the two respondents competes with the claimant.” The Supreme Court criticized the findings of the Vizcaya Court of Appeals, which seemed to conclude that there was no purpose of competition from the fact that the respondent is not in the restaurant business.

However, the only proven fact were the respondents’ statements about the impending closure of the restaurants, and the Supreme Court concluded that such acts were not objectively important enough to have an influence on the market that would strengthen the position of competitors, because the statements were made as part of the eviction and were not widely spread.

Authors: Esther Ballesteros and Miquel Peguera