Unfair Competition in Russia

Unfair competition in Russian law

The differing economic interests of market participants often result in the use of unlawful methods of competition, which are commonly combined into the concept of “unfair competition.”

In accordance with the Russian Federal Law of July 26, 2006, No. 135-ФЗ, “On Protection of Competition” (hereinafter the Law on Protection of Competition), unfair competition means any actions of business entities (groups of persons) that

1. are aimed at gaining advantages in carrying out commercial activities;
2. contradict Russia’s legislation, business customs, and the requirements of integrity, reasonableness, and fairness; and
3. have caused or may cause losses to other business competitors or have harmed or may harm their business reputation.

According to Paragraph 1 of Article 10bis, “Unfair Competition,” of the Paris Convention for the Protection of Industrial Property, an act of unfair competition is any act of competition that contradicts fair customs in industrial and commercial affairs. According to said international legal norm, the following actions are prohibited:

1. all acts of such a nature as to create confusion by any means whatsoever with the establishment, the goods, or the industrial or commercial activities of a competitor;
2. false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities of a competitor; and
3. indications or allegations that, in the course of trade, are liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity of the goods.

The Law on Protection of Competition contains the special chapter 2.1, “Unfair Competition.” In accordance with this chapter, along with a direct infringement of the competitor’s IP rights, the following actions relating to intellectual property are prohibited: 

1. unfair competition related to the acquisition and use of the IP rights to the means of individualization of a legal entity as well as the means of individualization of goods, works, or services (for example, registration as a trademark of a designation that was previously known as used by a competitor to individualize its product); and
2. activities leading to confusion with a competitor’s activities or with its goods or services, in particular

• the use of a designation that is identical or confusingly similar to a competitor’s means of individualization on the Internet (for example, by inclusion in a domain name); and
• copying or imitating a competitor’s product—its packaging, color scheme, corporate identity, design elements, and other unprotected means of individualization.

Thus, parasitic competition is not allowed, i.e., actions on the market aimed at

• obtaining unreasonable advantages in the form of lower expenses for the development of goods or means of individualization;
• the possibility of lowering prices (compared with bona fide competitors); and
• attracting customers by using the business reputation of a well-known brand, misleading consumers in respect to the product and its manufacturer. 

Fighting unfair competition

At present, unfair competition can be stopped both administratively (by the Federal Antimonopoly Service) and by courts (based on a lawsuit filed by an interested party).

The Federal Antimonopoly Service (FAS), to suppress unfair competition, is entitled to

• initiate and consider cases of violations of the antimonopoly legislation;
• take conclusions on the circumstances of the case;
• issue warnings, decisions, rulings, and orders; and
• hold the perpetrators accountable for violating antitrust laws.

In addition to appealing to the FAS in an administrative procedure, as indicated above, an injured party may appeal to the arbitration court for the protection of its rights. Article 15 of the Civil Code of the Russian Federation and Part 3 of Article 37 of the Law on Protection of Competition allow a person affected by a violation to recover both real damages and lost profits. At the same time, in such processes, the plaintiff must prove both violation by the respondent of the Law on Protection of Competition and infliction of losses by such violation. In this regard, in practice, claims for damages are initiated after the antimonopoly body has ruled that the antimonopoly law is violated (such a decision eliminates the need for the plaintiff to prove that the violator has committed acts contrary to the Law on Protection of Competition).

The problem of combating unfair competition today is quite large, and it can only be solved through the interaction of law enforcement agencies, the judiciary, the legislature, the rights holders themselves, and other organizations, including patent law firms.

Protecting the interests of participants in competitive market relations is an important area of Sojuzpatent’s service to its clients. Our lawyers have many years of experience in successfully representing clients in cases involving breaches of antitrust laws. Sojuzpatent’s specialists are ready to provide step-by-step guidance on how to protect clients’ rights and represent them at all stages of the antimonopoly proceedings. 

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Ms. Tatiana V. Ekhlas

General Counsel

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