(ADVERTISING) UNFAIR COMPETITION

Regardless of what most people could think, Mexican legislation, concerning unfair competition, is quite modern, having absorbed international treaties to the domestic legislation has made a very robust legal framework in order to defend the rights of business that may have been “victims” of non-accepted advertising practices by their competitors.

As well, the Mexican legal system has incorporated several procedures in order to empower the relevant authorities to ensure to award the appropriate remedies according to domestic, and International Law.

General Overview

The advertising industry has existed for a very a long time, however, it has been since the post-war era that it has grown exponentially.

Recently, advertising has reached new heights, growing even more because of the digital platforms, like mobile content, and social media, and as of 2018, it is an industry worth over a trillion dollars.

During this period of time, numerous companies have appealed to several unorthodox advertising methods, some which could be deemed as unfair competition, instead of engaging and investing in creativity and innovation.

Thus, in developed and developing countries, healthy competition is considered to be the engine of the economy, on the contrary, unfair competition in these countries is considered to be against of what it is customary and usually accepted practices in industrial and commercial matters.

More often than not, this kind of practices go beyond of what it is accepted, and legal, therefore, International Treaties and domestic legislation have had the need to legislate this unaccepted conducts and catalogue some forms of it as Industrial Property and commerce infringement.

International Treaties

The “Paris Convention for the Protection of Industrial Property” of March 20th, 1883 (Paris Convention), has defined unfair competition in its article 10bis as “Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.”

The Paris Convention, also in its article 10bis states that unfair competition practices are:

  1. all acts of such a nature as to create confusion by any means whatever 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;
  3. indications or allegations the use of which in the course of trade is 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.

As well, the World Trade Organization members have entered into the “Agreement on Trade-Related Aspects of Intellectual Property Rights”, better known as TRIPS, in which its article 2, states that “In respect of Parts II, III and IV of this Agreement, Members shall comply with Articles 1 through 12, and Article 19, of the Paris Convention (1967).” This means that all members shall comply with assuring effective protection against all forms of unfair competition.

Mexican Legal Framework

Mexico is a member of both mentioned International Treaties, however, there is also domestic legislation created to protect consumers, and competitors who play by the rules, and aim to tackle different forms of unfair competition.

The applicable domestic legislation is located in articles 6 of the Commerce Code, 213 of the Industrial Property Law, and article 32 of the Consumer Protection Federal Law, and at first instance, the Institutions in charge of its enforcement are, the Mexican Institute of Industrial Property (IMPI as per its acronym in Spanish), and the Federal Consumer Prosecutor’s Office (PROFECO in Spanish).

Pretty much in line with the Paris Convention, Mexican Law states that it constitutes an infringement (unfair competition) to perform acts that are against the customary and usually accepted practices in industrial and commercial matters.

As well, when performing industrial or commercial activities, to act in a way that causes or induces the consumer to confusion, error or deception, or to intend or achieve to discredit the products or services of a third party.

Moreover, Mexican Law states that advertising cannot be misleading or abusive, this means that it cannot refer to characteristics or information, related to products or services, that even if being true or not, misleads or confuses the consumers by the inaccurate, false, exaggerated, partial, artificial or tendentious way in which it is presented to the public.

These legal hypotheses have been commonly identified in the following concepts:

1. Misleading Advertising. Refers to the advertising practice that (i)causes or induces the consumers to confusion, error or deception by making them believe in the existence of a commercial relationship or association in between an establishment and a third party’s, (ii) that products are manufactured under a certain kind of specification, license or authorization of another person, (iii) that services or products are commercialized under a third party’s authorization or license, and (iv) that products come from a specific location, region, when in reality such products come from another causing confusion as to the true origin of the products.

2.Comparative Advertising. This is a practice that may, or may not constitute infringement or unfair competition.When doing it correctly and objectively it will not be deemed as unfair competition, however, there are a few rules to follow.

This kind of advertising constitutes unfair competition when it confuses the consumer or induces them into error when referring to the product’s or service’s characteristics or information, even if being true it is presented in an inaccurate, false, exaggerated, malicious, or tendentious manner.

In order to not fall under the scope of unfair competition, some rules must be observed, such as (a) avoiding the usage of categorical or superlative terms like “the best”, unless said terms are entirely grounded and certified, (b) compare the same specific product, with the same function, substitute products, etc., (c) compare products that are in the same price range (expressed in money, not percentages), the price must be certifiable, among others that can provide objectivity.

It is important to point out, that although Comparative Advertising is not prohibited in Mexico, it is not as used as in other parts of the world since there is a very thin line in between legality and illegality. A bona fide competitor can incur in unfair competition and several other infringements located in the Industrial Property Law and the Consumer Protection Federal Law, without intending to cause confusion among consumers.

3. Ambush Marketing. Can be defined as the advertising strategy put into action by a competitor of the official sponsor of a major event, in which the competitor literally “ambushes” the event (more commonly seen in sporting events, such as the World Cup, Formula 1, Wimbledon, etc.) in order to cause or induce consumers to confusion, by making them believe in the existence of a commercial relationship or association in between the event’s organizer and them.

An example of this strategy can be when a competitor, gifts its products in a massive way to the attendees of the event, whereas the official sponsor’s products are advertised, and sold inside the venue. The competitor tries to induce confusion on the consumers and make them believe in the existence of a commercial relationship between the event and him due to the overwhelming exposure of its Trademarks.

In Mexico, when a person or an entity commits an infringement due to the performance of unfair competition practices, the person or entity whose rights were violated can file a claim before the IMPI, however, when such conducts are due to unorthodox advertising strategies, the claim can be filed before the IMPI and/or the PROFECO.

The procedure before the PROFECO, consists of a claim made by someone (it can be an individual or the affected corporation), who is never a party in the procedure, since the PROFECO, acting as a state attorney will investigate the facts, and decide on whether the defendant is guilty or not of committing the claimed unfair competition acts while advertising.

Whereas in the procedure before the IMPI, there is a plaintiff and a defendant, both of whom have to provide enough evidence to sustain either the claim or the defence, therefore, the IMPI acting as a judge will decide on whether the conducts are in fact, unfair competition practices or not.

In both cases, the sanction will always be a fine, which is calculated depending on the seriousness of the conducts and the recidivism. In the procedures followed by PROFECO, the infringement to article 32 of the Consumer Protection Federal Law is always considered as severe, and in case of recidivism, the fine will amount 10% of the annual gross income of the infringer, which was obtained due to the commercialization of the goods or services related to the unfair competition practice.

It is important to note that both decisions (issued by the IMPI or by PROFECO) are not final, and can be appealed by the relevant party before the Federal Court of Administrative Affairs (or Tribunal Federal de Justicia Administrativa in Spanish), and therefore, before the Federal Circuit Courts (through a Juicio de Amparo).

Among other possible remedies to take into account, in Mexico, there is a non-profit organization called Consejo de Autorregulación y Ética Publicitaria A.C. (or CONAR as per its acronym in Spanish), founded by several actors of the advertising industry (advertisers, agencies, media companies, etc.) with the purpose of serving as a conciliator in an Alternative Dispute Resolution (ADR) of an advertising nature, and issuing resolutions based on the Code of Advertising Ethics.

In this regard, in case the person or entity whose rights were violated decides not to file a claim before the relevant authorities (IMPI, and/or PROFECO) they can go to the CONAR, in order to start ADR against who the consider infringe their rights, in order to settle the dispute in an amicable manner.

As well, the CONAR functions as an advocate for “advertising ethics”, in order to ensure the consumers receive the most accurate information through responsible advertisement and avoid unfair competition practices in the future among its members.

 

Final Thoughts

Finally, although most of the Companies out there play by the rules (accepted habits, methods, strategies, etc., or actual laws), and rely on a very competitive, and rough advertising strategies. This generates healthy commercial battles with their competitors, which brings out the best, in terms of creativity and innovation, of their advertising/marketing departments, to captivate the consumers. However there are also many other Companies that, instead of putting all the effort and investing in creativity, prefer to compete in a disloyal manner, trying to draw customers by inducing them into confusion or error, as well as misleading them by fraudulently comparing a diverse range of goods and services available in the market.

 

Manuel Gutiérrez