Amendments to the Unfair Competiton Act and its influence on other legislation

The Act No. 29/2009 of 30 December modifies the legal system of unfair competition and advertising to enhance consumer and user protection

Act No 29/09 incorporates the Community Directive 2005/29/EC dealing with unfair company commercial practice in their relations with consumers on the domestic market into the Spanish law, along with Directive 2006/114/EC on deceptive and comparative advertising, thereby introducing a number of major modifications to the Unfair Competition Act, to the General Advertising Act, to the Code of Law regarding the Consumers and Users Protection Act and other complementary legislation, together with the Retail Trade Organization Act. The Act came into force in January 2010.

The modifications to the Unfair Competition Act are considerable, such as that relative to its territorial range, no longer limited to “unfair competition acts which do or may have substantial effects on the Spanish market” and now subject to a general provision defining as unfair “any conduct objectively contrary to the demands of good faith and fair dealing”. There must be two basic elements in determining that conflict; on the one hand that the conduct of an entrepreneur or professional must be contrary to professional diligence, understood here as honest market practices for their evaluation and, on the other hand, for such conduct to “significantly or potentially distort the economic behaviour of the average consumer or an average member of the group targeted by the practice, if a commercial practice is addressed to a specific consumer group”, in this case applying the notion of ‘average consumer’ established by the European Community Court of Justice. Introduction of this Act creates an unitary framework relative to the unfairness of aggressive and deceptive acts, irrespective of whether aimed at a consumer or at an entrepreneur so that, in both cases, the same level of correction is demanded, superseding “the traditional distinction between unfair acts and the regulation of illicit unfair or deceptive advertising”, as explained in the Rationale to Act No. 29/2009.

This amendment to the Unfair Competition Act also includes a number of criteria to regulate comparative advertising, notably that goods or services compared must have the same ends or that the comparison has to be made objectively between their essential, pertinent, verifiable and representative characteristics. Chapters III and IV of the Act are also amended, firstly regulating acts of unfair competition which, affecting competitors, are considered only likely to prejudice those affected when they are consumers and users, for example concerning deceptive omissions and secondly actions arising from unfair competition including, among other, the one regarding the declaration of the unfairness, the cessation of the unfair conduct, the rectification of deceptive, incorrect or false information or the compensation for damages and losses caused by such unfair conduct if involving the agent’s fraud or culpability.

Finally, a new section is included in the Act dealing with Codes of Conduct which must, fully observing the rules on competition, help enhance consumer and user protection. Thus access is regulated to effective systems for out-of-court settlement of claims which meet requisites set in the Community provisions, which may include action against entrepreneurs who publicly join codes of conduct and who breach obligations freely undertaken or commit acts of unfair competition, or against those responsible for codes which encourage unfair acts. As final substantial modification to the Unfair Competition Act, mention must be made of the chapter dealing with the procedural norms in which rules are incorporated dealing with the burden of proof in connection with the veracity and accuracy of factual assertions by entrepreneurs or professionals, and to include actions for the cessation of unfair practices detrimental to the financial interests of consumers and action against breach of Codes of Conduct mentioned above.

Reference must also be made to the decision to maintain the General Advertising Act, beyond a purely contractual standard, because of the relevance of advertising in citizens’ decision-making processes. This Act sustains the concept of illicit advertising and guarantees actions and remedies making it possible to eliminate it, particularly in the case of advertising affronting personal dignity or infringing rights and values recognised in the Constitution, especially in relation to children, young people and women.

Taking up the jurisprudential criterion which requires it, an unique system for the Unfair Competition Act and the General Advertising Act is created for actions and remedies against any commercial practice detrimental to the economic interests of consumers, while not relinquishing specific regulation of advertising and without impairing the special authority established in the latter in connection with illicit advertising using a degrading or discriminating image of women, ultimately repealing Part IV of the General Advertising Act.

This legislation introduces major amendments into the Consumers and Users Protection Act, making it clear that entrepreneurs’ commercial practices targeting consumers are governed exclusively by it and the Unfair Competition Act, and entrepreneurs or professionals cannot be made subject to obligations, demands or prohibitions other than those in these provisions, although it does make this general system compatible with a number of specific regulations, for example in connection with financial services or real estate. The Consumers and Users Protection Act now includes the obligation to inform consumers of commercial practices which include data on the features of the goods or service and their price, enabling a consumer or user to reach a decision about contracting it and, among other questions, specifically regulating price information to adjust it further to the demands in the regulation on the information which must be provided in commercial practice.

Finally, unfair commercial practice is classified as a consumer breach, although this provision does not have effect in assigning or modifying administrative jurisdiction attributed by state or regional regulation to other public sector Administrations.

And Act No. 29/2009 amends the Retail Trade Organization Act to adjust regulation on promotional selling to the provisions in the Directive, maintaining the substantive regulation on the ordering of commercial activity, with express reference to the Unfair Competition Act in dealing with its effect upon the legitimate economic interests of consumers.

Antonio TorralbaMariscal & Asociados, Abogados