Unfair Competition: Types of Acts, Legal Actions, and Damages

Unfair Competition in Spain: Legal Framework and Available Actions

Unfair competition is one of the pillars of Commercial Law. Law 3/1991 of January 10 on Unfair Competition (LCD), reformed by Law 29/2009, establishes the legal regime for unfair competition acts in the Spanish market. This guide analyzes the types of unfair acts, available legal actions, and protection mechanisms for affected businesses.

General Clause: Art. 4 LCD

Art. 4 LCD contains the general unfairness clause: any behavior that is objectively contrary to the requirements of good faith is deemed unfair. This article operates as a catch-all provisión, allowing prosecution of conduct that does not exactly fit the specific types but that violates competitive good faith.

The Supreme Court's case law (STS 505/2019 of October 1) has specified that the general clause cannot be applied indiscriminately but requires proving that the conduct is objectively contrary to good faith and produces a distorting effect on competition.

Types of Unfair Acts

#### Acts of Confusión (Art. 6 LCD)

Acts that create confusión with another party's activity, services, or establishment are deemed unfair. Confusión can be:

• Direct: The consumer confuses a product or service with that of a competitor (identical names, packaging, logos).
• Indirect (risk of association): The consumer, without confusing the products, believes there is a business connection between the competitors.

STS 1/2021 (Civil Chamber) established that confusión must be assessed based on the overall impression produced on the average consumer, not on a detailed analysis of individual elements.

#### Acts of Deception (Art. 5 LCD)

Conduct containing false information or information that, though truthful, by its content or presentation misleads recipients is deemed unfair. Deception may relate to:

• The nature, composition, or substantial qualities of products or services.
• Price or sale conditions.
• The reasons for the commercial offer.
• The nature, qualifications, or capabilities of the business.
• Consumer rights.

#### Acts of Denigration (Art. 9 LCD)

Statements about a competitor's activity, services, or establishment that are apt to undermine their market reputation are deemed unfair, unless they are exact, true, and relevant. Denigration constitutes an aggravated type of unfair act due to its capacity to cause reputational damage.

The burden of proof of the accuracy and relevance of the statements falls on the person making them (Art. 9 LCD in fine).

#### Acts of Imitation (Art. 11 LCD)

Imitation of business services and initiatives is, in principle, free, unless one of these circumstances occurs:

• It generates a risk of confusión (association with another business).
• The imitation is systematic (repeated copying of all the competitor's initiatives).
• The imitation occurs through undue exploitation of another's reputation or effort.

The Supreme Court (STS 214/2017) has established that freedom of imitation is a fundamental market principle, and only imitations that generate additional unfair effects (confusión, parasitic exploitation) are unlawful.

#### Exploitation of Another's Reputation (Art. 12 LCD)

Undue exploitation of the industrial, commercial, or professional reputation acquired by another in the market is deemed unfair. It frequently occurs in cases of using third-party trademarks in illegitimate comparative advertising or exploiting a competitor's notoriety.

#### Violation of Trade Secrets (Art. 13 LCD)

Disclosure, acquisition, or exploitation of trade secrets without the holder's consent is deemed unfair. This type has been reinforced by Law 1/2019 of February 20 on Trade Secrets, which transposed Directive (EU) 2016/943 and established a specific protection regime.

#### Inducement to Contractual Breach (Art. 14 LCD)

Inducing employees, suppliers, clients, or other obligated parties to breach the basic contractual duties they have with a competitor is deemed unfair. This includes systematic recruitment of key employees from a competitor.

#### Discrimination and Below-Cost Sales (Arts. 16-17 LCD)

Unjustified consumer discrimination and below-cost sales (below acquisition price) are deemed unfair when they aim to eliminate a competitor or discredit a product's image.

Legal Actions Against Unfair Competition

Art. 32 LCD establishes a catalogue of actions that can be brought before the Commercial Courts:

1. Declaratory action: Declaration of the unfairness of the act.
2. Cessation action: Order for immediate cessation of the unfair act or its prohibition if it has not yet occurred.
3. Removal action: Elimination of effects produced by the unfair act.
4. Rectification action: Correction of misleading, incorrect, or false information.
5. Damages action: Compensation for damage caused by the unfair act, provided there was intent or negligence by the infringer.
6. Unjust enrichment action: When the unfair act caused the infringer's enrichment at the injured party's expense.

#### Standing

The following are entitled to bring actions (Art. 33 LCD):

• Any natural or legal person who participates in the market and whose economic interests are directly harmed or threatened.
• Consumer associations and competent bodies of the autonomous communities.
• The Public Prosecutor in defense of general interests.
• Entities from other EU Member States legitimized under their legal system for the defense of professional or consumer interests.

#### Limitation Period

Unfair competition actions prescribe after one year from the time they could be exercised and the legitimate party became aware of the person who performed the unfair act. In any case, they prescribe after three years from the performance of the act (Art. 35 LCD).

Interim Measures

Art. 36 LCD allows requesting interim measures within unfair competition proceedings. In addition to the general measures under the LEC (Arts. 721-747), particularly relevant are:

• Provisional cessation of the unfair conduct.
• Retention of illicit products or materials.
• Preventive annotation of the claim in public registries.
• Publication of the interim resolution.

For the adoption of interim measures, the applicant must demonstrate appearance of right (fumus boni iuris) and danger in delay (periculum in mora). Security may be required.

Compensation for Damages

The damages action under Art. 32.1.5 LCD requires proving:

• The existence of an unfair act.
• Intent or negligence by the infringer (not strict liability).
• Actual damage (financial or moral).
• Causal link between the unfair act and the damage.

Damage quantification may include:

• Direct damages: Direct costs caused by the unfair act.
• Lost profits: Benefits not obtained due to the unfair conduct.
• Moral damages: Reputational harm, especially in denigration cases.

Lexiel as a Tool in Unfair Competition Litigation

Commercial lawyers can use Lexiel AI to search Supreme Court and Provincial Court case law on unfair competition acts, filter by type of act (confusión, imitation, denigration), industry sector, or compensation amount. Access to the latest case law enables building solid arguments and anticipating the foreseeable judicial response.

Frequently Asked Questions

What is the deadline for filing an unfair competition lawsuit?

One year from when the action could be exercised and the infringer was identified, with a maximum of three years from the performance of the act (Art. 35 LCD).

Which court has jurisdiction?

The Commercial Courts of the defendant's domicile or the place where the unfair act has occurred or may occur (Art. 52.1.12 LEC and Art. 86 ter LOPJ).

Is it necessary to prove intent or negligence to obtain compensation?

Yes. Unlike other jurisdictions, the damages action for unfair competition in Spain requires proving the infringer's intent or negligence (not strict liability).

¿Can a company sue a former employee for unfair competition?

Yes, especially for trade secret violations (Art. 13 LCD and Law 1/2019) or inducement to breach non-compete agreements. The post-contractual non-compete clause under Art. 21.2 of the Workers' Statute is also relevant.

¿Is comparative advertising unfair competition?

Not necessarily. Comparative advertising is lawful as long as it is truthful, objective, and not denigrating (Art. 10 LCD). It is unfair when it compares goods that do not meet the same needs, does not refer to verifiable characteristics, or creates confusión.

Can I request interim measures before filing the lawsuit?

Yes, the LEC allows requesting pre-action interim measures (Art. 730.2 LEC), with the obligation to file the claim within 20 days of the adoption of the measure.