Limitation of Compensation against Unfair Trade Practices

The Competition Law was passed in 2018 and became effective as of 1st July 2019, the author wishes to share a typical case law in unfair competition (trade) practices. Being far from perfection, the Competition Law should have been crafted in a more comprehensive and practical way to establish a fairer and healthier competition environment.

After more than two years of pursuing a lawsuit for claiming damages caused by unfair competition practices, the aggrieved party has not received any amount of compensation. This obviously affects the psychology and beliefs of straightforward businesses. What is the role of state management and law enforcement agencies in providing a healthy competition environment for businesses to compete freely?

Vietnam Competition Administration regularly issues an annual report on the number of unfair competition (UC) cases under resolution or investigation process. Most UC cases involved in comparative advertising. Once the violation occurs, the violated enterprise will suffer losses such as revenue reduction, ruin of brand reputation, costs to restore the brand image, time and effort to recover losses. To compensate for such damage, the only way which enterprises would rely on is to file for a lawsuit; however, there are many obstacles by doing so.

Company A and Company B were engaged in the same business sector of supplying chemical products used in the textile industry. Company B made comparative advertising at a public event that Company A’s goods quality would cause harms to consumers’ health. Company A’s revenue fell significantly and its customers were confused about the quality of Company A’s products. Company A had to reduce the selling price of the products, organize events to restore its brand image. In addition, Company A hired a consulting agency to collect evidence and complained about Company B’s practices to the competition administration authority. 

After receiving the complaint and conducting the investigation procedure, the competition administration authority finally determined that Company B had conducted unfair competition practices and imposed administrative sanctions in accordance with laws. After the decision on sanction the administrative violation was issued, Company A filed a lawsuit against Company B to request for correction and public apology in the press and on the website of Company B; and to compensate for actual damages that Company A had suffered. However, after nearly 2 years of pursuing the lawsuit, the Court of First Instance and Appeal only ordered Company B to apologize and correct the false information, while the claim for damage was not accepted.

Compensation regulations for non-contractual damages are insufficient to satisfy the deterrence towards the violating party and are incompatible to recover damages for the aggrieved party in UC cases. As World Intellectual Property Organization (WIPO) commented: “the success of the law of UC depends primarily on the role of the judicial body which is the court (WIPO – Protection against unfair competition).

At present, the specific regulatory guidance on determining damages from unfair competition practices has not yet been specifically provided. There have been many recommendations on the issuance of detailed guidelines on identifying and adopting the approach to the handlings with the cases of compensating for damages caused by UC. The government and the Supreme Court, however, have not yet specifically regulated this issue up to now. Every interpretation and application of the law completely depends on the opinion of the Courts at all levels. The above-mentioned case shows that the Court’s view was inappropriate, and failed to ensure a fair competition environment.

Unlike Vietnam, some countries around the world offer some solutions to solve the matter of determining the damages from unfair competition cases, which are unclear and uncertain. The following are some typical examples:

Profit of the aggrieved party

If the parties in the dispute are rivals of each other in an industry, the profits gained by the violating party may be regarded as the profits that the aggrieved party has lost due to the infringing act of the violating party.

Minimum damages

Some states of the United States provide the minimum damages that the aggrieved party has the right to request without proving actual damages. For example, some states stipulate that the amount of compensation suffered by the aggrieved party ranges from USD25 to USD5,000 without proving the actual damages of the aggrieved party.

Punitive damages

This amount of compensation is not equivalent to the level of the act of violation. Instead, the purpose of this compensation is to punish for conducting the unfair competition practices intentionally, obstinately, unethically, and recklessly. 

Attorney’s fee

Under the Lanham Act of the United States, the losing party must bear attorney’s fee if the losing party conducts the unfair competition practices intentionally.

Other damages

In some circumstances, the court is willing to accept unclear damages, such as the inconvenience suffered by the aggrieved party, travel expenses, time spent to remedy damages, and loss of business opportunities.

Regarding the case mentioned above, the Court did not admit the evidence provided by Company A (the aggrieved party) because it was not convincing, clear and sufficient to prove the damages. In addition, the Court did not apply any conjunctive relief or suggest any necessary relief that had been deterrent to punish the violations of Company B (violating party). If the court would have applied one of solutions to determine the damages in developed countries that we refer to above, the competition environment will be guaranteed and the violator will face adequate penalties and pay prices for its illegal conduct of business.

Enterprises take time and continuous efforts in improving technology, product quality, and bringing benefits for consumers, while the laws do not protect and maintain fair competition. Consequently, there are no more devoted enterprises willing to create, invest, and develop business. Then, the more powerful enterprises and those who know how to take advantage of legal loopholes will monopolize the market. Such competition environment may reduce competitiveness of the nation economy, hence that will deter development of prosperous nation in the long-term.

Bui Tien Long (Rudy)