The Prohibition of Unfair Competition

What does the law allow us asaggressive competition“?

How to recognize and tackle unfair and forbidden practices?

This article is summarizing and general for the series related to unfair competition. It presents the general principles and the idea of ​​unfair competition, as well as the relation of the rules for fair competition in the Competition Protection Act (CPA) to other laws. The procedure for protection against unfair competition is also examined. The individual forms of unfair competition, with their specific features, are the subject of separate articles. Some of them have already been published and will be referenced. The others await publication.

Principle questions

The main idea of competition law is to ensure protection and conditions for the expansion of competition and free enterprise in business activities. At the same time, however, it is recognized that some forms of competition are unfair and therefore the Bulgarian law also expressly prohibits any action or inaction in the course of business activity that is contrary to good commercial practice and harms or may harm the interests of competitors. It is not difficult to notice some contradiction. On the one hand, the idea is to encourage as much competition as possible, on the other, certain forms of competition are explicitly prohibited.

It should be noted here that the prohibition of certain, unfair forms of competition is not a typical part of competition law. In a number of countries it is a part of consumer protection law for example, or its objectives are achieved by other special branches of law, such as industrial property rights (guaranteeing trademark and patent rights) or separate trade secret protection laws. In Bulgaria, however, it is accepted that protection must be provided also through the means of competition law and through law enforcement by the regulator, which is called upon to ensure competition protection. The idea is that when, for example, a consumer is misled or not own brand is used or a certain sectoral regulation is not observed, this leads to an infringement against all competition on the market and damages fair traders – these are not only those whose rights, related to, for example, trademarks or confidential information are infringed, but also all other traders who comply with the rules of good faith, even if this leads to costs on their side. This is the reason why in Bulgaria, along with the special laws and the corresponding possible sanctions, the provisions of the Competition Protection Act related to unfair competition are also applied. The practical significance of this principle is that when a violation is visibly committed, the infringer may be sanctioned on the one hand by the special law itself (for example the Consumer Protection Act or another law, introducing regulatory requirements for the specific business sector), and on the other – for unfair competition. Unfair competition may be penalized whenever something that is both unfair in character and possibly harmful to the competitors’ interests is committed.

Unfair competition and Classical Competition Law

There is an ongoing tendency in the EU to strenghten the powers of Competition Protection Authorities. The aim is to provide them with greater opportunity to apply genuine competition law. This branch of law is related to the prohibition of cartels, the prohibition of abuse of dominant position and the control of large mergers and acquisitions. Current European law envisages the strengthening of the Authorities’ rights (including the Bulgarian Commission for Protection of Competition) in these areas, as well as in the field of “competition advocacy”. Moreover, European law requires that states ensure that no side activities will prevent the Authorities from focusing on genuine competition law. Simplified rules on compensation for the victims of cartels and abuse are also envisaged.

Unfair competition does not fit in this category. It is not considered a part of genuine competition law. This is so due to the principle that cartels and abuse affect the competition as such, while unfair competition affects competitors rather than the market as a whole. Moreover, unfair competition is in fact the most intense form of competition.

The practical consequences of this setting are at least the following:

  • after the transposition of Directive 2019/1 in Bulgaria, the Commission for Protection of Competition will have to focus mainly on other activities, different from tackling unfair competition;
  • in case of damages from unfair competition, only a part of the opportunities stipulated in the Protection of Competition Act can be used. On the topic of compensation lawsuits for damages from unfair competition, expect a separate article. For more content regarding compensation for violated trade secrets, see here.


Nevertheless, and regardless of how the Bulgarian legislation will transpose Directive 2019/1, the actions of unfair competition are prohibited and their violation may lead to serious consequences – both the imposition of a sanction in favor of the State and the compensation for all resulting damages. Even if the victims are unable to take advantage of the entire simplified procedure, stipulated in the Competition Protection Act, there is no way to repeal the general rule that everyone is obliged to repair the damage caused by them to others, through their own fault.

Nature of unfair competition. Definition. General prohibition of unfair competition


The legal prohibition is very broad in character. According to the legal text, any action or inaction in the course of business activity that is contrary to good commercial practice and harms or may harm the interests of competitors is prohibited.

Several basic elements of the concept of “unfair competition” can be deduced from this provision. Only in the presence of all of these elements can we talk about any form of unfair competition. However, they are such in character that virtually any unfair commercial conduct that has the potential to harm a competitor is unfair competition.

Firstly, there can be unfair competition only in the course of economic activity, i.e. activity, the results of which are intended for market exchange. Actions that are not related to economic activity cannot be considered unfair competition. For example, if a consumer damages the good name of a company in private conversations (damaging the good name of a competitor is generally a separate form of unfair competition), this cannot be considered a violation from this type. However, it is important to keep in mind that if a person generally carries out business activities, then their private conversations could be related to them. For example, if the manager of a company spreads false information about a competitor at a private dinner in front of a common customer of theirs, it is very likely that this would be seen as related to their business activity and the manager, as well as the company, could be subject to a sanction for these actions.

Secondly, the actions or inactions must be contrary to good commercial practice in order to be considered unfair competition. Due to poor legal technique, there are two different definitions in the law, referring to the phrases good and bad faith, but with regards to unfair competition, good faith in commercial practice means the rules determining market behavior, which arise from laws and customary commercial relations and do not violate good morals. In short, if the action/inaction in question is in conflict with any law or secondary legislation or customary practice, if these are not immoral in character, it may be viewed as unfair competition. If it is common practice to demonstrate behavior that is contrary to good morals in a given sector, however, deviating from it would not be deemed unfair competition, even though it is contrary to the rules regulating market behavior in the sector. Moreover, it is likely that complying with this commercial practice will be viewed as in bad faith. Protection such as “everyone in this market does so” could not be effective.

In order to define any improper market behavior as unfair competition, it should be able to harm the interests of competitors. However, the Commission for Protection of Competition interprets this requirement quite broadly and practically any behavior that is contrary to good commercial practice is perceived to be detrimental to the competitors’ interests. This is so due to the fact that while fair traders comply with all the rules, and hence suffer certain restrictions, the unfair ones gain an unfair advantage by violating these rules. The interests of fair competitors are potentially harmed because they tolerate these constraints and the costs or limited opportunities for action resulting from them.

When we speak of harming the competitors’ interests, it is important to note that it is sufficient enough harming to be possible. With the exception of the specific violation “customer theft”, the law does not require actual damages to have been made in other cases of unfair competition. It is not necessary that a competitor has actually suffered damages, in order for unfair competition to be present. It is enough that there is a real opportunity for that to occur. For example, in the case of imitation, the imitated trader does not have to prove that a consumer was misled that he is buying from him/her, but in fact bought from another trader. It is enough that there was a possibility for such a delusion to take place.

Of course, if specific damages have actually occurred, compensation for them can be claimed. Such can be ruled by the Court, while the Commission for Protection of Competition can only impose a sanction in favor of the State, as well as order the termination of the violation. The Commission may also gather evidence as an investigative body. That is why the files before the Commission are rather a form of preventive approach and aim at terminating the unfair actions of the improper traders, while the correction of the resulting damages is achieved through a lawsuit. A file in the Commission can also significantly support proving one’s claims in a case for damages.

Unfair competition can be both an action or inaction. For example, if good commercial practice stipulates that something should be done (for example, when a registration regime is in force, that the relevant registration is made) and that is not done, then that will also be a violation. No active action needs to have taken place. In this sense, protection such as “I have not  actively undertaken anything” would not be met with success.

From a procedural point of view, until recently the Commission for Protection of Competition and the Court accepted that only a competitor of the violator could seek protection from unfair competition. This means that both traders must be active in the same product- and geographic market or, in other words, offer interchangeable goods or services. This seems rational due to the very name “unfair competition”, as well as the requirement that it must be able to harm the interests of a competitor. Recent practice, however, has rightly expanded the opportunity to seek legal protection. According to this practice, it is important to prove that the one who claims protection from unfair actions has an interest to receive such protection. They may not be a competitor of the violator, but may, for example, supply raw materials to his market or use the violator’s and his competitors’ services. Of course, the requirement that the interests of the violator’s competitors must be endangered also remains valid.

After the description of unfair competition, the question whether the Competition Protection Act actually supports or hinders “aggressive competition” arises. Its basic logic is that the more and stronger the competition, the better. The broad prohibition on unfair competition, however, gives another impression.

In fact, the key is that anything that is not explicitly prohibited by a legal act or by generally accepted rules in the relevant industry, no matter how aggressive or how much it harms the competitors’ interests (and it harms them even just because it “pulls customers”), It is allowed and even encouraged by competition law (even by actual competition law). “Customer pulling” is at the basis of competition.

This is precisely where the role of the several special provisions in the Competition Protection Act, regulating specific forms of unfair competition, should be. The legislator has determined that these are actions which are improper in character and should be prohibited. However, if there is no other law or custom to prohibit them, they could not be considered a form of unfair competition. That is why the legislator has prohibited them in the Competition Protection Act itself. It is worth noting, however, that there is duplication between this Act and the Consumer Protection Act, the Marks and Geographical Indications Act and the Trade Secret Protection Act. The infringements as per these Acts would also constitute an infringement within the meaning of the  Competition Protection Act without the need for an explicit legal text (and there are such explicit legal texts in the Protection of Competition Act). This duplication creates practical problems, as in many cases it remains unclear whether in the case that a specific Act is violated, but for some reason the specific text of the Protection of Competition Act is not, the so-called “general prohibition of unfair competition” can be applied. The correct answer is that it should be possible.

The general prohibition of unfair competition expresses itself precisely in this – regardless of whether the Protection of Competition Act describes that a given action is a specific violation, if it is an action related to business activity, is unfair and may harm a competitor, it is considered unfair competition and is therefore prohibited.

Forms of unfair competition

The law stipulates the following cases of unfair competition:

  • General unfair competition;
  • Damaging the competitors’s good name. For such a violation to occur, a competitor’s good name or credibility must be harmed through allegations, by spreading false information or by presenting facts in a distorted form;
  • Misleading. The act of misleading should be related to the essential properties of the product, which in practice means, that in order to claim that an infringement has taken place, it should be possible for the average consumer to make the decision to purchase the product precisely because they have been deceived;
  • Misleading advertising;
  • Prohibited comparative advertising. Comparative advertising, as the Court has recently had the opportunity to rule, is in some cases pro-competitive and allows consumers to make informed choices. That is why not every comparative advertisement is prohibited. The law lists the cases, in which comparative advertising is allowed. In general, these are the cases when an objective and true comparison is being made, which in no way damages the prestige of the competitor with whom the comparison is made.
  • Imitation. In its essence, this is identity theft. In one form or another, the infringer tries to take advantage of the fame and reputation of another company that has invested time, experience and resources to establish itself on the market;
  • Unfair attraction of customers, including the so-called “customer theft”, prohibited gifts and raffles when buying, selling on below-cost prices in large quantities for a long period of time. Customer theft is a specific violation because it is the only form of unfair competition, in which the law requires actual damages to have occured, i.e. a real “stolen client”;
  • Knowledge, usage or disclosure of a production or trade secret in bad faith.

We will prepare a separate article for each of the typical forms of unfair competition, including a checklist of when there is a violation and when not. Here it can be pointed out that the majority of unfair competition forms are in one way or another misleading. It would not cover all cases of unfair competition, but it would be perfectly true to state that whenever a company lies to its customers about something that would affect their choice, it is unfair competition. In the case of damaging a competitor’s good name, lies or untruths about the reputation of another market participant are being stated; in the case of misleading or spreading misleading advertising, the lies or untruths are about the properties and characteristics of the infringer or its product. In the case of imitation, the misleading is about who has produced the product or service or who offers it. It is important, with regard to misleading practices, that general suggestion is taken into account when assessing whether there is a violation or not. In other words, using unclear text or inserting lowercase letters with an asterisk would not help to avoid sanction. If the average user would be confused, there is a violation.

Relation to other laws

As it became clear, unfair competition is too often expressed in violations of other laws. Moreover, unfair competition is precisely the endangerment of the interests of competitors through the violation of good practices, the main part of which is legal rules. This raises the question of how the  Competition Protection Act relates in its part on unfair competition to the laws that have been breached. The rule in this case is principled and very clear – the application of one law does not exclude the other, on the contrary  both are applied. This rule applies in full regardless of whether the other law is sector-specific (e.g. the Food Act, the Health Act or the Radio and Television Act, etc.) or another general law that applies to all sectors (typical examples are the Consumer Protection Act, the Marks and Geographical Indications Act, the Commerce Act). The situation with the Trade Secret Protection Act is a bit more complicated, as described below.

This means that if the other law also stipulates a sanction, the infringer will be subject to two sanctions. At first sight, this violates a basic rule in Penal Law (as well as Administrative Penal Law), namely the rule non bis in idem (no one can be punished twice for the same thing).

The reason behind this is the understanding that it is not really a single violation for which two sanctions are imposed, but two (or possibly more, e.g. if two general laws are violated – the Protection of Competition Act, the Consumer Protection Act and one special law) separate violations, albeit committed with a single action. In itself, the violation of the special law leads to negative consequences for the public relations regulated by it. This is also the grounds for imposing a sanction under this law. However, if the action is of such a character, as to threaten the interests of competitors, the proper functioning of the markets is also disrupted. This in turn serves as grounds for imposing a sanction under the Protection of Competition Act.

Relation to the Consumer Protection Act

It must be acknowledged that in a number of countries unfair competition (or rather certain forms of unfair competition – e.g. misleading, misleading advertising, some cases of unfair customer attraction such as prohibited promotions) are rather perceived as a part of Consumer Law and not of Competition Law. That is so due to the understanding that these actions primarily harm consumers. It is no coincidence that for a long time there have been texts related to misleading advertising in the Consumer Protection Act, which still regulates misleading and aggressive commercial practices and stipulates sanctions for them. The consumer is harmed because for one reason or another they are deceived or moved to purchase something they would not otherwise buy. Had the consumer not been deceived or pressured, they might have chosen something else. That is precisely why the Consumer Protection Act states that unfair practice is such practice, which would significantly change the behavior of the “average consumer”, i.e. of a reasonable, critical user who carefully evaluates the information received. Roughly speaking, the consumer is harmed because they have been deceived by the trader regarding what they will receive.

But what else follows from this incorrect influence on consumer choice? By purchasing from the trader who lied to them, the consumer is not actually purchasing the good or service they could have chosen had they not been misled. That is, they do not buy from any of the honest traders in the market, who have honestly told them what they offer. That is why the competitors’ interests are also violated and this serves as grounds for imposing a sanction under the Protection of Competition Act. One can immediately, of course, object that none of the honest traders was specifically harmed, because it is not known from which of them would have the client bought had they not been lied to. As it became clear, however, the law does not require that damages to a competitor must have actually occurred, it is sufficient enough that an opportunity for that to happen has occurred. In other words, had the consumer not been deceived, they could buy from any of the other traders, but because of the deception, they would not buy from any of them. Therefore, a trader who lies to his consumers or pressures them into purchasing something will be punished under both laws. It does not matter whether he will be punished as per a specific article from the Protection of Competition Act, for example misleading, or under the general prohibition of unfair competition.

Relation to the Marks and Geographical Indications Act and the Industrial Design Act

One of the typical manifestations of unfair competition is imitation. This can mean the imitation of a brand, of appearance, of a name, of anything. Among the most common cases is the imitation of a brand or the shape of the product. However, the usage of a  not own trade mark or a registered industrial design would constitute an infringement within the meaning of the Marks and Geographical Indications Act or the Industrial Design Act. In this case, what has been previously said about the relation to the Consumer Protection Act applies again. The Commission for Protection of Competition, as well as the Supreme Administrative Court have both stated many times in their practice that the competition law protection of trademarks, domains, etc. does not compete with, is not excluded from, but also does not itself exclude IP protection. The two laws are applied in parallel, as the proceedings under them can also develop in parallel. Again, in one case the relations related to the protection of industrial property are affected, while in the other case the incorrect redirection of the customer is tackled. In contrast to the case with Consumer Law, however, here the connection with the particular competitor that was harmed is much more direct. Because the unfair trader not only lies to his customers regarding who he/she is or whose products are being sold, but also “steals” from the popularity of the brand or design owner.

It should be noted, however, that the preconditions for applying the two protectionsare different. It is possible that there is a violation under one law, but not under the other. In general, industrial property protection requires registration or at least an application for registration of the trademark/design. The actual usage of the trademark is made conditional on at least the filing of an application, in order for its protection to be provided under this procedure.

In the case of imitation under the Competition Protection Act, on the other hand, it is not required to own a registered trademark or design. It is sufficient enough for a particular sign, name or appearance to have been actually used, but it is necessary that this usage has led to the acquisition of fame and popularity. In the case of imitation under the Protection of Competition Act, it really must be “identity” that is being stolen, while in the case of protection of industrial property, the leading factor is that the prohibition to use something, registered by another, is violated.

Relation to the Trade Secret Protection Act

The Trade Secret Protection Act is new and is the result of the transposition of an EU Directive. As a result of weaknesses in the legal technique used, it does lead to inconsistencies and ambiguities in its implementation. First of all, this law contains a definition of “trade secret”, while the Protection of Competition Act contains a definition of “production or trade secret”. Different phrases are used in the two definitions, but their common result is that most likely, if a certain information is a trade secret within the meaning of the Trade Secret Protection Act, it would also be a “production or trade secret” within the meaning of the Protection of Competition Act.

The Trade Secret Protection Act does not stipulate the imposition of an administrative sanction (as provided for in the Consumer Protection Act, the Marks and Geographical Indications Act and other special administrative laws). It regulates what is considered a trade secret, when its acquisition, usage and distribution are lawful and when not, as well as damage compensation cases. The Protection of Competition Act, for its part, envisages an administrative penalty for when such a violation is committed. Therefore, it is not correct that the legal definitions differ.

A problem also arises from the fact that in principle the Competition Protection Act (as described below) stipulates that compensation is due for any violation under the Act. There is a special procedure for cartel violations and abuses. Art. 105 of the Competition Protection Act, which references the Code of Civil Procedure, serves as grounds for seeking compensation before the Civil Court. The entirety of the Trade Secret Protection Act, however, is devoted to cases for trade secret protection and explicitly states that the establishment of violations and the imposition of sanctions for disclosure of trade secrets in carrying out business activities contrary to good commercial practice are carried out under the terms and procedures of the Competition Protection Act. It also states that the decisions of the Commission for Protection of Competition are not an obstacle to protection under the terms and procedures of the Trade Secret Protection Act. The question on whether in case of violation of the prohibition of unfair competition established by the Commission for Protection of Competition in the form of gaining knowledge of, using or disclosing a production or trade secret, the damages should be reimbursed under the Competition Protection Act or the Trade Secret Protection Act, remains incompletely clear. A complication also arises from the rule of the Competition Protection Act, stipulating that when the Supreme Administrative Court confirms a decision of the Commission for Protection of Competition for an established violation, the Civil Court is obliged to recognize this in compensation cases. In the case of trade secrets, however, it is not certain whether this is so due to the fact that, as we have pointed out, different terminology is used in both laws and therefore it is not certain that a violation within the meaning of the Competition Protection Act will also be considered a violation within the meaning of the Trade Secret Protection Act. However, the victim would benefit from using the procedure under the Trade Secret Protection Act, as it gives them certain advantages.

These legal weaknesses of the Trade Secret Protection Act had been discussed even before its adoption, but unfortunately have been preserved in the final text.

Protection against unfair competition

The protection against unfair practices can be achieved in two main ways:

  • under administrative procedure through a file for imposition of a sanction and termination of the violation;
  • through a lawsuit for damages.

Legal protection through administrative files does not only mean protection before the Commission for Protection of Competition. This can also be done in accordance with the relevant general or special law (if there is such), which has been violated. For example, before the Commission for Protection of Competition, the Patent Office, the Energy and Water Regulatory Commission, the Communications Regulation Commission, the Financial Supervision Commission, the relevant Ministries, etc. As mentioned, proceedings before such Bodies may take place in parallel and separately from the proceedings before the Commission for Protection of Competition. Whether to use such a file depends on the specific infringement and the specific regulation in the relevant law, including what protection it provides. In some cases, it is convenient to wait for the ruling on such a file and use it before the Commission for Protection of Competition in order to prove that the good commercial practice has been violated.

The typical administrative protection against unfair competition is through a file under the Competition Protection Act. The older practice assumed that such a file could only be initiated by a direct competitor of the infringer, but the understanding that this can also be done by any person who has an interest in establishing the violation has been gaining ground.

Such a file may lead to two consequences:

  • imposition of a sanction on the infringer;
  • imposition of an obligation to terminate the violation under fear of a sanction for each day of its continuation.

The two consequences occur at different moments. The sanction may be effectively imposed only after the entry into force of the decision imposing it. That is, payment of the sanction is due if the decision is not appealed or if it is confirmed by the Court. The obligation to terminate the infringement, however, is immediately enforceable. As soon as the Commission for Protection of Competition pronounces itself, the obligation should be enforced, even though the decision has not yet been confirmed by the Court. This immediate enforcement can in itself be revoked by the Court, but this rarely occurs, and until the Court rules, the obligation for termination remains valid.

As for the sanction, it is important to emphasize that it is in favor of the State and the harmed competitor cannot benefit from it. The sanction can reach up to 8 percent of the violating undertaking’s total turnover for the previous year. With regards to a sanction, it should be noted that it is in principle imposed on the infringing undertaking, but if an individual who has not acted as a representative of the undertaking assists in committing the infringement, the sanction will also be imposed on the individual.

The harmed competitor can take advantage of the Commission for Protection of Competition’s Decision in order to support a future lawsuit for damages. This is so due to the rule of the Competition Protection Act stipulating that the effective Decision of the Supreme Administrative Court, confirming the Decision of the Commission to establish a violation under the Act, is binding for the Civil Court regarding the fact of the violation and the violator. The Commission’s Decision, which has not been appealed or the appeal against it has been withdrawn, is also binding for the Civil Court regarding the fact of the violation and the violator. In other words, there will be no need to prove that something unlawful has been done and who perpetrated it before the Court, but it should be proved that damages have occurred, their extent and their relation to the violation.

In practice, the file in the Commission for Protection of Competition can be used as preparation for a case before the Court. The meaning of this tactic is that the competitors of the infringer may not avail of evidence of the infringement and may not be able to gather such evidence, even though they know that an infringement has been committed. However, the Commission has the powers of an investigative body and it is possible for it to gather evidence, which will in turn be used by the infringer’s competitors.

As mentioned, the Competition Protection Act does not require that in order for a violation to be established, it must have led to real damages. In order for a violation to be established, it is sufficient enough that there was a real possibility for the occurrence of damages. That is not the case in compensation lawsuits, however. Precisely because of the nature of these lawsuits, only actual damages can be compensated through them (which, however, could also be wasted benefits). It is still debatable in the Bulgarian practice whether non-pecuniary damages could be compensated, due to the still circulating outdated concept that undertakings cannot endure such damages and all damages for the undertakings have a material manifestation. However, little by little, the opposite understanding is beginning to gain ground.

For the infringer’s competitors, who cannot prove the actual occurrence of damages for them, the opportunity to take action through a file before the Commission for Protection of Competition remains. As we mentioned, this tactic makes sense, even though the sanction imposed is in favor of the State and not the competitors. The point is the obligation for termination of the infringement, which the Commission imposes. It prevents the actual occurrence of damages.

Another important point for the legal protection against unfair competition is how to stop unfair actions in time. This is generally a serious problem, especially with regard to unfair competition, because, unlike the cases of cartels and abuses, the Protection of Competition Act does not stipulate the opportunity to impose a prohibition of the continuation of the actions before the Commission’s Decision to establish a violation. As a rule, the Civil Procedure Code provides for the possibility of precautionary measures, but the possibility of imposing such measures requires additional proving and also depends on the Court’s subjective assessment, especially regarding whether the measures are appropriate or not. Especially with regard to trade secrets, one of the great advantages of the Trade Secret Protection Act is that it allows, under clear conditions, to request the prior imposition of clearly defined measures that would really stop the infringement on time.