Notes on Unfair Competition and EU Competition Law (Italy-focused)

Unfair competition and the foundations of competition law (Italy)

Context: Unfair competition is part of national legislation; within the EU, member states retain distinct rules. In Italy, unfair competition is governed by Title X Book Five of the Civil Code (CC), 1942, with its basis in Article 41 of the Italian Constitution, which protects private economic initiative and allows entrepreneurs to offer identical or similar goods/services in a competitive market.
Purpose: Freedom of economic initiative enables coexistence of multiple entrepreneurs; specific provisions are needed to ensure fair, lawful, and professionally correct competitive behavior.
Historical development: Unfair competition arose from jurisprudence in the second half of the 19th century. Before the current discipline (Articles 2598-2601 CC), the 1882 Civil Code lacked dedicated provisions; courts applied general tort law (civil tort under Article 2043 CC) to sanction unfair competitive acts. The unfair competition tort is linked to Article 2043 CC, as compensation requires typical tort elements: ext{Wilfulness and/or fault} \land ext{Actual damage} \land ext{Causal link}.
Evolution into codified rule: The 1942 Civil Code introduced a specific regime for unfair competition in Arts. 2598–2601 CC. It defines unfair competition as a form of competition among entrepreneurs using means/techniques not conforming to the principles of professional correctness and likely to damage a competitor’s business.
Conditions for application (Art. 2598 CC): two prerequisites
- 1) Qualification of both active actor (engaging in unlawful competition) and passive actor (injured party entitled to protection) as entrepreneurs
- 2) Existence of a relationship of economic competition between them
Conceptualization of competitive relationship (objective vs. subjective)
- Subjective element: plurality of economic operators operating on the market
- Objective element: the market where competitors operate and the goods/services offered to consumers
Potential competition (sufficient for applying Art. 2598 CC): a recognized view is that a relationship of potential competition can trigger liability
Three elements constituting a potential market:
1. Territorial sales market: companies must operate in the same territorial market, considering possibilities for the company’s expansion from territorial and commodity perspectives
2. Ongoing competition: competition must exist at the time the conduct is alleged to be harmful
3. Product market is identical or at least similar/substitutable, as producers tend to broaden production to include substitutes
Competitive relationships across economic levels and stages: actors at different levels (producer–retailer; wholesaler–retailer) can still have a competitive relationship under Art. 2598 CC.
Article 2598 CC distinguishes two main forms of unlawful acts:
- 1) Acts of confusion (n.1)
- 2) Acts of disparagement and appropriation of merits (n.2)
- 3) A residual, general provision: any other means not in conformity with the principles of professional correctness capable of damaging others’ business (n.3)
List of unfair practices (typified acts): Art. 2598 CC provides several examples of practices contrary to fair trading intended to damage opponents; examples include using another entity’s brand names and disseminating disparaging information about a competitor’s products.
Civil remedies: Courts can declare an act unfair, issue injunctions to stop the conduct, and award compensatory damages.
RK note (case-law perspective): The Italian Supreme Court has stated that the purpose of the Competition Law differs from the purpose of Unfair Competition Law.
(Transition to EU framework) The Unfair Competition regime interacts with EU competition law; while EU law addresses market-wide competition, unfair competition rules often focus on conduct affecting individual operators.

Unfair competition vs. civil tort foundations and remedies

Unfair competition = a tort-based liability regime built around the elements of civil tort, particularly under Article 2043 CC: ext{Wilfulness/fault} \land ext{Actual damage} \land ext{Causal link}.
The 2598 CC regime provides a list of acts and allows court remedies (injunctions and damages) for acts of confusion, disparagement, appropriation, and other non-conforming conduct.
The jurisprudentially developed category allows courts to identify additional (atypical) acts deemed unlawful, leaving room for evolving professional ethics in business practice.

Unfair competition under Article 2598 CC: typology and residual acts

Article 2598 identifies two broad typologies of unlawful conduct:
- Acts of confusion (n.1)
- Acts of disparagement and appropriation of the merits of others (n.2)
A third, residual clause (n.3) covers other means not conforming to professional correctness and capable of damaging another’s business.
Residual acts are largely shaped by jurisprudence because there is no exhaustive list of all possible unfair acts; judges assess whether conduct aligns with current professional ethics in the relevant sector.
False advertising and misattribution: false claims about own products or services that mislead the public or discredit competitors fall under unfair competition; such advertising may be unlawful even when not aimed at a particular competitor but risks misleading consumers generally.
The law recognizes acts that distort consumer or entrepreneur evaluation through communications (especially advertising). The core aim is to maintain a fair comparative framework in the market.

Additional forms of unfair competition (examples and concepts)

False attribution and misrepresentation: attributing to one’s own product qualities or merits that belong to a competitor, or mischaracterizing a competitor’s product to discredit it.
Parasitical competition: systematic imitation of another’s business initiatives with tactics designed to avoid complete confusion but to exploit another’s creativity and market position.
Dumping: repeatedly selling below cost to push competitors out of the market and capture their customers/resellers.
Diversion of employees: poaching key personnel from a competitor to gain competitive advantage.
Violation of company secrets: illicit acquisition, disclosure to third parties, or use of secret information in a manner contrary to professional propriety; theft of trade secrets constitutes unfair competition regardless of method.
For competition law purposes, the key element is unfair means used with the deliberate aim of gaining an advantage to the detriment of a competitor.

EU competition law: objectives and enforcement pillars

Objectives (EU level):
1) Efficiency
2) Welfare
3) Commercial/economic freedom and freedom to compete (level playing field)
4) Market structure and protecting competition as such
5) Fairness
6) European integration/internal market
Enforcement pillars in the EU framework:
1) Public enforcement of competition rules by the Commission and NCAs (Article 101-102 TFEU)
2) Merger control under Regulation (EC) No 139/2004 (EUMR)
3) Private enforcement under Directive 2014/104/EU (Damages Directive)
Soft law plays an important role across all three pillars (e.g., notices, guidelines, and communications).

Public enforcement framework (historical and structural overview)

Early EU enforcement was centralized: the Commission enforced Articles 101-102 TFEU; NCAs had limited enforcement powers.
Regulation 17/62/EEC established Commission powers and investigator tools and set the incentive framework for centralized enforcement and occasional comfort letters.
Regulation 1/2003/EC overhauled enforcement by:
- Abolishing ex ante notification for potentially restrictive agreements
- Creating mandatory enforcement by NCAs under Articles 101-102 TFEU once an agreement could affect intra-EU trade
- Introducing cooperation between the Commission and NCAs (ECN) and setting cooperation rules
Regulation 1/2003 also established the system enabling direct enforcement by NCAs and national courts, in parallel with the Commission.
Regulation 773/2004/EC governs initiation of proceedings by the Commission; ECN+ Directive (2019/1/EC) strengthens cooperation and procedural standards among NCAs.
The notion of ‘effect on trade’ is central to jurisdiction under Articles 101-102 TFEU. The Commission and NCAs use this concept to determine whether EU-wide enforcement is warranted.
Case-law pillars include: Socièté Technique Minière (56/65), Wood Pulp cases, Lange and Sandage (1989).
The Commission’s Notice on the effect on trade (2004) systematizes indirect and potential effects on intra-EU trade and provides quantitative criteria (e.g., thresholds) for practicable enforcement.

The effect on trade and jurisdictional thresholds

Central criterion: whether an agreement or conduct has an effect on intra-EU trade.
Quantitative indicators (from the Commission Notice on the effect on trade):
- An agreement does not have an effect on intra-Community trade if:
- ext{Aggregate market share of the parties on any relevant market within the Community affected by the agreement} \le 5\%,
- ext{For horizontal agreements, aggregate annual Community turnover of the undertakings concerned in the products covered by the agreements} \le 4.0\times 10^{7} \text{ EUR}.
If the thresholds are not met, NCAs must notify the Commission of the opening of a formal investigation (Art. 11(3) Regulation 1/2003).
The role of the judiciary (CJEU and national courts) is crucial for ensuring compliance with the rule of law and limiting agency power; judicial review is available for Commission decisions (General Court) and national authorities’ decisions.
The ECN+ Directive (2019/1/EC) harmonizes procedural standards but full harmonization remains incomplete.

Pillars in detail: enforcement architecture and procedural autonomy

Public enforcement architecture:
- First pillar: centralised EU competition enforcement by the Commission (Art. 101-102 TFEU)
- Second pillar: decentralised enforcement by NCAs under Regulation 1/2003 in parallel with EU rules
- Third pillar: national competition enforcement under domestic law (when appropriate)
The three categories of enforcement scenarios (under Regulation 1/2003):
1) Centralised EU enforcement: Commission applies Arts. 101-102 TFEU under Regulation 1/2003
2) Decentralised EU enforcement: NCAs apply Arts. 101-102 TFEU in parallel with national competition law
3) National competition proceedings: NCAs apply national competition rules under their own procedures
The EU enforcement system is governed by procedural autonomy: different rules apply to Commission vs NCAs, and to EU-wide vs national proceedings.
Article 35 of Regulation 1/2003 requires MS to designate a competition authority for implementing Arts. 101-102 TFEU; Article 3(1) of Regulation 1/2003 uses the term ‘may affect trade’ as a trigger for NCA enforcement; Article 12(1) permits sharing of evidence among authorities.
The role of the CJEU: judicial review of Commission decisions; national courts review NCAs’ decisions.

Merger control (EUMR) and the SIEC test

The second pillar: merger control under Regulation 139/2004/EC (EUMR)
Purpose: ex ante control of concentrations to assess whether they significantly impede effective competition (SIEC) on the relevant market post-merger
Notification: transactions with a community dimension must be notified to the Commission (one-stop-shop; Article 4 EUMR)
Commission remedies: potential conditional clearance or prohibition (Article 2 EUMR)
A merger cannot be implemented before the Commission adopts the necessary decision (Case C-633/16 Ernst & Young)
Centralised enforcement under the EUMR; national authorities have limited competence for intra-community mergers
Judicial review: Commission merger decisions are reviewable by the CJEU

Private enforcement and the Damages Directive

The third pillar: private enforcement under Directive 2014/104/EU (Damages Directive)
Objective: ensure victims can obtain full compensation for harm suffered from infringements of Articles 101-102 TFEU in national courts
Rationale: deterrence and justice; private enforcement complements public enforcement; direct effect of Articles 101-102 TFEU on individuals
Private enforcement regimes cover follow-on actions (where a prior competition authority decision exists) and standalone actions (where no earlier decision exists)

Soft law and guidance for enforcement

Key soft-law instruments supporting three pillars include:
- Commission Notice on the definition of the relevant market (1997)
- Commission Notice on cooperation within the Network of Competition Authorities (2004)
- Commission Notice on the handling of complaints under Articles 81 and 82 (now 101 and 102 TFEU) (2004)
- Guidance on the method of setting fines under Regulation 1/2003 (2006)
For Articles 102 TFEU enforcement, soft-law guidance includes:
- Guidelines on the effect on trade concept (2004)
- Notice on best practices for proceedings under Articles 101-102 TFEU (2011)
- Notice on access to the Commission file (2005)
- Immunity and fine reduction notices for cartel cases (2006)
- Block exemptions and Guidelines on applying Article 81(3) (now 101(3)) (2004, revised; effective 2023)
National competition authorities (NCAs) also issue their own soft-law guides for domestic and cross-border enforcement.

Italy: enforcement model and domestic framework

Italy’s competition law history and framework:
- Law N. 287 of October 1990 introduced the first competition rules in Italy: address restrictive agreements, abuse of dominant positions, and mergers to create/reinforce dominance.
- Presidential Decree N. 217 of April 30, 1998 (Decree N. 217/1998) details proceedings before the AGCM (Autorità Garante della Concorrenza e del Mercato) and specifics of inquiry powers and parties’ rights (including access to files and defense rights).
- Law N. 241/1990 provides the general framework for administrative procedures (including those handled by the AGCM) and sets a general right of access to documents; Section 3 resembles Article 102 TFEU in scope.
- Sections 5 and 7 contain provisions on mergers, including concentration definitions, the dominance test, and the concept of control.
- Section 31 of Law N. 689/1981 (General Sanctions Law) applies, where compatible, to fines levied by the AGCM.
Italian landscape: Italy has progressively integrated EU competition rules with its national regime; the AGCM is the national competition authority responsible for enforcing Italy’s competition rules and applying national procedures in line with EU law.
Unfair Commercial Practice Directive (B2C): EU framework for unfair business-to-consumer practices; this directive guides national regimes in addressing unfair practices in B2C relationships, complementing unfair competition rules that focus on business-to-business conduct and market-level competition.

Key practical implications and connections

Unfair competition law in Italy acts as a toolkit to protect individual entrepreneurs fighting competition that uses improper methods, with remedies including injunctions and damages.
EU competition law frames market-wide concerns and sets the rules for how competition is enforced across the internal market, with three pillars ensuring public enforcement, merger control, and private enforcement.
The interaction between national unfair competition rules and EU competition law underpins the broader aim of maintaining fair competition while allowing freedom of economic initiative.
The jurisprudential development of Art. 2598 CC to cover atypical acts ensures the law remains responsive to evolving commercial practices and technological changes.
The shift from a centralized EU enforcement model (pre-2003) to a decentralized model (post-2003) increased enforcement capacity and flexibility, while creating a network (ECN) to harmonize approaches and share evidence.
The Damages Directive strengthens private enforcement, aligning remedies with modern expectations of deterrence and justice in competition law.

Formulas, numbers, and explicit references (LaTeX)

Elements of civil tort underpinning unfair competition under Art. 2043 CC:
- ext{Wilfulness or fault} \land \text{Actual damage} \land \text{Causal link}
Potential market (3 elements):
- Territorial market: ext{same territorial market}
- Ongoing competition: ext{competition exists when the conduct is complained of}
- Product market identical or substitutable: ext{product market identical/substitutable}
Thresholds for intra-EU trade effects (Commission Notice):
- ext{Aggregate market share} \le 5\%
- ext{Aggregate annual turnover (horizontal)} \le 4.0\times 10^{7} ext{ EUR}
SIEC concept: ext{SIEC} = ext{Significantly Impede Effective Competition}
Key EU instruments and references (selected):
- Articles: 101-102\ TFEU
- Regulation: 1/2003/EC, 17/62/EEC, 773/2004/EC, 139/2004/EC (EUMR)
- Directives: 2014/104/EU (Damages Directive)
- Case law:
- Sociètè Technique Minière (56/65)
- Wood Pulp cases (various Joined cases 89, 104, 114, 116, 117 and 125-129/85)
- Lange and Sandage (1989)
- Manfredi (C-295/04)
- Ernst & Young (C-633/16)
Notable procedural references:
- Article 35 Regulation 1/2003 (designation of competition authorities)
- Article 11(3) Regulation 1/2003 (notification duties for potential infringements)
- Article 12(1) Regulation 1/2003 (evidence sharing among authorities)
- ECN+ Directive (Directive 2019/1/EC)

Summary takeaway

Unfair competition in Italy sits at the intersection of civil tort law and competition law, guarding fair play in business practices and protecting entrepreneurial freedom against deceptive or abusive conduct.
EU competition law structures enforcement around public enforcement, mergers, and private enforcement, with a modern shift to decentralised enforcement and enhanced cooperation among authorities.
Italy combines EU-wide rules with its own framework to regulate competition, including the AGCM’s powers and the procedural rules that govern administrative penalties, mergers, and fair competition practices.
Ongoing evolution in soft-law guidance and case-law keeps both national and EU regimes aligned with changing market realities, including B2C unfair practices and cross-border enforcement challenges.