Supreme Court Judgment of 11 July 2018

The claim leading to the lawsuit between two undertakings in the tool sector suggests the existence of acts of deception consisting of the press release issued by Bellota, one of two undertakings in the case, claiming that it was the first undertaking in the sector to obtain the “Q de oro” award. The plaintiff was part of the same sector as the defendant, which had earned such award before the plaintiff, even though its activity was not manufacture per se but rather assembly, offering the public goods bearing its own distinctive signs. The judgment handed down by the court of instance dismissed the claim, and the decision was upheld on appeal.

The Supreme Court has examined the assumed fact and interpreted Art. 5.1 of the Law on Unfair Competition (hereinafter, LCD), concluding that the plaintiff’s appeal had to be allowed and the existence of acts of deception declared. The basis for this decision is Art. 18 LCD, which provides that any advertising considered to be unlawful under the General Law on Advertising shall be deemed unfair, and now referring to Art. 3(a) of the General Law on Advertising General, “misleading advertising” is deemed to be unlawful advertising. Referring again to the LCD, Art. 5.1. contains those cases in which deception is deemed to be an unfair conduct.

Pursuant to Art. 5 LCD, any conduct containing false information or information which, though true, given its content or presentation induces or may induce error among its intended recipients, even changing their economic behavior, shall be considered unfair as it is misleading, provided that it affects any of the following aspects: ……. g) The nature, characteristics, and rights of the entrepreneur or professional, or the agent therefor, such as their identity and solvency, qualifications, status, approval, affiliation, or connections, and their intellectual or commercial rights, or the awards and distinctions they may have received.”

The Supreme Court considers that in order to classify the information that Bellota spread in its press release, which was furthermore repeated by several media outlets, the following two requirements must be met: a) the information provided must be able to induce error among its intended recipients; and b) it must be able to affect the economic behavior of said intended recipients.

As regards the first requirement, the judgment reasons that the information provided could formally be considered true if it is taken into account that Bellota manufactures hand tools and Egamaster does not do all its own manufacturing but rather does assemble and market this type of tool under its own brand. However, information deemed to be of the unfair type also includes that information which, while formally true, induces error among its intended recipients, as occurs in this case. Egamaster was awarded the “Q de oro” before Bellota, and it assembles and puts together parts that have been previously manufactured by a third party, then places its trade mark on the finished goods, such that to the public and its clients Egamaster is the manufacturer. Accordingly, the assertion made in the press release claiming that Bellota is the first undertaking in the sector to earn the “Q de oro” induces error, insofar as consumers of those goods may understand that the sector also includes undertakings such as Egamaster, given that it ultimately does sell hand tools under its own brand.

With respect to the second requirement, the Court has examined the facts in light of the description of the concept of “economic behavior” contained in Art. 4.1 LCD and in light of the parameter describing the intended recipient as being reasonably well-informed and reasonably observant and circumspect, within the circle of intended recipients of the information, in order to determine if their economic behavior has been significantly distorted as a consequence of the deception. The court considers that misleading information concerning any awards of excellence may be relevant as regards the influence they have on the economic behavior of the users. This relevance is confirmed with this very information, which denies that other undertakings in the sector hold a given quality, that is, the same quality rewarded under the “Q de oro” award. This relevance is further reinforced as a result of the information having been spread, given that several outlets in that industrial sector repeated it.

When Bellota reports that it is an agricultural spare part and hand tool manufacturer, as well as the first undertaking in that sector to receive the “Q de oro” award, it is denying that any other undertaking in the sector, such as Egamaster, may have achieved this recognition before it. This is the same as denying Egamaster this public recognition for quality in business. Therefore not only is this advertising capable of creating error among intended recipients as to the plaintiff’s quality in business, it is furthermore capable of affecting the economic behavior of the intended recipients, as it transmits, in comparison, pejorative information about the plaintiff in relation to the defendant (the plaintiff does not hold the recognition of quality in business that the defendant, however, does hold).