Volume 11 - Issue 53
/ May 2022
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https:// www.amazoniainvestiga.info ISSN 2322 - 6307
DOI: https://doi.org/10.34069/AI/2022.53.05.23
How to Cite:
Kovalenko, I., Muzyka, Y., Khashev, V., Derevyanko, N., & Yakovchuk, S. (2022). Mechanism of protection of business entities
from unfair competition. Amazonia Investiga, 11(53), 227-233. https://doi.org/10.34069/AI/2022.53.05.23
Mechanism of protection of business entities from unfair competition
Механізм захисту суб’єктів господарювання від недобросовісної конкуренції
Received: May 3, 2022 Accepted: June 4, 2022
Written by:
Inna Kovalenko99
https://orcid.org/0000-0001-7595-777X
Yuliia Muzyka100
https://orcid.org/0000-0002-0000-9625
Vadym Khashev101
https://orcid.org/0000-0002-2240-0713
Nataliia Derevyanko102
https://orcid.org/0000-0002-4749-6782
Serhii Yakovchuk103
https://orcid.org/0000-0001-7066-3860
Abstract
The purpose of the article is to clarify the
mechanisms of protection of economic entities
from unfair competition in Ukraine. The subject
of the study is measures to combat unfair
competition. The research methodology includes
the following methods of scientific knowledge:
dialectical, logical, formal and logical, system
and structural, method of analysis, legal
forecasting method. Research results. The
definition of unfair competition and its features
provided in the works of domestic and foreign
scientists are analyzed. The concepts of
"economic competition" and "unfair
competition" are considered, the manifestations
of the latter are studied. Practical
implementation. The mechanisms of protection
of the rights of entrepreneurs are considered in
detail with reference to the legal instruments,
which regulate the order of their realization.
Value / originality. The author’s definition of the
concept of "economic competition" is
formulated.
Keywords: economic competition, economic
entity, mechanism, protection, unfair competition.
99
PhD in Law, Associate Professor, Professor of the Department of Public and Private Law of Kyiv National University of
Technologies and Design (Ukraine).
100
V.I. Vernadsky Taurida National University, Ukraine.
101
PhD in Law, Associate Professor, Associate Professor of the Department of Criminal Law and Criminology of Dnipropetrovsk
State University of Internal Affairs (Ukraine).
102
PhD in Law, Head of the Department of Criminal Law and Administrative Law Disciplines, Associate Professor of Social and
Legal Disciplines, Corresponding Member of the Academy of Administrative and Legal Sciences of Stepan Demyanchuk International
University of Economics and Humanities (Ukraine).
103
PhD in Law, Associate Professor of the Department of FireaRM Training of the National Academy of Internal Affairs (Ukraine).
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Introduction
The right of citizens to entrepreneurial activity is
enshrined at the highest legislative level. Thus, in
accordance with the provisions of the Basic Law
of Ukraine (Law of Ukraine No. 254k/96-VR,
1996), everyone has the right to entrepreneurial
activity, which is not prohibited by law. This
right is undoubtedly a mandatory and necessary
element in the structure of socio-economic rights
of citizens. It ensures not only the functioning of
a market economy, but also the optimal
combination of market self-regulation of
economic relations between economic entities
and state regulation of macroeconomic
processes, pursuant to the constitutional
requirement of responsibility of the state before
an individual for its activity, and declaration of
Ukraine as a sovereign, independent, democratic,
social and constitutional State, defined by the
Commercial Code of Ukraine.
At the same time, the State, granting its citizens
the right to entrepreneurial activity and in every
way supporting and ensuring it, prohibits certain
actions aimed at restricting competition, which is
a necessary condition for the functioning of a
market economy. Thus, the Basic Law of
Ukraine and a number of other regulations
enshrine a list of offenses in this area (abuse of
monopoly position in the market; illegal
restriction of competition; unfair competition,
etc.), for which there is legal liability. At the
same time, it is not the monopoly position as an
element of world economic competition that is
outlawed, but the abuse of the latter. So, as one
can see, the State, by giving certain rights to
entrepreneurs, imposes the corresponding
obligations on them.
However, unfortunately, the cases of unfair
competition are not isolated; its most common
manifestations are: misuse of symbols,
discrediting of the business entity, dissemination
of misleading information, inducement to
boycott a business entity, etc. Therefore, the
purpose of our article is to study the mechanisms
of protection of economic entities from this
negative phenomenon.
Methodology
The methodological basis for the research is the
set of general scientific and special legal methods
of scientific knowledge, the use of which is due
to the peculiarities of combating unfair
competition in Ukraine.
Dialectical method is used for the general
characteristics of economic competition and
unfair competition in Ukraine. This method, as
well as logical method is applied for considering
the mechanism of protection of business entities
from unfair competition and examining their
features.
The method of analysis is applied when
considering the works of scientists on the topic
of the research.
Using formal and logical method, the conceptual
and categorical apparatus of the Article is
formulated; in particular, the concepts of
“economic competition” and “unfair
competition” are defined, the Authors’ definition
of the term of “economic competition” is
proposed.
System and structural method makes it possible
to identify the forms of unfair competition, as
well as the acts, which are considered unfair
competition.
Legal forecasting is helpful in determining the
areas of improvement of the activities of
authorized entities in the field of administrative
and legal support of economic competition
(subsection 3.2).
Literature Review
In the 12th century Smith (1904) established the
riverly clause as a competition, defined the
conditions for effective competition, and proved
that competition by equating the rate of return,
leads to the optimal distribution of capital and
labor between industries and theoretically
developed the model of perfect competition.
According to Porter (1990) – the author of the
concepts of competitive strategy and
international competitiveness – competition is a
complex process determined by the interaction of
five main forces: the rivalry of existing
competitors in the market; appearance of new
competitors; introduction of new competitive
goods (substitutes); competitive ability of
suppliers (sellers); opportunities for buyers.
In his scientific work, Schumpeter (1934) notes
that true competition is competition born of a
new product, new technology, new type of
organization, new source of supply. It determines
the final cost of goods and is a source of
Kovalenko, I., Muzyka, Y., Khashev, V., Derevyanko, N., Yakovchuk, S. / Volume 11 - Issue 53: 227-233 / May, 2022
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innovation, implementation of new technological
solutions.
Mill (1848) developed the equation of
international demand, highlighted non-
competitive groups in the market, proved the
existence of several types of of elasticity of
demand (price, income, cross), substantiated the
nature of alternative costs and economies of
scale.
These ideas were later developed by
Chamberlain (1949). He laid the foundation for
modern Western theory of 4 main types of
markets: perfect competition; monopolistic
competition; oligopolies; monopolies. The
scientist proposed to use two criteria for the
classification of markets – interchangeability of
products offered by different enterprises and the
interdependence of these companies.
According to Fatkhutdynov (2000), competition
is the process of managing the subject with its
competitive advantages to win or achieve other
goals in the fight against competitors to meet
objective or subjective needs within the limits of
the law or under natural conditions.
Honcharuk (2004) notes that competition has a
subject-object structure. Subject-object structure
is a system of relationships between its entities
that have unidirected goals and interests. It
reflects the nature and forms of their interaction
with the competition. Competitors are natural or
legal persons (or a group of persons) whose
interests are directed to the same object. These
are individual buyers and sellers of goods,
services, labor, and the economy, the State, the
national economy as a whole, entering into
competitive relations with each other. The
objects of competition are the conditions of
production and sales, consumer preferences,
labor, loans, government benefits, preferences –
that is, everything that gives rise to competitive
relations.
Mokhnenko, Riznyk, Khomliak (2014) argue
that competition is an economic process of
interaction and struggle of producers for the most
favorable conditions of production and sale of
goods, obtaining the highest profits. It reflects the
relationship between production and sale of the
product, which is causal, essential, necessary and
repetitive objective economic law. Competition
law establishes a causal link between the
possibility to create a product that consumers
need and the opportunity to sell it to the benefit
of the customer.
Results and Discussion
Competition (from the Latin "concurro" –
confronted) means competition between market
participants for the most favorable conditions of
production, sale and purchase of goods. This type
of economic relationship takes place when
producers of goods act as independent entities;
their dependence is related only to market
conditions, a desire to win a competitive position
in the production and sale of their products. In
market relations, competition – natural and
objectively existing phenomenon – can be
considered as the law of the commercial
economy (Samuliak and Terekhov, 2019,
p. 337).
Despite the large number of scientific papers on
the problem of competition, to date there is no
single definition of this concept. However,
essential characteristics of the latter, according to
Hredzheva (2009), are:
1) market nature of competition (interaction of
enterprises, firms in the market);
2) limited amount of effective demand, for
which there is a fierce struggle;
3) competition develops only in real market
segments.
Thus, based on the definitions provided by
foreign and domestic scientists, we can conclude
that economic competition is a struggle of
economic entities using their own achievements
in real market segments in order to win or obtain
other advantages under conditions of limited
solvent demand and as a result of which
consumers and economic entities s can choose
between several sellers (buyers).
At the legislative level, the concepts of protection
of economic competition are regulated by the
Constitution of Ukraine (Law of Ukraine No.
254k/96-VR, 1996), the Laws of Ukraine "On
protection of economic competition" (Law of
Ukraine No. 2210-III, 2001); "On the
Antimonopoly Committee" (Law of Ukraine
No. 3659-XII, 1993); "On protection against
unfair competition" (Law of Ukraine No. 236/96-
VR, 1996) and others.
Thus, according to Article 42 of the Constitution
of Ukraine (Law of Ukraine No. 254k/96-VR,
1996), the abuse of a monopolistic position in the
market, the unlawful restriction of competition,
and unfair competition, shall not be permitted.
The types and limits of monopolies are
determined by law. Article 92 of the Basic Law
stipulates that exclusively the laws of Ukraine
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determine the rules of competition and the norms
of antimonopoly regulation.
The Law of Ukraine “On Protection of Economic
Competition” (Law of Ukraine No. 2210-III,
2001) provides the following definition of this
phenomenon: it is competition between business
entities in order to gain advantages over other
ones due to their own achievements, as the result
of which consumers, economic agents can decide
between several retailers, purchasers, and a
separate enterprener cannot determine the terms
and conditions for the circulation of goods on the
market.
Unfair competition, in accordance with the
provisions of the Commercial Code of Ukraine
(Law of Ukraine No. 436-IV, 2003), shall be
deemed any actions in competition that
contradict the rules, trade and other honest
practices in business activity. Unfair competition
is the unlawful use of business reputation of an
economic entity, creating impediments to
economic entities in the process of competition,
and gaining unlawful advantages in competition,
unlawful collecting, disclosure and use of the
trade secret, or other actions classified under Part
1 of this Article. (Article 32).
The Law of Ukraine “On Protection against
Unfair Competition” (Law of Ukraine No.
236/96-VR, 1996), in turn, defines unfair
competition as any action in competition that is
contrary to trade and other fair practices in
economic activity. These include:
1) illegal use of the business reputation of the
business entity (illegal use of symbols,
illegal use of goods from another
manufacturer, copying the appearance of the
product, comparative advertising);
2) creation of obstacles to business entities in
the process of competition and achievement
of illegal advantages in competition
(discredit of the subject, inducement to
boycott the business entity, inducing the
supplier to discriminate against the buyer
(customer), bribing the employee, official of
the supplier, bribery of an employee ,
buyer’s (customer’s) official, the official of
the buyer (customer), achieving undue
illegal advantages in competition,
dissemination of misleading information);
3) illegal collection, disclosure and use of trade
secrets (illegal collection of trade secrets,
disclosure of trade secrets, inclination to
disclose trade secrets, illegal use of trade
secrets).
Slobodyaniuk (2006) further points out that
forms of unfair competition are:
− illegal actions aimed at gaining certain
advantages over a competitor due to its
intellectual activity and business reputation;
− illegal actions connected with disruption of
production process of competitor, creating
obstacles during the competition and
achieving illegal advantages in competition;
− actions related to the illegal collection,
disclosure and use of trade secrets.
There are two ways to protect against unfair
competition – administrative and judicial ones.
The first is to address to the Antimonopoly
Committee of Ukraine to protect violated rights.
This agency is the State body with a special
status, the purpose of which is to ensure State
protection of competition in business and public
procurement. The main task of the Antimonopoly
Committee of Ukraine is to participate in the
formation and implementation of competition
policy in terms of:
1) exercising State control over compliance
with the legislation on protection of
economic competition on the basis of
equality of business entities before the law
and the priority of consumer rights,
prevention, detection and termination of
violations of legislation on protection of
economic competition;
2) control over concentration, coordinated
actions of economic entities in the course of
the regulation of prices (tariffs) for goods
produced (sold) by natural monopolies;
3) promoting the development of fair
competition;
4) methodological support for the application
of legislation on the protection of economic
competition;
5) control over the creation of a competitive
environment and protection of competition
in the area of public procurement;
6) monitoring of State aid to economic entities
and control over the admissibility of such aid
for competition (Law of Ukraine No. 3659-
XII, 1993).
To fulfil the above objectives, the Committee is
authorized to consider applications and cases of
violations of legislation on protection of
economic competition and to investigate these
applications and cases, as well as to adopt orders
and decisions on applications and cases, review
decisions on the cases, provide conclusions on
the qualification of actions in accordance with
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the legislation on protection of economic
competition.
All applications and cases submitted to the
Antimonopoly Committee are considered under
the Regulation of the Antimonopoly Committee
of Ukraine No. 5 (Order No. 5, 1994). This legal
act determines certain features of the procedure
for consideration of applications, cases of
contravention of the law on protection of
economic competition by the Antimonopoly
Committee of Ukraine and establish the
procedure for reviewing decisions by the
Committee in these cases.
An application for violation of the legislation on
protection of economic competition (including
violations of the legislation on protection against
unfair competition) may be submitted by
economic entities – competitors, suppliers or
buyers of the defendant and other individuals and
legal entities who can confirm that actions or
omissions by the defendant may have negative
impact on their rights.
The complaint is submitted exclusively in
writing and is considered within 30 calendar
days. If it is necessary to obtain additional
information that cannot be provided by the
applicant, the term for consideration of the
application may be extended by 60 calendar days
(the applicant shall receive a written notification
from the body of the Committee authorized to
consider it). If the person withdraws an
application, the statement is remained without
examining, which shall not be an obstacle for the
Committee to continue to investigate the issues
raised therein.
The submission of the application is free of
charge. The application should indicate the signs
of violation (according to the applicant); name,
known details (address, telephone number, etc.)
of business entities, public authorities or local
governments. If the applicant withdraws the
application or fails to comply with the
requirements within the prescribed period
(which, however, does not deprive him/her of the
right to apply to the Committee with a repeated
application), the latter remains without
consideration.
If the applicant believes that his / her application
may have negative consequences for him / her,
the Antimonopoly Committee of Ukraine may
investigate on its own initiative. To this end, the
applicant must submit a reasoned request to
initiate proceedings on the Committee’s own
initiative.
Based on the results of consideration of cases on
violation of the legislation on protection of
economic competition, the bodies of the
Antimonopoly Committee of Ukraine make
decisions, including on:
recognition of the violation of the legislation on
protection of economic competition;
termination of violations of the legislation on
protection of economic competition;
obligations of the authority, local government,
administrative and economic management and
control body to revoke or modify the decision or
terminate agreements recognized as anti-
competitive actions of public authorities, local
governments, administrative and economic
management and control bodies;
recognition of a business entity occupying a
monopoly (dominant) position in the market;
forced division of an economic entity occupying
a monopoly (dominant) position in the market;
imposition of a fine;
blocking of securities;
elimination of the consequences of violations of
the legislation on protection of economic
competition, in particular elimination or
mitigation of the negative impact of concerted
actions, concentration of economic entities on
competition;
cancellation of the authorization for the agreed
actions;
end of the proceedings (Art. 48 of the Law of
Ukraine No. 2210-III, 2001).
As for the court procedure, then, pursuant to Par.
7, Part 1, Art. 20 of the Commercial and
Procedure Code of Ukraine (Law of Ukraine
No. 1798-XII, 1991) the jurisdiction of
commercial courts extends to disputesarising
from relations related to the protection of
economic competition, restriction of monopoly
in economic activities, protection against unfair
competition, including in disputes related to
appeals against the judgments of the Anti-
Monopoly Committee of Ukraine, as well as
cases filed by the bodies of the Anti-Monopoly
Committee of Ukraine on issues referred by law
to their competence, except for disputes referred
to the jurisdiction of the High Intellectual
Property Court.
Thus, legal relations related to the restriction of
monopoly and protection of economic entities
from unfair competition are subject to regulation
of economic law, and therefore cases arising
from the relevant legal relations are considered
by commercial courts.
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According to Art. 176 of the Commercial
Procedure Code of Ukraine (Law of Ukraine No.
1798-XII, 1991), if there are no grounds for
leaving the statement of claim without motion,
return of the statement of claim or refusal to
initiate proceedings, the court shall open
proceedings within five days from the date of
receipt of the statement of claim or statement on
elimination of deficiencies filed under Article
174 of this Code.
Par. 2, Part 3, Art. 12 of this Code (Law of
Ukraine No. 1798-XII, 1991) stipulates that the
general action proceedings are intended for
consideration of cases, the consideration of
which is inexpedient in the simplified action
proceedings due to complexity or other
circumstances.
In accordance with Part 3, Art. 247 of the
specified regulatory legal act in resolving the
issue on consideration of the case in the
simplified or general action proceedings, the
court shall take into account: 1) the cost of claim;
2) the significance of the case for the parties;
3) the remedy chosen by the plaintiff; 4) category
and complexity of the case; 5) the amount and
nature of evidence in the case, including whether
it is necessary to appoint an expert in the case,
call witnesses, etc.; 6) the number of parties and
other case parties; 7) whether the consideration
of the case is of significant public interest; 8) the
opinion of the parties on the need to consider the
case under the rules of simplified action
proceedings.
Par. 5, Part 4, Art. 247 of the same Code
enshrines that the cases in disputes arising from
relations that are related to the protection of
economic competition, restriction of monopoly
in economic activities, protection against unfair
competition may not be considered by way of
simplified action proceedings.
In view of the above imperative requirements,
such cases are subject to general action
proceedings.
Conclusion
Based on the above, the following conclusions
can be drawn. Economic competition is a
struggle of economic entities using their own
achievements in real market segments in order to
win or obtain other advantages under conditions
of limited solvent demand and as a result of
which consumers and economic entities s can
choose between several sellers (buyers).
Unfair competition is any action in competition
that contradicts the rules, trade and other fair
practices in business (improper use of the
business reputation of the entity, creating
obstacles to economic subject in competition and
achieving undue advantage in competition,
illegal collection, disclosure and use of trade
secrets, as well as other actions specified by law).
There are two ways to protect against unfair
competition – administrative and judicial ones.
The first is to apply for protection of violated
rights to the Antimonopoly Committee of
Ukraine, which is the state body with a special
status, the purpose of which is to ensure State
protection of competition in business and public
procurement. The second one is filing a claim in
the relevant commercial court, as legal relations
related to the restriction of monopoly and
protection of economic entities from unfair
competition are regulated by economic
legislation. We have considered in detail these
mechanisms for the protection of the rights of
entrepreneurs with reference to legal instruments
governing their implementation.
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