Competition Law. Unfair Competition

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LESSON 6: COMPETITION LAW. UNFAIR COMPETITION

The primary purpose of competition law is to remedy some of the situations in which the free market system breaks down. The invisible hand that Adam Smith identified in 1776 ensures in most situations that the free market economies left to their own devices will produce results more beneficial tan ban be realized by intervening in the market . The process of competition is seen as being of value and meriting protection. Protection is needed when undertakings look forward to restrict competition or when they behave in a reproachable way, using unfair methods to attract clients and consumers. We, then have two different aspects of competition law.

In the first place, we talk of maintaining the competition, and States interferes in the market to guarantee the existence o free competition establishing regulations to prevent the restriction of competition in the market by the agreements between enterprises that arrange prices or divide the markets between them. It also includes mergers and prevents dominant companies from abusing its position through excessive pricing or discrimination against costumers. The interference with the free market is in the interests of the consumers. Competition is a basic mechanism of the market economy and encourages companies to provide consumers products that consumers want. It encourages innovation, and pushes down prices. In order to be effective, competition needs suppliers who are independent of each other, each subject to the competitive pressure exerted by the others. In the second place, competitors may have the temptation of using unfair practices and this occurs when the enterprise employ “any” method to attract consumers and get rid of competitors, such as denigration, misleading advertising or induce competitor’s employees to breach of contract or other similar practices. We then talk of Unfair Competition. In Spain we have a double regulation of economic competition. On one hand, the rules governing competition the Competition Act (Ley 15/2007, de 3 de Julio de Defensa de la Competencia), whose main is objective the maintenance of competitive market. On the other, the rules governing Unfair Competition, the Act Against Unfair Competition (Ley 3/1991, de 10 de enero, de Competencia Desleal) and the Advertising Law (Ley 34/1988, de 11 de noviembre, General de la Publicidad). Finally it is important to notice that competition law in Spain has a double level of legal sources: European Community Law and National Law, being the EC Law basic provisions art. 81 to 89 of the EC Treaty. 1. Competition Law

The Competition Act 2007, has reformed the previous Act of 1989, with tow main objectives: firstly, to overcome the shortcomings of the former institutional system by setting un an institutional structure to protect effective competition in the markets, and secondly, to align some aspects of the Spanish competition system with EC competition law, which has experienced a steady reform since 2000. The Act, estates in its preamble that “Article 38 of the Constitution recognizes the freedom of enterprise within the framework of a market economy and the guarantee and protection of it by the public authorities, in accordance with the demands of the economy in general and, as the case may be, of the planning. The existence of effective competition between businesses constitutes one of the defining elements of the market economy, disciplines the action of businesses and reallocates the productive resources in favour of the most efficient operators or techniques. This productive efficiency translates to the consumer in the form of lower prices or an increase in the quantity offered of the products, their variety and quality, with the subsequent increase in the welfare of society as a whole. In this context, there is an overall agreement with regard to the growing importance of competition, which has become established as one of the principal elements...
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