Decision sets new criteria for unfair competition actions


Unfair competition acts in Mexico fall under three distinct sets of rules:

  1. the Paris Convention for the Protection of Industrial Property (Article 10bis);
  2. the Industrial Property Law (Article 213, Paragraph I); and
  3. the Commercial Code (Article 6bis).

It has been common practice in the country to link an unfair competition action with an action for trademark infringement. Thus, neither the Mexican Industrial Property Institute nor the federal courts usually decided on unfair competition claims alone. However, this practice has evolved in recent years.

As a consequence of such change, in a recent decision the Eighth Federal Circuit Court in Administrative Matters of the First Circuit has set new standards for unfair competition cases. These are outlined below:

  1. The plaintiff no longer has the burden of proving that the unfair competition acts at issue occurred among competitors providing goods or services falling within the same class, since the unfair competition acts can be the result of indirect competition (eg, a sponsored sporting event). Unfair competition acts may occur when competitors or economic agents trade and compete in a "circumstantial” market - that is, a market that is not stable, but is formed on the occasion of a specific activity.  

  2. Competition refers to at least four elements: the competitors, the market, the merchandise and the customers. These elements were defined as follows:
  • A 'competitor' is a natural or legal person who performs an independent economic activity (as compared to other entities which conduct the same activity), which can be carried out by itself or through a third party, and by which it can obtain benefits or cause injury to other parties. 
  • A 'market' consists of a set of activities performed freely by economic agents without the intervention of the state. It can also be defined as a set of commercial operations that affect a given sector, or as a set of consumers who may buy a product or service. A market may also be constituted by the state, or by the evolution of supply and demand in a given industry. 
  • The 'merchandise' represents the goods or the activity that the competitors are offering, providing or advertising to consumers. 
  • The 'customers' are the potential consumers of the goods or services offered by the competitors.

Competition in general involves relationships between natural or legal persons, who are independently engaged in economic activities through the sale of goods or services to customers. Such relationships carry potential consequences. In principle, free competition cannot be restricted simply because the success of one competitor might lead to the demise of another. Free-market commercialism is encouraged, as long as all parties abide by the rules.

  1. There is a dynamic relationship between industrial property rights and unfair competition. Industrial property law protects a series of exclusive rights of ownership; this involves the creation of a monopolistic situation which, as a logical consequence, restricts competition. On the other hand, unfair competition law sets forth the criteria with which competitors must comply.

  2. According to Article 213, Paragraph I of the Industrial Property Law, unfair competition acts are administrative infringements, which include acts against the industry, trade and good practices. Thus, Paragraph I contains the general rule that governs infringement actions involving unfair competition acts. The rest of Article 213 describes other illicit acts that can harm industrial property rights, such as trademarks and patents.

Arguably, the new standards set forth by the Circuit Court might facilitate the filing of infringement actions against general acts of unfair competition. 

Rudy Camacho Jr, Arochi Marroquín & Lindner SC, Mexico City

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