Unfair competition, related activities, and damage to reputation: the Italian Supreme Court clarifies

Case facts

Our analysis begins with the ruling no. 2800/2019 issued by the Court of Appeal of Catania, which partially upheld the appeal filed by Alfa Srl against Beta Srl.

The dispute concerned the conduct of the latter, accused of engaging in unfair competition against Alfa Srl. Beta Srl was alleged to have concealed Alfa’s original product labels by inserting its own company markings, creating confusion among customers, and providing (without authorization) technical support and maintenance for third-party IT products.

The relevant legal framework: Article 2598 of the Italian Civil Code

Article 2598 of the Italian Civil Code governs acts of unfair competition, protecting against activities—however expressed—that aim to unlawfully appropriate a competitor’s market share or clientele.

The rationale behind this provision is to impose rules of fairness and loyalty on companies operating in the market so that no one gains advantage through methods contrary to commercial ethics.

Unfair competition and related services

The Italian Supreme Court’s ruling closely analyzed a key element of unfair competition, highlighting that even companies engaged in related activities may find themselves in situations qualifying as unfair practices.

In this case, Beta Srl was not directly manufacturing the same products offered by Alfa Srl but instead provided maintenance and support services for these products. The Supreme Court confirmed that, despite the lack of direct production, Beta Srl was still in direct competition with Alfa Srl since both companies offered services that fulfilled the same customer needs.

This judicial decision prompts significant reflection on the concept of unfair competition and modern market dynamics. Today, companies compete not only through product manufacturing but also through a broad range of services directly related to the products themselves.

In the field of technical support, for instance, the provision of maintenance, repair, or after-sales service has become an essential part of the value a company offers its clients.

Businesses must therefore carefully consider the scope of their activities and the potential implications on competition, even when the products or services offered are not identical.

The crucial recognition of damage to image and corporate reputation

Furthermore, the Supreme Court ruling marked a turning point in the fight against unfair competition by emphasizing a fundamental aspect: the recognition of damage to corporate image and reputation.

This type of damage cannot merely be presumed or based on the potential of a competitor’s conduct to cause discredit. On the contrary, the Court emphasized that damage to image and reputation must be specifically alleged and convincingly demonstrated.

The Court asserted:

“Evidence of such damage may be provided through presumptions, based on circumstances specifically alleged by the allegedly harmed party, but one certainly cannot assume the existence of non-material damage based solely on the ‘mere capability’ of the unfair practice to cause discredit, or on the ‘potential discredit’ that could result. Thinking this way essentially means assuming the damage exists in re ipsa”.

Therefore, the injured party cannot rely on vague claims or hypothetical damages but must provide at least solid circumstantial evidence showing that its image and reputation were genuinely harmed by the unfair competition of a third party.

Consequently, it will be necessary to collect accurate and detailed documentation to demonstrate the damage suffered.

Legal implications

In conclusion, the Supreme Court—by reversing and remanding to the Court of Appeal—provides important guidance and highlights that in an increasingly complex and interconnected world, competition can arise from various elements, including the provision of related services, and must be managed with legal sensitivity.

At the same time, this ruling serves as a warning for companies to operate ethically and fairly, avoiding damage to the image and reputation of their competitors. It also offers a protection mechanism for businesses harmed by unfair practices, provided they can convincingly demonstrate the extent of the damage.

In any case, it is always advisable to consult an expert lawyer to fully understand the legal implications of one’s (and others’) business conduct and to safeguard corporate interests.