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Passing off another’s goods as own unlawful

ISLAMABAD:The top court has held that it was unlawful for a trader to pass off his goods as those of another by using the same or confusingly similar mark, name, or get-up.
“As nobody has any right to represent his goods as the goods of somebody else, it is unlawful for a trader to pass off his goods as the goods of another by using the same or confusingly similar mark, name, or get-up,” a 13-page judgment authored by Justice Syed Mansoor Ali Shah read.

Justice Shah was hearing a matter regarding interpretation of the phrase ‘fraudulent use of another’s trademark, firm name, or product labelling or packaging’ as used in clause (d) of Section 10(2) of the Competition Act 2010 as well as clause (a) of Section 10(2)(a) of the same Act, which includes ‘distribution of false or misleading information that is capable of harming the business interests of another undertaking’ in the prohibited deceptive marketing practices.

The judgment observed that there was nothing in the language of Section 10(2)(d) of the Act that the meaning of the word “use” had been restricted therein to the use of the same trademark, firm name, or product labelling or packaging.

“We, therefore, hold that the word ‘use’ in Section 10(2)(d) of the Act includes the use of trademark, firm name, or product labelling or packaging which is confusingly similar (also referred to as deceptively similar) to that of another undertaking,” it added.

Briefly, the facts of the case are that K&N’s Foods (Pvt) Limited filed a complaint against A Rahim Foods (Pvt) Limited with the Competition Commission of Pakistan,.

K&N’s Foods claimed that Rahim Foods was involved in deceptive marketing practices in contravention of the provisions of Section 10 of the Act.

In the complaint, K&N’s Foods mainly alleged that Rahim Foods was copying its product labelling and packaging for the sale of its several frozen and processed meat products.

It also alleged Rahim Foods had copied its trademark term “Combo Wings” for one of the products, that was, the chicken wings.

Two officers of the commission conducted an inquiry into the matter.
After collecting and considering the respective evidence of the parties, the inquiry officers submitted their report to the commission, confirming the allegations and proposing the initiation of proceedings against Rahim Foods under Section 30 of the Act.

The judgment noted that Act aimed to address the situations that tend to lessen, distort or eliminate competition, such as (i) actions constituting an abuse of market dominance, (ii) competition restricting agreements, and (iii) deceptive marketing practices.

“Free and Fair competition is a fundamental concept in economics that involves providing a level playing field for all market participants,” it stated.
“It is based on the principles of a free market where businesses compete on equal terms, and consumers make decisions based on price, quality, and preference. Free and fair competition is competition that is based on quality, price, and service rather than unfair practices. Predatory pricing, competitor bashing, and the abuse of monopoly-type powers, for example, are unfair practices,” the judgment further read.

The court observed that when competitors could compete freely on a “level playing field”, economies were more likely to thrive.

“On the other hand, unfair competition is using illegal, deceptive, and fraudulent selling practices that harm consumers or other businesses to gain a competitive advantage in the market. However, free and fair competition is encouraged and enforced through legislation and regulation to promote economic efficiency, innovation, and consumer welfare,” it added.

The verdict read that violations of fair competition principles could lead to legal consequences, penalties, or other corrective measures.

“Competition is not only healthy for businesses, but pivotal for innovation. It sparks creativity and nurtures transformation and progress,” it continued.
The court noted that Article 18 of the Constitution provided that every citizen shall have the right to conduct any lawful trade or business.

It further observed that clause (b) of the proviso to Article 18 stated that nothing in this law would prevent the regulation of trade, commerce or industry in the interest of free competition.

“Therefore, regulation in the interest of free competition actualises the fundamental freedom guaranteed under the Constitution to conduct lawful trade and business. As free and fair competition ensures freedom of trade, commerce and industry and therefore forms an intrinsic part of the fundamental right to freedom of trade and business guaranteed under Article 18 of the Constitution. The preambular objective of the Act is to ensure ‘free competition’ in all spheres of commercial and economic activity to enhance economic efficiency and to protect consumers from ‘anti competitive behaviour’,” it read.

The SC noted that the term “free competition” envisaged by the Constitution and aimed to be ensured by the Act, therefore, meant a competition through fair means, not by any means.
“To ensure fair competition in trade and business, Section 10 of the Act has prohibited certain marketing practices by categorising them as deceptive marketing practices, and Sections 31, 37 and 38 of the Act have empowered the commission to take appropriate actions to prevent those practices. With this constitutional underpinning in the background, we now proceed to examine the meaning and scope of clauses (a) and (d) of Section 10(2) of the Act,” the judgment stated.

The court noted that the provisions of Section 10(2)(a) of the Act did not mention this requirement.
“Conversely, the ‘malice’ of the defendant [that] is not required to be proved in a common law action for passing-off, has been made relevant in the provisions of Section 10(2)(d) of the Act by using therein the expression ‘fraudulent use’. Goodwill, misrepresentation and damage are the three essential elements of a passing-off action under common law, which are usually referred to as its ‘classic trinity’, and the liability for passing-off under common law is not affected by the defendant’s state of mind,” it added.

The judgment observed that the expression “fraudulent use” in Section 10(2)(d) had made the intention of the defendant (user of another’s trademark, firm name, or product labelling or packaging) also relevant for holding them liable under the Act.

“However, as the Act has not defined the term ‘fraudulent’ and thus not given any particular meaning to it, the expression ‘fraudulent use’ in Section 10(2)(d) is to be understood in its ordinary sense of ‘intentional and dishonest use’ in contrast to a mere ‘mistaken or negligent’ use,” the verdict read.

The judgment noted that a trader might not sell their goods under false pretences, either by deceptively passing them off as the goods of another trader so as to take unfair advantage of his reputation in their goods, or by using a trade sign the same, or confusingly similar to, a registered trademark.

“The misrepresentation alleged in a passing-off action is therefore also judged on the same or confusingly similar standard as it is done in a trademark-infringement action. Further, the criterion to determine the confusing similarity (also referred to as deceptively similar), which is described hereinafter, is also common in both these actions,” it continued.

“K&N’s Foods, which may have been aggrieved of the decision of the tribunal on the point of non-applicability of the provisions of Section 10(2)(a) of the Act, has not impugned the decision of the tribunal by preferring an appeal to this court, and it is the commission that has challenged the decision of the tribunal on that point by filing the appeal,” the judgment read

The court observed that though the role of the commission under the Act was primarily of a regulatory body, it was quasi-judicial as well under some provisions of the Act.

“The provisions of clauses (a) and (d) of Section 10(2) of the Act, 24 in our view, envisage the quasi-judicial role of the commission while deciding upon the divergent claims and allegations of two competing undertakings. And, as held by this court in Wafaqi Mohtasib case, an adjudicatory body deciding a matter in exercise of its quasi-judicial powers between two rival parties under a law cannot be treated as an aggrieved person if its decision is set aside or modified by a higher forum under that law or by a court of competent jurisdiction and such [a] body thus does not have locus standi to challenge the decision of that higher forum or court,” it added.

“The appeal filed by the commission in the present case against the decision of the tribunal setting aside partially its quasi-judicial order is therefore not maintainable,” the judgment observed.

The court also rejected Rahim Foods’ petition in the matter.

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