We invite you to read the article written by our associate from the Public Law and Regulated Markets Group, Felipe Giovanazzi, on a ruling that determined comparative advertising is only considered unfair if it causes actual harm to competitors’ clientele.
On August 6, the Santiago Court of Appeals, in case Rol No. 11426-2022, ruled on appeals filed by both parties against the final first-instance judgment issued by the 19th Civil Court of Santiago in a 2020 unfair competition case involving two supermarket chains.
In broad terms, the plaintiff filed a complaint against the defendant for violating Articles 3 and 4, letters b) and/or e), of Law No. 20,169. This arose from comparative advertisements that did not comply with the legal requirements, namely, that the comparison must be based on truthful and verifiable data. Specifically, the defendant’s chain allegedly promoted one of its advertising campaigns as having the lowest prices on the market, based on unreliable and biased information.
The first-instance court partially upheld the unfair competition claim, ruling that one of the campaigns did not meet the veracity and verification requirements established by law. The court noted that the campaign relied on information unilaterally collected by the defendant and was biased in several ways, such as selecting specific products on a single day from certain supermarkets in the national sample, failing to clarify which private-label products were considered “equivalent,” and comparing only to “other brands” that excluded most competitors and focused on a single chain (consideration 21).
Consequently, the court ordered the defendant to cease its unfair competition actions, publish an extract of the judgment, and correct the advertising campaign in question.
Both parties filed appeals against this decision, and the defendant also filed a cassation motion in form, which were resolved by the Court of Appeals on August 6. The ruling accepted the defendant’s appeal, overturning the previous judgment and instead dismissing the claim in its entirety.
While the ruling contains interesting considerations, such as the evidentiary value of legal reports and the procedural opportunity to raise the exception of lack of standing (both in consideration 3), this summary will focus on unfair competition. In particular, three key aspects regarding the interpretation of unfair competition under Law No. 20,169 stand out:
a) Multiple legal statutes may apply in acts of competition. The court expressly stated that in unfair competition disputes, “some degree of convergence or concurrence of actions or legal statutes that may resolve the controversy often occurs.” The court even provided examples, including consumer protection, free competition, intellectual property, tort liability, and “even contractual liability” (consideration 4).
Thus, the court reaffirmed the multiple legal statutes applicable to unfair competition cases listed in Article 2 of Law No. 20,169 and added two more: contractual and non-contractual civil liability. Accordingly, an act of unfair competition could give rise to damages without the breach of a general duty of care, or it could constitute a breach of a contractual obligation.
b) Competition must be strong or “vigorous” to be sanctionable. According to the second-instance judges, unfair competition requires that the alleged behavior significantly deviate from the “standard” of fair competition. This is because the regulation should not become a tool that obstructs the competitive relationships that market participants must maintain (consideration 7).
c) Harm as an element of unfair competition. While Article 3 of Law No. 20,169 establishes the general hypothesis of unfair competition and Article 4 could be seen as providing illustrative examples, the court clarified that cases under Article 4 must also meet the elements of Article 3: (i) an objective element—existence of a specific act; (ii) a subjective element—the act does not conform to good faith or fair practices; and (iii) harm, defined as “the diversion or capture of a competitor’s clientele” (consideration 7).
To justify including harm as an element, the court explained that “the figures conceived in the law are intended as hypotheses of civil unlawful acts of unfair competition,” requiring “the concurrence of elements or requirements proper to tort liability” (consideration 8). This applies even though multiple legal statutes may apply in unfair competition cases.
Based on this understanding, the appellate court rejected the plaintiff’s argument that comparative advertising requirements constitute “strict liability or a sort of hazardous act,” emphasizing that the law requires a subjective element and harmful result—i.e., client diversion (consideration 10).
Therefore, the court granted the defendant’s appeal, noting that the alleged conduct “at most” could be considered “unethical, contrary to good practices” in market positioning or misleading advertising that does not rise to unlawful conduct enforceable by law (consideration 11).
Accordingly, the Santiago Court of Appeals concluded that no matter how imprecise or unethical an advertisement may appear, it is not considered unfair unless it causes actual harm to competing businesses.
While this ruling may be seen as supporting good-faith conduct in commercial interactions—particularly in competitive relations—it remains unclear whether doctrinal and case law interpretations also encompass “misleading,” “unethical,” or “contrary to good practice” behavior as used by the court. It is also uncertain how compatible these interpretations are with the literal text of Article 3 of Law No. 20,169.
Finally, a cassation motion on the merits has been filed regarding this ruling. It will be interesting to follow this case and see whether the Supreme Court upholds the interpretation of unfair competition elements and the standard for comparative advertising established in this decision.
Column written by:
Felipe Giovanazzi | Associate Public Law and Regulated Markets Group | fgiovanazzi@az.cl
