Practice Areas Review: Unfair Competition

Unfair Competition in Pharmaceutical Sector: Prevailing Violations

Alexey KOT

Alexey KOT

Managing Partner, Antika Law Firm, PhD (Law), Member of the Public Council of the Antimonopoly Committee of Ukraine

PROfile

ANTIKA

Address:
12 Khreschatyk Street,
2nd Floor, Kiev, 01001
Tel.:
+38 044 390 0920
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Antika Law Firm was founded in 2010. The firm provides legal services to national and international companies that do business in Ukraine and abroad. 

Main areas of practice: antitrust, litigation and arbitration, criminal defense for business, construction & real estate, subsoil use, energy & energy efficiency, project financing, corporate/M&A, legal expertise.

The firm has been recognized by authoritative international and Ukrainian guides such as The Legal 500 EMEA, Chambers Global, Chambers Europe, IFLR1000 Energy and Infrastructure, Best Lawyers, Ukrainian Law Firms, 50 Top Law Firms of Ukraine, and is recommended in the area of antitrust, dispute resolution, corporate/M&A, banking, finance and capital markets, real estate, land, subsoil use, energy, energy efficiency and energy savings.

Antika’s team includes 15 lawyers, who have significant experience in various fields of legal practice.

Our lawyers are professionals with broad experience and skills to provide comprehensive and creative solutions. We follow traditions in law. Meanwhile, having a good understanding of today’s challenging business requirements and a deep knowledge of the legal environment we bring an innovative, creative and practical problem-solving approach to all of our work.

The firm’s main principles are high quality and timely legal services, strict confidentiality and a bespoke approach to every client’s project.

Antika serves Ukrainian and international companies doing business in telecommunications, heavy machinery, chemical and food industries, pharmaceuticals, automotive, construction, real estate and complex development, energy, oil and gas, subsoil use, wholesale and retail, media and sports, banks and financial services market.

The firm also advises the World Bank, EBRD, NEFCO, KfW, USAID on energy efficiency, utility and other infrastructure projects in Ukraine.

The firm is a member of the Ukrainian Chamber of Commerce and Industry, the American Chamber of Commerce in Ukraine, the Canada-Ukraine Chamber of Commerce, the European Business Association, and the International Turkish Ukrainian Businessmen Association.

 

The Antimonopoly Committee of Ukraine traditionally focuses on the monitoring of compliance with competition law on the pharmaceuticals market. This is connected not only with the social importance of this market, but also with the relatively high level of competition and profit on it. In view of this, it is no surprise that when companies try to increase sales they often violate current legislation on protection against unfair competition.

One of the most common violations of legislation on protection against unfair competition on the pharmaceutical market is the misuse of business reputation of the entity and deception of consumers.

Misuse of business reputation includes several relative violations stipulated in Articles 4-7 of the On Protection against Unfair Competition Act of Ukraine: unlawful use of trademarks (Art. 4), copying goods’ outward appearance (Art. 6), unlawful use of goods made by other manufacturers (Art. 5) and comparative advertising (Art. 7).

The most common are the first two violations. Unlawful use of trademarks lies in using the name, trade name or brand name, trademarks (signs for goods and services), advertising materials, package design of goods and periodicals, other indications without the permission (consent) of a business entity, which earlier started to use them or similar to them indications in economic activity that led or may lead to confusion with the activity of this business entity.

Copying the outward appearance of goods is replication of the outward appearance of goods belonging to another business entity and commercialization of them without explicitly indicating the manufacturer of copies, which may lead to confusion with the activities undertaken by the other business entity.

It should be noted that the above violations are very similar in nature to violations in the area of intellectual property.

Similarly, the outward appearance is often protected as an object of intellectual property by patents and/or design inventions.

However, the scope of regulation of protection against unfair competition has distinctions that can enable companies to protect their rights in cases where intellectual property legislation does not provide such protection.

The area of application of legislation on protection against unfair competition is bigger, since protection is provided not only to registered trademarks of goods and services but to any indication that is used by the company.

At the same time, appealing to the Antimonopoly Committee of Ukraine with a complaint about the misuse of indications or copying of the external appearance, it should be understood that the primary purpose and function of the Committee is protection of competition on the market, not the protection of an individual’s rights. Therefore, the company is unable to claim through the Antimonopoly Committee of Ukraine to obtain damages or other compensation from an offender.

However, if the purpose of appeal is to halt the illegal activities of the offender and prevent similar situations in the future, an appeal to the AMCU can be an effective tool. Thus, the Committee may impose on the offender a fine of up to 5% of revenue from sales of goods (services) for the year preceding the imposition of the fine. Such fine is essential for any company regardless of its size and, therefore, has a significant “preventive” effect.

Another important tool that the Antimonopoly Committee of Ukraine has is the right to withdraw from commerce those goods containing an illegally used indication which are copies. This prevents the further spread of infringing goods.

Another violation of legislation on protection against unfair competition that is very common on the pharmaceuticals market is the dissemination of information that deceives consumers. This violation is stipulated in Article 15-1 of the On Protection against Unfair Competition Act of Ukraine and is one of the important mechanisms that ensure accuracy and completeness of advertising information about goods.

According to Article 15-1 of the On Protection against Unfair Competition Act of Ukraine, the dissemination of misleading information is giving either directly or through another person by business entity to one or several persons or general public, including in advertising, incomplete, inaccurate, false information, in particular due to the chosen method of statement, omission of certain facts or fuzziness of wording that affected or may affect the intent of these individuals to purchase (order) or realization (sale, delivery, performance, provision) of goods, works, services to the business entity.

The information is considered misleading if it:

— contains incomplete, inaccurate or false information about the origin, manufacturer, seller, method of manufacture, source and manner of acquisition, realization, the number of consumer properties, quality, completeness, suitability for use, standards, specifications, the sales peculiarities of goods, works and services, price and any discount on them, as well as the essential terms of the contract;

— contains incomplete, inaccurate or false information about the financial standing or business activity of the business entity;

— refers to authorities and rights that are not enjoyed, or relationships that are not involved in;

— refers to production output, purchase, sale or supply of products, works and services that were not performed at the day of spreading information.

Unfortunately, the provisions contained in Article 15-1 of the On Protection against Unfair Competition Act of Ukraine are fairly subjective, that is why usually in practice especially while creating promotional material the question related to whether the advertising video, announcement or other types of advertisements correspond to legislation on protection against unfair competition.

It is also worth noting that special requirements are applied to advertising of pharmaceuticals in terms of its completeness and information that it contains.

The basic requirements for the amount of information that must be contained in the advertising of pharmaceuticals are established by part 4 of Article 21 of the On Advertising Act of Ukraine. In particular, such advertising must contain:

— objective information about a medicinal product and should be produced in such a way that it is clear that the message is advertising and the advertised good is a medicinal product;

— demand of consultation with a doctor before using the medicinal product or medical device;

— recommendation for mandatory review the instructions to the medicinal product;

— the following warning: “Self-medication can be harmful to your health”, which takes at least 15 percent of the area (length) of the whole advertising.

Parts 5-14 of that Article also contain a list of facts and information, which is prohibited from being used in the advertising of medicines.

However, despite the prohibitions and list of the required information, the current legal regulation of pharmaceutical advertising in Ukraine is very liberal in comparison with the legislation of the EU and the United States.

It should be noted that the debate on the reform of legal regulation in this area and detalization of the information to be provided in advertising has recurred repeatedly. In particular, a proposed introduction of a mechanism that would oblige the indication in advertising of counterindications and side effects of medicines and administration details. A similar obligation exists in the USA where an advertiser in the advertising of medicines has to note side effects and counterindications in such quantity that meets positive effects and benefits specified in the advertising. Unfortunately, initiatives on introducing similar principles in Ukraine have remained in projects.

According to the Antimonopoly Committee of Ukraine during 2013-2015 the most common cases of violations of Article 15-1 of the On Advertising Act of Ukraine in pharmaceutical advertising are the provision of false information about the possibility of usage of a medicinal product for a certain range of customers, providing false information on the therapeutical effects of medicines and details of administration.

In particular, a very common violation in the advertising was the use of indication on possibility for children to take the medicines but without specifying their age. In terms of the Antimonopoly Committee of Ukraine, such indication points to the possibility of children’s administration irrespective of age. Thus, if a medicine can be used only for children from a certain age the advertising in question was clearly regarded by the Committee as misleading.

Another example is specification in the advertising the information about the possibility of the medicine administration by pregnant women and during lactation. According to the medicine’s instructions on use, it can be used if prescribed by a doctor. The Antimonopoly Committee of Ukraine decided that advertising is misleading because the consumer receives the idea that the medicine can be taken without any restrictions, whereas in fact such restrictions exist and its use was only allowed subject to a doctor’s prescription.

Another common misleading violation concerned the therapeutic characteristics of medicine. For example, the indication in advertising in any form of information that over some time the pain disappears, there comes relief, etc. In view of the Antimonopoly Committee specifying such information in advertising is allowed only if the relevant medicine properties are confirmed by pharmacological properties or corresponding research.

Another example is stating in advertising of information that the medicine “cures coughing fast”, whereas in reality under pharmacological properties the medicine soothed defluvium of mucus and softened the cough. The Antimonopoly Committee regarded this as misleading.

It should be noted that in the view of the AMCU the most common misleading claim was the instructions for use.

Thus, when creating adverts on medicines special attention should be paid as to compliance of statements used in advertising, information on properties, counterindications and pharmacological effect of the medicine, which is described in the instructions for use and avoid statements that could have or create a picture of the wider use of medicine than in fact.