Article 15 of the Unfair Competition Law has been amended
28 October 2022
The “Create and Grow Law” has introduced a new paragraph 4 to article 15 of the Unfair Competition Law, which establishes that thatrepeated non-compliance with the rules combatting late payment in commercial transactions is also unfair.
This amendment came into force on 19 October 2022.
On 29 September 2022, the Spanish Official State Gazette published Law 18/2022 of 28 September 2022 on promoting business creation and growth, known as the “Create and Grow Law”, as part of the Spanish Government’s Recovery, Transformation and Resilience Plan.
The Create and Grow Law aims to (i) promote business creation and growth by adopting measures to speed up company creation; (ii) better regulate how businesses operate and eliminate obstacles to their economic activities; (iii) reduce late payment in commercial transactions; and (iv) improve access to financing. To this end, the Create and Grow Law amends existing regulations.
Chapter IV of the Create and Grow Law deals specifically with measures aimed at combatting late payment in commercial transactions. It amends article 15 of Law 3/1991 of 10 January on unfair competition (“Unfair Competition Law”) to introduce a fourth paragraph which establishes that “Likewise, within the framework of article 2, repeated non-compliance with the rules combatting late payment in commercial transactions is considered unfair”.
This amendment of article 15 of the Unfair Competition Act came into force on 19 October 2022.
2. How article 15 of the Unfair Competition Law has been amended
Article 15 of the Unfair Competition Law now reads as follows:
“Article 15. Violation of rules.
- It is considered unfair to take advantage in the market of a competitive advantage acquired by infringing the laws. The advantage must be significant.
- The simple infringement of legal rules whose purpose is to regulate competitive activity shall also be considered unfair.
- Likewise, within the framework of article 2, the hiring of foreigners without a permit to work obtained in accordance with the legislation on foreigners shall be considered unfair.
- Likewise, within the framework of article 2, repeated non-compliance with the rules on combating late payment in commercial transactions shall be considered unfair.”
2.1 The new article 15.4 of the Unfair Competition Law
Article 15 of the Unfair Competition Law classifies as unfair an economic agent infringing legislative provisions that are not unfair competition law per se but when infringed have negative effects on competition in the market and mean that economic agents operating in the market are not treated equally. Unfair competition arises because the economic agent that infringes the rules gains a competitive advantage over its competitors, who face unjustified difficulties in carrying out their market activity.
Based on this idea, the new article 15.4 of the Unfair Competition Law stipulates that “repeated non-compliance with the rules combatting late payment in commercial transactions” is unfair conduct. It might seem that this rule could apply automatically so that any breach of the rules designed to combat late payment in commercial transactions is always considered unfair conduct.
However, a careful reading of the article shows that a specific infringement of the regulations on commercial late payment needs to pass two tests to be considered unfair competition.
2.1.1 Competitive advantage aim
By referring to non-compliance with the provisions combatting commercial late payment “within the framework of article 2”, the legislator is indicating that the non-compliance will only be an act of unfair competition if its aim is to gain a competitive advantage.
According to article 2 of the Unfair Competition Law, infringing the provisions combatting commercial late payment to promote or procure one’s own or a third party’s services is aimed at gaining a competitive advantage. In short, the repeated breach of the late payment provisions must be objectively sufficient to have a bearing on how economic relations are formed and developed in the market. This means that not just any breach, even a repeated one, constitutes unfair competition. On the one hand, the breach must be intended to give the services more market presence. And on the other, and for the same reason, the breach must have a minimum impact (otherwise it would be unable to influence competition for the services in question).
Therefore, when a breach of the late payment provisions does not seek to alter competition, the corresponding sanctions, if any, will be those set out in the late payment provisions. When it aims to alter competition, the infringement may also be analysed through the lens of the Unfair Competition Law to determine whether it entails an unfair conduct.
2.1.2 Repeated infringing conduct
This second factor adds a degree of uncertainty to the scope of article 15.4. It seems clear that the need for “repeated” non-compliance means that several breaches will have to be committed for the infringing conduct to be significant enough to be considered an infringement of the Unfair Competition Law (in view of, among other factors, the reference to article 15.2, which requires that the infringer gain a substantial advantage − which is unlikely to happen in practice when only a small number of invoices are unpaid). We will just have to wait and see how judges interpret this concept of repetition to be able to more precisely determine what conduct might infringe the new article 15.4.