In circumstances where businesses employ wrongful – or simply unlawful – tactics to compete with others, it is referred to in common law as unlawful competition. Crucially, a business has to hold the intention to wrongfully act to its own advantage which, in turn, will consequently have to be to the prejudice and disadvantage of another for it to be criticised for unlawfully competing with another.
There are various forms of unlawful competition, only the most noteworthy which are explained below:
Typically, an employee acting in his scope of his employment with his employer obtains substantial knowledge and access to confidential information. Whilst most employers define what they regard as confidential information in their employment agreements – normally depicted as “client information, supplier lists and/or price lists” – it is essential to consider what the effect of such information would have, should it be utilised by a competitor, in order to consider if and what information could be regarded as unlawful.
Moreover, an employee holds a common law duty against his former employer not to divulge or misuse its confidential information.
Similarly, businesses entering commercial negotiations, tend to sign Non-Disclosure Agreements with the aim of protecting each other’s confidential information. Naturally, it assists a contracting party to simply rely on contractual remedies in the case of breach to enforce its rights to protect the confidential information, however, confidential information obtained unlawfully would be protectable through interdictory relief based on common law remedies.
Whilst the use of another party’s confidential information is a perfect example of this guise of unlawful competition, by devising a stratagem to utilise any other aspects of another’s business to the advantage of a third party’s business which will consequently enable it to springboard in the particular industry, is unlawful – it would always harm the business responsible for creating its own fruits through hard labour.
By poaching or soliciting employees who have learnt their skills and experience from a competitor, would naturally cause a business to excel in the industry which would, in turn, compromise the competitor who has lost a valuable employee who was an asset formed from valuable investments in time, money, efforts and otherwise, is Unlawful Competition. Business relationships in suppliers, partners and clients are other examples of subject matters that can be used as another’s fruit of labour.
It would be unjustified and unlawful to engage in conduct which would assist another party to breach its contract with a third party – the breach in itself gives rise to remedies only to the disposal of the innocent party against the party in breach. Whilst many examples of such intentional intervention to the benefit of the intervening third party exist – and whilst such interference holds great commercial value for such party – one of the most common examples is the employing of a party contractually bound to a restraint of trade agreement.
Once a restraint of trade undertaking is considered to be reasonable and enforceable and an erstwhile employee breaches the provisions thereof, it is advisable to inform the employer of the fact that a restraint of trade agreement exists inter partes. An undertaking from the new employer should be sought not to employ this person any further, by failure of which such employment will constitute a procurement of the employee to breach his restraint of trade agreement with the previous employer.
In turn, such interest is – notionally – more protectable than the right of the person undertaking such restraint and, it is being protected by restraining such person not to engage competitively or otherwise, for a certain required and reasonable period and territory and on the conditions of what the restrained actions in relation to the competitive involvement in the labour market, or otherwise, will entail.