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Interference with Prospective Advantage
If there is no contract yet and the defendant is only being sued
for inducing another not to enter into a contract with the
plaintiff, the tort committed is appropriately called interference
with prospective advantage.
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Tuttle vs. BuckDefendant in said case was a wealthy banker and a
man of considerable influence in the community. He maliciously
established a barber shop and employed his influence to attract the
customers of the plaintiffs barber shop. The defendants sole
purpose in establishing his shop was to ruin the plaintiff. Having
successfully ruined the plaintiff, the defendant sued the
former.
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The Court sustained the plaintiff stating that: When a man
starts an opposition place of business, not for the sake of profit
himself, but regardless of loss to himself, and for the sole
purpose of driving his competitor out of business, and with the
intention of himself retiring upon the accomplishment of his
malevolent purpose, he is guilty of a wanton wrong and an
actionable tort. In such a case he would not be exercising his
legal right, or doing an act which can be judged separately from
the motive which actuated him. To call such conduct competition is
a perversion of terms. It is simply the application of force
without legal justification, which in its moral quality may be no
better than highway robbery.
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Unfair CompetitionArticle 27 of the Civil Code provides that
unfair competition in agricultural, commercial or industrial
enterprises, or in labor through the use of force, intimidation,
deceit, machination or any unjust, oppressive or highhanded method
shall give rise to a right of action by the person who thereby
suffers damage.
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Section 2 of Article XIV of the Constitution provides: The State
shall regulate or prohibit private monopolies when the public
interest so requires. No combinations in restraint of trade or
unfair competition shall be allowed.
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Article 186.Monopolies and combinations in restraint of trade.-
The penalty of prision correccional in its minimum period or a fine
ranging from 200 to 6,000 pesos, or both, shall be imposed
upon:
1. Any person who shall enter into any contract or agreement or
shall take part in any conspiracy or combination in the form of a
trust or otherwise, in restraint of trade or commerce or to prevent
by artificial means free competition in the market;
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2. Any person who shall monopolize any merchandise or object of
trade or commerce, or shall combine with any other person or
persons to monopolize and merchandise or object in order to alter
the price thereof by spreading false rumors or making use of any
other article to restrain free competition in the market;
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3. Any person who, being a manufacturer, producer, or processor
of any merchandise or object of commerce or an importer of any
merchandise or object of commerce from any foreign country, either
as principal or agent, wholesaler or retailer, shall combine,
conspire or agree in any manner with any person likewise engaged in
the manufacture, production, processing, assembling or importation
of such merchandise or object of commerce or with any other persons
not so similarly engaged for the purpose of making transactions
prejudicial to lawful commerce, or of increasing the market price
in any part of the Philippines, of any such merchandise or object
of commerce manufactured, produced, processed, assembled in or
imported into the Philippines, or of any article in the manufacture
of which such manufactured, produced, or imported merchandise or
object of commerce is used.
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Passing Off and Disparagement of Products
The Intellectual Property Code or Republic Act No. 8293 gives a
definition of the term unfair competition.
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Section 168.Unfair Competition, Rights, Regulation and Remedies.
- 168.1. A person who has identified in the mind of the public the
goods he manufactures or deals in, his business or services from
those of others, whether or not a registered mark is employed, has
a property right in the goodwill of the said goods, business or
services so identified, which will be protected in the same manner
as other property rights.168.2. Any person who shall employ
deception or any other means contrary to good faith by which he
shall pass off the goods manufactured by him or in which he deals,
or his business, or services for those of the one having
established such goodwill, or who shall commit any acts calculated
to produce said result, shall be guilty of unfair competition, and
shall be subject to an action therefor.
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168.3. In particular, and without in any way limiting the scope
of protection against unfair competition, the following shall be
deemed guilty of unfair competition:(a) Any person, who is selling
his goods and gives them the general appearance of goods of another
manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the
devices or words thereon, or in any other feature of their
appearance, which would be likely to influence purchasers to
believe that the goods offered are those of a manufacturer or
dealer, other than the actual manufacturer or dealer, or who
otherwise clothes the goods with such appearance as shall deceive
the public and defraud another of his legitimate trade, or any
subsequent vendor of such goods or any agent of any vendor engaged
in selling such goods with a like purpose;
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(b) Any person who by any artifice, or device, or who employs
any other means calculated to induce the false belief that such
person is offering the services of another who has identified such
services in the mind of the public; or(c) Any person who shall make
any false statement in the course of trade or who shall commit any
other act contrary to good faith of a nature calculated to
discredit the goods, business or services of another.
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Interference
Unfair competition includes cases involving the tort of
interference with contractual relations and interference with
prospective advantage.
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International News Service vs. Associated PressThe defendant INS
was held to have been guilty of unfair competition when it
appropriated news taken from bulletins issued by complainant
Associated Press. The parties were competitors in the gathering and
distributions of news and its publication for profit in newspapers
in the U.S. The Court explained that news of current events are not
copyrightable and may be regarded as common property. However,
competitors are under a duty to conduct its own business so as not
unnecessarily or unfairly injure that of the
other.Misappropriation
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Gokongwei vs. The Securities and Exchange CommissionThere are
other legislation in this jurisdiction, which prohibit monopolies
and combinations in restraint of trade. Basically, these anti-trust
laws or laws against monopolies or combinations in restraint of
trade are aimed at raising levels of competition by improving the
consumers effectiveness as the final arbiter in free markets. These
laws are designed to preserve free and unfettered competition as
the rule of trade. The law against monopolies and combinations
that, by reason of the inherent nature of the contemplated acts,
prejudice the public interest by unduly restraining competition or
unduly obstructing the course of trade.
Monopolies and Predatory Pricing
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FRAUDA false representation of a matter of factwhether by words
or by conduct, by false or misleading allegations, or by
concealment of what should have been disclosedthat deceives and is
intended to deceive another so that the individual will act upon it
to her or his legal injury.Fraud is commonly understood as
dishonesty calculated for advantage. A person who is dishonest may
be called a fraud. In the legal system, fraud is a specific offense
with certain features.
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Anti-fraud provisions of the Securities Regulations Code:Sec 26.
Fraudulent transactions- (a) it shall be unlawful for any person,
directly, or indirectly, in connection with the purchase or sale of
any securities-26.1Employ any device, scheme, or artifice to
defraud;26.2Obtain money or property by means of any untrue
statement of a material fact or any omission to state a material
fact necessary in order to make the statements made, in the light
of the circumstances under which they were made, not misleading;
or
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26.3Engage in any act, transaction, practice, or course of
business which operates or would operate as a fraud or deceit upon
any person.
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OBJECTIVEThe essential objective of securities legislation is to
protect those who do not know market conditions from overreaching
of those who do.Implicit from any violation of the Securities
Regulation Code is the liability for damages caused by such
violation.
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CHARLES HUGHES & CO. v. SECURITIES AND EXCHANGE
COMMISSIONPetitioner was incorporated on April 9, 1940, under the
laws of New York, and maintains its principal office and place of
business in New York City. It is engaged in over-the-counter
trading in securities as a broker and dealer, being registered as
such with the Commission. The dealings which resulted in the
revocation were continued sales of securities to customers at
prices very substantially over those prevailing in the
over-the-counter market, without disclosure of the mark-up to the
customers. The Commission concluded that such practices constituted
fraud and deceit upon the customers.
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MISTATEMENTSKINDS:False Registration StatementProspectus and the
like
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FALSE REGISTRATION STATEMENTPLAINTIFF: Sub-section 56.1 of the
Securities Regulation Code gives right: Any person acquiring a
security, the registration statement of which or any part thereof
contains on its effectivity an untrue statement of a material fact
required to be stated therein or necessary to make such statements
not misleading, and who suffers damage, to sue for damages.
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He is not entitled to damages if at the time of such acquisition
he knew of such untrue statement or omission.
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Limitations with respect to matters stated in an income
statement:56.2 of Securities Regulation Code
If the person who acquired the security did so after the issuer
has made generally available to its security holders an income
statement covering a period of at least twelve (12) months
beginning from the effective date of the registration statement,
then the right of recovery under this subsection shall be
conditioned on proof that such person acquired the security relying
upon such untrue statement in the registration statement or relying
upon the registration statement and not knowing of such income
statement, but such reliance may be established without proof of
the reading of the registration statement by such person.
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DEFENDANTS:(a) The issuer and every person who signed the
registration statement; (b) director or partner or any person with
similar functions at the time of the filing of the registration
statement or any part, supplement or amendment thereof with respect
to which his liability is asserted; (c) Every person who is named
in the registration statement as being or about to become a
director of, or a person performing similar functions, or a partner
in, the issuer and whose written consent thereto is filed with the
registration statement;
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(e) Every person who, with his written consent, which shall be
filed with the registration statement, has been named as having
prepared or certified any part of the registration statement, or as
having prepared or certified any report or valuation which is used
in connection with the registration statement, with respect to the
statement, report, or valuation, which purports to have been
prepared or certified by him. (f) Every selling shareholder who
contributed to and certified as to the accuracy of a portion of the
registration statement, with respect to that portion of the
registration statement which purports to have been contributed by
him. (g) Every underwriter with respect to such security.
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DEFENSES:The defendants are free from liability if they can
prove that at the time of acquisition, the plaintiff knew of the
untrue statement or omission.The plaintiff cannot be said to have
relied on the untrue statement if he was aware of the falsity
thereof.It is an assumption of risk because the plaintiff made the
investment knowing the danger thereof on account of the false
statements
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DAMAGES:Suits may be filed before the Regional Trial Court;RTC
may award damages in the amount not exceeding TRIPLE the amount of
the transactions plus actual damages.
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LIABILITY2 or more persons: SOLIDARYHowever, any person who
becomes liable for the payment of such damages may recover
contribution from any other person who, if sued separately, would
have been liable to make the same payment unless the former wars
guilty of fraudulent representation and the latter was not.All
persons held liable shall contribute equally to the total liability
adjudged therin.
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2. PROSPECTUS and the likeA formal legal document, which is
required by and filed with the Securities and Exchange Commission,
that provides details about an investment offering for sale to the
public. A prospectus should contain the facts that an investor
needs to make an informed investment decision.Also known as an
"offer document."
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Civil liabilities for the false statements in the prospectus,
communications and reports are defined in:SEC. 57. Civil
Liabilities Arising in Connection With Prospectus, Communications
and Reports. - 57.1. Any person who: (a) Offers to sell or sells a
security in violation of Chapter III; or
(b) Offers to sell or sells a security, whether or not exempted
by the provisions of this Code, by the use of any means or
instruments of transportation or communication, by means of a
prospectus or other written or oral communication, which includes
an untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading (the
purchaser not knowing of such untruth or omission), and who shall
fail in the burden of proof that he did not know, and in the
exercise of reasonable care could not have known, of such untruth
or omission, shall be liable to the person purchasing such security
from him, who may sue to recover the consideration paid for such
security with interest thereon, less the amount of any income
received thereon, upon the tender of such security, or for damages
if he no longer owns the security.
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(c) Any person who shall make or cause to be made any statement
in any report or document filed pursuant to this Code or any rule
or regulation thereunder, which statement was at the time and in
the light of the circumstances under which it was made false or
misleading with respect to any material fact, shall be liable to
any person who, not knowing that such statement was false or
misleading, and relying upon such statements, shall have purchased
or sold a security at a price which was affected by such statement,
for damages caused by such reliance, unless the person sued shall
prove that he acted in good faith and had no knowledge that such
statement was false or misleading.
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PRESCRIPTIVE PERIOD No action shall be maintained to enforce any
liability unless brought within 2 years after the discovery of the
facts constituting cause of action and within 5 years after such
cause of action accrued.