Boycott and Unfair Competition according to the Court of Milan

A recent summary judgment of the Specialised Business Division of the Court of Milan (order of 9 July 2014, docket no.13161/2014) engages with the notion of boycott from a private law point of view. Conduct falling within this category may indeed be relevant from both the unfair competition and the antitrust laws perspective (see for an example of the latter here), under certain conditions. The Milan Court ruling deals with the former.

A reseller of conditioning and heating systems filed a motion for a preliminary injunction against the Italian distributor of a well-known German manufacturer. The petitioner claimed that for years it had been the respondent’s exclusive wholesaler for the territory of Sicily. After the termination of the relationship, it had continued to sell the products distributed by the respondent, buying from authorised wholesalers. After some time, however, the respondent had allegedly embarked on a boycott campaign, inducing its resellers to refuse to do business with the petitioner.

The case described is, in short, a kind of forced or pressured boycott, where the boycotting party exerts pressure on third parties to prevent them from dealing with the boycotted party.

The proceeding Judge placed the dispute in the context of Article 2598 no. 3 of the Italian Civil Code, prosecuting un-categorised unfair competition conduct. In accordance with judicial precedents, the Judge stated that, for such a case as the one described to fall within the unfair competition doctrine, three conditions must be met (besides, of course, the existence of a competitor relationship between the parties and the harmful potential of the relevant conduct): a) a position of market power of the boycotter in the relevant geographic area or trade sector; b) the pressure exerted by the boycotter upon third parties to refrain from doing business with the boycotted party; c) the exclusive purpose of hindering the competitor.

The Judge found that, in the case before her, there was prima facie evidence of all these elements, and remarked how, in these kinds of cases, fulfilling the burden of proof for the boycotted party is harder than usual, as those who have knowledge of the tort are for the most part directly involved and still have on-going business relationships.

The bargaining power of the respondent in the relevant market derived, in the Judge’s view, from the fact that it had a nation-wide network of wholesalers, was able to control the final destination of its products and could impose price policies on resellers. The Judge noted that, since it wasn’t an antitrust case, any consideration on market dominance in a technical sense was irrelevant.

As for the boycott itself, the Judge was satisfied that the petitioner had presented prima facie evidence of the exertion by the respondent of undue pressure in two forms, both of a discriminatory nature: making the granting of discounts to resellers conditional upon their refusal to deal with the petitioner and altogether denying access to its network of authorised wholesalers to businesses who entertained commercial relationships with the petitioner.

With regard to the purpose of the respondent’s conduct, the Judge found that the available evidence showed a lack of any appreciable reason for the respondent’s business decisions, other than the intent to cut the petitioner out of the relevant market. She observed that even the wholesalers who had been encouraged not to deal with the petitioner, according to their account of events, had never been offered any reasons justifying the ban.

The respondent’s objection that the petitioner had failed to prove any losses was swiftly dismissed on the grounds that the tort in question does not require evidence of actual, but only potential, harm to the competitor.

With regard to danger in delay (periculum in mora), also required for the granting of urgent remedies in the Italian procedural system, the Judge observed that the boycott currently in place against the applicant determined a risk of harm to goodwill and loss of market share that would be hard to recover after lengthy ordinary proceedings.

On these grounds, the Judge granted a preliminary injunction against the respondent, subject to a pecuniary fine for any violation of the order.