Capital, the English weekly, reviews Alemayehu Fentaw's work on Ethiopian Law of Unfair Competition

Ethiopian Unfair Competition Law

By Kirubel Tadesse

It is a central tenet of a capitalist economic system that competition is desirable and needed. Underlying this is the belief that robust competition between commercial rivals keeps prices low, results in high quality and provides overall economic efficiency. If business organizations compete on a level playing field, it is believed that they will flourish, and consumers are more likely to pay lower prices, and get better quality and more choices.

Explaining state of business competition legislation, Alemayehu Fentaw (LLB) in his article ‘Ethiopian Unfair Competition Law: A Critical Evaluation’ writes that one fundamental purpose of the unfair competition law is to assure that competition is fairly and properly carried out. He explains that the rules against unfair competition aim at securing fair competition for consumers and traders through the preservation of goodwill. Many academic lawyers agree that goodwill and consumers’ expectations, however divergent, are directly related. A certain consumer, who is a habitual customer of a given trader, has a legitimate interest in the preservation of the trader’s goodwill, precisely because, in the eyes of the consumer, it is this trader and only this trader who can market products or services of the best quality or of the most quantity or of his taste or whatever at a relatively lower price. Put differently, the consumers’ interest consists in their right not to be deceived, misled, confused, or wronged as to the business,products/services, or commercial activities of the trader whom they look up to and continue to patronize. In Everett F. Goldberg’s, the Protection of Trademarks in Ethiopia, Journal of Ethiopian Law, the harm that a competitor does to his rival through unfair competition is explained as cutting down or taking away his clientele. However, each and every act of taking away a trader’s clients does not amount to an act of unfair competition. This is so, because such clients may be taken away by virtue of honest and proper competition. A case in point is a competitor taking away a good portion of his rival’s clientele by offering a product or service of better quality. yet, there are other trade practices that aim at taking away a competitor’s clients and thereby cutting down the goodwill, which are presumed to be unfair and improper, and, as such, are prohibited by law. In this sense, commerce is like a game in which competitors must play by the rules, which are the rules against unfair competition.

Alemayehu Fentaw explains in his article that the law of unfair competition is primarily comprised of acts that cause an economic injury to a business through a deceptive or wrongful business practice. In the words of Everett Goldberg, “Unfair competition is a particular type of extra-contractual liability. …unfair competition is a type of liability based upon fault.” Alemayehu also infers that unfair competition, as a species of extra-contractual liability, can be broken down into two categories: commercial unfair competition and, civil unfair competition.
The definition of commercial unfair competition in Art.133 of the Commercial Code has been supplemented recently by Trade Practice Proclamation No. 329/2003. Besides supplementing the Commercial Code’s definitional provision of commercial unfair commercial competition, the Trade Practice Proclamation broadens its scope of protection. According to Alemayehu’s article it prohibits three categories of unfair trade practices: anti-competitive practices, unfair competition, and abuse of dominance. Generally, unfair trade practices which may affect trade within Ethiopia are prohibited by the Commercial Code, the Civil Code, Trade Practice Proclamation, Trademarks Registration and Protection Proclamation, and the Criminal Code. However, since the scope of this article is limited to the second category of unfair trade practices known as “unfair competition”, no attempt shall be made to treat the remaining two categories. Generally, unfair trade practices which may affect trade within Ethiopia are prohibited by the Commercial Code, the Civil Code, Trade Practice Proclamation, Trademarks Registration and Protection Proclamation, and the Criminal Code.

Alemayehu, invoking Article 133 of the Commercial Code, defines any act of competition contrary to honest commercial practice as ‘unfair’. He explains unfair competition as any act likely to mislead customers regarding the undertaking, products or commercial activities of a competitor and as any false statement made in the course of business with a view to discrediting the undertaking, products or commercial activities of a competitor. “Unfair competition depends upon commercial custom in determining what acts are honest and what are not. By virtue of its flexibility, the general standard requires judges to exercise their discretionary powers. In exercising their judicial discretion, the judges must take into account the peculiarities of each case as well as the historical and cultural context in which the case arises,” said Alemayehu Fentaw in his article.

“Any act gives rise to liability if it is likely to mislead customers”, though it does not create actual confusion. It is sufficient that an act passes the test of likelihood of confusion. One standard example of an act of unfair competition that is likely to mislead or confuse customers is trademark infringement. To prove a claim of unfair competition based upon trademark infringement, it is not necessary to prove actual confusion of specific customers. Proof of the likelihood of confusion in the market circumstances satisfies the requirement, so that similarity between two marks can make the case for unfair competition. Strictly speaking, sub-art (2) (a) does not grant legal rights in trademarks beyond registration. However, sub-art (2) (a) affords a remedy for unfair competition involving special designations, including trademarks. Unlike trademark infringement claims under the Trademarks Registration and Protection Proclamation, unfair competition claims do not require any registered marks. As a result, sub-art (2) (a) of Art.133 involves all unfair competition claims based upon trademark infringement and extend further to cover other situations of unfair competition. A likelihood of confusion exists when there is confusion as to the enterprise/undertaking/business, products and services, or commercial activities. More particularly, confusion may occur with respect to any of the following: (a) trade-names, (b) distinguishing marks, (c) the appearance of a product, and (d) the presentation, including advertising, of products or services,” illustrates Alemayehu Fentaw in his article. “Sub-art.(2) (b) of Art.133 broadens the touchstone of liability for unfair competition by making actionable any false statement that is likely to discredit or compromise the reputation of a business or its activities, when made in a competitive context. A claim of unfair competition under sub-art (2) (b) requires a showing that a party made misrepresentations in the course of business. The elements an alleged injured party must show to sustain a claim of unfair competition based on false discrediting statements are: a party uses any false statement in the course of business to misrepresent the nature, characteristics, qualities or geographic origin of a competitor’s undertaking, goods or services with the purpose of discrediting the establishment, products or services of a competitor,” he further explained in the sub-section on ‘False Discrediting Statements’.

Alemayehu points out that unfair competition is also subject to regulation by legislation, the Trade Practice Proclamation No329/2003. Commenting on the definition of unfair competition in Art.10 of this Proclamation, he said “First, it is important to bear in mind that the logical organization of Art.10 is parallel to that of Art.133 of the Commercial Code. Despite the absence of the test of honest commercial practice in sub-art.(1) of Art.10, unlike sub-art.(1) of Art.133, both deploy general standards: likelihood of elimination of competitors in the former and contrariness to honest commercial practice in the latter. Also sub-arts.(2) of the two articles consist of specific standards. The difference between these sub-articles lies in the former’s inclusion of such activities as provided for in (d), (f), (g), (h), and (i). In Alemayehu’s opinion, the whole of the provisions under sub-art(2) can be reformulated in such a manner as to avoid redundancy, which he suspects has been an outcome of bad legislative draftsmanship. In this regard, his proposal is to merge some of the provisions together as follows:

a)and (c): Misleading/confusing activities;
(b)and (e): False discreditory statements;
(d): Secret information;
(f) and(g):Restricting, impeding, debaring, or weakening the competitive(efficient) production and distribution of goods and services;
(h): Dumping, and
(i): Trading in humanitarian aid.

With respect to sub-art.(2)(d), it is interesting to note two serious pitfalls. That the information has to be secret is self-evident in as much as what is prohibited is the acquisition, disclosure, or use of such information contrary to honest commercial practice. But, what kind of information is considered secret is not clear. Besides, the legislation fails to pin down the nature of the sort of information that it purports to protect. The legislation should have made it explicit that to qualify for protection, a piece of information should not only be secret, but also a trade secret. He concludes his article by pointing out one serious procedural lacuna, the absence of a rule precluding the administrative tribunal known as the Investigation Commission where a proceeding for unfair competition has been instituted in a regular court prior to any time before a complaint has been brought before the Commission. He contends that this violates an important consideration of fairness, as it in effect subjects a defendant to two forums on the same matter.
http://www.capitalethiopia.com/archive/2007/december/week3/feature.htm

Capital reviews Alemayehu Fentaw's work on Legal Pluralism

Legal Pluralism: Its promises and pitfalls for Ethiopia

By Kirubel Tadesse

Ethiopia has dealt with diversity in ways that recognize legal identities on the basis of cultural as well as territorial boundaries. The ideas of multinational federalism and legal pluralism are mutually reinforcing. The present politico-legal order of Ethiopia is based upon a federal constitution which was adopted in 1994. In Ethiopia today, multinational federalism is given expression in Article 8 of the Constitution, what might be called the sovereignty clause, which vests sovereignty in the various ethno-national groups of the country, and Article 39 which reassures these groups their “unconditional right to self-determination, including secession”. As a manifestation of their right of self-determination on a cultural level, every ethno-national group has been left to their customary way of maintaining group cohesion. Particularly, Article 34 (5) gives expression to what Lawrence Friedman calls “cultural pluralism”, which he considers as one of the two variants of horizontal legal pluralism in addition to structural pluralism. This presses on the idea of multinational federalism. The article by Alemayehu Fentaw, Assistant Lecturer, Faculty of Law, Jimma University, which arises from his senior research which was supported by the research and graduate programme of Addis Ababa University in June 2004, explains that legal pluralism rests upon the very idea of federalism, be it mono national or multinational.
Alemayehu Fentaw explains, “Federalism is inherently and inextricably intertwined with legal pluralism. In keeping with federal theory and practice elsewhere, the Constitution of the Federal Democratic Republic of Ethiopia has established a federal state structure where governmental powers are shared between the federal governments on the one hand and nine constitutive units of the federation. Logically speaking, such division of powers, especially legislative power between the two levels of government, necessarily entails pluralism in the law. This is exactly what has been referred to as “structural pluralism” by Friedman. Consequently, in ways that would reflect diversity in the law on a territorial basis, currently in Ethiopia there are one federal and nine state legal systems. While the federal is full-fledged and real, the state legal systems are fledgling and yet under construction.
On his acclaimed article which was expressed as, ‘a thesis which examined Ethiopia’s new experiment in federalism with care and fresh insight’ by Andreas Eshete, president of Addis Ababa University, Alemayehu goes on to explain the growing importance of legal pluralism which has been reflected in the demands of the country’s ethnic groups for representation in their respective political and legal institutions, both at local and national levels. He states, “Non-territorially, attempts have been made to accommodate the interests of cultural and religious communities. For instance, Muslims are given adjudicatory authority in accordance with Islamic law with respect to civil matters. In such cases, religious rules determine family law with the effect that citizens embracing different faiths are subject to different legal norms.
Although family law may seem too insignificant an area of jurisdiction to call this a case of non-territorial self-government, as Ayelet Schachar points out, it has alongside its distributive role regarding maintenance and succession, a demarcating function that determines ascriptive membership in a community through lineage and marriage.”
Alemayehu, following the tack taken by Professor Andreas Eshete, proposes to consider legal pluralism as a federalist policy and practice “under the unfavorable condition aspect of non-ideal theory,’ which, in the words of John Rawls, ‘deals with unfavorable conditions, that is, with the conditions of peoples whose historical, social, and economic circumstances make achieving a well-ordered regime, whether liberal or hierarchical, difficult, if not impossible.” Alemayehu says Andreas remarks that ‘Federalism is a public value tailored to conditions unfavorable to constitutional democracy that are not universal but rather peculiar to certain societies.’ For him, therefore, a general justification of federalism grounded in an invariant particularist value is utterly indefensible. Instead, federalism is justified to the extent that it comes to terms with the unfavorable conditions that prompted it in ways that enhance or, at least, do not compromise democratic ideals of universal reach.”
Despite the purported decentralization or devolution of legislative powers, the Ethiopian regional states have little legislative autonomy says Alemayehu Fentaw, and to assert his point quotes Professor Andreas, “What is dispersed to regional states is executive power. If this is correct, the problem is to explain or explain away the legislative… powers that the constitution grants to member states. The real power of the states, in respect to the law is therefore the administration of justice, not legislation.” Therefore, legislative federalism is not realized in Ethiopia and the center continues to overshadow the peripheries/states as has been the case throughout Ethiopia’s history; as Andreas points out one-party dominance establishes the legislative supremacy of the center,” concludes Alemayehu Fentaw.
Obviously legal pluralist ethos has played a central role in the making of the new Ethiopian Constitution, Alemayehu says what might be called, a major departure from the received constitutional tradition of the country, the Constitution of the Federal Democratic Republic of Ethiopia provides the framework for the independent validity of non-state or unofficial laws such as customary and religious laws in some fields of social activity. Here it is important to draw a distinction regarding the nature of legal pluralism. One helpful distinction is that between formal, or what Professor Gordon Woodman calls “state legal pluralism,” and informal, or as Woodman calls “deep legal pluralism.” Both formal and informal legal pluralism are discernible in Ethiopia. According to Andre Hoekema formal pluralism is a legal concept referring to the inclusion within the legal order of a principle of recognizing ‘other’ law.
Alemayehu on his article’s chapter ‘Informal Legal Pluralism: Crafting a Second Recognition’ explains that in most parts of Ethiopia, the traditional practice of dispute resolution in accordance with the ethnically based criminal norms applied by community elders is kept alive and well. Despite the extension of the formal legal system to all corners of the country, it has difficulty penetrating the indigenous legal cultures since its advent. This is more so in the peripheries than in the center. For instance, the customary law systems hold sway in the day to day affairs of these nationalities: the Somali, the Amhara and the Gumuz.
Alemayehu Fentaw explains that two chief challenges tend to complicate the effort to appraise the successes and failures of legal pluralism in Ethiopia: adequate protection of human rights and forum shopping. These are at best challenges posed by the fact of legal diversity. Particularly, they complicate the task of synchronizing the state and non-state law systems. The problem of adequate protection of human rights figures in prominently, since the non-official norms axiomatically deviate, at least in some ways, from the official constitutional and statutory norms. On a different plane, legal pluralism gives rise to the notorious problem of forum shopping, which has been the subject of unending debates in contemporary conflict of laws. Of course, much of the intricate problems of conflict of laws are excluded, as they fall outside the scope of this article. In the sections that follow, we shall attempt to paint, albeit with a broad brush, the two challenges and point to some possible ways of mediating them, so to speak.
Alemayehu Fentaw says “having analyzed the implementation of legal pluralism in Ethiopia, I have arrived at the following points by way of recommendation. On the one hand, the federal government should:
1. Launch a state-led statewide field research by legal anthropologists, with an eye to studying and analyzing all of the customary law systems within its boundaries and conforming them to the minimal standards for adequate protection of the human rights of its citizens;
2. Extend full public recognition to the ethnically based customary law systems; particularly, redraw the boundaries of formal legal pluralism to accommodate at least the well-established and dominant customary dispute (criminal) settlement mechanism; stated differently, leave elbowroom for the non-state actors.”
Alemayehu Fentaw finally recommends that state governments should assume a moral duty to execute their constitutions; and in order to effectively execute their constitutions, state judicial and legislative organs require judicial review and legislative autonomy respectively. “Both governments, federal and state, should enact codes of conflict of laws with a view to addressing the complex problem of choice of law, and tailored to meet challenges arising from legal diversity, especially forum shopping,” he concludes
http://www.capitalethiopia.com/archive/2007/november/week2/feature.htm

Ethiopia and the Search for Regional Peace in the Horn of Africa

By Terrence Lyons

Conflict in the Horn of Africa exploded in December 2006 as Ethiopia’s dramatic military intervention in Somalia shook the entire region. After a rapid and surprising advance, the Somali Transitional Federal Government (TFG) supported by Ethiopian troops ousted the Union of Islamic Courts (UIC) and their affiliated militias that had controlled Mogadishu since June. It is too early to predict whether the regime now in Mogadishu will be able to consolidate its authority, whether supporters of the Islamic Courts will initiate a guerrilla war or a series of terrorist attacks in Somalia or Ethiopia as some al Qaeda leaders have urged, and whether Ethiopia will be able to withdraw its forces as quickly as planned. But it is clear that these events have transformed the Horn of Africa, thereby creating new and perhaps fleeting opportunities for building a more peaceful region.

The remarkable turn of events in Somalia is one part of a complex network of conflicts in the region. The power struggles within Somalia are embedded within regional rivalries between neighboring states Ethiopia and Eritrea and are complicated further by the connection to Washington’s concerns regarding the global war on terrorism. Stalled processes of political reform in Ethiopia and increased authoritarianism in Eritrea are also part of this regional system of insecurity and conflict. Policy makers in Washington and elsewhere in the international community should recognize that developments in one part of these interdependent conflicts have ripple effects that shape opportunities and risks in other parts.

From the perspective of Addis Ababa, the dangers emanating from Somalia in late 2006 were linked to threats from Eritrea and internal Ethiopian insurgent groups such as the Oromo Liberation Front (OLF) and the Ogaden National Liberation Front (ONLF). These regional and domestic adversaries had increased their military presence in areas controlled by the UIC. To Ethiopia, the potential that these threats would increase over time – rather than the ideology of the Islamic Courts or their ties to al-Qaeda – compelled a response. Ethiopia acted preemptively by providing the military might to drive the UIC out of Mogadishu, to end the safe havens offered Ethiopia’s enemies, and to bring the TFG to power in the Somali capital. This intervention had both regional motivations and regional consequences.

Ethiopia’s next steps in Somalia will be crucial to regional stability. The new government’s authority in Mogadishu will be challenged if Somalis perceive it as an agent of Ethiopia. The new regime will need to reach out to key constituencies, most notably the powerful Hawiye clan leaders entrenched in Mogadishu as well as many of the moderate leaders within the diverse Islamic Courts’ movement, to build a broad-based coalition capable of administering the state without depending upon external forces for security. The sacking of the speaker of the transitional parliament who had talked to the Islamic Courts, however, is not encouraging. Ethiopia must withdraw its troops quickly as planned, most critically from Mogadishu. Plans by the Africa Union to deploy a peacekeeping force are welcome, but peacekeepers are unlikely to be deployed in sufficient numbers before Addis Ababa withdraws, leaving the potential for a destabilizing power vacuum. Ethiopia needs to apply pressure on its allies in the TFG to jumpstart an inclusive dialogue as quickly as possible in order to provide a political framework that will encourage troop contributing states to step forward. There is a brief window of opportunity to build stability in Somalia that Ethiopia and the broader international community should pursue with creativity and resourcefulness.

Beyond Somalia, regime change in Mogadishu may open up new opportunities to resolve other conflicts in the region. At the moment, Ethiopia is clearly victorious in the regional power struggle and has demonstrated a considerable degree of military capacity and boldness. In particular, it has outmaneuvered its regional rival, Eritrea, which had sought to gain advantage by backing the Islamic Courts in Somalia. A sense of triumph may make Addis Ababa less willing to take actions on other difficult issues. Past patterns of behavior suggest that Ethiopia may seek to consolidate its position rather than seizing opportunities to make progress on conflict resolution issues and political reform at the regional and domestic levels.

It is possible, however, that the reduction of threats from Somalia and a greater sense of security may make Ethiopia’s Prime Minister Meles Zenawi more open to steps to end the stalemate over the disputed border with Eritrea. Some in Ethiopia argue that withdrawing from the town of Badme, as required by the Eritrea Ethiopia Border Commission set up by the 2000 Algiers peace agreement, would destabilize the regime by opening it up to questions regarding its commitment to defend Ethiopian interests. Larger threats to the ruling party, however, are likely to arise from opposition in the cities of Ethiopia proper and from the Oromo region. Little is gained by further delay in implementing the Border Commission decision, which affects an area of little intrinsic importance. The regime’s increased security and authority following its success in Somalia creates a propitious moment to move beyond the border stalemate and tackle the broader issues of regional peacebuilding.

The regime in Eritrea is characterized by deeply engrained patterns of obstinacy and may well dig in rather than reassess its regional policies after its setbacks in Somalia. The power shifts in Mogadishu, however, may encourage Asmara to examine new non-military options now that its allies in Somalia are on the run.

By the same token, the failure of Somalia-based military strategies pursued by some of the Ethiopian regime’s domestic opponents may provide opportunities for Meles to reach out to those leaders within the opposition who are willing to engage in electoral competition. The ONLF and OLF both worked with Eritrea and the UIC to increase their capacities to attack from safe havens in Somalia, a strategy that has failed. As a further consequence of the shifts of power in Somalia, talks with political leaders from the OLF may offer particular promise. Key local elections are scheduled later this year in Ethiopia, providing a context for renewed efforts to construct a more open political system.

Regional peacebuilding and democratization in the Horn of Africa face enormous challenges; expectations for progress must be modest. Nevertheless, Washington should test whether opportunities for new approaches are better in this moment of flux and uncertainty than has been the case recently. In particular, Washington and others should reinvigorate and provide substantial support for the beleaguered peace implementation process between Ethiopia and Eritrea. The UN peacekeeping mission and the border demarcation process are dangerously off the rails. If this constraining framework is allowed to collapse, the prospects for renewed war increase substantially. Ethiopia should be pressed to demarcate the border as required by the agreement while Eritrea should be sanctioned if it does not remove arbitrary restrictions it has placed on UN peacekeepers. Washington should furthermore continue to press Addis Ababa to release political prisoners and to restore the political freedoms Ethiopians enjoyed prior to the 2005 electoral crisis.

The dramatic events in Somalia in December should be seen in part within their regional context. In addition to creating an important opportunity to build a new political order in Somalia, the transformation of power in Mogadishu has opened up small windows of opportunity to rescue the faltering peace implementation process between Ethiopia and Eritrea and to press for talks between the ruling party and major opposition movements in Ethiopia. Washington should move quickly to explore these opportunities for peace across the Horn of Africa before distrust and old hostilities make leaders less flexible and conflicts more protracted. In addition to the urgent questions of building a new order in Somalia, promoting peace along the Ethiopia-Eritrea border, and political reform within Ethiopia and Eritrea will contribute to a more favorable climate for the full range of U.S. objectives.

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Terrence Lyons is an associate professor on conflict analysis and resolution at George Mason University and the author of a recent Council on Foreign Relations Special Report, Avoiding Conflict in the Horn of Africa: U.S. Policy Toward Ethiopia and Eritrea.