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Confusion in products is unfair competition

The fact that one gas distributor also filled the gas cylinders of competitors caused confusion to consumers and therefore constituted unfair competition

malcolm_mifsud
Malcolm Mifsud
9 June 2017, 8:07am
The court upheld Liquigas’s claims limited to Easygas
The court upheld Liquigas’s claims limited to Easygas
The fact that one gas distributor also filled the gas cylinders of competitors caused confusion to consumers and therefore constituted unfair competition. This was decided by Mr Justice Mark Chetcuti in a judgement in Liquigas Malta Limited -v- William Mifsud, Jason Mifsud and Easygas Malta Limited.

Liquigas presented an application in court where it stated that it sells liquid petroleum gas (LPG) and distributes it in cylinders it owns, which are green. It also has yellow and brown cylinders which used to belong to EneMalta. Its competitor, Easygas, uses grey cylinders.

The plaintiff company further explained that they obtained film showing William and Jason Mifsud at Easygas filling up Liquigas’s cylinders, which is prohibited at law. Liquigas complained that this is a breach of their property rights which has confused consumers, who would be under the impression that the Liquigas cylinders would have been filled by the company, but which in fact were filled by Easygas. This amounts to unfair competition in terms of Articles 32, 32B and 33 of the Commercial Code. Liquigas asked the court to declare that this activity is tantamount to unfair competition and to order the defendants to pay a penalty and damages.

William and Jason Mifsud replied by rejecting the allegations listed in Liquigas’s application and therefore, denied creating unfair competition or being liable to damages.

Easygas also replied in their statement of defence that the plaintiff company could not have filed an unfair competition case and a damages case in the same action. It also denied filling up Liquigas’s cylinders.

Paul Agius Delicata, the COO of the plaintiff company testified that they put the gas cylinders on the market, while Gasco is the company which stores the gas and fills the cylinders. Each cylinder had a serial number, a sign stamped on it and its own colour. Easygas were exporting these cylinders to Italy, but following a report to the Italian police it was discovered that 40,000 cylinders painted grey belonged to Liquigas. The Liquigas cylinders were returned by the Italian police.

In December 2011, Liquigas had noticed that a number of grey cylinders had yellow or green seals and therefore, the plaintiff company suspected that cylinders were being filled by Easygas illegally, because at the time before May 2014, only Liquigas was authorised to fill gas cylinders. Liquigas were of the opinion that not only was there unfair competition, this was also dangerous.

The Malta Resources Authority carried out an inspection, but took no action. In order to prove their case further, Liquigas arranged to have Easygas’s activity filmed. The film showed the defendants, Jason and William Mifsud, filling cylinders at Easygas’s premises. This evidence was given to MRA, the police and the responsible Minister, but again no action was taken. Easygas denied this and said that their gas cylinders were either imported full or else filled at Liquigas. 

Liquigas produced a court decree of a previous action, where Easygas was prohibited from filling cylinders that belonged to the former company. Other documents were produced, such as a document showing that Easygas was sending 40,000 cylinders for retesting, however, from evidence by the Italian company, it transpired that many yellow cylinders had to be painted grey.

The court examined the requisites that make up unfair competition. Liquigas and Easygas operate in the same sector by selling LPG gas in cylinders. The cylinders have distinctive colours for each company. There are other distinctive marks, such as the name of the company printed on the cylinders. They both operate in Malta and in the same period of time. Authorised distributors distribute cylinders of both companies. Until 2014, the only company authorised to fill cylinders was Gasco. 

The court pointed out that there was a judgment in a case between the two companies where Liquigas, successor of EneMalta, was the only company authorised to fill gas cylinders and was the owner of all yellow cylinders. 

The court quoted from Law of Trade Marks and Trade Names by Kerly, which reads:

“The risk that the public might believe that the goods or services in question come from the same undertaking or, as the case may be, economically linked undertakings, constitutes the likelihood of confusion required by... (art. 5(1)(b) of the Directive). In short, the sort of confusion required to satisfy this provision is confusion as to origin.”

Mr Justice Chetcuti pointed out that the films presented, clearly show that yellow cylinders belonging to Liquigas were being filled at Easygas. This is also a form of confusion to consumers, who may think that they are purchasing a Liquigas cylinder as the licensed company that may fill the cylinder, when in fact the product is not genuine and may malfunction and cause harm. Further confusion may arise when the court received evidence of a yellow cylinder with an Easygas mark on it.

The court then considered the implications of Legal Notice 249/2008 which stipulates that cylinders are to be collected at the owners’ plant. This is intended to curb the wrongful use of the cylinders. In this particular case Easygas had in its possession cylinders belonging to Liquigas and therefore this was in breach of the Legal Notice.

The court also looked at the Commercial Code which in Articles 32 and 32B allows for a penalty of €4,658.75, which the court ordered.

The court further upheld Liquigas’s claims limited to Easygas.

Dr Malcolm Mifsud, Partner, Mifsud & Mifsud Advocates

malcolm_mifsud
Malcolm Mifsud is a partner at Mifsud & Associates.
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