Can a person start new businesses to compete relentlessly with someone they hate?

Question

Let's take two people, Alice and Bob. Alice offends Bob in some way and Bob is determined to take revenge. He does this by starting new businesses to compete with Alice, e.g. if Alice owns a restaurant, he starts a new restaurant nearby, sells similar food, and sells it more cheaply (because he's willing to take a loss to get revenge, and he has the resources to sustain the loss). If Alice moves locations, he moves too. If Alice switches businesses, he switches too.
Is it legal for Bob to do this kind of thing? If it violates a law, which one would it be?
This kind of behavior sounds obnoxious enough that I'm guessing it is illegal, but I can't find a law that prohibits it. It doesn't seem like harassment, since Bob isn't humiliating or embarrassing Alice. It doesn't seem like unfair competition, because presumably once Bob achieves his aim of driving Alice out of business, he won't raise prices to unreasonable levels, in fact he'd probably shut up shop too. I'm tagging the question with "harassment" and "competition" anyway, since I can't think of anything else.
If the jurisdiction matters, assume the EU. If the country matters, assume Germany.

bdb484 · Accepted Answer

Generally speaking, there's nothing wrong with setting up shop to compete with someone, even if you hate them, and even if you hope to bring them to financial ruin.
But there are laws surrounding what is and is not fair competition, and the behavior you're describing -- relying on greater resources to cut prices until a competitor folds up shop -- is known as "predatory pricing." In the United States, it's illegal under the Clayton Act, 15 U.S.C. § 2, assuming that Bob is cutting prices below cost, and that Alice's exit from the market could lead to a monopoly for Bob.
I don't know the limits on predatory pricing anywhere else, but my understanding is that it's illegal throughout the E.U., including in Germany, where Wal-Mart has struggled mightily to adapt to local competition law.

Falc · Answer

I found a Dutch study (https://zoek.officielebekendmakingen.nl/kst-29800-XIII-86-b2.pdf), containing an international (Europe-centric) comparison of laws permitting or forbidding the sale of goods at a loss.
In short, Germany, one of the countries in the study, has a specific law on economic competition: "Gesetz gegen Wettbewerbsbeschränkungen" (1st of januari 1999).
Glossing over the brief explanation of the law in the study, I strongly suspect this behaviour would violate (at least) this law.

Robbie Goodwin · Answer

Either the jurisdiction does matter, or all jurisdictions have the same laws. Which do you think is true?
Of course you can start a business to compete with people you hate, but not legally. Here in the UK, companies may do only what their articles of association specify and the powers that be would not accept "to compete with people they hate" as legitimate aims… so what? That's a technicality.
On the other hand, what you describe clearly represents harassment which here in the UK is a crime in and of itself, nothing to do with "business" as such.
Could you try running the idea that harassment must be  humiliating or embarrassing past two or three lawyers… or even one?

o.m. · Answer

If this is not just hypothetical, Alice might need a German lawyer and not just some folks on an English-language internet forum.

It is common that commercial rental contracts contain a non-competition clause for other, nearby properties held by the same landlord. So the situation in a commercial shopping mall would differ from the situation on opposite sides of the street.
Rules against "improper competition" cover a many different cases, but not usually offering the same service cheaper. Selling food below purchase price over a long period is a special case.
If a business is not operated with the intention to make a profit, then the tax office might not consider it a business. But that doesn't mean a startup can't make losses at first. So Bob should talk to his tax advisor.
In some cities, zoning laws limit e.g. the density of gaming parlors. They would not usually limit the density of restaurants if other commercial activity would be allowed in that zone.

Lichtbringer · Answer

City planing (Stadtplanung) may regulate the distance between businesses with similar offers that you have to follow to get a permit.
Number 4 from this official German website seems pretty broadly applicable.
"Unfairly acts (the person) who... hinders competitors in a targeted way". Though you would have to ask a lawyer if this was actually applicable. Laws are not always formulated how we would commonly interpret language.

Silver Orbit · Answer

Provided Bob's business practices are not anti-competitive and there is no direct personal confrontation or attempts to impede Alice's business by interference in her property, it is unlikely that this kind of practice is illegal.
Many competing business owners do in fact hate each other and take legal steps to grow their own business at the expense of the others and make their business more competitive than the others.

Can a person start new businesses to compete relentlessly with someone they hate?

6 Answers

Add your own answers!

Ask a Question