One of the most important assets of a business is its reputation and reputation built over years may be ruined in a moment. In many cases a commercial dispute and a legitimate business competition over the same market slice become a powers struggle involving tools such as publications in the media or even involvement of third parties (such as customers of the competitor) in order to pressurize the competitor and perhaps persuade the competitor to withdraw. Does the end justify all means?
In a case recently adjudged in an Israeli Court an optical accessories distributor sued a competitor due to a series of harmful publications under which, inter alia, the competitor approached customers of the distributor and published to them that the distributor sells non-original goods. At the end of the day, beyond the damage to the distributor's reputation, a series of agreements with customers have failed and other which were supposed to be signed in the future did not materialize.
The Court found that the competitor spread false rumors about the distributor and thus violated the law against defamation, as such publications had the potential to humiliate, degrade or damage the distributor's occupation. We emphasize that the Defamation Law (with the defenses set in it) also protects corporations (and not just individuals), as in the case described. Note also that one of the defenses set in the law is known as the "substantial truth” defense. However, such defense requires not only that the publication was true but also that the tortfeasor made the publication in good faith. Thus, the defense will not hold, even if it was the truth, when the publication was intentional and with malice aforethought. In the case of a negative campaign which only purpose is to damage a competitor we believe that the "substantial truth” defense would be difficult to substantiate.
In the case described above the competitor sent letters to some of the distributor's major customers, which caused at least one major customer to terminate a substantial agreement. The Court found that this also constitute the tort of tortious interference (or intentional interference with contractual relations) to substantiate which one need show that a third party breached a binding contract due to deliberate actions of the tortfeasor which were conducted without justification. This finding of the Court caused the competitor to be liable for compensating the distributor for its financial losses.
To summarize, business competition is recommendable, but the reasonable limits must be kept. In some cases, a Court may also may also find officers of a corporation personally liable for actions of the corporation and therefor it is vital, prior to taking decisions on competition means, and certainly before contacting customers or suppliers of a competitor, to consult with an attorney knowledgeable in this area in order to avoid legal consequences.