Unfair Competition and Client Poaching – Partner Liability for Breach of Fiduciary Duty
Healthy competition is a cornerstone of the free market economy. However, one of the most common issues arising in corporate relationships is the poaching of a company’s clients by one of its partners. The breach of contractual obligations by a partner for personal gain does not in itself automatically constitute unfair competition. Departing from a company to pursue a new commercial venture is not prohibited, and the same applies to individuals withdrawing from business partnerships. The issue arises when such departure is accompanied by conduct that undermines commercial loyalty.
For a partner’s breach of contract to be deemed unfair competition, additional specific circumstances must be present. Such circumstances include client poaching through strategic planning and the exploitation of the company’s reputation.
The Concept of Unfair Competition in Business Relationships
According to the law on unfair competition, any act performed in a commercial, industrial, or agricultural context, which pursues competitive aims and contradicts good business ethics, is prohibited. The violator may be subject to legal action both to cease the act and to compensate for any resulting damages.
The prohibitive rule described above requires three elements for application: (1) competitive conduct, (2) violation of good business morals, and (3) competitive intent, as interpreted through Articles 914 and 919 of the Greek Civil Code. Notably, the intent to harm a competitor is not necessary.
Competitive behavior refers to actions carried out within the same or a similar industry. An act becomes unfair or unlawful when it offends good business ethics.
In the context of unfair competition law, “good business ethics” should not be understood merely as reflecting social or moral norms, but rather as shaped by the economic and market conditions at play, weighing the conflicting interests involved. Protection extends beyond the individual interests of competitors to also include consumer interests and, ultimately, the proper functioning of the market itself (see Supreme Court Decisions No. 659/2023 and No. 1336/2022).
A breach of contractual obligations motivated by competitive goals is not automatically deemed unfair. To be considered unfair, special circumstances must exist which render the breach improper. Such circumstances may include deliberate planning to poach clients—clients being a key business asset—or the exploitation of another’s reputation or internal infrastructure (see Supreme Court Decision No. 483/2021).
The Position of the Courts
These principles were recently reaffirmed by the Hellenic Supreme Court (Areios Pagos). Specifically, the Court overturned a ruling of the Court of Appeals that had dismissed a claim as legally unfounded.
The case involved a business dispute between a partner in a general partnership (O.E.) and a former partner. The claimant O.E. alleged that the former partner, through a coordinated plan, had unfairly targeted the company’s reputation and client base. The aim was to start a separate business operation via her husband, thereby misappropriating the entirety of the company’s clientele.
The O.E. argued that the defendant:
- Removed all electronic equipment, which was the “nerve center” of its commercial operations, containing critical client and supplier data.
- Initiated a pretextual out-of-court termination of the company, rendering it in liquidation and leading to the cancellation of important contracts.
- Used unfair and deceptive means to attract and retain the company’s clientele.
The Court of Appeals rejected the claim, stating that even if the allegations were true, they did not constitute unfair client poaching. According to the court, the clients simply accepted better offers from a competitor. The defendant’s behavior was not seen as violating good business ethics. The claimant, it ruled, had no absolute right to retain its clientele, as client migration is part of legitimate competition.
However, the Supreme Court found the appellate court’s approach to be legally flawed. It ruled that the claimant’s argument was not limited to mere client poaching, but addressed a broader pattern of coordinated misconduct. The defendant, as a partner, owed a heightened duty of loyalty. Her actions—including the removal of data, instigation of contract terminations, and redirection of clients to her husband’s company—constituted unfair practices.
The Court deemed the claim legally sound and the defendant’s liability sufficiently established.
Conclusions
The legal boundaries of unfair competition are gaining increased importance in the context of corporate disputes. Former partners who exploit internal company data and client lists expose themselves to significant legal risk. Judicial rulings are strengthening the protection of business goodwill and reputation. Recent decisions are enhancing legal certainty in cases of internal partnership conflicts.
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