While companies are free to undertake and compete, they are not free to use all the means at their disposal to develop their business. Unfair competition occurs when a company makes excessive use of this freedom, resorting to procedures that are unfair and contrary to the rules and morals of business.
HOW TO IDENTIFY AN ACT OF UNFAIR COMPETITION?
Various acts may constitute unfair competition:
Denigration
Denigration consists in spreading pejorative and malicious information about a competitor, generally discrediting his or her goods, services, activity, work or person.
The following, for example, constitute acts of disparagement:
- Disparagement of the professional skills of the competitor
- The denial of the quality or reliability of a product, financial soundness
- Allegations of cartel practices between companies
Please note: the comparison of competing companies or competing products is not prohibited. Indeed, comparative advertising is authorized under certain conditions: if it is not misleading or likely to mislead, if it relates to products meeting the same needs or having the same objective and if it objectively compares the essential characteristics , relevant and verifiable of these products.
Confusion
Confusion consists of creating in the minds of customers an assimilation or resemblance between competing companies or their products. Total similarity is not required, a likelihood of confusion is sufficient. Examples of acts of confusion:
- Imitation or resemblance of distinctive signs, advertising messages imitation of the name, sign, website of a competing company.
- The manufacture and sale by one company of products similar to those marketed by another
The judge will take into account the notoriety of the distinctive signs, the sector of activity, the geographical influence, the originality of the products.
The disorganization of the competing company
The disorganization of a competitor’s business consists of using methods designed to undermine the company’s internal organization:
- Unfair poaching maneuvers: the massive recruitment of staff or employees of a competing company
- Unfair poaching maneuvers: the massive recruitment of staff or employees of a competing company
- Order diversion
Economic parasitism
Parasitism is the act of an economic agent following in the wake of a company in order to profit from its know-how, efforts or investments.
In this case, the aim is to punish an agent who appropriates the work or know-how of others, without spending any money or effort.
Examples of acts of parasitism :
- Copying of commercial documents
- Imitation of a website, a product, a domain name
WHAT IF YOU ARE VICTIM OF AN ACT OF UNFAIR COMPETITION?
You can obtain damages from the judge by proving 3 elements:
- An act constituting unfair competition: simple impudence or negligence can constitute an act of unfair competition.
- Damage suffered: any damage leading to a commercial disturbance is covered (material damage such as loss of clientele, non-material damage).
- The causal link between the fault committed and the damage suffered
Time limit to bring an action: 5 years to bring an action for unfair competition
Going to court:
- If the dispute concerns merchants, the competent court will be the commercial court of the defendant’s place of residence.
- If a non-merchant is a defendant in the action, only the civil courts have jurisdiction. If the non-merchant brings the action, he has the choice of seizing either the commercial court or the civil court.
- If the action for unfair competition is coupled with an action for infringement, it will be necessary to seize the Judicial Court.
Please note: an action for unfair competition should not be confused with an action for counterfeiting. Infringement actions are designed to protect against the use of a company’s intellectual property rights (e.g. a trademark).
THE SANCTIONS OF THE AUTHOR OF UNFAIR COMPETITION
- Payment of damages to the victim to compensate for the harm suffered as a result of this practice (loss of clientele, moral prejudice).
- The cessation of unfair practices, which may be accompanied by a fine.
For example: changing products or distinctive signs in the case of imitation, withdrawal of an advertisement, withdrawal of disparaging remarks if they have been published, closure of a business for a certain period, prohibition on using a name, etc. - The judge may also order publication of the decision at the defendant’s expense.
WHAT CLAUSES TO INCLUDE IN CONTRACTS TO AVOID UNFAIR COMPETITION?
- THE NON-COMPETITION CLAUSE: this limits the possibility for an employee to exercise a competing activity with that of his employer after the termination of the contract.
- THE CONFIDENTIALITY CLAUSE: this prohibits the employee or business partner from disclosing to third parties information of which he became aware during the performance of his contract.
- THE NON-POUGHT OR NON-SOLICITATION CLAUSE: this prohibits an employee, following the termination of his contract, from canvassing or diverting his employer’s clientele. It can also be concluded between an employer and his clients by obliging them not to make his former employees work for a specified period.
News item
Damage assessment.
In February 2020, case law clarified the question of compensation for loss resulting from an unfair practice that gives the perpetrator an unfair competitive advantage over its competitors.
To assess the compensation to be awarded to the victim company, the court takes into account the unjust savings made by the responsible party, as well as the respective business volumes of the parties affected by the conduct.
Thus, when it is too difficult to prove the extent of the economic loss resulting from acts of unfair competition (e.g. parasitism, failure to comply with a mandatory regulation), the damage may be assessed in terms of the undue advantage gained by the wrongdoer(Cass. Com., February 12, 2020, n°17-31.614).
Anact constituting denigration: a company in a business relationship with another disclosed to the latter’s customers the payment difficulties encountered with it, implying that, through the fault of this company, the services due to the customers would not be performed.
The author was ordered to pay damages.
The message discredited the company’s services and thus constituted a denigration practice (
Cas. com. September 30, 2020 No. 18-25.204 ). Devaluation of the image of a company and damage to its notoriety. Jurisprudence has held that the presentation of products by a discount distributor on an advertising leaflet can affect their notoriety. A retail store featured one-brand shoes and bags on low-quality flyers, alongside food items. The court considered that this could affect the reputation of the brand’s products, regardless of the lack of confusion between the different products advertised. Thus, unfair competition can result from a simple devaluation of the image of the company (
Cas. com. November 18, 2020 No. 19-13.479 ).