Unfair Competition: Proving Fault and Harm

Competition is free, but it is subject to the principle of fair dealing. When that boundary is crossed, the action en concurrence déloyale (unfair competition claim under French law) provides a powerful remedy. Mastering its conditions and the evidentiary challenges it presents is essential.

TL;DR

• The claim is grounded in Article 1240 of the Code civil: fault, harm, causation.
• Four principal forms: disparagement, imitation, business disruption, and economic parasitism.
• Harm is presumed under case law but must still be quantified.
• Commercial or civil courts have jurisdiction depending on the parties involved.

The Legal Basis

The action en concurrence déloyale has no dedicated statutory text in French law. It is built entirely on Article 1240 of the Code civil:

Any act whatever of man, which causes damage to another, obliges the one by whose fault it occurred to compensate it.

This general law foundation has allowed case law to develop a coherent regime that coexists with intellectual property law (which protects specific exclusive rights) and consumer law (which addresses, among other things, unfair commercial practices).

The Classic Forms of Unfair Competition

Trade Disparagement (Dénigrement)

Dénigrement (trade disparagement) consists of publicly discrediting the products, services, or reputation of a competitor. It is distinguished from legitimate criticism by its malicious character and its commercial context.

The Cour de cassation (Com. 24 septembre 2013, no. 12-19.790) held that disparagement requires:

• derogatory information;
• disseminated publicly;
• targeting, directly or indirectly, an identifiable competitor.

Unlike defamation, truth is not an automatic defense. Accurate information may still constitute disparagement if conveyed in bad faith within a commercial context.

Imitation and Likelihood of Confusion

"Protection against imitation operates alongside trademark and design law. It allows a party to act where no registered proprietary right exists, on the more flexible ground of overall appearance."

Imitation déloyale (unfair imitation) covers conduct creating a risk of confusion in the minds of customers:

• imitation of a product's presentation;
• slavish copying of a website;
• reproduction of a competitor's marketing communications;
• imitation of a commercial name.

The central criterion is the likelihood of confusion, assessed from the perspective of the average consumer who is reasonably attentive and informed.

Disruption of a Competitor's Business

Several types of conduct fall within this category:

1. Organized and concerted mass poaching of employees.
2. Systematic diversion of clients orchestrated by former staff.
3. Misappropriation of trade secrets (now governed by the loi du 30 juillet 2018).
4. Circumvention of non-compete clauses through dishonest arrangements.

Ordinary individual recruitment is lawful. It is the organized and concerted nature of the conduct that establishes unfairness.

Economic Parasitism (Parasitisme Economique)

Parasitisme économique (economic parasitism) consists of slipstreaming behind another party in order to free-ride on that party's investments and reputation without incurring any cost. The Cour de cassation has defined it as:

All conduct by which an economic actor inserts itself into the wake of another in order to profit, without any expenditure, from that party's efforts and expertise.

Economic parasitism does not require proof of confusion. It sanctions the abusive exploitation of economic value created by another.

Evidence

Proving Fault

Fault may be established by any means: bailiff's reports (constats d'huissier), particularly for online conduct, witness statements, written exchanges, and public communications. For websites, records from the WHOIS registry, Wayback Machine archives, and timestamped screenshots are indispensable.

Proving Harm

This is often the weakest link. The Cour de cassation (Com. 12 février 2008, no. 06-17.501) established a claimant-friendly principle: harm is necessarily inferred from an act of unfair competition. This presumption facilitates the admissibility of the claim but does not relieve the claimant of the obligation to quantify the amount of damages.

Several methods are available:

• loss of revenue (based on a comparable before-and-after analysis);
• loss of margin on diverted clients;
• cost of remediation (corrective communications campaign);
• protective costs incurred.

Expert accounting evidence is frequently indispensable.

Remedies

Cessation of the Unlawful Acts

This is the primary remedy. It may be obtained on an emergency basis (en référé) on the ground of a manifest unlawful disturbance (trouble manifestement illicite) under Article 873 of the Code de procédure civile before the commercial court. Interim proceedings are the most effective tool for swiftly halting ongoing harm.

Damages

Full compensation for harm (réparation intégrale), which includes:

• lost profits (gain manqué);
• actual losses suffered (perte subie);
• reputational harm;
• non-economic harm to the company (goodwill and reputation).

Ancillary Measures

• Publication of the judgment in the trade press or on the defendant's website;
• Penalty payments (astreinte) to ensure compliance with injunctions to cease the conduct;
• Confiscation of infringing items in cases of product imitation.

Coordination with Other Proceedings

Intellectual Property Infringement Actions

Where a competitor infringes a proprietary right (trademark, design, patent), an infringement action should be pursued. An unfair competition claim may be brought as a subsidiary action for conduct that falls outside the scope of the proprietary right.

The rule is now well established: artificial cumulation of infringement and unfair competition claims for the same facts is not permitted. However, complementary claims remain possible where the underlying facts are distinct.

Unfair Commercial Practices Claims

Directive 2005/29/CE, transposed into Articles L121-1 et seq. of the Code de la consommation, sanctions misleading or aggressive commercial practices directed at consumers. Such actions may be brought by consumer associations and the public prosecutor.

Proceedings Before the Autorité de la Concurrence

For anticompetitive practices (price-fixing cartels, abuse of a dominant position), the route is administrative and may result in substantial financial penalties. The relationship between such proceedings and a civil action en concurrence déloyale must be considered in advance.

In Summary

The action en concurrence déloyale is a flexible litigation tool that can be deployed across a wide range of situations. Its success depends on rigorous evidence and a sound assessment of harm.

The firm advises businesses facing acts of unfair competition, from preliminary assessment through to proceedings before the commercial and civil courts.