COMPETITION • FRENCH LAW • UNFAIR COMPETITION
The French legal system is based on commercial and industrial freedom, and its corollary, free enterprise i.e. the free play of competition. However, economic operators must not engage in unfair behavior, i.e., conduct that is contrary to trade practices or to the laws and regulations in force. The action for unfair competition allows the victim of practices contrary to the rules of fair trade to bring a tort action against the perpetrator, without any proprietary rights. The action is based on Articles 1240 and 1241 of the Civil Code. Unfairness constitutes a tort or fault (faute)and gives rise to damages.
Based on civil liability, an action for unfair competition requires the victim to prove a fault, harm and a causal link between the fault and the resulting harm. A fault is a a wrongful act that is contrary to law or to usual business practice. It is not necessary to show intent, as negligence or carelessness, will suffice.
The act of competition is traditionally defined as the appropriation of a clientele. The action in unfair competition thus supposes in principle the existence of a customer base and the commonality of the latter between the offending undertaking and the victim. Case law has adopted a very comprehensive definition of the notion of shared customer-base.
Thus, the Court of Cassation considers that the only condition for the admissibility of an action for unfair competition lies in the existence of a fault that generates harm: the tort of unfair competition may be based on the mere existence of an identical final clientele or a shared virtual clientele. However, the position of the courts as to the requirement of a competitive relationship differs according to the act of unfair competition in question. Accordingly, confusion presupposes a risk of equating the operators concerned, the clientele of which must be common and in close proximity in order for there to be a risk of confusion. Similarly, although disruption is actionable even when the party that acquires the customer base is not the instigator of the disruption, the claim of unfair acquisition of customers through disruption cannot prosper outside of a competitive context. For a finding of disparagement, even if the commercial activities of the undertakings are different, it is sufficient that the end customers or the economic channel be the same. Finally, it is traditionally acknowledged that parasitic behavior may be tortious even in the absence of any competitive situation, but actions for parasitism are not conditional on the absence of a competitive situation between the parties.
The victim undertaking must show that the harm suffered is direct and certain and quantify the harm suffered. Case law has, however, shown itself to be quite flexible as to this requirement in matters of unfair competition: the specificity of competitive damage has gradually led the courts to automatically infer the existence of harm from acts of unfair trading. The damage may be material or non-material and is determined by the court exercising its discretion. The court may call upon expert witness or order that specific examinations be carried out.
Mere coincidence instead of causality is not sufficient. A causal link exists where the court finds a correlation between the installation of a competing undertaking and the trader’s loss of turnover, between the slavish copying of a model sold at a lower price and the winning of a contract or between acts of parasitism and the undertaking being placed under the administration of the court where its chances of survival have been diminished by the acts of unfair competition
Unfair competition actions are subsidiary because they are available to victims not able to assert any proprietary claims. The subsidiary nature of the action for unfair competition also allows for other legal actions to be brought concurrently. Indeed, such an action does not exclude either an action for infringement, or an action for defamation, or a tort action seeking damages for a specific loss, when the parties, the cause of action and the subject matter are different.
Actions for unfair competition may be brought by any natural or legal person who suffers a competitive disadvantage, with the exception of consumer associations. They are primarily brought in the context of horizontal relations and concern distinct products or services. However, they can also be brought for the same product in the context of vertical relationships, despite their contractual nature.