Unfair competition: definition

The agency INVESTIG CORP Private Investigator is a recognized specialist in the collection of evidence regarding unfair competition. Before turning to the added value of the agency, let’s try to define what unfair competition is.

General information on unfair competition

Free competition between professionals is a fundamental principle of capitalism and market societies. However, in order to preserve moral principles and an ethic in commercial relations, the courts have held that this competition between companies must remain loyal.

The leading decision of the Paris Court of Appeal of 8 April 1842 lays the foundations of civil liability for unfair competition:

“if free competition is allowed to trade, this can only mean fair competition, and not one that would tend to harm the industry of others by means that would be disgusted with delicacy and commercial probity “.

Also, when acts of competition are not fair we speak of unfair competition.

It should be noted that there are no laws specific to the concept of unfair competition that would list wrongdoing and it is therefore the common law of tort that applies.

unfair competition definitionThe law of unfair competition essentially relies on two articles of the Civil Code: articles 1240 and 1241 (formerly 1382 and 1383 of the Civil Code):

    Article 1240 of the Civil Code: “Any fact of man, which causes damage to another, obliges him by whose fault he has succeeded in repairing it. “

    Article 1241 of the Civil Code: “Everyone is liable for the damage he has caused not only by his own act but also by his negligence or imprudence. “

Let us note the difference between the law of tort and the law of contractual liability which requires the prior signing of a contract between the parties.

In addition to these two articles of the Civil Code, the law of unfair competition is based on jurisprudence.

Conditions of civil liability in matters of unfair competition

To engage the tort liability of a third party (private or public company, association, individual …), three conditions must be met: a fault, a harm (personal, direct and certain) and a causal link between the fault and the prejudice. If and only if these three conditions are met, then third party liability may be incurred.

Fault

Any fault allows to engage the civil liability of its author, even if it is in good faith.

Examples of acts of unfair competition

In the field of competition, case law has established that there are four types of fault: confusion, disorganization, denigration and parasitism.

Confusion: acts that create confusion with a competing company

The most common unfair competition law, confusion can relate to the visual or sound identity of a company, the packaging of a product or the layout of a commercial stand.

Denigration: acts that denigrate a competing company

The denigration concerns the dissemination of information about a competitor with intent to harm.

Criticisms may be related to the competitor’s products, his call for outsourcing or his management methods, for example.

Disorganization: acts that disrupt a competing enterprise

Here are some illustrations of disloyal acts of disorganization of a company:

  •     to hire an employee who is bound by a non-competition clause while knowing that he is bound by such a clause
  •     massively dismiss employees of a competing company
  •     divert orders placed by customers of a competitor

Illicitness: Acts to obtain an unlawful competitive advantage

Companies that do not comply with applicable regulations are particularly targeted by these unfair acts (non-payment of employee social security contributions, tax evasion …).

Parasitism: acts that parasitize a company

Parasitism can consist in enjoying:

  •     the notoriety of a person for profit by placing himself in the wake of his fame
  •     the work of a third party to reduce its own investments

Injury

The existence of injury is the second fundamental condition for bringing an action in unfair competition and is easily explained to the extent that the action in unfair competition is mainly aimed at repairing the damage suffered.

The harm must always be personal, direct and certain, and not purely contingent and may be material or moral.

The agency INVESTIG CORP Private Investigator has been able to observe a propensity to diversify the damage that can be repaired through unfair competition.

In general, the damage is the loss of a clientele or contracts, and consequently a decrease in turnover.

However, other material damages may be referred to as the loss of a competitive advantage or the depreciation of a trademark.

The non-material damage concerns him an attack on the notoriety of a mark, the reputation or the probity of a company.

It should be noted that, although in theory there must be prejudice, the judges often consider that the damage is necessarily caused by acts of unfair competition found [2].

This tendency has the effect of simplifying the proof of the causal link between the fault and the harm suffered.

The causal link between fault and harm

The existence of a causal link between the fault and the injury is the third fundamental condition for engaging in unfair competition.

As noted above, the causal link may be evaluated with some flexibility by the magistrates who are used to assuming this connection if the evidence of the other elements is properly reported.

However, the Court of Cassation has broken several judgments of the Court of Appeal that have not characterized the causal link.

Indeed, a company whose turnover has been steadily declining since 2012 can not claim a possible fault of a competitor in 2019 to explain its regression.

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[1] Court of Cassation, Commercial Chamber, March 23, 1965: Articles 1240 and 1241 of the Civil Code “… imply, inter alia, the existence … of prejudice suffered by the plaintiff …” (published in the Bulletin).
[2] Court of Cassation, Commercial Chamber, 25 January 2000 (Appeal No. 97-19957); February 25, 2003 (Appeal No. 00-19707); 3 June 2003 (Appeal No. 01-15145).

Contact INVESTIG CORP Private Investigator by phone on +33 1 88 33 50 55 or by using the form on the contact page.

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