Competition is free in France, and winning a competitor’s customers is perfectly lawful. What is sanctioned is the method: creating confusion with the competitor’s products, disparaging it, disrupting its business, or riding in its wake to benefit from its investments without spending anything. This conduct falls under ordinary civil liability (Article 1240 of the French Civil Code). Cases are rarely won on the principle of fault. They are won on evidence, which often has to be obtained from the opponent, and on the quantification of loss, which the Cour de cassation has made more accessible since 2020.
An SME in Alsace manufactures stainless steel tanks for winemaking. Within six months, three of its sales staff and the head of its design office resign to join a company set up by a former partner forty kilometres away. The new entity shows on its website projects that look exactly like the SME’s tanks, approaches its customers with quotes 15% lower, and an email circulates among wine cooperatives claiming the SME is “on the verge of bankruptcy”. Turnover drops by 20%. The managing director wants to act, but he has only suspicions and two emails forwarded by customers. That is thin, but it is enough to start.
1. The four types of fault
French case law traditionally distinguishes four categories.
- Confusion: imitating a competitor’s products, presentation, distinctive signs or communication to the point of creating a risk of confusion in customers’ minds.
- Disparagement (dénigrement): publicly discrediting the products, services or business of an identifiable competitor, even through accurate statements. Disclosing information likely to discredit a competitor is not wrongful, however, if it relates to a matter of general interest, rests on a sufficient factual basis and is expressed with restraint (Cass. com., 9 January 2019, no. 17-18.350).
- Disruption (désorganisation): targeted mass poaching of employees, misappropriation of files, use of confidential information. Poaching is not wrongful in itself, since employees are free to change employer; it becomes wrongful when it aims to disrupt the competing business.
- Free-riding (parasitisme): placing oneself in the wake of another operator in order to profit, without spending anything, from its efforts, its know-how or its reputation. It can exist between non-competitors and requires identifying an individualised economic value, the fruit of investment, that the other party has appropriated.
In the Alsace case, all four are present: copied tanks, a disparaging email, the group departure of the key team, and the reuse of projects that took years of development.
2. Evidence: Article 145 first
The claimant must prove fault, loss and causation. The decisive documents, customer files, drawings, emails between the former employees and the new company, sit with the opponent. Article 145 of the French Code of Civil Procedure allows a party to obtain from the court, before any proceedings, a measure of inquiry to preserve or establish evidence of facts on which the outcome of the dispute may depend. Where surprise is necessary, the measure can be ordered on an ex parte application (sur requête), without an adversarial hearing: a judicial officer (commissaire de justice), assisted by an IT expert, then visits the competitor’s premises and copies the files matching specific keywords.
The measure must be legally permissible, justified by a legitimate reason and proportionate. An application asking to “seize all commercial documents” will be withdrawn. An application targeting the names of the diverted customers, the tank references and exchanges with the poached employees over a defined period will stand. Precision is everything. Trade secrets are not an obstacle in themselves: the court can place the documents in escrow and organise an adversarial sorting process (Articles R. 153-1 et seq. of the French Commercial Code).
3. Quantifying loss: the 2020 case law
For a long time, victims struggled to show the extent of their loss, because a fall in turnover could have other causes. The Cour de cassation opened a path by ruling that, where loss is difficult to quantify, it may be assessed by taking into account the undue advantage the perpetrator of the unfair competition gained at the expense of its competitors, adjusted in proportion to the respective business volumes of the parties affected by those acts (Cass. com., 12 February 2020, no. 17-31.614). Case law also holds that loss necessarily follows from an act of unfair competition, even if it is only non-pecuniary.
In practice, three methods are combined: the margin lost on customers actually diverted; the savings made by the free-rider, which did not bear the development costs; and the reputational harm caused by the disparagement. The victim’s chartered accountant should be involved from the moment the claim is filed.
4. Act fast, and choose your court
The limitation period for an unfair competition claim is five years (Article 2224 of the French Civil Code), but urgency is what counts: the summary judge (juge des référés) can order an end to a manifestly unlawful disturbance, such as the circulation of a disparaging email or the use of a misappropriated file, and grant an interim payment where the obligation is not seriously disputable. Between traders, the commercial court, or the economic activities court (tribunal des activités économiques) where one exists, has jurisdiction.
If the products are protected by an intellectual property right, such as a registered design, the infringement action falls to the specialised judicial court, and the unfair competition claim can be joined to it for separate facts; an unregistered tank is protected only through unfair competition and free-riding, which means proving something more than the mere reuse of an unprotected shape, whose copying is in principle free as long as it creates neither confusion nor the unjustified appropriation of an identified investment, and that is why the Alsace SME will have to show, with documents to back it up, that the projects reproduced on the competitor’s website took years of development and that the way they are presented is sowing confusion among the cooperatives that buy from it.
5. The former employees and the former partner
Employees who resign are bound by a non-compete obligation only if their contract contains one that is valid and backed by financial consideration. They remain bound by a duty of loyalty until the end of their notice period, and by the confidentiality of trade secrets without time limit. The former partner is bound by the non-compete clause in the shareholders’ agreement or the share transfer deed, if there is one, and by the warranty against eviction (garantie d’éviction) if he sold his shares.
The Alsace SME obtained an ex parte order. The seized files contained its customer file and the drawings of two tanks. The summary judge ordered the disputed projects removed from the website and a correction sent to the cooperatives that had received the email. The action on the merits is pending, based on an expert report putting the loss at 900,000 euros.
Get help with an unfair competition case
The firm acts for claimants and defendants alike, from the Article 145 application through to the quantification of loss. See our business law page and our articles on abuse of economic dependence and abrupt termination by a foreign partner. For an initial discussion: contact.
Frequently asked questions
What is unfair competition under French law?
A set of wrongful practices in the course of competition, sanctioned under Article 1240 of the French Civil Code: confusion, disparagement, disruption of a competitor and free-riding.
What is the difference between unfair competition and free-riding?
Free-riding means placing oneself in another operator’s wake to benefit, without giving anything in return, from its efforts and investments. It requires neither a competitive relationship nor a risk of confusion.
Can telling the truth about a competitor amount to disparagement?
Yes. Disparagement can exist even if the information is accurate. It does not if the information concerns a matter of general interest, rests on a sufficient factual basis and is expressed with restraint.
How can I obtain evidence held by a competitor?
Through a pre-action measure of inquiry (mesure d’instruction in futurum) under Article 145 of the French Code of Civil Procedure, ordered ex parte where surprise is necessary and carried out by a judicial officer.
How is the loss calculated?
Through the margin lost on diverted customers, the undue advantage gained by the perpetrator, including the savings it made, and non-pecuniary or reputational harm. Loss necessarily follows from an act of unfair competition.
On the same subject: abuse of economic dependence, limitation of liability and penalty clauses and franchising and distribution in France.