Unfair competition represents a constant threat in the business world. This phenomenon occurs when economic actors adopt unethical practices. In other words, they violate the rules of fair play and compromise the integrity of the market. Therefore, it is crucial for companies to protect themselves against unfair competition to ensure their stability, reputation, and long-term viability. Discover in this article concrete examples to know in order to protect your business from unfair competition.
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Definition of Unfair Competition
Unfair competition is defined as any practice contrary to the rules of fairness, seeking to destabilize or eliminate a competitor unfairly. It encompasses various acts of competition such as disparagement, confusion, internal disorganization, general market disorganization, and economic parasitism. These practices, when implemented deliberately, cause significant harm to the targeted companies.
Branches of Law Involved
Unfair competition is described as an abuse of law. It falls under the civil liability of common law based on Article 1240 of the Civil Code. In practice, handling a case of unfair competition may lead to consulting different branches of law such as:
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- competition law;
- business law;
- corporate law;
- intellectual property law;
- civil law;
- commercial law, etc.
However, to know precisely which law applies to a particular case, a victimized company must be accompanied by a lawyer specializing in unfair competition. We recommend this link: https://www.acbm-avocats.com/avocats-specialises-concurrence-deloyale/ if you are looking for advice or assistance in a situation of unfair competition. A lawyer specializing in unfair competition is essential to stop the acts of unfair competition and demand damages in compensation for the harm suffered.
Competent Jurisdiction
The various jurisdictions in France have specific roles in handling unfair competition cases.
Commercial Court
The plaintiff can resort to the commercial court in the first instance for disputes of unfair competition between companies.
Court of Appeal
If dissatisfied with the decision rendered, they can appeal to the Court of Appeal. The latter is a second-instance jurisdiction. The Court of Appeal reexamines the facts and evidence presented in the first instance. It can confirm, overturn, or modify the decision of the commercial court.
Court of Cassation
Finally, the Court of Cassation, which is the highest jurisdiction in France, can be seized if the Court of Appeal’s ruling did not satisfy the plaintiff. The Court of Cassation is located in Paris. Moreover, the powers in cassation regarding unfair competition must be characterized by the Commercial Chamber. In unfair competition cases, the Court of Cassation examines the legal questions raised by the parties. Consult your lawyer specializing in unfair competition to be sure of the jurisdiction to seize.
Exact Location
Each major city has its own jurisdictions. Thus, one can seize the commercial court or the Court of Appeal of Paris, Lyon, or Versailles. However, a case in Marseille must be handled by the commercial court of Marseille or the Court of Appeal of Aix-en-Provence, as Marseille falls under the jurisdiction of the Aix-en-Provence Court of Appeal. Therefore, to know exactly which court to approach, it is advisable to consult a lawyer specializing in unfair competition.
The Different Types of Unfair Competition and Illustrative Examples
Disparagement
Disparagement is defined as discrediting the person or products of a competitor. Here is an example of unfair competition through disparagement: in the technology sector, Company A deliberately spread false information about the quality of Company B’s products, its direct competitor. Through misleading advertising campaigns, Company A attempted to discredit Company B’s reputation. This act of disparagement caused significant harm to Company B.
Confusion
The author of confusion misleads customers by using the brand or products of a competing company. Here is an example of unfair competition through confusion: a company, acting unfairly, deliberately adopted the distinctive signs of a competing company. By using similar logos and visual elements, this company sought to blur the lines. It misleads consumers who may confuse its products with those of the rival company. This act of unfair competition has had detrimental effects on the reputation and customer base of the harmed company.
Internal Disorganization
This practice can take several forms, such as poaching employees, diverting customers, and violating distribution networks. An example of unfair competition in each of these cases will be provided below. Regarding customer diversion, one might imagine a former employee using their experience in their former employer’s business to attract that employer’s clients. They act unfairly knowing that a non-compete clause was included in their employment contract and that the obligation of loyalty to their former employer is imposed on them. Employee poaching can be illustrated by a case in a competitive sector like pharmaceutical research. Here is a case of a company that invests heavily in training and developing talented researchers. A competitor, seeking to match their rival’s skills, deliberately recruits these researchers, thus violating the obligation of loyalty to the former employer. In addition to financial harm, this act of competition can lead to a slowdown in innovation in the harmed company, jeopardizing its market position. The violation of distribution networks can be exemplified by a company using deceptive tactics to circumvent established commercial agreements and contracts. Suppose a company has established exclusive contracts with distributors in certain regions. A unscrupulous competitor might attempt to bypass these agreements by selling its products directly in those areas. This causes harm not only to the harmed company but also to its distribution partners.
General Market Disorganization
This involves non-compliance with applicable regulations in the market. Here is an example of unfair competition in this case: abusive contractual clauses between companies can favor unfair competition. When a company inserts restrictive clauses in its contracts with suppliers or partners, it can distort the competitive landscape. Indeed, it unduly limits the opportunities for other market players. These clauses can take the form of excessive territorial restrictions, limitations on access to certain essential resources, etc. Thus, general market disorganization sets in, hindering free competition and generating harm to competing companies.
Economic Parasitism
In this practice, an economic agent intrudes into the wake of another. Its goal is to profit from their efforts and know-how without spending anything. Here is an example of unfair competition in the form of economic parasitism: to create innovative products, a company invests substantial resources in research and development. The act of economic parasitism manifests when competing companies deliberately target the skills and knowledge of the original company. This can be reflected in:
- unauthorized copying of products;
- theft of intellectual property;
- reproduction of marketing strategies, etc.
These acts of unfair competition harm the targeted company, which has invested time and resources to develop its know-how.