Taking action against unfair competition: what penalties and procedures?

You have identified unfair competition by a rival and you have gathered sufficient evidence. The question now is: what can you do about it? What steps can you take to put a stop to these practices and obtain compensation? To do this, it is crucial to prove fault, loss and causality. And what are the possible outcomes of legal action? To take effective action against unfair competition, it is essential that you understand its legal basis and definitionYou will also need to be aware of the procedural tools available to you and the penalties that the courts can impose. This article guides you through the practical aspects of the action: from emergency measures to quickly stop the disturbance to action on the merits for full reparation, not forgetting the essential questions of the courts' jurisdiction.

Taking urgent action: preventive measures in summary proceedings

Time is often a critical factor when it comes to unfair competition. A smear campaign, market confusion, mass poaching... these acts cause damage that worsens day by day. Waiting for the outcome of a trial on the merits, which can take months or even years, can leave your company with irreparable damage. Fortunately, the law provides for emergency procedures to enable you to react quickly: summary proceedings.

Le classic" summary proceedings (before the President of the Commercial Court or the Court of First Instance, depending on the case) allows the judge to be asked for rapid measures when two main conditions are met:

• Either the existence of a manifestly unlawful disturbance This means that the unfair competition fault must be sufficiently obvious and flagrant, even if discussions on the merits remain possible.
• Either a imminent damage serious harm is about to occur if nothing is done immediately.

What can you obtain in summary proceedings?

• The most frequent and useful measure is the immediate cessation of unfair practices. The judge can order your competitor to stop its misleading advertising, withdraw confusing products, stop using a contentious name or logo, etc. This prohibition is generally accompanied by a fine. on-call dutyIn other words, a financial penalty (e.g. €1,000 per day of delay) to ensure that the decision is complied with quickly.
• You can also request a provisionThis is an advance on the damages that you will claim in court. This measure is granted if the existence of your loss and its cause (fault) are not seriously disputable.
• Lastly, the judge may order various precautionary measures to prevent the damage from worsening while awaiting judgment on the merits.

The major advantage of summary proceedings is that they are quick (decisions are often handed down within a few weeks) and the judge can order measures to be taken. even if there is a serious dispute on the substance of the law. The interim relief judge does not settle the dispute definitively, but takes the urgent measures required to deal with a situation that is clearly abnormal or dangerous.

Another useful emergency procedure is the request for a in futurum" investigative measures (on the basis of article 145 of the Code of Civil Procedure). Its purpose is not to put an end to the disturbance, but toobtain evidence with a view to a future trial on the merits. If you suspect unfair practices but have difficulty proving them (for example, internal manoeuvring by your competitor), you can ask the judge to order an expert report, a bailiff's report, or even the seizure of certain documents from your opponent. To be successful, you will need to show "legitimate grounds", i.e. serious and plausible suspicions. If you fear that the evidence will disappear if your opponent is warned, you can even request these measures "on request", i.e. without an initial adversarial debate. This is an invaluable tool for building a solid case before taking more costly and time-consuming legal action on the merits.

Action on the merits: obtaining compensation and definitive measures

While emergency measures are designed to deal with the most pressing problems, it is theaction on the merits which will enable the dispute to be settled definitively, establish your competitor's liability and obtain full compensation and lasting bans.

What penalties can the judge impose at the end of the trial?

• Awarding damages This is the "classic" sanction of civil liability. It is designed to compensate you in full for the loss you have suffered as a result of the unfair competition. As we saw in the previous article, this damage may be material (loss of turnover, margin, etc.), but it may also be intangible (damage to brand image, commercial disturbance, moral prejudice). Assessing this loss is often complex, and judges have wide discretionary powers. It is essential to provide them with all possible supporting evidence (accounting analyses, impact studies, certificates, etc.). Don't forget that judges may also take into account any profits unduly made by the wrongdoer when setting the amount, as a deterrent.
• Injunctions to do or not to do something In addition to financial compensation, the judge can order concrete measures to put a definitive end to unfair behaviour and eliminate its effects. He may order a definitive ban to use the disputed name, slogan, advertising process or design. It can also order positive measuresThese injunctions are often accompanied by fines to ensure that they are enforced. There is one important limitation, however: except in very specific cases involving the breach of a contractual non-competition obligation, the judge cannot prohibit your competitor from carrying on its own commercial activity; he or she can only prohibit your competitor from resources deemed unfair.
• Publication of the judgment To complete the compensation, particularly in the event of damage to your image or confusion in the marketplace, the judge may order the publication (in full or in extracts) of the judgment in newspapers or on websites of your choice, at the expense of your convicted competitor. This is an effective way of informing customers and professionals of the offence committed and re-establishing the truth.

Which court should be seised? Jurisdiction over unfair competition

Knowing where and how to take action is a technical but crucial question. A mistake can lead to delays or even failure. To achieve this, it is essential to distinguishing unfair competition from other types of commercial dispute.

Jurisdiction: what type of court?

The choice of court depends on the nature of the parties and sometimes on the link with other disputes:

• The Commercial Court : The natural jurisdiction for unfair competition disputes between traders (commercial companies, artisans registered in the trade register, etc.). This is the most common case.
• The Judicial Tribunal : It has jurisdiction if at least one of the parties is not not a trader (self-employed professionals, associations, private individuals, etc.). It also has jurisdiction over so-called "mixed" disputes (a trader against a non-trader) where it is the non-trader who is being sued. Finally, certain courts have exclusive jurisdiction over unfair competition actions, such as related an intellectual property infringement action or certain restrictive competition practices.
• The industrial tribunal Warning: its competence is strictly limited to disputes arising from employment contracts. It will have jurisdiction if you are acting against a current employee for breach of his duty of loyalty (for example, if he is preparing a competing activity during his working hours), or against an former employee for breach of a non-competition clause clause in their contract. On the other hand, if you take action against a former employee (not bound by a clause) for acts of unfair competition after At the end of the contract, the Commercial Court or the Court of First Instance will have jurisdiction, not the Industrial Tribunal. There is sometimes a fine line between the two, but a mistake in jurisdiction can be fatal.

Territorial jurisdiction: where geographically?

Once you have identified the type of court, you need to know which one to choose geographically. The Code of Civil Procedure (article 46) generally gives you a choice:

• The Court of defendant's domicile (the registered office for a company).
• OR the the place where the harmful event occurred (for example, the place where a denigrating advertisement is broadcast).
• OR the the place where the damage occurred. This last option is often used in unfair competition cases. The place where the damage is suffered is the place where your customers were actually affected by the unfair acts. If your business and your customer base are national, or if the unfair acts have been widely publicised (on the internet, for example), you may have a choice of several courts. Note that this does not necessarily have to be the location of your own registered office, but the place where the economic impact occurred.

The prescription: don't act too late!

A final point to bear in mind is the time limit for bringing an action. A civil liability action for unfair competition is time-barred after 5 years. This period does not necessarily begin to run from the first unfair act, but from the day on which you have knew or should have known the facts enabling you to bring your action. Note that case law considers that this is not a "continuing offence": even if the unfair acts continue over time, the 5-year period starts to run as soon as you become aware of the initial facts. It is therefore essential to be reactive and not let a damaging situation drag on.

Taking action against unfair competition requires a precise analysis of the situation, a good knowledge of the procedural options and an appropriate strategy. Whether it's a quick summary procedure to stop the bleeding or a full-blown action to obtain full compensation, there are ways of defending your rights.

Choosing the right procedure and the right jurisdiction is essential if you are to defend your rights effectively. Our firm will guide you through these steps and help you obtain the appropriate sanctions. Do not hesitate to consult us.

Sources

• Civil Code: Article 1240, Article 1241, Article 2224 (Prescription).
• Code of Civil Procedure: Article 46 (Territorial jurisdiction), Article 145 (Measures of inquiry in futurum), Article 835, Article 873 (Summary proceedings).
• Commercial Code: Articles L442-4 (Jurisdiction over certain restrictive practices), L721-3 (Jurisdiction of the Commercial Court).
• Code of Judicial Organisation: Article L211-10 (Jurisdiction over intellectual property).
• Code du travail (mention of the exclusive jurisdiction of the Conseil de prud'hommes for disputes relating to employment contracts).