French Competition Law provides a comprehensive review of the French rules relating to competition: restrictive agreements, commercial negotiation, abuses of a dominant position, procedure and merger control.

French Competition Law

In the absence of a general statute, case law traditionally bases unfair competition actions on Civil Code Articles 1240 and 1241. Even if unintentional, unfairness is considered actionable and requires that victims be compensated . However, the interpretation given to Articles 1240 and 1241 is so broad that they are applied not only as a means of compensating harm actually inflicted but also prev …

The legal basis of unfair competition

The post-revolutionary French legal system, in opposition to the corporatist tradition prevalent under the “ancien régime”, is based on commercial and industrial freedom, and its corollary, free competition. Markets are subject to the laws of supply and demand and operators are free to offer the same customers similar products or services. However, even though the appropriation of customers is the inevitable result of the law of supply and demand, free competition is not without its limits. Like all freedoms, the rights and freedoms of others must be respected. Market players must comply with a certain number of basic rules and not adopt practices that could be classified as unfair or contrary to trade norms or the laws and regulations in force. As developed through the case law of French courts, this doctrine on unfair practices allows victims to hold perpetrators liable in civil court.  

The doctrine of unfair competition thus has certain limits: an undertaking does not possess any exclusive right to its clientele, and the mere canvassing of these clients by other undertakings is therefore perfectly legal, once there is no element of unfair competition present .

Further, a free market implies that operators are free to set their prices. Thus a manufacturer does not commit an act of unfair competition by selling products at a lower price than competitors, as long the price charged does not go beyond normal commercial practices and is not ridiculously low . 

CA Paris, 26 February 1991, LawLex200200001825JBJ; 27 May 1992, LawLex200200001731JBJ; 27 March 1996, LawLex200200001369JBJ.

Cass. com. 3 May 2000, LawLex200200000140JBJ, on low pricing, unfair competition and financial aid; CA Versailles, 20 October 1993, LawLex200200001617JBJ, on the right to attract clients through pricing policies; CA Paris, 3 July 1996, LawLex200200001345JBJ; 25 September 1996, LawLex200200001330JBJ, on the right to charge lower prices.

The theoretical basis of unfair competition

In the absence of a general statute, case law traditionally bases unfair competition actions on Civil Code Articles 1240 and 1241. Even if unintentional, unfairness is considered actionable and requires that victims be compensated . However, the interpretation given to Articles 1240 and 1241 is so broad that they are applied not only as a means of compensating harm actually inflicted but also preventively through injunctive relief safeguarding applicants against potential damage . The provisions are applied to actually stop certain behavior and thus the doctrine of unfair practices goes beyond the normal role of French civil liability law, which is compensation rather than prevention. Unfair competition also supposes a specific concept of harm, less rigorous than in civil liability cases . Recently, the doctrine of unfair practices has been applied even more broadly, such that today action for unfair practices is said to be possible even where there is no possibility of a loss of customers . It can thus involve undertakings without a common customer base , or that have no customer base at all .  

The evolution of an undertaking on the market should not be hindered by unfair practices designed to cause it harm, whether that be loss of customers, attacking its reputation, or the exploitation or creation, at that undertaking's expense, of a similar or distinct customer base. The doctrine of unfair practices allows undertakings to bring actions against others even where there is no direct competitive link. This may lead us to wonder whether unfair competition rules do not also protect market incumbents from new entrants which could explain why unfair competition litigation has been growing: unfair competition actions, which are subsidiary actions, are now systematically introduced alongside claims for compensation for infringements to exclusive rights (principally IP rights).

According to some commentators, unfair competition actions are disciplinary in nature and serve to ensure that business practices are complied with. Depending on whether the action is punitive or aims to obtain compensation, the wrongful act is defined more or less narrowly and the sanction enables not only the protection of direct victims of the harm but also protects consumers. Some European nations, such as Germany, Belgium and the Netherlands, combine this ethical concept with a wider notion based on the premise that it is in the interests of consumers or end users to ensure that operators adhere to best commercial practices. Embracing such a concept allows the sanctioning of behaviors which, between competitors, would not be wrongful .

Other legal commentators regard unfair competition law as protecting a specific right - the ownership of business goodwill. This theory is based on the traditional concept of the unfair competition suit which requires that the parties share a common customer base. This concept is no longer reflected in the case law however. It has also been argued that unfair competition law acknowledges the existence of “a private right on a competitive value which is non-protected by a special law”. Intellectual property is effectively specially protected by law, but copying may be unfair. Although the courts recognize that “an action for unfair competition has as its object to ensure the protection of the party who is unable to assert an exclusive right”, it does not confer any right but merely  sanctions the wrongdoing committed by that party's competitor.

Cass. civ., 18 April 1958; Cass. com., 18 July 1971; 3 October 1978; 17 October 1984; 6 May 1986; 26 April 1994, LawLex200200001576JBJ.

Cass. com., 9 February 1993, LawLex200200001668JBJ; 16 December 1997, LawLex200200001200JBJ.

Cass. com., 9 February 1993, LawLex200200001668JBJ; 29 June 1993, LawLex200200001632JBJ.

CA Paris, 29 March 1993, LawLex200200001652JBJ; 3 April 1995, LawLex200200001468JBJ; Cass. com., 27 February 1996, LawLex200200001383JBJ.

CA Versailles, 12 February 1990, LawLex200200001887JBJ; CA Paris, 20 February 1992, LawLex200200001752JBJ; Cass. com., 30 January 1996, LawLex200200001395JBJ; CA Paris, 24 September 1996, LawLex200200001332JBJ, regarding disparagement.

CA Paris, 6 November 1990, LawLex200200001849JBJ, specifying that mutal aid societies are not merchants where professional activity is at issue; Cass. com., 8 November 1994, LawLex200200001523JBJ, for a non-profit organization.

This is also the approach adopted by European Union with Directive No 2005/29 of 11 May 2005 on unfair commercial practices. It establishes a single general prohibition of those unfair commercial practices distorting consumers' economic behaviour. The general prohibition applies  equally to unfair commercial practices which occur outside any contractual relationship between a trader and a consumer. The Law of 3 January 2008, which transposes the directive into French law under Articles L. 121-1 et seq. of the Consumer Code lays down the principle according to which the rules relative to competition may contribute to the strengthening of the rules for the protection of consumers, and vice versa. The protection of the consumer against deception or abusive behavior by certain traders extends to competitors who do not resort to  the same practices. And conversely the development of fair and legitimate competition between undertakings encourages them to market better quality goods at more compeittive prices, which is in the interests of consumers. 

Actions for unfair competition are aimed at protecting free competition. However, as the freedom to compete can be limited by means other than unfair practices, it is necessary to distinguish this area from other types of restrictions on competition. 

This difference was outlined by Professor Paul Roubier , who drew a distinction between competition that is illegal and competition that is unfair. As regards the former, the competitive conduct is without any legal justification, while for the latter, the illegality results from an excessive use of the freedom to compete. 

A distinction also needs to be made between unfair competition and intellectual property infringements, as the Intellectual Property Code does award monopoly use on holders of such rights, in effect limiting the freedom of competition.

Le droit de la propriété industrielle, 1952, t. I, No 104, 482.

Unfair competition and free competition 

Competition is illegal where it is restricted or forbidden by legislative or regulatory provisions. These rules are often reinforced by criminal sanctions. Under this heading come prohibitions against resale below cost (Article L. 442-5 Commercial Code), misleading advertising (Article L. 121-2 et seq. Consumer Code), the use of pyramid schemes (L. 121-15 Consumer Code), fraud, and falsification (L. 441-1 and L. 413-1 et seq. Consumer Code). To ensure a conviction for such acts, the victim has only to establish the constitutive elements of the alleged infringement and show that he/she suffered direct harm. Unlike in cases of unfair practices, consumer associations defend the interests of those they represent by suing for illegal competition. 

Does this mean that illegal competition precludes action under the heading of unfair competition? The answer is no. Damages may be obtained for any of the infringements pursuant to Articles L. 420-1 et seq. of the Commercial Code for harm suffered in the context of a civil action brought in accordance with ordinary law and the litigant may prefer to file a civil suit rather than bring criminal proceedings .

See Cass. com., 9 April 1996, LawLex200200001367JBJ; CA Aix-en-Provence, 19 May 1994, LawLex200200001567JBJ, for misleading advertising; Cass. com., 18 October 1994, LawLex200200001535JBJ, classifying as unfair competition sales without administrative authorization and that reduce prices enough to incite customers to abandon the brand distributor; CA Bordeaux, 31 March 1999, LawLex200200000139JBJ, resale below cost is an act of unfair competition and may incur penalties under Article 1240.

Unfair practices and illegal competition

Freedom of competition can also be limited under contract. The parties to a contract can agree to suppress all competitive activity either during the contract or for a fixed period of time following the expiration of the contract. Such non-compete clauses are often found in employment, agency (e.g. sales representatives, commercial agents, company executives) distribution, sales, or lease-management (non-re-establishment clauses)  agreements. The rules on unfair practices and those on non-compete clauses under contract have different objectives. The latter simply forbid competition, regardless of the means used, while the former focus on the unfairness of the method, and not on the very existence of competition itself. They also have different legal foundations. The concept of unfair trade practices is grounded in Articles 1240 and 1241 of the Civil Code, i.e. it may incur tort liability, while the violation of a non-compete clause constitutes a breach of a contractual obligation. There is a presumption of liability in such cases, as a non-compete duty must be carried out in effect, not merely in intent, whereas no such presumption exists in unfair practices actions, for which the victim bears the burden of proof of the existence of the fault ("faute") and the resulting harm . However, these differences do not mean that the roles of both are not complementary to a certain extent .

For an example see Cass. 1re civ., 18 January 2005, LawLex200500003991JBJ, restating that liability for unfair competition assumes a fault has been committed which is characterized by acts other than merely the potential infringement of a non-compete obligation sanctioned by the loss of the compensatory indemnity.

See Cass. com., 15 March 1994, LawLex200200001589JBJ, on the unfairness of third party involvement concerning restrictions on sales outside a network.

Unfair practices and contractual restrictions on competition

Freedom of competition can also be restricted by the rules governing intellectual property, which confer on the holder of such rights a monopoly on their exploitation or use. Infringement actions or passing off ("contrefaçon") allow patentees to defend their property rights against any fabrication, importation or sale of patent-protected products (Article L. 615-1 et seq. of the Intellectual Property Code). Equally prohibited is the unauthorized reproduction of registered designs or models (L. 521-1 et seq.) or any reproduction, use, or use of a reproduction of goods protected by trademark (L. 716-1 et seq.). Traditionally, the notions of passing off and unfair competition are in conflict; the Court of Cassation has stated that legal actions on these grounds should be distinguished  as they seek different objectives. An action for infringement is aimed at punishing the violation of an exclusive right protected under law, whereas an unfair practice is considered a wrong whatever the exclusive rights of the victim . Thus, both actions have a different legal basis, and it is perfectly possible that the grounds for an unfair practices suit exist even where there is no passing off . Consequently neither can one of these actions be considered in any way the supplement, accessory, or consequence of the other . Nonetheless, in certain circumstances both actions may be introduced concurrently but the admissibility of an unfair competition action is independent of the admissibility of an action for infringement .

Cass. com., 6 November 1984; 14 November 1995, LawLex200200001411JBJ; 21 October 1997, LawLex200200001211JBJ.

Cass. com. 17 January 2018, LawLex201800000135JBJ, dismissing the argument that the armed forces medical institute's possession of a single copy of the product in question would allow the unfair competition action against the defendant company to be dismissed.

Cass. com., 14 November 1995, 93-19.157; 6 May 2003, LawLex200300002732JBJ; 12 June 2007, LawLex200700000752JBJ; 12 June 2007, LawLex200700000752JBJ.

Cass. civ. 1re, 10 April 2013, LawLex201300000610JBJ.

French Competition Law

19. The legal basis of unfair competition

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19. The legal basis of unfair competition

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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