Among the practices that run counter to free competition, the disruption of a competitor’s business gives rise to numerous disputes. Sanctioned on the basis of anaction for unfair competition, disruption requires fault, damage and a causal link. The expertise of an unfair competition lawyer is essential for effective action.
There are several ways of disrupting a competitor’s business or the market in general. In both cases, certain practices constitute acts of unfair competition.
- recruiting the competitor’s employees, particularly for key positions or on a massive scale ;
- infringing business secrecy, in particular by disclosing confidential documents or appropriating manufacturing secrets.
The multiplication of aggressive acts or their scale, with the aim of destabilising a competitor, may be punished. Most frequently, actions based on the disorganisation of the business involve the mass poaching of employees or the misappropriation of customers. The difficulty lies in striking a balance between normal free competition and unfair competition. For example, a customer does not belong to a company. They are free to choose a competitor at any given time, unless they are approached by illegal means.
In addition to these actions, the Cour de cassation requires proof of the competitor’s wrongful conduct. The role of theexpert competition lawyer is to qualify the acts and obtain evidence. He then determines the most effective strategy from among the various amicable, pre-litigation or litigation actions.
What is the disruption of a competitor’s business?
The concept of disorganisation can be divided into two parts:
- the disorganisation of a single targeted competitor ;
- general market disruption.
The latter is the same as illegal competition. Certain actions are in fact reprehensible in order to maintain free competition in a healthy market. For example, it is forbidden to sell products at a loss, to sell at a premium, or to offer prices that are unreasonably low compared with the rest of the market. By taking these actions, the company destabilises all the players in its market and can lead to their downfall. Imagine a massive price cut proposed by one player and followed by a few companies. Forced to revise its margins downwards, the company could quickly find itself out of business, even if its market share and sales do not fall.
Any disorganisation of a competitor’s business is designed to weaken its internal operations or market position.
Failure to comply with the applicable rules can also become an act of unfair competition. For example, opening on Sundays when competitors are forbidden to do so, or running sales outside the legal periods. Even if these days, between private sales, promotions and sales, it is difficult to know what price is being charged and for what purpose.
Disruption of a distribution network is also possible: unauthorised distributors who obtain supplies from authorised distributors are committing an act of unfair competition. Marketing products outside the distribution network is not in itself an act of unfair competition. Unless parallel sales constitute parasitic sales.
Unfair competition action for disorganisation
An action for unfair competition is based on common law liability.Article 1240 of the Civil Code (formerly article 1382 of the Civil Code) defines civil liability as follows: “Any act of man whatsoever which causes damage to another person obliges the person through whose fault it occurred to make reparation for it“. This presupposes fault, damage and a causal link between the two.
In matters of disorganisation, it is particularly difficult to gather tangible evidence. In the case of a mass poaching of employees, you will have to show that the competition deliberately wanted this to happen. The number of departures is significantly higher than in other years. Why are your employees leaving your company for that of your competitor? Does it offer significant benefits and better working conditions?
Beware: in certain environments, it is not uncommon for an employee who has left for a competitor to remain in contact with his former colleagues. They may tell them about the better terms and conditions, leading to several departures. This is the difficulty of disorganisation through mass recruitment. The Court of Cassation recently recalled that the mass nature of the poaching, causing damage to the company, constitutes an indication of unfair competition (Court of Cassation, 21 December 2017).
The courts require proof of the company’s disorganisation. This is stronger than a simple temporary problem. Your business is presumed to be in jeopardy and its survival compromised.
Why call in a lawyer in the event of disorganisation?
It is because of the difficulties of proving that a company law lawyer is important. Not all aggressive behaviour by a competitor is punishable by the courts. Only a lawyer specialising in competition cases can distinguish between aggressive competition and unfair competition. Gaining a competitive advantage over another company must be done in compliance with the principle of fair competition.
Your lawyer will therefore begin with an in-depth study of the evidence submitted. This is done objectively in the light of the latest case law. This enables the acts to be classified on the right legal basis, so that the right action can be taken.
Once the facts have been qualified, theunfair competition lawyer quickly knows how to act. To prove disorganisation, he can call in a bailiff. In this way, the bailiff can make observations and prepare to lodge a complaint for unfair competition. Evidence of your competitor’s intentions is also useful, but often difficult to obtain.
At the same time, you need to prepare evidence of the damage and its assessment by the court. When it comes to disorganisation by a competitor, this can be difficult. Isn’t a simple drop in sales in itself linked to a mass poaching? Fault, prejudice and causal link. Keep these 3 elements in mind when bringing an action for unfair competition.
How do you act in the event of disorganisation?
As soon as a competitor commits isolated acts of disorganisation, consult a lawyer. Time is a precious ally. Your competition lawyer can immediately assess the facts and propose the appropriate strategy. Even if poaching a few employees is not always enough to win an unfair competition case in court, consulting a lawyer early on means you can take action before you reach a point of no return.
Your lawyer specialising in business disruption and unfair competition can indicate the points to look out for, as well as the evidence needed. It may be a matter of clues or prima facie evidence. It is possible to ask the court for a bailiff’s report on the premises of the company accused of acts of unfair competition. The lawyer must be precise in the mission to be entrusted to the bailiff, in order to gather all the evidence.
Then it’s time to take action! Before taking legal action, your lawyer can send a formal notice. A formal notice issued by a lawyer has an immediate impact on your competitor. Its practices are unmasked and you will take action. The message is clear.
If the formal notice remains unanswered, an action for unfair competition should be brought before the Commercial Court. Attempts at amicable resolution and negotiation are still possible.
Summary proceedings may be considered in urgent or obvious cases. Interim prohibition measures can be taken to put an end to the disturbance.
Action on the merits requires a longer timeframe. This is an opportunity to put together a complete file of evidence to obtain compensation for the damage suffered.
What are the penalties?
Your lawyer will require you to cease your actions immediately. This can be done under penalty. You can also demand preventive measures to prevent such acts from being repeated.
Your lawyer will also seek damages in line with the seriousness of the harm established. If you are unable to establish material damage, you may seek compensation for non-material damage.
Finally, don’t overlook the appeal of legal publication. In competition matters, publicising unfair competition practices is part of the game. The image of the competing company is impacted by this publicity.
Examples of disorganisation by a competitor
Hiring a competitor’s employees with a non-competition clause
Have one or more employees resigned to go and work for your competitor in breach of a non-competition clause? You can take action against the employees, but also against the competitor company. The mere breach of a non-competition clause is sufficient to demonstrate a desire to disorganise.
Every employer is supposed to ask whether the candidate has a non-competition clause, as soon as he hires him from one of his competitors. This will be obvious if the employee is in a key position in the company or if the inclusion of a non-competition clause is widespread in the sector of activity concerned. The competitor cannot simply defend himself by denying that he knew of the existence of such a clause!
The non-competition clause must, of course, be valid!
Hiring a competitor’s employees without a non-competition clause
An action for unfair competition may be brought following the poaching of a competitor’s employees and the diversion of its customer base: a company lost 75% of its technical sales team in the North of France. “As a result, the company was unable to prospect effectively for its traditional customers in order to win their loyalty, or to develop a new customer base, or to devise a new commercial strategy to adapt to the unfair practices of its competitor, to whose benefit it lost several invitations to tender“. The Douai Court of Appeal reiterates the consequences of misappropriation of customers combined with poaching (Douai Court of Appeal, 13 December 2018).
An action for unfair competition is possible if you are aware of manoeuvres carried out by your competitor. This is the case when the new employer offers particularly high remuneration that is out of line with market practice.
This will also be the case if the poaching is massive, i.e. involves a large number of employees in a very short space of time, or employees in key positions in the company. For example, the Marseilles Court recently found a software publisher guilty of counterfeiting and unfair competition for having poached 9 employees from its competitor (decision of 23 September 2021, Generix v ACSEP case).
Other cases of competitor disorganisation
In other cases, disorganisation may result from a multitude of acts of aggression. For example, concealing a competitor’s advertising, misappropriating customers or fraudulently recovering customer files, divulging incorrect or secret information about a competitor, etc.
The Court of Cassation now considers that the misappropriation of a customer file constitutes an act of unfair competition. It does not require the canvassing to be massive or systematic (Cour de cassation, 12 May 2021).
Other practices such as electronic couponing have been punished as unfair. For example, the purchase of a product of brand X may give rise to a coupon for another product of the same brand but not for that of a competing brand. This constitutes a misappropriation of customers and an unfair practice.
Disorganisation and unfair competition
The disorganisation of a competitor’s business is one of the 4 forms of unfair competition created by the courts, alongside :
The Goldwin law firm defends the interests of companies that have been subjected to acts of unfair competition. It does everything in its power to put a rapid end to the facts and re-establish conditions of normal competition. Our lawyers are also committed to obtaining damages to compensate for the harm suffered.
They will work with you and advise you on the best strategy to adopt. They put their expertise and experience in competition law at the service of your company’s long-term survival. Our unfair competition lawyers develop creative and innovative strategies to protect your efforts and investments. They have a sense of enterprise and business.
Every day, the Goldwin law firm works with businesses on a day-to-day basis to get to know them better. In this way, we can provide a better defence, give better advice and define the right strategy when faced with an act of unfair competition. Contact us for an expert opinion on the disruption to your business.
