Denigration is one of the most common types of conflict between companies. When a company abuses a right of communication to denigrate the products and services of another company, this is known as denigration. An act of unfair competition, it requires swift action and success in proving its constituent elements.
The expertise of an unfair competition lawyer is invaluable in resolving such cases. While competition is normal when it is healthy, certain practices can render a company liable. Such is the case with disparagement, a reprehensible form of unfair competition. A lawyer who is an expert in competition law will advise you on the legal action to take to put a stop to the disturbance and obtain compensation for the damage caused.
In a tense competitive market, any means seems good for capturing market share. But not everything is legal. Taking a competitive advantage over another company can be done in compliance with the principle of fair competition. Otherwise, the company abuses its entrepreneurial rights and incurs liability.
What is denigration?
Denigration consists of making comments that discredit a competitor’s products and services in the eyes of consumers, with the aim of gaining a competitive advantage. Denigration constitutes an act of unfair competition, which exposes its perpetrator to penalties.
Article 1240 of the Civil Code (formerly article 1382 of the Civil Code) defines traditional civil liability as the obligation to repair any damage caused to another person by one’s own fault. Denigration is a creation of the courts based on this general principle.
Asa legal creation, disparagement is evolving rapidly. The Court of Cassation no longer requires direct and effective competition. It punishes on the basis of denigration even in the presence of indirect competition.
Moreover, disparagement is possible even if the remarks made or the reproaches are true! Criticism based on a company or product does not prevent a conviction on the grounds of disparagement. Showing the accuracy of the facts revealed is not enough to exonerate oneself from liability.
There are various forms of disparagement, and the development of new technologies has made the dissemination of negative comments faster and more violent. For example, spreading false negative reviews online can be a form of denigration. Similarly, the publication of studies discrediting a competitor or indicating the obsolescence of its products can be a form of disparagement.
Note that disparagement can also occur internally: an employee disparages his own company. This is grounds for dismissal for misconduct.
What should you do in the event of disparagement?
You must react immediately to any denigration. A formal notice sent to the person responsible for the denigration starts the procedure. In some cases, it can even stop the process. The formal notice can limit the actions of the unmasked competitor. Sometimes, however, this is not enough, and an action for unfair competition must be brought before the Commercial Court. This is possible for 5 years. Obviously, no company can wait that long if the denigration is damaging.
Denigration creates a feeling of distrust in the company’s products. These days, social networks can rapidly spread information without verification. This period of fake news is conducive to acts of denigration. Above all, the internet multiplies the scope of denigration.
The loss of customer confidence quickly leads to a drop in sales, a tarnished reputation, investment in communication reduced to nothing, etc.
The first thing to do is toassess the consequences of denigration. What is the current and foreseeable future scope of the acts of denigration? Does it concern a single product or the whole company? Is the act of disparagement legally established? What are your chances of winning in court by filing a complaint for defamation? Within what timeframe? What other solutions are available to deal with such an act of unfairness?
The boundaries between fair competition and unfair competition are not always clear. Certain acts may be repugnant to your company without constituting a punishable offence. The sound advice of a lawyer with real expertise in competition matters is essential in defining the boundaries of denigration.
Why call in a lawyer in the event of disparagement?
A lawyer specialising in disparagement is a competition law strategist. He knows the limits of competition between companies. Your lawyer will advise you on what action to take in the event of unfair competition or disparagement.
First of all, your lawyer will check whether the 3 conditions for an act of disparagement have been met in order to characterise the disparagement:
- public statements made to the general public. This will not be the case for an internal document used to train sales staff in developing their sales arguments.
- statements that devalue your company in terms of its brand, management, products, prices, policies, communications, etc.
- Identified comments against your company: this does not mean that all companies in a sector of activity have the same faults. Your company must be identified or clearly identifiable. It is possible to target a group of companies in a given sector.
A competition lawyer then gathers evidence of the denigration. Screenshots, witness statements, bailiff’s reports, documents supporting the loss suffered, etc. are all necessary.
Legal action is then possible. Your lawyer will help you file a complaint for defamation. He or she will adopt the best strategy for determining which court has jurisdiction: the Commercial Court at the location of the accused competitor’s head office.
If the defamation occurs online, using a bailiff in Paris will enable the Paris Commercial Court to assume jurisdiction. If the alleged acts are related to an infringement action, the judicial court has jurisdiction.
What are the penalties?
Your lawyer will take legal action to stop the denigration, possibly subject to a fine. You can also demand that the disparaging content be removed. To do this, you will need to have clearly identified all the places where the disparaging comments are visible. This can be complicated online.
Your lawyer will also seek damages depending on the seriousness of the harm established. The causal link between the acts of disparagement and the harm suffered must be demonstrated. You will need to gather material and quantified evidence of the harm suffered and submit it to the court. A simple drop in sales is not sufficient, as it cannot be attributed solely to the act of defamation.
Finally, you can take your competitor to court on the grounds of communication. Have the disparaging remarks caused a stir in the media? Request public publication of the court’s decision on your competitor’s website and in several media. This will restore your reputation while weakening your competitor’s reputation. Be careful, however, not to give the case any more publicity than it had before. The publication of the court decision should be discussed with your lawyer and your communications department.
Examples of denigration
The Court of Cassation ruled that denigration was justified in a case involving the disclosure of information relating to a product. The issuing company, believing that there was a health risk, stopped manufacturing the product and published the information in the press and online. In the absence of a sufficient factual basis in view of the seriousness of the allegations, the Cour de cassation confirmed the act of unfair competition by denigration. In this case, there was no direct and effective competition between the persons concerned! Bringing a type of product into disrepute may be enough to constitute disparagement.
Several court rulings have also found acts of disparagement against the Yuka application in 2021. The app had given a negative rating to charcuterie products containing nitrites deemed to be carcinogenic. The courts found that the denigration was constituted when Yuka delivered information that discredited the products without a sufficient factual basis and without a measured presentation.
In another case, the judges decided that the mere comparison of prices in an advertisement did not constitute an act of disparagement. Comparative advertising is authorised and regulated. As long as an advertising campaign complies with these principles, there is no reason to regard it as disparagement.
Denigration also concerns negative acts and omissions. For example, claiming to be the only one to do or offer something implies that competitors are incapable of doing it. A number of cases have held that disparagement applies in these situations (for example, an advertisement for “the only natural aperitif” disparages other aperitifs. This will also be the case when a company is convicted of unfair competition when it is in breach of a non-competition clause.
Denigration, defamation and freedom of expression
Denigration differs from defamation, which is punishable under the law of 29 July 1881 on freedom of the press. Defamation must be directed at a natural or legal person, and not at products or practices. An action for defamation is time-barred within 3 months, whereas an action for disparagement is time-barred within 5 years. A desire to cause harm is required, as is unfair conduct in dealings.
It may seem normal for a company to want to convince others that its products are the best. Criticising other companies may be a matter of freedom of expression. Everything will depend on the context and the comments made or actions taken. The Court of Cassation recently ruled that there is no remedy where the information relates to a subject of general interest, has a sufficient factual basis and is expressed with a certain degree of restraint (Commercial Chamber, 4 March 2020).
While there is no need to be in direct competition to denigrate, it is necessary to have an interest in damaging the victim’s reputation. Journalists can therefore rarely be accused of acts of disparagement. Their criticism of companies must be dictated by a desire to inform.
An act of unfair competition
Denigration is one of the forms of unfair competition recognised by the courts. There are other forms of unfair competition, such as :
- parasitism
- disorganisation
- confusion and counterfeiting.
Attacking a competitor publicly or openly, outside the rules of fair competition, is reprehensible. The Goldwin law firm defends the interests of companies that have been attacked. We do everything we can to restore your reputation.
Our lawyers will support and advise you in taking the necessary steps to put an end to the situation. Thanks to their expertise and experience in competition law, our lawyers can best protect your interests and tailor their strategy to the situation you are facing. An unfair competition lawyer is invaluable to the survival of your business.
Every day, the Goldwin law firm works with companies in their day-to-day business, 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. Get an expert opinion on an act of unfair competition by denigration quickly by contacting us. If you are a victim of commercial disparagement by a company, let’s discuss the facts and context together. We will then establish a winning strategy for your reputation.
