Unfair Competition: How to Quantify the Damage When the Unfair Advantage Is Your Guide

Imagine: you are a craftsman in Tassin-la-Demi-Lune, specialising in façade renovation. You scrupulously comply with environmental standards, train your employees, invest in quality equipment. But your competitor, based a few streets away, bypasses all these constraints. Their prices are unbeatable, their deadlines shorter. Your clients leave. How do you quantify what you have lost? This question haunts every property owner or business manager faced with unfair competition.

The law provides an unexpected answer: what if we look not at what you have lost, but at what your competitor has saved by cheating? This is the meaning of a ruling by the Court of Cassation on 12 February 2020 (No. 17-31.614) which opens a new path for assessing damage. A breath of fresh air for victims of parasitic acts or non-compliance with regulations.

This article analyses this decision and shows you how it can help you, whether you are a landlord, a tenant bothered by commercial nuisances, or a real estate professional.

The Facts: A Story Like Many Others

Two French crystal manufacturers are in dispute. One, the company Cristallerie de Montbronn, denounces the practices of its competitor, which, with impunity, uses cheaper manufacturing techniques that do not comply with French regulations on the "crystal" designation. What is more, this competitor claims in its interviews a French origin for its products, deceiving consumers and attracting customers who should have gone to its rule-abiding competitor.

The company Cristallerie de Montbronn, which employs more than 20 people and generates more than 5 million euros in turnover, sees its market eroded. It files a complaint for unfair competition and misleading commercial practices. Before the courts, it claims damages. Problem: how to quantify the exact loss of earnings? Lost customers? Not easy to prove.

The Court of Appeal delivers an initial judgment, then the case goes up to the Court of Cassation. The debate focuses on a technical but crucial question: can the savings made by the perpetrator of unfair competition be taken into account to remedy the damage?

The Court's Reasoning — Analysed

The Court of Cassation validates the method of the Court of Appeal: yes, the damage can be assessed based on the unfair advantage obtained by the unfair competitor. In short, the amount of damages corresponds to what the wrongdoer saved by not complying with the rules (for example, by not investing in compliant equipment, not training staff, or not paying necessary licences).

The legal basis is Article 1240 of the Civil Code (formerly Article 1382), which provides: "Any act of a person which causes damage to another obliges the person by whose fault it occurred to make reparation." Here, the fault is the misleading commercial practice and unfair competition. The damage is certainly difficult to quantify, but the Court considers that the unjustly saved sum by the perpetrator constitutes a relevant measure of that damage.

However, note: the Court specifies that this assessment must be modulated according to the respective business volumes of the parties affected by the acts. In other words, not the entirety of the competitor's savings is taken, but only the part corresponding to the impact on the victim.

What few people know: this decision does not create a new rule, but it clarifies a method already used in other disputes (for example, in patent infringement). It confirms that judges have some latitude to determine the damage when direct proof is impossible.

What This Changes for You — Concretely

If you are the owner of a commercial premises in Saint-Priest, and your tenant complains that a competitor, located opposite, charges abnormally low prices because it does not comply with safety standards (and therefore saves on work), this decision concerns you. Your tenant could obtain compensation for its damage by demonstrating the competitor's unfair advantage. And this could stabilise its business, thus guaranteeing you a regular rent.

If you are a real estate professional (agent, developer, property trader), you should know that acts of parasitism (copying your visuals, poaching your prospects, etc.) are now easier to remedy. The calculation of the compensation can be based on the investments you have made and which the competitor has avoided.

undefined, I have encountered cases where an owner in Lyon, victim of a neighbour blocking access to his garage, could not quantify the loss of enjoyment. The method of the savings made by the perpetrator (for example, the cost of security that he should have paid) could have been used.

Concretely, if you are in this situation, you must:

• Gather evidence of the unfair advantage: invoices avoided, studies not carried out, compliance costs not borne by the competitor.
• Have this advantage assessed by a chartered accountant.
• Demonstrate the link between this advantage and your own loss of customers or turnover.
• Act within the 5-year limitation period from the discovery of the damage.

Four Tips to Avoid This Type of Dispute

• Document your investments: Keep all invoices, quotes, time spent, on everything related to your activity: training, equipment, communication. This will serve to calculate the savings your competitor has made.
• Monitor the market: Regularly record the prices charged by your competitors. An abnormal difference may hide non-compliance with the rules. Report it to the authorities (DGCCRF) before taking legal action.
• Use mediation: Before going to court, try conciliation. The Lyon Commercial Court offers fast procedures. This can lead to an agreement without going through the long judicial tunnel.
• Consult a lawyer at the first signs: Do not wait until you have lost 30% of your clientele. Early consultation allows you to secure evidence and choose the most appropriate strategy.

Further Analysis: Related Case Law and Developments

This decision is part of a broader trend: courts increasingly accept flat-rate or indicative methods for assessing damage, especially in unfair competition matters. One can cite a ruling of the Paris Court of Appeal of 10 September 2015, which, in a parasitism case, had already adopted the notion of savings made. But the Court of Cassation, with this 2020 ruling, gives a solid foundation to this method, which should encourage lower courts to use it more systematically.

However, caution: this method only works if the unfair advantage is clearly identifiable and quantifiable. If the competitor merely copied an idea without any direct avoided cost, the damage will remain difficult to assess. In that case, other methods must be used (loss of chance, loss of earnings, etc.).

The future? One can expect the notion of "unfair advantage" to be extended to other areas, such as non-compliance with environmental or social standards, where the savings made by fraudsters are often massive.

Summary and Next Steps

What to remember:

1. Competitive damage can be assessed on the basis of the savings made by the perpetrator of the unfair acts.
2. This method is particularly useful when the loss of customers is difficult to prove.
3. It applies to all acts of unfair competition, including parasitism and non-compliance with regulations.
4. You must act within 5 years and gather evidence of the unfair advantage.

FAQ:

• What to do if my competitor does not comply with standards and charges lower prices? Gather evidence of their breaches (photos, bailiff's reports, testimonies), then consult a lawyer to bring an action for unfair competition. You can claim damages equivalent to their savings.
• Can I act without proving a precise loss of customers? Yes, thanks to this decision. It is enough to demonstrate the unfair advantage and quantify it. The judge will then modulate according to your market share.
• What are the time limits to act? The limitation period is 5 years from the discovery of the damage. Do not delay, as evidence may disappear.
• How much does a procedure cost? Lawyers' fees vary depending on complexity. A first 30-minute consultation at €45 allows you to take stock. Then, depending on the case, count between €1,500 and €5,000 for a first instance procedure, excluding any expert appraisal.
• Can I obtain an anticipatory investigative measure? Yes, you can ask the interim relief judge to order a seizure-counterfeiting or a detailed description of the competitor's practices, even before the trial on the merits.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of procedure — and often much more. Book an appointment →