Quantifying Harm in Unfair Competition Cases

Quantifying harm in unfair competition cases remains one of the most sensitive aspects of business litigation.

 

Although the principle of full compensation is a cornerstone of civil liability under French law, its application in the field of unfair competition raises significant difficulties. The harm caused by unfair competitive practices is often diffuse, progressive, and closely intertwined with external factors unrelated to the wrongful conduct itself.

 

This challenge has led French courts to gradually refine their approach to competitive harm, in an effort to strike a balance between facilitating redress for victims and avoiding turning compensation into a sanction for profitable wrongdoing.

 

Recent rulings of the Cour de Cassation (French Supreme Court) illustrate this constant balancing act.

 

This article reviews those key decisions and the guidance they provide regarding compensation for harm arising from acts of unfair competition.

 

In matters of civil liability, French case law has consistently held that harm – a prerequisite for the application of compensatory mechanisms – must be certain and precisely assessed, as lump-sum compensation is, in principle, excluded[1].

 

This requirement flows from the principle of full compensation, which prohibits both the unjust enrichment of the victim and the disguised punishment of the wrongdoer.

 

However, in unfair competition cases, this principle encounters a structural difficulty. While wrongful conduct may be clearly established, proving and quantifying the resulting harm is often materially complex. The economic effects of unfair practices are rarely immediate, frequently diffuse, and commonly intertwined with external factors unrelated to the wrongful conduct.

 

Aware of this reality, French courts have gradually accepted more flexible assessment methods, going so far as to acknowledge that any act of unfair competition necessarily causes harm, even if solely of a non-pecuniary nature[2].

 

In this respect, the Cristal ruling handed down by the Cour de Cassation in 2020 marked a significant milestone by recognizing that the undue advantage obtained by the wrongdoer may serve as a basis for assessing the harm suffered[3].

 

Recent decisions nevertheless reflect a tightening of the compensatory framework. The Cour de Cassation now appears to seek to preserve a delicate balance: facilitating redress for victims without turning compensation into a sanction for profitable wrongdoing.

  

The elusive nature of harm in unfair competition cases

 

The specific difficulty of unfair competition litigation lies less in establishing the wrongful conduct than in identifying its effects. Distortions of fair competition rarely produce immediately quantifiable consequences. Their impact unfolds over time, overlaps with external market factors, and often renders any precise economic assessment illusory.

 

French courts have, therefore, acknowledged that any act of unfair competition necessarily causes, by its very nature, a business disruption.This disruption constitutes harm in itself, irrespective of any quantified financial loss, and justifies compensation for non-pecuniary damage, which is irrebuttably presumed.

 

This presumption does not stem from excessive leniency, but rather from a pragmatic observation: any breach of the rules of fair competition necessarily affects the competitive position of the company concerned.

 

This minimum level of compensation ensures that evidentiary difficulties do not lead to a total absence of redress. However, it cannot, on its own, justify automatic economic compensation.

 

Undue advantage as a response to evidentiary difficulties

 

It is against this backdrop that the Cour de Cassation, in its Cristal ruling, recognized that economic harm may be assessed by reference to the undue advantage obtained by the party responsible for the unfair conduct. This method relies on an indirect reconstruction of the harm and reflects a clear intent not to allow unfair conduct to thrive behind the veil of evidentiary shortcomings.

 

However, undue advantage was never intended to operate as an autonomous punitive mechanism. It serves merely as an assessment tool, and only where a genuine link exists between the unjustly obtained gain and the victim’s competitive position. In any event, compensation must not place victims in a more favorable position than they would have been in absent the wrongful conduct.

 

The judicial refocusing on the requirement of actual economic harm

 

Recent decisions reflect a noticeable refocusing. While the Cour de Cassation continues to recognize the relevance of the Cristalmethodology, it now firmly reiterates its limits.

 

The mere existence of an unlawful competitive advantage is not sufficient, in itself, to establish compensable economic harm.

 

The Uber France case[4]clearly illustrates this position. Finding that the alleged business disruption had not resulted in any significant diversion of customers or a corresponding decline in turnover, the Cour de Cassation refused to award economic compensation based on the undue advantage theory. In the absence of proven economic harm, only compensation for the non-pecuniary harm suffered could be awarded.

 

As such, the presumption of economic harm associated with an undue advantage remains a rebuttable one. It may be overturned where the defendant is able to demonstrate the absence of actual loss, loss of profits, or loss of opportunity for the victim.

 

Civil liability preserved from a punitive logic

 

This evolution reflects a deliberate effort to preserve the compensatory purpose of civil liability under French law.

 

The Doctrine ruling[5] established a clear boundary in this respect.

 

Non-pecuniary harm, inherent in any breach of the rules of fair competition, remains irrebuttably presumed. Economic harm, by contrast, only benefits from a rebuttable presumption, which is set aside wherever the absence of actual impact is established.

 

The Cour de Cassation thus refuses to transform unfair competition into a tool for punishing profitable wrongdoing. The role of the civil courts is not to award compensation for a harm that does not exist, even where the wrongful conduct has generated financial gain.

 

Compensation is, therefore, not intended, as a matter of principle, to neutralize the profits obtained by the wrongdoer. The undue advantage remains a method of assessment, not a mechanism for confiscation or restitution.

 

This clarification does not contradict the Cristalruling. Rather, it clarifies its proper scope of application: the undue advantage serves to quantify a probable but difficult-to-establish economic harm, not to compensate for the very absence of such harm.