The proper use of the “Made in France” label … unfair competition better indemnified by the judges

22 December 2020
Catherine Robin

The interest of producers and manufacturers for the “Made in France” label is renewed, in this pandemic period where consumers’ sensibility is exacerbated.

The French economic administration has just published a guide on the essential rules (available here), so that the “Made in France” is not considered as deceptive marketing practice (art. L 121-1 et seq. of the French Consumer Code) or as deception on origin (art. L. 413-8 of the French Consumer Code), nor prohibited by customs provisions as being a fraudulent origin marking on import (art. 39 of the French Customs Code).

For non-food products, companies are invited to refer to the European regulations about non-preferential customs origin in order to identify the “nationality” of the product concerned. When several countries are involved in the manufacturing process, the product originates from the country where the last substantial transformation (1), economically justified (2), carried out in a company equipped for this purpose and having resulted in the manufacture of a new product or corresponding to an important manufacturing stage (3) took place (circular of May 13, 2016). In other words, a non-food product can benefit from a “Made in France” label or its equivalent, if its last substantial transformation was carried out in France. Depending on the category of products concerned, the notion of “last substantial transformation” means a specific transformation (working for textiles), a change in the price heading of the product or a value-added criterion.

The manufacturer is free to put “French manufacture” or an equivalent on its products. This kind of mention differs from labels and collective marks such as “Origine France Garantie”, created by professionals or private structures and whose function is to identify the origin of products emanating from a group of actors (association, group of manufacturers, producers or merchants, legal entity of public law) authorized to use it by a regulation of use.

Controls are carried out by the French economic administration (Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes, DGCCRF) and the French customs administration (Direction Générale des Douanes et des Droits Indirects, DGDDI).

In addition to criminal sanctions, the wrong use of “Made in France” may have serious consequences under tort, if a competitor brings an action for unfair competition on this basis.

Indeed, for the first time this year, the Cour de Cassation has ruled that the damage caused by a misleading practice can be compensated by taking into account, not only the loss of profit or losses suffered by the (unfortunate) competitor, but the savings made by the unfair competitor (Cass. com. 12 Feb. 2020, n°17-31614).

In this case, a French factory of crystal goods sued a competitor for having presented products consisting of glass, crystalline or luxion products made in China with a “Made in France” label, to give the impression that the entire product was made of crystal. Held responsible for unfair competition through a deceptive commercial practice, the competitor was ordered to pay compensation calculated in consideration of the undue competitive advantage and the unfair savings (with reference to its personnel expenses). The Cour de cassation approved the reasoning of the first judges, which departs from the traditional analysis of unfair competition consisting in the assessment of the damage to be repaired by lost profits, lower sales, reduced sales, orders, loss of margin, loss of value, etc.

The solution deserves approval insofar as negative consequences of acts of unfair competition such as free-riding or failure to comply with mandatory regulations are difficult to quantify.

Thus, the Cour de cassation agrees to take into consideration the savings of the unfair competitor obtained by taking advantage of a competitive advantage to which it is not entitled. This method already exists for counterfeiting litigation, which already takes into consideration the savings made by the counterfeiter on design and promotion costs (art. L. 716-4-10 of the French Intellectual Property Code, introduced in 2019).

The action in unfair competition thus finds an attractive power already initiated by the jurisprudence according to which a prejudice is necessarily inferred from the unfair act. There is now an adequate method of evaluation of the damage which will not only compensate the victim but also discourage unfair acts.

Catherine Robin, Partner in charge of the Distribution Department and Ambre Luciak, legal counsel.