In a decision handed down on June 5, the French Supreme Court (Cour de cassation) ruled that the installation of a direct competitor in the immediate vicinity of a retailer can constitute a prejudice. A retailer may therefore contest the arrival of a competitor if he considers that this causes him moral prejudice. In this situation, the principle of fairness in the performance of contracts comes into play.
Breach of the duty of good faith and fair dealing
In this case, Mr. [X] had signed a licensing agreement with Française des Jeux (FDJ) entitling him, as an agent, to market scratch cards, draws and sports betting in his tobacconist's and lottery business. In 2015, FDJ granted a license to a hotel-restaurant to sell scratch cards and sports betting. The establishment was located opposite the tobacco-press and lottery business.
Mr [X] sued FDJ for contractual liability, claiming that it had breached its obligation of good faith and fair dealing.
Initially, the Court of Appeal ruled against the company that had concluded the two licensing agreements for the sale of scratch cards and sports betting. It found in favor of Mr [X], pointing out that FDJ had granted approval to a company located "very close by" to the tobacconist's and lottery business.
The FDJ company disagreed with this verdict, believing that the approval had been given to promote the town's commercial dynamism, and appealed to the French Supreme Court.
Existence of moral prejudice
In this case, the shopkeeper in charge of the tobacconist's, newspapers, games and miscellaneous products store complained that the mandate granted by the FDJ company to the hotel-restaurant located a few meters away constituted moral prejudice. He said that he had lived with the uncertainty of seeing his business go out of business, which is what happened, since it ended up in liquidation.
For its part, the respondent company invokes the freedom of trade and asserts that the merchant's bankruptcy is linked to the general decline in his customer base and not to local competition for a few products.
In a ruling handed down on June 5, 2024, the French Supreme Court (Cour de cassation) ruled in favor of the merchant, rejecting the idea of strictly literal execution of contractual terms. The court recalls that agreements must be performed in good faith and with loyalty. In other words, even if the installation of a direct competitor a few meters away was not prohibited by the contract, FDJ's attitude could not be considered as loyal and resulted in moral prejudice for the shopkeeper (strong concern about the future of his business).
Pursuant toarticle 700 of the French Code of Civil Procedure, the Cour de cassation rejected FDJ's claim and ordered it to pay the sum of 3,000 euros into the merchant's business account.