Unfair competition against a former employer forbidden
On 16 December 2015, the Supreme Court of Mauritius (the “Court“), in Oisel (Maurice) Ltée v Echevin M F & Ors, held that an act of competition against a former employer is not forbidden except if the former employee is bound by a restrictive clause but however, it will be so if disloyal practices or unfair means are used to that effect.
In this case, Oisel (Maurice) Ltée (the “Plaintiff“) had entered an action for “concurrence déloyale” (unfair competition) against two of its previous employees (the “Defendants“) and Solutions Eau et Environnement Ltée (the “Company“), an entity which was set up by one of the Defendants (the “Defendant 1“).
It was the contention of the Plaintiff that the Defendants have through the Company unfairly used confidential information (technical specifications, price mechanism) obtained in the course of their employment with the Plaintiff. It was further averred that the Defendants have taken unfair advantage of their position as employees of the Plaintiff while working for the same project for the benefit of the Company. The Company, which is engaged in the same activity as that of the Plaintiff, had quoted for a project and was awarded same. The case for the Defendant 1 was that although the latter competed with the plaintiff on that project, he had done so in a fair and professional manner and has acted with utmost integrity throughout. The other Defendant was still employed by the Plaintiff when the contract was awarded to the Company.
The question that the Court asked was whether the use of confidential information obtained by Defendant 1 during his employment to usurp the project from the plaintiff amounted to “concurrence déloyale“? Considering the law relating to the rule of free competition and the “liberté de concurrence“, the Court concluded that “the Defendant 1 through his Company has acted unfairly and in a disloyal manner to usurp the contract from the Plaintiff and this has caused the latter prejudice” which is valued in the amount equivalent to the loss of profit that it would have obtained had its offer been accepted by the client.
While the Competition Act 2007 is silent on what constitutes free competition, our case-law sheds light on this freedom as well as its limitations and hence adopts the principle which is laid down in France and explained below.
- The rule of freedom of competition is elaborated in the landmark case of L’Arcopole Ltd v Gerbe D’or Ltd and Anor [1982 MR 53] where it was held that:
“the general rule appears to be that competition, unless regulated by law or precluded by monopoly established by law, is free. So that every individual may freely exercise an economic activity of his choice, organize it freely and seek customers in competition with others where this activity inevitably has adverse consequences on a competitor. Any damage caused thereby remains unproductive of liability, the justification being the countervailing legality of free competition and freedom of enterprise and of human endeavor…”
- The limitations to this freedom of competition are classified as follows:
Part III of the Competition Act 2007 restricts some acts of competition which are prohibited, hence unlawful. They are namely:
(i) Horizontal agreements which:
o exist between enterprises that supply or acquire goods or services of the same description;
o have the object or effect of, in any way:
– fixing the selling or purchase prices of the goods or services;
– sharing markets or sources of the supply of the goods or services; or
– restricting the supply of the goods or services to, or the acquisition of them from, any person; and
o significantly prevent, restrict or distort competition.
(ii) Bid rigging – where one party to an agreement agrees not to submit a bid or tender in response to an invitation for bids or tenders or agrees upon the price, terms or conditions of a bid or tender to be submitted in response to such a call or request.
(iii) Vertical agreements involving resale price maintenance.
(iv) Abusive actions or behaviour of an enterprise that is, or a group of enterprises that are, a party to a monopoly situation.
This relates to clauses pertaining to an obligation of confidentiality or of non-competition on termination of a contract of employment. The employees have a contractual obligation towards their employer. If after resignation the ex-employees compete against their former employer, then this act of competition is unlawful.
Unlike the first two instances, the act of competition here is itself lawful, i.e. permissible, but the means of exercising it should not be unlawful. When the employee competes by unfair means, the act of competition has “un caractère déloyal”. To be able to obtain damages, the plaintiff must also prove prejudice resulting from the unfair manœuvre used, showing “le lien de causalité entre la faute et le préjudice”. This is confirmed in the case of Ferney Spinning Mills Ltd v Independent Spining Mills [2000 SCJ 334].