Cass. com., 5 Feb. 2025, No. 23-10.953

In this case, which pitted two takeaway pizza restaurant chains against each other, two central themes of business law came into play: the limits of the banking monopoly in franchisor-franchisee relations and the difficult balance between business confidentiality and the right to evidence.

While the granting of financing to franchisees can be a strategic economic lever, it must respect the banking monopoly. Furthermore, the use of confidential documents in court raises the question of the limits of trade secrets , which cannot be an obstacle to the right to evidence.

The facts

A company ABC Food, a franchisee of Speed Rabbit Pizza, accused Domino’s Pizza France and its franchisee French Pizza of distorting competition by granting them hidden loans in the form of current account contributions and excessive payment terms, practices prohibited by the banking monopoly.

Believing that these advantages constituted an anti-competitive practice, ABC Food and Speed Rabbit Pizza sued Domino’s Pizza and French Pizza for a ban on these practices and for payment of damages.

For its part, Domino’s Pizza sought damages, citing breach of business secrecy, arguing that its opponents had produced a confidential internal document containing strategic information about its franchise network in court.

The court decisions

The Court of Appeal of Paris ruled in favour of Domino’s Pizza, validating the financing operation and ordering ABC Food and Speed Rabbit Pizza to pay 30,000 euros in damages for having used a document covered by business secrecy.

The Court of Cassation partially overturned this decision and recalled two essential principles.

1 – Banking monopoly and distribution network

The banking monopoly prohibits companies from granting credit on a regular basis, with a few strictly regulated exceptions (art. L. 511-5 and L. 511-7 of the Monetary and Financial Code). This prohibition also exists within the framework of a commercial network such as franchising in particular. In principle, a franchisor cannot finance the franchisee’s activity, as this would constitute a banking activity reserved for credit institutions. This rule has forced some companies at the head of a network of shops to have a banking subsidiary in order to grant financing to shops.

However, an exemption to the banking monopoly exists when a parent company finances the activity of a subsidiary or, more broadly, of a company that it controls. Financing by means of a current account contribution does not then fall under the banking monopoly.

In this decision, the Court of Cassation points out that the exception allowing a company to lend to a company it controls through a current account contribution only applies if this control already exists at the time of the loan.

The Court of Cassation thus approves the decision of the Court of Appeal, which had not found an infringement of the banking monopoly.

The company at the head of the distribution network was certainly not yet a shareholder of the point of sale, but ‘by the effect of the synallagmatic promise to sell and purchase all the shares of French Pizza, Domino’s Pizza effectively controlled it on the date of the current account advance’.

Effective control of the company was therefore able to take place as soon as the promise of sale was signed and without waiting for the sale of the shares.

2️ – Business secrecy and right to evidence: a balance to be found

The other part of this decision concerned business secrecy.

Domino’s Pizza accused its opponents of having produced a confidential internal document in the context of the trial, seeking compensation of 30,000 euros.

The Court of Appeal had validated this request and convicted SPEED RABBIT PIZZA.

The Court of Cassation overturned this conviction and reiterated that business confidentiality is not absolute (art. L. 151-8 of the Commercial Code).

The Court of Cassation first of all recalls the rules at stake, namely Articles L. 151-8, 3°, of the Commercial Code and Article 6, § 1, of the Convention for the Protection of Human Rights and Fundamental Freedoms.

‘In proceedings relating to a breach of trade secrets, the secrecy is not enforceable when its acquisition, use or disclosure has occurred for the protection of a legitimate interest recognised by European Union law or national law.’

‘The right to evidence may justify the production of elements covered by business secrecy, provided that such production is essential for its exercise and that the infringement is strictly proportionate to the aim pursued.’

The Court of Cassation then criticised the Court of Appeal for not having investigated whether the production of a document protected by business secrecy was not essential to prove the alleged facts.

« In ordering the companies SRP and ABC Food to pay damages for having produced, during the proceedings, a document protected by business secrecy, the judgement holds that it has not been demonstrated that the production of this document constitutes an exception to the protection of business secrecy provided for in Articles L. 151-7 and L. 151-8 of the Commercial Code, in particular that it would be justified by the protection of a legitimate interest recognised by European Union law or national law.

By deciding as it did, without seeking, as it was invited to do, to determine whether the document produced was not indispensable to prove the alleged facts of unfair competition and whether the harm caused by its obtaining or production to the business secrets of the company Domino’s Pizza was not strictly proportionate to the objective pursued, the court of appeal did not provide a legal basis for its decision. ’

The Court of Cassation therefore reiterates that a confidential document covered by business secrecy may be produced in court if its use is essential and proportionate to the intended purpose.

Business secrecy: relative protection

Business secrecy is an essential protection for companies, but it cannot be absolute.

Business secrecy covers any information that has commercial value, actual or potential, due to its secret nature and that:

• is not generally known or easily accessible to persons familiar with this type of information due to their sector of activity;
• is subject to reasonable protection measures, given the circumstances, to preserve its secrecy.

The protection of these secret documents must not, however, be an obstacle to the proof of a right or a means of blocking legal action.

The Court of Cassation is therefore constantly seeking to strike the right balance between protecting business secrets and the right to prove misconduct in a dispute. As is often the case when two principles conflict, it is necessary to try to reconcile them so that one does not come to limit the other.

This decision is in line with other rulings that have set limits on business secrecy in matters of competition and evidence.

The Court of Cassation had already adopted a similar position in 2024 (Cass. com., 5 June 2024, no. 23-10. 954) by ruling that ‘the right to evidence may justify the production of elements covered by business secrecy , provided that such production is essential to its exercise and that the infringement is strictly proportionate to the intended purpose’.

In matters of unfair competition, a competitor who is the victim of wrongdoing may therefore produce a secret document, but it must be ensured that the communication of this document was essential to prove the wrongdoing.

This concept will undoubtedly be the source of numerous legal debates, particularly in this dispute, as the Court of Appeal will once again have to rule on this point and decide whether or not the communication of this secret document was essential.

What lessons can be learnt by companies?

Companies at the head of a distribution network must ensure that the financing or aid granted to members of the network is not classified as bank loans.

With regard to business confidentiality, be careful not to disclose documents covered by this confidentiality in the context of litigation. If you decide to disclose such a document, you will then have to be able to justify that its disclosure was essential to prove misconduct. This must be anticipated to limit the risk of being penalised. In case of doubt, it is then preferable to proceed with the specific procedure allowing the disclosure of secret documents under the control of the judge.

By Olivier Vibert, Lawyer

Partner at Kbestan, a business law firm in Evreux and Paris