The Domino's Pizza Enterprises Ltd (ASX: DMP) share price has edged lower in morning trade following an update on its French legal proceedings.
At the time of writing the pizza chain operator's shares are down 1.5% to $55.93.
What did Domino's announce?
This morning Domino's revealed that the Cour de Cassation in France has delivered its judgment in relation to an appeal by competitor, Speed Rabbit Pizza, against a decision of the Paris Court of Appeal in favour of its French subsidiary.
Speed Rabbit Pizza alleges that Domino's and its franchisees breached French laws governing payment time limitations and lending. This allegedly gave Domino's and its franchisees an unfair competitive advantage in the country.
Speed Rabbit Pizza's initial claim was dismissed in July 2014, as was its appeal in the Paris Court of Appeal on October 2017.
What now?
The Cour de Cassation is France's highest Court and reviews the decision-making process of lower courts on points of law or procedure.
According to today's release, the Cour de Cassation has held Speed Rabbit Pizza liable for disparaging Domino's and ordered it to pay €500,000 in damages. This decision is now final and cannot be further appealed.
Furthermore, the Cour de Cassation did not find Domino's liable for any unlawful conduct and made no findings in relation to the merits of Speed Rabbit Pizza's allegations.
However, it has partially set aside the Paris Court of Appeal decision on procedural grounds. This is because it did not properly examine all the evidence submitted by Speed Rabbit Pizza in relation to alleged unfair competition practices by Domino's.
The Court has also created a new legal principle that any act of unfair competition necessarily causes damage. Based on the new principle, it held that the Paris Court of Appeal should have examined whether Domino's conduct adversely affected its competitor in terms of profitability and economic attractiveness or provided an unfair advantage to its franchisees.
Speed Rabbit Pizza now has around two months to lodge an appeal of the original 2014 decision of the Paris Commercial Court.
Domino's continues to deny all claims and will defend any new proceedings if they are initiated.
It notes that any new appeal could take 18 – 24 months from the time it is brought before any decision is made. In the meantime, it is reviewing the judgment and its potential implications and will provide further updates if any material developments arise.
