Nestle was ordered to pay €500,000 plus legal fees to Ethical Coffee after a French court ruled that Nespresso competed unfairly against the maker of knock-off capsules that work in its machines.

The decision, confirmed by Ethical Coffee founder Jean-Paul Gaillard, follows a December 2012 allegation by the Switzerland-based company that Nespresso conducted a “smear” campaign against its products through the Nespresso Club, online and through machine distributors.

Nespresso plans to appeal the ruling, Diane Duperret, a spokeswoman for the Nestle brand, said in an e-mailed statement.

Nespresso, Europe’s biggest maker of single-serve coffee, has been losing market share to capsules made by companies including D.E Master Blenders, Mondelez International and Ethical Coffee as some of its patents expire.

The brand has been adding espresso varieties and expanding in countries such as the US to boost sales as growth has slowed.

“We are disappointed in the decision by the Paris court,” Duperret said. “We do not agree with the way in which our communications have been characterized. We are committed to free and fair competition.” In April, Nestle came to an agreement to end a probe by the French competition regulator by offering to lift obstacles to makers of rival capsules. France is the source of more than a quarter of Nespresso’s sales, according to the regulator.

Bloomberg