Transcript Unfair Competition Law: false advertising, false representation, false

Prof. Dr. Susanne Augenhofer
LL.M. (Yale), LL.M. (FU Berlin)
Humboldt University
Berlin, Germany
Unfair Competition Law
False advertising,
false representation,
false publicity/
propaganda
Kunming, 14th October 2010
Unfair Competition Law
I. European legal frame work
II. German legal frame work
III. Examples
IV. Conclusions
Unfair Competition Law
„To things of sale
a seller’s praise belongs.“
Shakespeare, Love’s labour’s lost, Act IV, Scene III
European legal framework –
History
• unfair competition law was not
mentioned in the treaty (unlike
antitrust law)
• jurisprudence by the CJ on
fundamental freedoms
UCL in Member States (MS)
before EU legislation
• originally developed in France from
tort law: to protect competitors
• Germany, Austria: unfair
competition codes already in 1909/
1923
• UK: no independent field of unfair
competition law
UCL in MS
before EU legislation
different concepts of unfair
competition law in MS, e.g.
concerning the notion of the
average consumer
European legal framework –
History
• Directive 84/450/EEC on
misleading advertising
protection of consumers,
businesses and public interest
Example of comparative advertising
www.eatmedaily.com
European legal framework –
History
• Directive 84/450/EEC on
misleading advertising
amended by
• Directive 97/55/EC on comparative
advertising
protection of consumers,
businesses and public interest
European legal framework –
current legislation
• Directive 2005/29/EC on unfair
commercial practices (UCPD)
protection of consumers
• Directive 2006/114/EC concerning
misleading and comparative
advertising
protection of businesses
European legal framework –
current legislation
• UCPD
maximum harmonisation
• Directive 2006/114/EC concerning
misleading
and
comparative
advertising
minimum harmonisation,
except rules on
comparative advertising
Directive
(Article 288 TFEU)
“A directive shall be binding, as to the result
to be achieved, upon each Member State to
which it is addressed, but shall leave to the
national authorities the choice of form and
methods.”
Degree of Harmonisation
• Minimum harmonsiation
MS have to meet the threshold, but
can go further
• Maximum harmonisation
MS have to meet the threshold,
cannot go further
CJ ruling Pippig/Hartlauer
CJ ruled inter alia:
Directive on comparative
advertising provides for full
harmonisation
it does not denigrate
competitor if price comparison
is done frequently
www.hartlauer.at
UCPD – Objective
“to fully harmonise the law on unfair
commercial
practices
harming
consumer interests”
but does not deal with:
UCPD – Objective
but does inter alia not deal with:
• questions of taste and decency
• contract law
• rules relating to health and safety
aspects of products
• not mere sales talk, e.g.
UCPD – Objective
ATTENTION
there are additional rules which
regulate certain aspects of advertising
e.g. Article 2 No. 2 lit.d of the Directive
on the sale of consumer goods:
product has to have features stated in
public statements, especially in
advertising and labeling
UCPD – Scope
„applies to unfair business-to-consumer
commercial practices, as laid down in
Article 5, before, during and after a
commercial transaction in relation to a
product.”
What are commercial practices?
Commercial Practices
(Article 2 lit. d)
“any act, omission, course of
conduct or representation,
commercial
communication
including
advertising
and
marketing, by a trader, directly
connected with the promotion,
sale or supply of a product to
consumers”.
CJ on sales promotions
sales promotions are governed
by the UCPD
therefore only prohibited if
unfair under the UCPD
cf. joint cases C-261/07-C-299/07(Total Belgium) 23/4/09;
C-304/08 (Plus) 14/1/10;
opinion of the advocate general C-540/08 (Mediaprint) 24/3/10
Advertising self-regulation
advertising industry commits
itself to comply with certain rules
self-regulation-organisations
exist in almost all MS, but with
different importance
coordination through EASA
(European Advertising Standards
Alliance)
UCPD – Structure
Big general clause
Article 5
Small general clause
Small general clause
Misleading UCP
Aggressive UCP
Articles 6,7
Articles 8,9
“Black list”
Annex I
Unfair Competition Law
II. German legal frame work
1. History
2. Current legislation
3. Excursion:
advertising self-regulation
German unfair competition
act (UWG)
• first regulation in 1894
• first code from 1909
• new code in 2004
• amended in 2008 in order to
implement the UCPD
UWG – Scope
today protection of :
• competitors
• consumers
• other market participants and
• the public as such (cf. § 1 UWG)
UWG – Structure
General clause
§3
Examples of
unfair UCP
Misleading
UCP
Comparative
advertising
Unreasonable
nuisance
§4
§§ 5, 5a
§6
§7
“Black list”
Annex I
UCPD – UWG
main difference I:
UWG generally governs B2C
as well as B2B relations
makes sense –
consumer protection and
protection of competitors as
“2 sides of the same coin”
UCPD – UWG
main difference II:
UWG generally governs
questions of taste and
decency
Self-regulation in Germany
• by the so-called Werberat (which
must not be confused with the
Wettbewerbszentrale)
• of less importance compared to e.g.
Italy or UK
• code covers mainly questions of taste
and
decency
(not
misleading
advertising)
UCPD – Structure
• “big” general clause (Article 5)
• two “small” general clauses:
 misleading UCP (Article 6, 7)
 aggressive UCP (Article 8, 9)
• Annex I (“black list”)
UCPD – Structure
Does a CP violate Annex I?
if not,
Is it misleading / agressive?
if not,
Does it violate the general clause?
if not
CP is fair
UCPD – “black list”
CP which are prohibited
under all cirsumstance
no case to case assessment
required
no. 1-23: misleading CP,
no. 24-31 aggressive CP
UCPD – “black list”
Examples I
“Claiming to be a signatory to a code of
conduct when the trader is not.”
“Displaying a trust mark, quality mark
or equivalent without having obtained
the necessary authorisation.”
“Claiming that a code of conduct has an
endorsement from a public or other
body which it does not have.”
UCPD – “black list”
Examples II
„Using editorial content in the media to
promote a product where a trader has
paid for the promotion without making
that clear in the content or by images
or sounds clearly identifiable by the
consumer (advertorial).”
e.g. “product reviews” written by
employees
UCPD – “black list”
Examples III
“Describing a product as "gratis", "free",
"without charge" or similar if the
consumer has to pay anything other
than the unavoidable cost of
responding to the commercial practice
and collecting or paying for delivery of
the item.”
UCPD – misleading
commercial practices
• Misleading actions (Article 6)
• Misleading ommissions (Article 7)
Misleading actions
(Art. 6 no. 1)
contains false information and is
therefore untruthful, or
in
any
way,
including
overall
presentation, deceives or is likely to
deceive the average consumer, even if
the information is correct with regard to
certain elements and
causes or is likely to cause him to take a
transactional decision that he would not
have taken otherwise
Misleading actions
(Art. 6 no. 1)
False information regarding:
•
•
•
•
•
existence or nature of product
main characteristics of product
price
trader’s identity
consumer’s rights
Average consumer
According to
consumer is
the
CJ
the
average
“reasonably well-informed and
reasonably
observant
and
circumspect”, taking into account
social, cultural and linguistic factors
Transactional decision
(Article 2 lit. k)
“any decision taken by a consumer
concerning whether, how and on what
terms to purchase, make payment in
whole or in part for, retain or dispose of
a product or to exercise a contractual
right in relation to the product,
whether the consumer decides to act or
to refrain from acting“
objective criteria
Misleading actions
(Article 6 no. 2)
• providing
information
generally
misleading
• creating confusion with competitors’
products
• failing to honour firm and verifiable
commitments made in a code of
conduct
Misleading omissions
(Article 7)
Trader omits material information that
the average consumer needs, according
to the context, to take an informed
transactional decision; or
hides or provides material information
in an unclear, unintelligible, ambiguous
or untimely manner; or
fails to identify the commercial intent
of the commercial practice if not
already apparent from the context and
Misleading omissions
(Article 7)
and this causes or is likely to cause the
average
consumer
to
take
a
transactional decision that he would
not have taken otherwise
medium used has to be taken into
account
Misleading omissions –
invitation to purchase
(Article 7 no. 4)
material information, if not apparent
from the context:
• characteristics of the product
• identity of the trader
• price including taxes
• special terms and conditions (e.g.
delivery, existence of right to withdraw)
UCPD –
aggressive CP (Article 8)
freedom of choice or conduct of the
average consumer is significantly
impaired by harassment, coercion,
including the use of physical force, or
undue influence and
thereby causes him or is likely to cause
him to take a transactional decision
that he would not have taken
otherwise
UCPD – general clause
(Article 5)
“A commercial practice shall be unfair
if:
(a)it is contrary to the requirements of
professional diligence, and
(b) it materially distorts or is likely to
materially distort the economic
behaviour with regard to the product of
the average consumer…”
UCPD – general clause
“professional diligence”
(Article 2 lit. h)
“means the standard of special skill and
care which a trader may reasonably be
expected
to
exercise
towards
consumers, commensurate with honest
market practice and/or the general
principle of good faith in the trader’s
field of activity“
Iphone I
(Higher Regional Court Hamburg, file number 5 U 185/08)
„Free internet“ – but VoIP excluded
court: misleading CP
www.electricpig.co.uk
Opel
up to 160.000 km =
lifelong guarantee?
www.opel.de
Conclusions
UCPD is an important step towards
European unfair competition law,
but still limited scope and many
general clauses which ask for
uniform interpretation by the CJ
German UWG influenced by UCP,
but still broader personal and
factual scope
Thank you for your attention!
Prof. Dr. Susanne Augenhofer LL.M. (Yale), LL.M. (FU Berlin)
Humboldt University Berlin, Germany
[email protected]