ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED
Directive 2006/114/EC of the European Parliament and of the Council, of December 12, 2006, on misleading and comparative advertising (“Directive“) aims to protect traders from misleading advertising and its unfair consequences and to define the conditions under which comparative advertising is permitted. The Directive repealed Directive 84/450/EEC as it had been amended but several of the latter’s provisions remained intact – the jurisprudence of Directive 84/450/EEC therefore remains relevant
This Directive is related to Directive 2005/29/EC on unfair commercial practices, which we have already analyzed in Chapter 3, with the difference that the latter protects consumers while the former protects businesses.
LEVEL OF HARMONIZATION: The Directive is of minimal harmonization and applies to “advertisements” which are either (1) misleading, or (2) unlawful comparative advertising, or both.
INTERPRETATION OF ADVERTISING: Based on the Directive, advertising is interpreted as «the making of a representation in any form in connection with a trade, business, craft or profession in order to promote the supply of goods or services, including immovable property, rights and obligations». The scope of the above interpretation is relatively broad, and it has been decided that even metatags consisting of keywords either embedded in website code or entered into a search engine, constitute advertising within its meaning. Likewise, using a domain name is considered advertising.
The reason it became necessary to control such advertisements is to protect against distortions of competition at EU level.
PROTECTION OF PROFESSIONALS: As mentioned above, the Directive is intended to protect professionals (i.e. traders) from misleading advertising by other businesses – i.e. it applies to B2B relationships which are considered unfair commercial practices. This is because, in relation to consumer protection, Directive 2005/29/EC on unfair commercial practices applies. The Directive clarifies that its purpose is to protect traders from misleading advertising and its unfair consequences for them, thus setting the minimum objective criteria for determining an advertisement as misleading.
PROTECTION OF TRADERS AND CONSUMERS: Regarding non-permitted comparative advertising, however, the provisions of the Directive apply not only to B2B relationships but also apply to B2C relationships – that is, where a trader directs comparative advertising to consumers. The way this is achieved is through article 6(2)(a) of Directive 2005/29/EC which states that any practice which creates confusion, including through comparative advertising, with products, trademarks, trade names and other distinctive features of a competitor, is misleading. In other words, the consumer must refer to article 4 of Directive 2006/114/EC to check whether the conditions of permitted comparative advertising are met.
The provision of article 4(a) of the Directive operates in a similar way in relation to B2B transactions. That is, the article in question, which states that comparative advertising which is misleading is not allowed, essentially refers to Directive 2005/29/EC and an examination of articles 6 and 7 concerning misleading commercial practices.
Therefore, the Directive:
“… will either provide conditions for such assessment under the UCPD for B2C transactions or impose additional requirements which are relevant for traders, mainly competitors, in B2B transactions.”
MEANING OF TRADER: Based on the Directive, “trader” is any natural or legal person who is acting for purposes relating to his trade, craft, business or profession and anyone acting in the name of or on behalf of a trader.
1. MISLEADING ADVERTISING
INTERPRETATION: Misleading advertising under article 4(b) is:
«… any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor»
Based on article 3, in order to assess whether an advertisement is misleading, all its features are taken into account and in particular any information concerning:
|«a)||the characteristics of goods or services, such as their availability, nature, execution, composition, method and date of manufacture or provision, fitness for purpose, uses, quantity, specification, geographical or commercial origin or the results to be expected from their use, or the results and material features of tests or checks carried out on the goods or services·|
|b)||the price or the manner in which the price is calculated, and the conditions on which the goods are supplied or the services provided ·|
|c)||the nature, attributes and rights of the advertiser, such as his identity and assets, his qualifications and ownership of industrial, commercial or intellectual property rights or his awards and distinctions..»|
2. COMPARATIVE ADVERTISING
WHAT IS COMPARATIVE ADVERTISING: Comparative advertising based on the Directive is «any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor ».
PERMISSIBLE COMPARATIVE ADVERTISING: The general perception as well as the course of jurisprudence to date, including the relevant Directive, is that comparative advertising is permissible. The reason given by the CJEU and the Directive is that it contributes:
“…in the objective presentation of the advantages of various comparable products and, therefore, in stimulating competition between suppliers of goods and services for the benefit of consumers, the conditions laid down for comparative advertising must be interpreted in the most favorable way.”
Indeed, consumers’ choices are widened when they are able to differentiate between goods – through this logic, it is legitimate to compare and promote product comparison through advertising.
At the same time, however, it must be ensured that comparative advertising is not used in a manner contrary to the rules of competition and unfairly or in a manner that affects the interests of consumers. That is, such advertising should be subject to rules that ensure transparency, prevent confusion and “motivate businesses to invest in the quality and image of their products”.
INTERPRETATION: The broad interpretation of the concept of “comparative advertising” is intended to cover all forms of comparative advertising regardless of how the comparison is viewed – that is, whether it is directly or indirectly viewed. For example, where advertising refers to a type of product (even if no specific business or product is mentioned) that refers to a competitor, it is considered comparative advertising. This applies regardless of whether the reference concerns undertakings acting in concerto – i.e. together.
COMPETITIVE RELATIONSHIP: From the above, it follows that it is necessary for a business, to be able to prove that it is a competitor of the advertiser, before making any claims against the advertised business.
Relevant is case C-381-05 where it was decided that for a case to fall within the Directive, there must be a competitive relationship between the advertiser and the business identified in the advertising message with reference to the products (goods or services) offered – that is, the existence of a relationship between businesses depends on the finding that the products they offer have some degree of substitutability – one for the other. To determine the existence of such a competitive relationship between products, the following shall be taken into account:
- the present state of the market and consumer habits as well as the possibilities of their evolution and the further potential for the substitution of products for one another which may be revealed by intensification of trade;
- the part of the Community territory in which the advertising is disseminated, without, however, excluding, where appropriate, the effects which the evolution of consumer habits seen in other Member States may have on the national market at issue and
- the particular characteristics of the product which the advertiser seeks to promote and the image which it wishes to impart to it.
CRITERIA OF COMPARATIVE ADVERTISING: However, in order to allow comparative advertising, the following conditions must be cumulatively fulfilled in their entirety:
|«a)||it is not misleading within the meaning of Articles 2(b), 3 and 8(1) of this Directive or Articles 6 and 7 of Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market (‘Unfair Commercial Practices Directive’) (7);.|
|b)||it compares goods or services meeting the same needs or intended for the same purpose;|
|c)||it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price;|
|d)||it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities or circumstances of a competitor;|
|e)||for products with designation of origin, it relates in each case to products with the same designation;|
|f)||it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products;|
|g)||it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name;|
|h)||it does not create confusion among traders, between the advertiser and a competitor or between the advertiser’s trade marks, trade names, other distinguishing marks, goods or services and those of a competitor..»|
OBJECTIVITY: An interesting case in the field of comparative advertising and the way objectivity is examined in relation to article 4(c) of the Directive, is case C-562/15 Carrefour Hypermarchés. In that case, Carrefour company (which operates various stores – including hypermarkets, supermarkets and other smaller stores), launched a television advertising campaign entitled “Lower Price Guarantee” in which it quoted comparative prices of other competing chains and offered consumers as refund, double the price difference in the event that they found any of the specific products at a lower price in a store other than Carrefour. What had been done, however, was that Carrefour had compared products of the Carrefour supermarket (and not of its smaller stores) with the smaller chain stores of its competitors – with the result that the price of Carrefour products was clearly lower.
Examining the issue, the CJEU stated that, as a general rule, article 4(c) of the Directive does not require that the category or size of the stores in which the products whose prices are compared are sold be similar. Also, comparing the prices of similar products sold in stores of a different category or size is permissible and does not oppose fair competition or the interests of consumers provided, however, that (1) the conditions of article 4 are met and (2) the advertisement compares prices objectively and is not misleading.
Where, however, the stores whose prices have been obtained are members of chains each of which has a range of stores of different sizes and categories, and the advertiser compares the prices of stores of a larger size or higher category in his chain with those recorded in stores of a smaller size or lower category of competitive chains, without this element appearing in the advertisement, this may distort objectivity.
Similarly, an objective comparison cannot be made where, what is being compared is price, while the products being compared have different qualities without these qualities being mentioned in the advertisement.
MISLEADING ADVERTISING: Regarding article 4(a) of the Directive, the CJEU decided that comparative advertising is misleading where, in any way, by act or omission, it misleads consumers it is addressed to and influences their economic behaviour or, for these reasons, it harms a competitor. It is important to mention that, although the CJEU recognized that under article 7 of Directive 2005/29/EC, restrictions on the medium in which the advertisement is shown may be taken into account for whether there is a misleading omission, in such circumstances, these limitations did not justify the omission of essential information about store differences. That is, the information should not only be clear, but should also be included in the advertising medium itself.
DESIGNATION OF ORIGIN: In relation to article 4(e), and products with a designation of origin, case C-381-05 is relevant where the question was whether beer could be compared to champagne. It was decided that for products that do not have a designation of origin, any comparison with products that have a designation of origin is not prohibited.
TRADEMARKS: With reference to article 4(d) and (f) – (h) and the use of trademarks, it should be noted that comparative advertising that makes reference to competitors’ trademarks is permissible, given that it complies with the provisions of the Directive.
However, it is impermissible (especially in relation to articles 4(f) – (h)) to use trademarks, brands or other distinguishing marks of a competitor to promote the advertiser’s products. Nor is it permissible for someone to copy a competitor’s mark and state above that the product (which the mark represents) is an imitation, since in this way he effectively usurps and unfairly benefits from the reputation of the mark.
METATAGS: Also of interest is the use of competitor brand metatags to attract consumers to websites. Such practice may be considered trademark infringement – but is there a way for it to be considered permissible comparative advertising?
The answer seems to be negative since it is difficult for the advertiser to be able to convince that the use of competitor metatags is not misleading and/or that it is not taking unfair advantage of the competitor’s trademark.
3. ROLE OF MEMBER STATES
Based on article 5 of the Directive MSs should provide appropriate and effective means to combat misleading advertising and enforce compliance with the provisions on comparative advertising in the interest of traders and competitors. Such means include:
- Right to take legal action against the said advertisement or
- File a complaint against the advertisement before an administrative authority which is competent to either decide on the complaint or refer the matter to the competent court.
EXERCISE OF RIGHTS BY ORGANIZATIONS: The above rights are exercised by anyone with a legal interest including organizations.
MSs may also decide that before a court or administrative body can take up a dispute, other existing means of dealing with complaints should first be resorted to, including means such as voluntary control of such advertising by independent bodies.
APPEAL BY A CODE OWNER: Also, the MSs can decide whether appeals can be brought separately or jointly against a number of traders in the same economic sector and whether these appeals can be brought against a code owner, if the code in question promotes non-compliance with any legal provisions. According to the Directive, a “code owner” is:
“…any entity, including a trader or group of traders, which is responsible for the formulation and revision of a code of conduct and/or for monitoring compliance with the code by those who have undertaken to be bound by it.”
The MSs, in accordance with article 5(3), are required to confer on the courts or administrative authorities powers under which they may, when they consider such measures necessary and, taking into account all the interests involved and in particular the public interest: order the cessation of misleading advertising or unauthorized comparative advertising, or initiate the appropriate legal proceedings for this purpose or, if the misleading advertisement or unauthorized comparative advertising has not yet been published, but its publication is imminent, prohibit it or initiate the relevant legal proceedings to ban this publication even if actual damage or harm, fraud or negligence on the part of the trader is not proven. Based on the same article, the MSs should ensure that the measures referred to in this paragraph can be taken within the framework of an expedited procedure, either with temporary or final effect.
In addition, in order to eliminate the continuing effects of misleading advertising or unlawful comparative advertising, the cessation of which has been ordered by a final decision, the MSs may confer on the courts or administrative authorities powers under which they may require the publication of the decision (in whole or in part in such form as they deem fit) and/or require the publication of a remedial statement.
Administrative bodies should, among other things, justify their decisions.
PROOF OF CLAIMS: Under article 7, MSs should confer powers on courts or administrative authorities to require the advertiser to provide evidence of the accuracy of the factual claims contained in the advertisement, if deemed necessary on the basis of the data of the specific case and taking into account the legitimate interests of the advertiser and in the case of comparative advertising to require that the advertiser present these evidence in a short period of time and in the event that he does not do so or where the claims are inaccurate, then these are considered inaccurate.
RIGHTS OF MSs: Based on article 8(1), MSs may adopt provisions which provide greater protection to traders and competitors against misleading advertising (but not comparative advertising as far as the comparison is concerned).