Commercial Practices, Misleading

From Max-EuP 2012

by Olaf Sosnitza

1. Definitions

Misleading commercial practices, or rather misleading advertising is an element of unfair competition (basic principles). Article 2(b) of the Misleading and Comparative Advertising Directive (Dir 2006/114) defines the term ‘misleading advertising’ as ‘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’. ‘Advertising’ means 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’ (Art 2(a) Dir 2006/114).

The Unfair Commercial Practices Directive (Dir 2005/29, hereinafter UCPD) uses the abstract term ‘misleading commercial practice’, which includes advertising (Art 2(d) UCPD). According to Art 6(1) UCPD a practice is regarded as misleading if it contains false information and is therefore untruthful or in any way, including its overall presentation, deceives or is likely to deceive the average consumer, even if the information is factually correct, in relation to one or more further specified elements, and in either case causes or is likely to cause him to take a transactional decision that he would not have taken otherwise.

2. Development of the law

Article 10bis of the Paris Convention for the Protection of Industrial Property, which binds the contracting states to ensure effective protection against unfair competition (basic principles), was amended by the revision conference in Lisbon in 1958 by a new para 3(iii). This paragraph introduced ‘misleading’ as an example of unfair competition. ‘Indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods’ shall be prohibited. Article 10bis of the Paris Convention also established the basis for the 1996 model provisions of the World Intellectual Property Organization on the protection against unfair competition which govern misleading practices in Art 4.

The efforts for harmonization in the European Union led to the initial Misleading Advertising Directive (Dir 84/450). This directive was modified later by the inclusion of comparative advertising (Dir 97/55) and eventually newly codified in Dir 2006/114. Originally the Misleading Advertising Directive applied to the misleading of persons carrying on a trade or business or practising a craft or profession (in the following referred to as ‘traders’) as well as to the misleading of consumers (consumers and consumer protection law). Misleading commercial practices in business/consumer relations (‘b2c’) are now exclusively governed by the UCPD (see Art 3(1) UCPD).

The prohibition of misleading advertising serves to protect both consumers and traders, whereby the latter shall not only be protected as the target group of advertising, but also in their position as competitors. At the same time the prohibition of misleading advertising also serves the public interest in undistorted competition. These different objectives are especially important when considering the background of the scope of application of the respective directives in secondary Union law, as the Misleading and Comparative Advertising Directive only protects traders from being misled (‘b2b’), whereas consumer protection is governed by the UCPD.

In addition to the basic rules on misleading advertising there also exist numerous special provisions in secondary Union law concerning misleading practices such as the Cosmetics Directive (Dir 76/768) or the Labelling Directive (Dir 2000/13). However, these sector-specific provisions do not exclude the application of the basic rules on misleading practices.

3. Details

The UCPD contains in Art 6(1) and (2) an extensive catalogue of behaviour which constitutes misleading practices. According to Art 6(1) of the UCPD, commercial practices shall be regarded as misleading if they mislead about (a) the existence or the nature of the product, (b) its main characteristics, (c) sales practices, (d) the price or the manner in which the price is calculated, (e) the need for a service, part, replacement or repair, (f) the nature, attributes and rights of the trader or his agent, and (g) the consumer’s rights or the risks he may face. According to Art 6(2) UCPD a commercial practice shall be regarded as misleading in its factual context, taking account of all its features and circumstances, if it either causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise and it involves either a confusion with any products, trade marks, trade names or other distinguishing marks of a competitor or if the trader does not comply with commitments contained in codes of conduct by which the trader has undertaken to be bound.

In the Member States of the European Union misleading advertising is regulated in different ways. Both the Misleading Advertising Directive and the UCPD grant the Member States wide discretion concerning the sanctioning of misleading advertising. The Member States are bound to ‘ensure that adequate and effective means exist to combat’ misleading advertising or misleading commercial practices (see Art 5(1) of the Misleading Advertising Directive; Art 11(1) UCPD), but they are free to put courts or administrative authorities in charge of the law enforcement. Frequently civil and criminal courts of the Member States are entrusted with the sanctioning of misleading advertising. In Germany, for example, §§ 12 ff of the Act against Unfair Competition (UWG) contain procedural rules for the enforcement of civil law claims. In case of a punishable misleading practice, § 16(1) of the UWG enables the public prosecutor to act ex officio on the basis of the code of criminal procedure. Consumers in Great Britain can initiate the sanctioning of misleading advertising through the Office of Fair Trading on the basis of the Consumer Protection from Unfair Trading Regulations 2008. Competitors can either instigate the criminal prosecution through the Office of Fair Trading (due to the Business Protection from Misleading Marketing Regulations 2008) or take legal action on a civil law basis. Moreover, an effective system of voluntary self-regulation exists as a result of the British Code of Advertising, Sales Promotion and Direct Marketing. In Italy the protection from misleading advertising is ensured by a federal administrative body (Autorità Garante della Concorrenza e del Mercato). In Finland the Konsumentenombudsmann prosecutes misleading advertising aimed at consumers; traders have to take legal action before civil courts.

Misleading advertising does not presuppose the actual occurrence of a deception of the market. It suffices if information is likely to deceive the relevant addressees. A prerequisite for the likelihood of deception is that the relevant advertising message can be subject to proof of the truth. Mere value judgments and advertising appeals cannot be tested on their truth and thus are not misleading in the above sense.

The identification of the target group is crucial for the determination if the advertising is likely to deceive and therefore is misleading. The European Court of Justice (ECJ) has construed the term ‘misleading’ by the elaboration of the normative consumer model (ECJ Case C-210/296 – Gut Springenheide [1998] ECR I-4681 and ECJ Case C-220/98 – Lifting Creme [2000] ECR I-117). This consumer model was the result of a comparative law study, in particular by taking recourse to the French and British interpretation of misleading actions. Originally, the German Federal Court acted on the assumption of a cursory, uncritical and superficial consumer; meanwhile German jurisprudence has given up this concept and follows the normative consumer model established by the European Court of Justice (ECJ).

The benchmark for the assessment whether an advertisement is likely to deceive is the perspective of a reasonably well-informed, reasonably observant and circumspect average consumer. The subject of the assessment is how a notional, typical consumer would understand the advertisement (see recital 18 UCPD). This constitutes a normative model, because it is not the actual comprehension but the expected comprehension of a notional reference person which is decisive. An advertisement is misleading if it is suitable—under consideration of the concrete circumstances of the individual case (ECJ Case C-220/98 – Lifting Creme [2000] ECR I-117)—to deceive the average consumer. On the basis of the average consumer model the numerical determination of deception emerging from empirical consumer surveys can only constitute one of several criteria for the assessment of whether an action is likely to deceive. The actual misleading or deceiving (eg of small minorities or cursory, uninterested consumers) is not actionable if in the opinion of the competent courts or administrative bodies the respective reference person would not be misled or deceived. In this case the protection from deceiving and misleading action is—as a result of a balancing of interests—second to the free movement of goods or the free movement of services and the freedom of expression of the advertisers as guaranteed in Art 10 ECHR.

In the assessment of whether a practice is likely to mislead, first the group of addressees has to be determined. This is the group of persons at whom the advertisement is aimed and whose behaviour is supposed to be influenced. Secondly, it must be asked which conception the advertising will provoke in an average person of this group. The assessment of the average consumer’s comprehension has to take into account whether the relevant group of persons has special abilities or special knowledge. The same applies to possible social, linguistic, cultural or national characteristics of the relevant audience. Furthermore, it must be taken into account that the perception of the average consumer is dependent on the category of goods or services in question (ECJ Case C-342/97 – Lloyd [1999] ECR I-3819). Advertisements for low-value consumer articles regularly attract less interest than advertisements for higher-quality or more expensive goods or services. In a further step it must be assessed whether the determined perception conforms with reality. If the average person’s perception differs from reality, it must be tested if the deception is relevant. This is the case if the deception refers to factors which are likely to influence the economical behaviour of the addressees. Deception as to circumstances which are completely irrelevant for the consumer’s decision thus do not have to be considered.

The reference consumer model of the ECJ is implemented differently in the Member States of the European Union. In part the Member States act on the assumption of a cursory consumer having less then average competence who is confronted with the advertisement without any expertise of his or her own. Some Member States assume a highly critical and sceptical consumer with substantial expertise as the point of reference. Other consumer models also exist in which the presumed capability of the average consumer falls between these two extreme poles.

If the advertisement is not aimed at consumers but at traders, their view as the addressed group is relevant, whereas analogous to the consumer model a normative trader model is applied. Generally, for professional circles one can take as a basis a higher level of knowledge, attentiveness and comprehension than for consumers because traders can consider the given information in the light of their background, experience and knowledge of the specific market conditions.

Literature

Tobias Lettl, Der lauterkeitsrechtliche Schutz vor irreführender Werbung in Europa (2004); Christian Twigg-Flesner, Deborah Parry, Geraint Howells and Annette Nordhausen, An Analysis of the Application and Scope of the Unfair Commercial Practices Directive, A Report for the Department of Trade and Industry (18 May 2005), <www.berr.gov.uk/files/file32095.pdf>; Giuseppe Abbamonte, ‘The Unfair Commercial Practices Directive’ (2006) 12/3 Columbia Journal of European Law 695; Frauke Henning-Bodewig, Unfair Competition Law. European Union and Member States (2006); Geraint Howells, Hans-Wolfgang Micklitz and Thomas Wilhelmsson, European Fair Trading Law—The Unfair Commercial Practices Directive (2006); Hans-Wolfgang Micklitz, in Münchener Kommentar zum Lauterkeitsrecht, vol 1 (2006) EG F; Jules Stuyck, Evelyne Terryn and Tom van Dyck, ‘Confidence through Fairness?’ (2006) 43 CMLR 107; Roger W de Vrey, Towards a European Unfair Competition Law. A Clash Between Legal Families (2006); Reto M Hilty and Frauke Henning-Bodewig (eds), Law Against Unfair Competition—Towards a New Paradigm in Europe? (2007); Henrik Saugmandsgaard, ‘The EU Consumer Policy Framework: Mission Nearly Accomplished?—New Rules on Consumer Protection Cooperation, Unfair Commercial Practices and Applicable Law’ in Liber amicorum en l’honneur de Bo Vesterdorf (2007) 745; Ansgar Ohly, ‘Introduction ch B’ and Olaf Sosnitza, ‘§ 5 UWG’ in Henning Piper, Ansgar Ohly and Olaf Sosnitza (eds), Gesetz gegen den unlauteren Wettbewerb (5th edn, 2010); Helmut Köhler, ‘Introduction UWG’, ch 4 and §§ 8 ff UWG in Helmut Köhler and Joachim Bornkamm (eds), Gesetz gegen den unlauteren Wettbewerb (29th edn, 2011).

Retrieved from Commercial Practices, Misleading – Max-EuP 2012 on 06 December 2022.

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