The Protection of Consumers and Competitors against Unfair Commercial Practices Chisinau, November 27th/ 28th, 2008

The Protection of Consumers and Competitors

against Unfair Commercial Practices

Chisinau,

November 27th/ 28th, 2008

The fairness of competition is important for

Consumers

Competitors

General Interest

(in the existence of competition)

Control of the behaviour of competitors in the market

Problem:

Each competitor wants to sell his goods or services.

Some competitors may try to increase their sales by using unfair

methods which are detrimental to competition, affecting in an unfair

way the chances of competitors and harming the interests of

consumers.

Directive 2006/114/EC – protection of competitors

Directive 2005/29/EC – protection of consumers

Before Directive 84/450/EEC and Directive 97/55/EC

The manufacturer/ trader has to somehow address the

consumers. He has to make a representation in some form to

promote his goods or services. The representation is referred

to as advertising.

To sell goods or services, the manufacturer/ trader has to get

the attention of consumers.

Misleading advertising

„Misleading advertising“ means 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.

Consumer

Can be the end-consumer, but also a specialist who wishes to

obtain goods and services.

The average end-consumer, as interpreted by the European Court

of Justice, is „reasonably well-informed and reasonably observant

and circumspect“.

Until the early 1990‘s – at least in Germany – the average

consumer was always regarded as being quick and hasty and not

very observant.

The reasonably well-informed and reasonably observant and circumspect consumer

The average consumer test is not a statistical test. A case-by-case

consideration needs to be done.

National courts and authorities will have to exercise their own faculty

of judgement to determine the typical reaction of the average

consumer in a given case.

Specialist

End-consumer

Every day/ or mass products

Luxury goods

Elderly people

Children/ Teenager

Particular groups

Misleading Advertisement

and

causes or is likely to cause him to take a transactional decision that

he would have otherwise not taken.

A commercial practice is misleading if it either:

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

The criteria are objective so that there is no need to prove that a

consumer was actually misled. The possibility of deception alone

can be considered misleading, if the other elements are present as

well. There is no need to prove the financial loss.

Misleading commercial practices prevent the consumer from

making an informed and thus efficient choice.

Misleading commercial practices may affect the sale figures of

competitors as the consumer might – due to the misleading

advertisement – chose the advertiser and buy his goods or

services, even so his offer is in truth less good than the offer of the

competitor.

Misleading Advertisement

The average consumers thinks

that if a trader shows in an

advertisement goods in an eye-

catching way, that the price

shown in the advertisement

covers all the displayed goods.

Misleading about the extent/ complexity of the offer

Misleading due to Bluff packaging

All the relevant price elements have to be given

Misleading about the price

„Now only offer“ is misleading, when price is not reduced.

„Instead offer“ is misleading, when price was already reduced

some time before and the time gap is remarkable.

129,90 EuroNow only 69,90 Euro

Instead 89,90 Euro

An eye-catching advertisement makes the consumer believe that

the goods are on stock and that he can take them right away

home.

Misleading about the number of goods on hand

The expectation regarding the time, in which the goods should be

on hand, depends on the kind of goods and of the manner (form

and circulation) of the advertisement.

The customer is mislead, when due to an inadequate number of goods on hand, his buying desire can not be satisfied.

Additionally and to the disadvantage of competitors, the risk is

given that the customer will buy instead, once he is in the store, a

different product.


„while stocks last“, „short supply“, „delivery only on order“, „delivery reserved“


Starting day


If there is no remark on the day, when the offer starts, the consumer will think – at least when the advertising is done in an eye-catching way – that the goods/ or services represented in the advertisement are right away available

Judgement can not be done with a schematically view.

Expectance of consumers is conditioned by the circumstances of

each individual case, especially by the content and extent of the

advertisement, the kind of advertised goods and the position of

the advertising company.

Omissions refer to the fact that consumers need information to

make informed choices. A trader must provide material information

that the average consumer needs.

Misleading because of omission

It is misleading to:

- omit material information that the average consumer needs,

according to the context, to take an informed transactional decision;

- hide or provide material information in an unclear, unintelligible,

ambigous or untimely manner.

„A good breakfast made from healthy wheat.“

Misleading because of omission

The cerials of Kellog‘s contain 15 % sugar.

It is not misleading that the advertiser does not

mention the sugar. The consumer knows that eating

food can produce tooth decay. The percentage

contained in the product of the advertiser is not that

high that it would increase the normal risk.

Misleading about impact on health?An advertiser does not have to point out the less

advantage features of his product. This is

especially true, if there is not much time or room

for the advertising, e.g. a tv-spot or an advertising

in a newspaper.

The obligation to point out a disadvantage is only given, if the

consumer will - by not informing – be deceived about a feature,

which is able to influence his decision in buying the product. But

when considering, if an obligation on informing is given, also the

legitimate interests of the manufacturer/ trader have to be

considered.

Advertising with leading position

1. The statement must be true.

2. The distance given to the competitors must be clear and

considerably.

3. There must be the prospective that the leading position is

somewhat consistent and continuing.

The advertising is not misleading, when the statement is just an

exaggeration, which is typically found in advertising.

Often done using the superlative – e.g. „the best“, „the biggest“

„Kellogg‘s - The best every morning“

Advertising with leading position?

No: The slogan is open for interpretation. It does

not say that Kellogg‘s breakfast is the best food

which one can have for breakfast.

One can also not verify the content as being true.

It is a subjective valuation.


„Philishave – the most sold shaver in Europe“


Competitor claimed that this statement, when done in an

advertising in Germany, would be misleading as the

electrical shaver „Philishave“ is not the most sold

electrical shaver in Germany. The German consumer

would think that the advertiser (Philips) also has in

Germany the leading position.

Philips held during the 4 years before the case came to court 46 to

48 % of the European market. The competitor ranging behind Philips

held only 37 to 39 %.

In Germany, Philips held in fact only 25 %. The German market

leader (the claiming competitor) held 55 %.

Philips was allowed to claim that it is the market leader in

Europe, as the claim was true having a clear (10 %) and

enduring (for at least four years) lead.

„Philishave – the most sold electrical shaver in Europe“

The court found that it was not misleading to claim the

European leadership, even so Philips was not the market

leader in Germany. The reasonably well-informed and

reasonably observant and circumspect German

consumer will not take the information on Philips being

the market leader in Europe also as an information about

its position in Germany.


„Undue influence“ means „exploiting a position of power in

relation to the consumer so as to apply pressure, even without

using or threatening to use physical force, in a way which

significantly limits the consumer's ability to make an informed

decision.“

A practice is considered aggressive, if the average consumer's freedom of choice or conduct is significantly impaired.

Agressive advertising

YES: If a consumer is already indebted to a trader and behind

with payments, the trader would be using undue influence if he

said he would reschedule the debt on condition that the

consumer bought another product.

Undue influence?

NO: Offering an incentive to a consumer, such as a free bus to

an out-of-town store, or refreshments while shopping, is not

undue influence. The consumer's ability to make an informed

transactional decision would not be impaired. In the same way, it

would be acceptable to offer a sales promotion.

Some practices may not fall under the criteria of „misleading“ or

„aggressive“ although they are unfair. There is a general clause

included in the Directives which will ensure that the new

legislation withstands the test of time.

A commercial practice – which is not misleading or aggressive –

will still be regarded as unfair, if it meets two cumulative criteria:

1. The practice is contrary to the requirement of professional diligence.

2. The practice materially distorts or is likely to materially distort the average consumer's economic behaviour.

General clause

Professional diligence is „the special skill and care which a

trader may reasonably be expected to exercise, commensurate

with honest market practices and/ or general principle of good

faith in the trader's field of activity.“

The criterion „to materially distort the economic behaviour of

consumers“ means using a commercial practice to appreciably

impair the consumer's ability to make an informed decision,

thereby causing the consumer to take an transactional decision

that he would not have otherweise taken.

Comparative advertising

Comparative Advertising

Comparative advertising may be very precious for the consumers

and to their advantage as it can give them valuable information.

Besides, it also challenges the manufacturer/ traders in trying

harder to please the consumer.

Because of an unfair one-sidedness, the comparative advertising

would distort competition, be detrimental to competitors and have

an adverse effect on consumer choice.

For the advertiser, comparative advertisement is an effective

marketing tool as he can show the advantages of his goods or

services.

BUT: A comparison done by a competitor can be less reliable than

those done by a neutral person. There is the risk of deception of the

consumer by an unfair one-sidedness.

Comparative Advertisement

3 (competing) interests

For the advertiser,

comparative advertisement is

an effective marketing tool as

he can show the advantages

of his goods or services.

For the competitor, being

compared, the comparison

can damage or take unfair

advantage of his reputation.

For the consumer, the

comparison of goods can be

useful information.

Directive 2006/114/EC

concerning comparative advertising

Safeguard that a comparison done by a competitor is objective.


„Comparative Advertising“ means any advertising which

explicitly or by implication identifies a competitor or

goods or services offered by a competitor.

This is a broad definition covering all forms of

comparative advertising, so that, in order for there to be

comparative advertising, it is sufficient for there to be a

statement referring even by implication to a competitor

or to the goods or services he offers.

4.3 Liter3.2 Liter

1.8 Liter2.1 Liter

Radio Advertisement of BMW

Therefore it is sufficient, if, due to the circumstances, the consumer

knows which competitor is meant, e.g. calling the home town of the

competitor.


Comparative advertising shall be permitted when …

it objectively compares one or more material, relevant,

verifiable and representative features of those goods and

services, which may include price.

Pippig Augenoptik versus Hartlauer

5.785,- Austrian Schilling


One single price of one single good

Pippig Augenoptikversus

Hartlauer



with lenses from

with lenses from

Comparative Advertising shall, as far as the comparison is concerned, be permitted when it is not misleading.

The competing goods being compared must meet the same needs

or be intended for the same purpose, that is to say they must display

a sufficient degree of interchangeability for consumers.

De Landtsheer Emmanuelversus

Comité Interprof. du Vin de Champagne,Veuve Clicquot

Belgian Beer

Pairs of products have to be compared

The competing goods being compared must meet the same needs

or be intended for the same purpose, that is to say they must display

a sufficient degree of interchangeability for consumers.

Pairs of products have to be compared.

But the pairs do not have to be viewed separately. The

advertisement can relate collectively to two or more sets of such

comparable products.

Colruyt versus Lidl

Two major grocery stores

„On the basis of our average price index of the year 2003, we are

able to state that a family, spending 100 Euro the week at Colruyt,

saved 155 to 293 Euro while not buying at Aldi, Lidl, Makro.“

Advertising of Colruyt on January 19th, 2004:

A: 1,98 Euro

Store B: 19,98 Euro

The selection has to consist of products which, when viewed

individually, satisfy the requirement of comparability.

Store A: 16,98 Euro B: 2,28 Euro

Comparison relating to a selection of comparable products

Trade marks, trade names etc. of competitors may be used for an

objective comparison.

OEM product number Katun product number Description of product Model

Toshiba versus Katun

The indication of OEM numbers constitute a positive statement that

the two products have equivalent technical features.

Katun = Supplier of spare parts and consumable items

Toshiba = Manufacturer of copying machines and its

spare parts and consumable items

Original equipment manufacturer

A comparison of material, relevant, verifiable and representative

features of the goods is given.

Thank you for your attention!

Documents

The Protection of Consumers and Competitors against Unfair Commercial Practices Chisinau, November 27th/ 28th, 2008