Prof. Dr. Susanne Augenhofer LL.M. (Yale), LL.M. (FU Berlin)

1. Prof. Dr. Susanne Augenhofer LL.M. (Yale), LL.M. (FU Berlin) Humboldt University Berlin, Germany

2. Unfair Competition Law False advertising,false representation, false publicity/propagandaKunming, 14th October 2010

3. Unfair Competition Law I. European legal frame workII. German legal frame workIII. ExamplesIV. Conclusions

4. Unfair Competition Law „To things of sale a seller’s praise belongs.“Shakespeare, Love’s labour’s lost, Act IV, Scene III

5. European legal framework – History unfair competition law was notmentioned in the treaty (unlike antitrust law) jurisprudence by the CJ on fundamental freedoms

6. 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

7. UCL in MS before EU legislation different concepts of unfair competition law in MS, e.g. concerning the notion of the average consumer

8. European legal framework – History Directive 84/450/EEC on misleading advertising protection of consumers, businesses and public interest

9. Example of comparative advertising www.eatmedaily.com

10. European legal framework – History Directive 84/450/EEC on misleading advertising amended by Directive 97/55/ECon comparative advertising protection of consumers, businesses and public interest

11. 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

12. European legal framework – current legislation UCPD maximum harmonisation Directive 2006/114/EC concerning misleading and comparative advertising minimum harmonisation, except rules on comparative advertising

13. 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.”

14. DegreeofHarmonisation • Minimum harmonsiation MS have to meet the threshold, but can go further • Maximum harmonisation MS have to meet the threshold, cannot go further

15. 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

16. UCPD – Objective “to fully harmonise the law on unfair commercial practices harming consumer interests” but does not deal with:

17. 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.

18. 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

19. 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?

20. 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”.

21. CJ on salespromotions 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 sales promotions are governed by the UCPD therefore only prohibited if unfair under the UCPD

22. Advertising self-regulation advertisingindustry commits itself to comply with certain rules self-regulation-organisations exist in almost all MS, but with different importance coordinationthrough EASA (European Advertising Standards Alliance)

23. Big general clause Article 5 UCPD – Structure Small general clause Misleading UCP Articles 6,7 Small general clause Aggressive UCP Articles 8,9 “Black list” Annex I

24. Unfair Competition Law II. German legal frame work 1. History 2. Current legislation 3. Excursion: advertising self-regulation

25. German unfair competitionact (UWG) first regulation in 1894 first code from 1909 new code in 2004 amended in 2008 in order to implement the UCPD

26. UWG – Scope today protection of : competitors consumers other market participants and the public as such (cf. § 1 UWG)

27. UWG – Structure General clause § 3 Examples of unfair UCP § 4 Misleading UCP §§ 5, 5a Comparative advertising § 6 Unreasonable nuisance § 7 “Black list” Annex I

28. 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”

29. UCPD – UWG main difference II: UWG generally governs questions of taste and decency

30. 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)

31. 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”)

32. 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

33. 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

34. 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.”

35. 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

36. 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.”

37. UCPD – misleadingcommercialpractices Misleading actions (Article 6) Misleading ommissions (Article 7)

38. Misleadingactions (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

39. Misleadingactions (Art. 6 no. 1) • False information regarding: • existence or nature of product • main characteristics of product • price • trader’s identity • consumer’s rights

40. Averageconsumer According to the CJ the average consumer is “reasonably well-informed and reasonably observant and circumspect”, taking into account social, cultural and linguistic factors

41. Transactionaldecision (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

42. Misleadingactions (Article 6 no. 2) providing generally misleading information creating confusion with competitors’ products failing to honour firm and verifiable commitments made in a code of conduct

43. Misleadingomissions (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, ambiguousoruntimelymanner; or fails to identify the commercial intent of the commercial practice if not already apparent from thecontextand

44. 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

45. 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)

46. 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

47. UCPD – generalclause (Article 5) “A commercial practice shall be unfair if: it is contrary to the requirements of professional diligence, and it materially distorts or is likely to materially distort the economic behaviour with regard to the product of the average consumer…”

48. 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“

49. Iphone I (Higher Regional Court Hamburg, filenumber5 U 185/08) „Free internet“ – but VoIP excluded court: misleading CP www.electricpig.co.uk

50. Opel up to 160.000 km = lifelong guarantee? www.opel.de