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

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

3. I. European legal frame work II. German legal frame work III. Examples IV. Conclusions Unfair Competition Law

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

5. European legal framework – History unfair competition law was not mentioned in the treaty (unlike antitrust law) jurisprudence by the CJ on fundamental freedoms

6. 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 Member States (MS) before EU legislation

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

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/EC on 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. “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.” Directive (Article 288 TFEU)

14. Minimum harmonsiation MS have to meet the threshold, but can go further Maximum harmonisation MS have to meet the threshold, cannot go further Degree of Harmonisation

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. 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 – Objective ATTENTION

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. “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”. Commercial Practices (Article 2 lit. d)

21. 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 CJ on sales promotions

22. 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)

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

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

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

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

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

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. 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) Self-regulation in Germany

31. “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

32. 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 – Structure

33. 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”

34. “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 I

35. „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 II

36. “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 – “black list” Examples III

37. Misleading actions (Article 6) Misleading ommissions (Article 7) UCPD – misleading commercial practices

38. 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)

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

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

41. “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 Transactional decision (Article 2 lit. k)

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

43. 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)

44. 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 (Article 7)

45. 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) Misleading omissions – invitation to purchase (Article 7 no. 4)

46. 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 – aggressive CP (Article 8)

47. “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 (Article 5)

48. “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“ UCPD – general clause “professional diligence” (Article 2 lit. h)

49. „Free internet“ – but VoIP excluded court: misleading CP Iphone I (Higher Regional Court Hamburg, file number 5 U 185/08) www.electricpig.co.uk

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

51. 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 Conclusions

52. Thank you for your attention! Prof. Dr. Susanne Augenhofer LL.M. (Yale), LL.M. (FU Berlin) Humboldt University Berlin, Germany susanne.augenhofer@rewi.hu-berlin.de