New ECJ ruling on misleading comparative advertisement

Under certain circumstances, advertisements with comparisons of sales prices must contain information about the precise sources of the products compared.

In a decision dated February 8, 2017, the European Court of Justice (ECJ) defined another case of (prohibited) misleading advertisement. When product prices are compared to those of competitors, it will now be necessary to ensure that the “type” of store from which the compared offers were sourced is similar in nature and size to that of the advertiser. If the stores differ in a way that may influence general pricing structures, details on the respective sources have to be clearly communicated.

Background of the decision

The French supermarket chain Carrefour had promoted a “lowest-price guarantee”: Prices for 500 products offered by Carrefour were compared to the prices of such products at competing retailers. If a consumer found one of the products offered at a lower price than Carrefour’s, he was promised to be reimbursed twice the price difference. The advertising focused exclusively on the prices in the “Hypermarkets” of Carrefour, i.e., particularly large stores with a wide range of products and a favorable price structure. The compared prices were taken from offers of “Supermarkets” of the competing retailers, however, which market a more limited range of products at often higher prices compared to the “Hypermarkets”.

A French court enjoined Carrefour’s campaign, finding it violated the principle of objectivity in advertising: The consumer was not clearly informed of the comparative benchmark applied, namely the different and non-comparable types of markets the advertised products were sourced from. Carrefour appealed.

Since the applicable legal norms regulating competition are based on harmonized European law and depend on its interpretation, the French Court of Appeals referred the following questions to the ECJ for clarification:

  1. Is a price comparison for products permitted only if the goods are distributed in stores of the same size or nature?
  2. Must the information that products, the prices for which are compared in an advertisement, were sourced from stores of a different “type” or size mandatorily be communicated to the consumer and, if so, in what form must such information be conveyed?

Decision of the Court of Justice (Judgment dated February 8, 2017, case C-562/15)

The Court noted that the relevant standards for comparative advertisement do not stipulate that the retail stores offering the compared goods have to be of the same nature or size. A consumer might also benefit from a comparison of prices offered by stores of a different type or size wherefore such comparison might enhance competition. As always, however, the principles of objectivity and transparency would have to be respected in any such comparative advertisement. A comparison of prices must not be misleading.

The Court opined that a risk of deception could exist if (i) the competitors concerned maintained retail stores of different sizes and nature (e.g. “Hypermarkets” and “Supermarkets”), and (ii) the prices compared in the advertisement did not relate to offers of stores of a comparable nature (iii) without the different sources being evident from the advertising. The Court shared the Advocate General’s opinion that “the prices of normal consumer goods could vary according to the nature and size of the store” (Judgment, margin-no. 27). A comparison could therefore be asymmetrical and artificially generate or intensify the impression of a price difference.

In a case in which the competitors concerned maintain stores of different nature and sizes, consumers would assume that the advertisement of a price difference takes into account all types of stores the competitor maintains and that the price differences (i.e. benefits) advertised would therefore apply vis-à-vis all of the competitors’ stores. As this assumption may not necessarily hold true, however, consumers may take an ill-informed purchase decision.

Such misapprehension could in the Court’s opinion be prevented, however, if the advertiser indicated the sources of the compared products and corresponding prices. The consumer would then know that he cannot necessarily assume the same price-benefit when frequenting other stores than the ones subject of the advertisement. The Court stated that such information must not only be provided in a clear manner, but furthermore must be included in the advertising message itself, to satisfy the requirement that the advertising be objective.

Relevance of the decision

This decision of the Court is relevant in several respects. The court confirms that, even in the context of a “simple price comparison”, care must be taken to ensure that the prices advertised are actually comparable. The specific markets and conditions under which the relevant products are sold may determine the level of information an advertisement needs to convey. This may still seem rather clear.

Less clear, however, is the Court’s statement that any information about the potential different nature or size of the stores whose prices are compared must be “contained in the advertising message itself”. As is often the case, the Court does not elaborate on the exact meaning of this criterion. Clarification can neither be found in the Advocate General’s opinion preceding and preparing this decision. The question therefore arises as to whether this criterion is supposed to implement a stricter test for the admissibility of comparative advertisements in cases such as the one at hand: So far “asterisks-disclaimers”, were oftentimes considered sufficient to provide consumers with additional information and to limit or exclude the risk of false interpretations of an advertisement. Whether in constellations such as the instant one this route is still available after the Court’s decision is not quite clear. It might now be necessary to include further details of a comparison in the main claim or at least in such close proximity that it can be considered “part of the main claim”. Both approaches will surely not resonate well with the advertisement agencies or marketing creatives.

It is the national courts’ objective to further define and apply the ECJ’s decision and criteria stipulated therein. The impact of this decision can therefore not yet be predicted. Companies and advertisers are well-advised, however, to critically scrutinize comparative advertisements based on prices. Depending on how “aggressive” a campaign is, it may be prudent to have alternative campaigns handy until further (national) court decisions show how this ECJ decision is implemented.

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Tags: #ECJ, #Intellectual Property

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