2. REDUCED OR RAISED LEVEL OF CONSUMER PROTECTION?

38 Ulf Bernitz

cars was in conformity with the 1984 Directive on Misleading Advertising. The ECJ demonstrated a tolerant attitude towards the advertising claims made and succeeded in reconciling the Directive with its ambition to keep parallel import channels open. The ECJ found it correct to advertise the cars as ‘new’, as they had not been driven on the highway, and found the claim that the cars were cheaper to be misleading only if it could be established that the decision to buy on the part of a significant number of consumers to whom the advertising was addressed was made in ignorance of the fact that the lower price of the cars was matched by a smaller number of accessories.

Another illustrative case is the Estée Lauder case20 about labelling a firming cream as ‘lifting’. The Estée Lauder Cosmetics Co argued before a German court that the use of the term ‘lifting’ was misleading because it gave the impression that the use of the firming cream would obtain results identical or comparable to surgical lifting. The ECJ, asked for a preliminary ruling, was obviously not impressed by the argument and stated, citing in particular another well-known case in the same field, Gut Springenheide:21

when it has fallen to the Court, in the context of the interpretation of Directive 84/450 [on misleading advertising] to weigh the risk of misleading consumers against the requirements of the free movement of goods, it has held that, in order to determine whether a particular description, trade mark or promotional description is misleading, it is necessary to take into account the presumed expectations of an average consumer who is reasonably well informed and reasonably observant and circumspect.22

The ECJ continued:

Although, at first sight, the average consumer—reasonably well informed and reasonably observant and circumspect—ought not to expect a cream whose name incorporates the term ‘lifting’ to produce enduring effects, it nevertheless remains for the national court to determine, in the light of all the relevant factors, whether that is the position in the case.23

As a third example, among rather many, I may mention the Hartlauer case24 on comparative price advertising. This case is about the interpretation of the provisions on comparative advertising which were made part

20Case C–220/98 Estée Lauder Cosmetics v Lancaster Group [2000] ECR I–117.

21Case C–210/96 Gut Springenheide and Tusky [1998] ECR I–4657.

22Recital 27.

23Recital 30.

24Case C–44/01 Pippig Augenoptik v Harlauer Handelsgesellschaft et al [2003] ECR I–3095.

Scope, Ambitions and Relation to Unfair Competition Law 39

of the Misleading Advertising Directive in 1997 and which will continue to be in force also in relation to B2C advertising. The Hartlauer company, a well-known price-cutter marketing spectacles in Austria, had made a direct price comparison with spectacles sold by the Pippig company at a much higher price. Without going into all the details, the ECJ, asked by the Austrian court for a preliminary ruling, basically accepted the type of comparative advertising at issue and underlined that Member States were precluded from applying stricter standards as far as the form and content of the comparison were concerned. Referring to the Estée Lauder case, the ECJ noted that the national court should take into account the presumed expectations of an average consumer who is reasonably well informed and reasonably observant and circumspect.

The cases mentioned, and many others, reveal the characteristic pro-com- petition approach taken by the ECJ and its policy not to apply too strict a standard when assessing whether or not consumers are likely to be misled. These basic features of the case law have been carried forward into the new Directive which refers to the average consumer as benchmark. The general clause on unfair commercial practices and the prohibitions in the Directive on misleading and aggressive practices all refer to the average consumer as the person likely to be mislead, having his freedom of choice restricted, etc.25 The Recitals refer to the notional, typical consumer and the benchmark is described as:

The average consumer, who is reasonably well-informed and reasonably observant and circumspect, taken into account social, cultural and linguistic factors, as interpreted by the Court of Justice.26

However, it is possible to offer extended protection to particularly vulnerable target groups, such as children and sick people. The Directive’s text speaks of clearly identifiable groups of consumers who are particularly vulnerable to the commercial practice or the underlying product because of their mental or physical infirmity, age or credulity. The need for special protection of particular groups of consumers in a weak position was particularly observed by the Nordic countries during the deliberations on the text of the Directive.27

As is explicitly stated in the Recitals, the average consumer test is not a statistical one. National courts and authorities will have to exercise their own faculty of judgement to determine the typical reaction of the average consumer.28 This is fully in line with existing case law in the Nordic

25See Arts 5(2)(b), 6(1) sentences 1 and 8.

26Recital 18.

27Recitals 18 and 19, Art 5.3.

28Recital 18, last sentences.

40 Ulf Bernitz

countries but certainly different from what has been the common approach in Germany. In German unfair competition case law consumer research pools or other statistical market surveys are very much used as evidence and it has often been considered sufficient that some 10–15 percent of the consumers, or the relevant group of specific addressees, have been misled by the advertising. However, the ECJ took a reserved attitude towards this type of evidence in the Gut Springenheide and Estée Lauder judgments and the Directive confirms this sceptical position.

Normally, traders carry the burden of proof as to the accuracy of factual claims they have made.29 However, it is for national law and courts to determine where to place this burden, and it is to be expected that differences between national procedural law in the Member States will have an impact on this issue.

Further, in order to counteract over-excessive use of fairness standards in Europe, eg in Germany, the Directive requires material distortion of consumer economic behaviour as a prerequisite for considering a commercial practice to be unfair.30 This requirement of commercial effect functions as a threshold and constitutes a de minimis rule. It requires that a commercial practice causes or is likely to cause the average consumer to take a transactional decision he would not otherwise have taken.31 The requirement excludes misleading representations of an irrelevant or petty character. Taking a tolerant position, the text of the Directive talks explicitly about:

The common and legitimate advertising practice of making exaggerated statements or statements which are not meant to be taken literally.32

Likewise, the material distortion requirement is applicable to the omission of relevant information. According to the text of the Directive omission of information is prohibited only if the omission causes or is likely to cause the average consumer to take a transactional decision he would not otherwise have taken.33

To conclude, the primary ambition of the Directive has been to continue and further develop the basic, pro-competition principles of assessment formulated by the ECJ. The Directive believes in the informed consumer, ‘reasonably observant and circumvent’ to quote the often used phrase of the ECJ, who is able to take exaggerations in advertising cum grano salis. This general approach of the Directive seems designed to reduce the level of protection offered under German unfair competition law and comparable

29Recital 21, second sentence.

30Art 5(2)(b).

31Art 6.1 first sentence.

32Art 5.3 in fine.

33Art 7.1.

42 Ulf Bernitz

proceedings.36 Orders for the cessation of unfair commercial practices shall be available.37 The wording and structure of the Directive do not support the proposition that it would be sufficient to offer competitors the possibility to submit claims to administrative authorities in charge of consumer protection.

There are certain practices, explicitly included in the Directive, which have a particularly strong link to the interests of competitors and which might be regarded as inclusions in the Directive of protection of unfair B2B practices. Thus, the use of brands, trade names, packaging, etc which mislead the average consumer about the commercial origin of the products and cause him or her to purchase the products on the basis of that misconception (passing off in a general sense) is covered by the Directive.38 The black list includes as a prohibited practice the promotion of a product similar to one made by a particular manufacturer in such a manner as deliberately to mislead the consumer into believing that the product is made by the same manufacturer when it is not.39 Obviously, the Directive includes the packaging (get-up) of products. Of particular practical importance would be misleading advertising or misleading exposure of products or their packaging in sales outlets causing consumers to purchase look-alikes.

The standard of assessment is touched upon in one of the Recitals, which declares that it is not the intention of the Directive to reduce consumer choice by prohibiting the promotion of products which look similar to other products unless this similarity confuses consumers as to the commercial origin of the product and is therefore misleading.40 This recital can be read as a pronouncement in favour of a rather restrictive view of the scope of protection offered, indicating the priority of consumer perception and thus possibly confining the application of the Directive to instances of clear deception of consumers looking for a particular brand or the like. This would be more in line with the rather restrictive view on passing-off prevailing in English law than with the elaborate German case law. In this much observed and economically important area, it will be the task of the ECJ to clarify and develop the legal standards to be applied. Most likely, the ECJ will use its present trade mark law jurisprudence on confusion and deception as an important point of departure.

Practices misleading as to the geographical origin of a product are also mentioned as a type of misleading action covered by the Directive, provided

36Art 11 on enforcement. Recital 21 first sentence has to be understood in the light of the text of the Directive itself.

37Art 11.2(a).

38See, in particular, Art 6.2(a) which comprises ‘any marketing of a product, including comparative advertising, which creates confusion with any products, trade marks, trade names or other distinguishing marks of a competitor’. See also Art 6.1(b), referring to misleading information about commercial origin of a product.

39Recital 13.

40Recital 14.

Scope, Ambitions and Relation to Unfair Competition Law 43

the representation deceives or is likely to deceive the average consumer and is likely to cause him to take a transactional decision he would not have taken otherwise.41 Thus, the Directive is not offering full protection of unauthorised use of protected appellations of origin or particular geographical denominations, a well developed particular area of law, but the provisions of the Directive might function in the future as a useful complement to existing, more detailed regulation in the field.

Misleading use of attributes, qualifications, connections to other undertakings, ownership of intellectual property rights and similar misleading actions all constitute typical examples of unfair B2B practices.42 However, they fall under the Directive as long as they are contrary to the standards laid down in the Directive of what is misleading to the consumer and having an economic effect.

Misleading use of commercial or geographical origin and misleading use of attributes, etc, are examples of types of practices considered unfair both from consumers’ and competitors’ point of view. However, misleading practices addressed only to business customers clearly fall outside the scope of the Directive. Here, as already mentioned, the less comprehensive, already existing Directive on Misleading and Comparative Advertising remains in force.

Other types of unfair B2B commercial practices, not affecting consumers and thus falling outside the scope of the Directive, are normally not subject to harmonised EC regulation. An example is denigrating statements in advertising about other businesses (normally competitors) which are not misleading and have no bearing on consumer interests.

4. THE EFFECTS OF THE DIRECTIVE ON SPECIFIC NATIONAL

PROVISIONS

The legal implications of the principle of full or maximum harmonisation adopted in the Directive are far-reaching, in particular in view of the broad definition of the commercial practices concept which, as already mentioned, includes all types of advertising, marketing and commercial communication.43 As a consequence, national legislation or established case law on commercial communication to consumers of a more restrictive character than the Directive prescribes cannot be upheld after the Directive has taken legal force, unless there is an exemption or temporary derogation. Without

41Art 6.1, in particular (b).

42Art 6.1(f) reads: ‘[t]he nature, attributes and rights of the trader or his agent, such as his identity and assets, his qualifications, status, approval, affiliation or connection and ownership of industrial, commercial or intellectual property rights or his awards and distinctions.’

43Art 2(d).

44 Ulf Bernitz

adopting this principle, it would not have been possible to establish a level playing field.

There are different exemptions and derogations which will not be covered in detail here. The most important one is that Member States are allowed a limited, six-year transition period to dismantle national provisions which are more restrictive or prescriptive than the Directive, provided the specific national measures applied are proportionate.44 The text of the Directive gives a certain, vaguely phrased, opening for prolongation of such Member State exemptions which seems to offer an opening for future negotiations and controversy. A derogation for national rules on commercial practices by the regulated professions has been admitted, without time limitation.45 In this area, different types of advertising bans still exist on the Member State level. Member States may impose more restrictive or prescriptive national rules on financial services and immovable property, ie these areas are within the ambit of the Directive but not covered by the full harmonisation principle.46

The Directive is confined to collective consumer interests, does not interfere with contract law and is without prejudice to individual actions brought by a consumer.47 Thus, the relationship between the pre-contractual marketing and advertising stage and the European contract law established by the different consumer protection Directives has been left open to be developed by case law, normally as a matter for national courts. For good reason, this legally tricky area has been found too difficult to regulate.

The Directive is without prejudice to Community or national rules relating to the health or safety aspects of products.48 Examples are national provisions in relation to alcohol, tobacco and pharmaceuticals. Thus, the Directive does not address specific advertising bans in the Member States, provided they relate to health and safety. However, such bans must be legitimate under the general Community law rules on free movement of goods and services. It follows from the case law that such national provisions must satisfy basically three tests, viz. that they are truly non-discriminatory, that they pursue important public health or safety interests and, thirdly, that they are proportionate, ie appropriate to ensure their aim and do not go beyond what is necessary to achieve such an objective.49

Specific Community directives continue to apply and take precedence within their specific fields of application (lex specialis derogat lex generalis).50

44Art 3.5.

45Art 3.8.

46Art 3.9.

47Art 3.2 and Recital 9.

48Art 3.3.

49Note, in particular, Cases C–405/98 Consumer Ombudsman v Gourmet International Products [2001] ECR I–1795 and the Bacardi Cases, C–262/02 Commission v France, C–429/02 Bacardi France v Télévision Francaise 1 (TF 1) et al [2004] ECR I–6569.

50Art 3.4.