EU-regulations

• EC Unfair Competition Law:

EU advertising law:

• Legal situation until now
• The key issues of the directive
• Implementation of the directive
• Future prospects

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• Comparative advertising in practice
• “It may be allowed to compare an apple with a pear, an apple, however must not be presented as a pear.”
• Until now, according to adjudication, comparative advertising has generally been inadmissible. Because of the European directive on comparative advertising, according to which comparative advertising is permitted, this adjudication has been rescinded. Is it a mere reversal of the burden of proof? No, such admissibility presupposes rather that the criteria that have to be met now are so tight that specialists rather speak of a mere psychological effect than of a real change. German law has meanwhile been adjusted to the directive by adopting its wording into the Act against Unfair Competition.
• I. Legal situation until now
• Any advertising claiming that one product is better than a product offered by a competitor – be it only a better price - is comparative advertising if consumers can “identify” the competitor. The directive did not alter anything as far as the definition of “comparative advertising” is concerned.
• From the point of view of § 1 of the Act against Unfair Competition, comparative advertising was considered to be generally inadmissible. There had been some exceptions, though, such as truthful and objective comparative advertising, in which services, goods or the system compared were objectively comparable, and if there was a sufficient reason for the comparison in its concrete form. The basic four conditions of permitted advertising generally included thus the following:
• the existence of a sufficient reason;
• necessary;
• truthful, and
• objective.
• II. Effects of the directive and its implementation
• 1. Key issues
• These four basic criteria have been replaced by more than fourteen requirements that a comparative advertisement has to meet in order not to be inadmissible “by way of exception”. Such a directive is directed only to the respective EU member state and not to its citizens, so that it would be the task of the legislator to implement the directive. The deadline for implementation was April 2000. According to the adjudication, though, all state agencies should comply with the directive as far as it is possible from the date of its enactment on, i.e. as of 23rd October 1997. Since § 1 of the Act against Unfair Competition forms merely a comprehensive clause which prohibits “unethical” advertising, the provisions of the directive were to determine the concept of “unethical behaviour” as soon as possible.
• 2. Implementation of the directive
• First of all, we have to make sure that the directive finds its application in a particular case, i.e. that we are concerned with a “comparative advert”. The directive defines a comparative advert as one which “in any way, either explicitly or by implication, identifies a competitor or goods or services offered by a competitor”. The scope of the term “comparative advertising” should be broad enough so as to strengthen the harmonization effect. This bears the effect, that in case of doubt the directive is supposed to be applicable. The directive is first of all concerned with comparisons which explicitly mention a competitor, as well as such which allow the consumer to identify the competitor even if his or her name is not mentioned explicitly. Within a small regional market shared by only two competitors, i.e. when it is assumed that the majority of the target group can “identify” the comparison with the competitor, already comparisons of general nature are likely to exceed the admissibility criteria. On the other hand, in a market in which a sufficient number of competitors is present, general comparisons which do not aim at certain competitors will not be regarded as “comparative advertising”.
• Having established that you are indeed concerned with a comparative advert, you must make sure that your advert complies with the preconditions contained in the directive. Otherwise it will be inadmissible.
• According to the directive, goods or services must be compared for “the same needs or purpose”. This means that competitors are generally allowed to compare either their hardware or software at a time. It is difficult though to draw a general line. One thing is certain – “apples” can be compared with “pears”, because they both serve the same needs or purpose (ingestion). Consequently it would theoretically be admissible to compare a notebook with a desktop as long as the comparative criterion emphasized in the advert were the computer-supported working as such. It would be inadmissible, however, to compare both devices from the point of view of mobility.
• Furthermore, personal comparisons are out of question. According to the directive, it would be inadmissible for a company to compare itself with its competitors from the point of view of environmental friendliness. Contrary to that, a comparison of commercial achievements of the company, such as for instance of its product called “PC” and its environmental compatibility would be permissible.
• Moreover, in order to be permitted, a comparative advert must objectively compare one or more material, relevant, verifiable and representative features of the goods and services. The directive does not specify though, when a property is “material” and “relevant”. It still remains to be seen if a distinction between “material” and “relevant” is necessary at all. The properties listed in the directive – “material, relevant and representative” – point to the fact that irrelevant secondary features may not be compared. However, the issue of “verifiability” plays a more important role as far as legal practice is concerned. It is not permitted to compare value judgements with each other – comparisons must be based on facts. Therefore, if a company promoted its software by claiming that it would still function in the year 2000, while that provided by its competitors would not, it applied an inadmissible comparative advertising since it was impossible – to definitely verify beforehand whether respective systems would still function in the year 2000 or not.
• It is permitted to use the brands of the competitor in the comparison, this comparison, however, is not allowed to create confusion in the marketplace. This means that it must be clear from a comparative advert who and what is the object of the comparison. In relation to designations of origin, the comparison must be between products having the same designation of origin. Hence, champagne can be compared only with another champagne and not with sparkling wine, but still “apples and pears” may be compared since they do not have designations of origin.
• The remaining requirements such as prohibition of imitation, prohibition of deception and prohibition of denigration had been existent in German law prior to the implementation of the directive (§§ 1, 3 of the Act against Unfair Competition).
• III. Projections for the future
• Comparative advertising generally makes good tactical sense for a person attacking a brand which enjoys a strong position in the marketplace rather than for a person defending the position of his or her brand in the marketplace. For instance, a company wanting to promote a new operating system can do so by comparing it with Windows 9X, whereas it would be pointless for Microsoft to attempt a reverse comparison.
• Many questions still have to be answered in detail, starting with legal questions, for instance whether the definition of “consumer” should be harmonized Europe-wide. Italian courts for instance state simply that the Italian population is generally not misled, whereas Germans have got accustomed to stringent compliance with the prohibition of deception under § 3 of the Act against Unfair Competition.
• Furthermore, many practical questions remain to be answered such as what minimum information a comparative advertisement must contain. There is no requirement for completeness, i.e. it is possible to compare only separate properties or only the price, it must be kept in mind, however, that consumers must not be mislead. Hence, apples can be compared with pears, but the apples of the competitor must not be presented as pears.
• The positive psychological effect of the change of the principle “comparative advertising is basically inadmissible but ...” into “comparative advertising is basically permitted when the directive is complied with” is unfortunately only the first step. The number of prerequisites that a comparative advertisement must fulfil has been increased from four to fourteen, which means that a comparative advertisement can be attacked quite easily by competitors. In any case, this applies to creative comparative advertising whereas a mere price comparison without any further information is more likely to be permitted from the legal point of view.
• In spite of this, there is still enough space for comparative advertising – across Europe.

Download of the check list on comparative advertising (Word97-Format) as a flow chart.