Competition Advertising in German Law!

by **Admin** Mon Dec 07, 2009 2:12 pm

For Competition law

Comparative Advertising in German Law

Competition is a constituent part of the economic organization of the Federal Republic of Germany. It accommodates the success of the victorious as well as the failings of the less fortunate. In order to prevent the system degenerating into a fight of all against all, the law of competition has invented an important corrective, namely the idea of performance competition (Leistungswettbewerb).

The Act against Unfair Competition on 7 June 1909 (Gesetz gegen den unlauteren Wettbewerb UWG) determines that the advantages a competitor wishes to obtain in competition should be based exclusively on his own achievements, and not through acting unfairly.

Advertising fits in perfectly well with this juridical system. It is unnecessary to underline here that it is not enough to have a superior product if a company wants to beat its competitors. Top performance must necessarily be accompanied by efficient advertising and well-organised marketing.

Competition law regards advertising as an essential element of free competition and accepts it in the interest of market transparency and the free formation of prices.

Publicity being the most efficient means of increasing sales to the disadvantage of competitors, the temptation to abuse it is naturally quite strong. This is why the principle of free competition imposes certain limits on advertising. Free competition is affected as soon as the advertising target is influenced by false, deceptive or ambiguous information, or is misled into irrational purchasing decisions. Here advertising becomes the contrary of what the legislator wants: it does not contribute to market transparency or act as a corrective to price fixing; instead it disinforms,veils market conditions or even leads to illogical decisions being made by a purchaser.

The juridical phenomenon of comparative advertising is regulated by the provisions in paragraphs 1 and 14 UWG. In order to systematize the large area of application of these legal provisions, legal doctrine has introduced a distinction between “personal” advertising (persönliche Werbung – referring, for example, to the nationality of a competitor, his family affairs, his religion,state of health, character etc.) and “comparative” advertising in the stricter sense.1

Personal advertising is considered to be unfair from the moment it unwarrantedly impinges on the competitor by a disregard for the truth of statements in the advertisement. Comparative advertising in the narrower sense can include a competitor referring to the products or services of another competitor either “positively” by trying to profit from the latter’s good commercial standing, or with the specific negative intention of discrediting the competitor or his products in the eyes of his customer (for example, “Compared to our products, everything else is low tech!”).

The same rule applies to cases – even where the statements are materially true – which depreciate or denigrate one or more specific competitors by using global assertions (for example, “We refrain from expensive advertising, as we have always preferred to use what we save to improve our products!”). Positive parasitical comparative advertising is prohibited because it is seen as unfair exploitation of the good standing of a third party.2

In the case of critical (negative) comparative advertising, German law, like French and Belgian law, has decided to adopt a system of absolute prohibition.3 This principle, however, is not applied in a rigid manner. German jurisprudence has, on the contrary, developed a flexible system which, however, unfortunately does not sufficiently ensure an unequivocal administration of the law. Following a number of decisions by the German Federal Supreme Court (Bundesgerichtshof (BGH)), the highest authority on this subject, advertising that refers critically to services or products of one or more particular competitors is only permissible where it is justified by a sufficient and creditable motive (“hinreichender Anlass”);4 where the assertions, in terms of their nature, style and tone, confine themselves to what is absolutely necessary to the safeguarding of legitimate interests; and where they do not go beyond a true and objective discussion.5

Judicially, the crucial point of comparison advertising can be seen in the concept of sufficient and creditable motive (“hinreichender Anlass”). German case law has established that this concept must be interpreted restrictively, because each advertisement that underlines the qualities of a company’s own products or services by accentuating the detects or disadvantages of those of its competitors is deemed to be fundamentally contrary to the idea of performance competition.6 In the interests of a practicable application of the concept “hinreichender Anlass”, it has been established that the mere desire of a merchant to sell does not suffice to justify comparative advertising criticizing particular competitors.7 Approved comparative advertising must be set in an exceptional situation in which the interest in publishing it prevails over the competitor’s interest in not being the subject of it. Such an exceptional situation will only be found if:
• the consumer urgently needs to receive objective information; or
• comparative advertising is needed to rebut the wrongful attach of a competitor, who, for instance, propagates false assertions or statements likely to mislead consumers in respect of a foreign product.
In all cases – according to the case law – it is essential that the declarations made confine themselves in nature and scope to what is strictly necessary, first to inform the consumer, and second to ward off an attack.
The first instance cited above (information for the consumer) may be subdivided as follows:
• comparison at the request of clients (neither provocated nor manipulated, of course),
• comparison of different systems or products or services (for example, comparison of diesel and petrol engines; of alcoholic and non-alcoholic drinks; of mass-produced and handmade products; of gas heating and oil-fired heating and so forth),
• indispensable comparison, for example for the protection of consumers from danger caused by a competitor’s products, or information about real technical progress (for instance comparison of cars with and without catalytic converters).

The right to rebut must, in each individual case, serve exclusively to ward off a competitor’s attack. The rebuttal must remain objective and in reasonable proportion to the attack, and must be moderate in its nature, tone and extent.

In all these cases, the notion of comparative advertising presupposes that there is a comparison with one or more specific competitors. Where advertising does not refer either explicitly or tacitly to the products or services of one or more defined enterprises, there is no “comparison”.
Furthermore, where comparative advertising does not characterise competitive products as being objectively inferior, such comparison lacks depreciating elements and cannot be restrained.8

It can provisionally be concluded that German law basically prohibits comparative advertising on principle. Nevertheless, it admits – within narrow limits – a number of interesting exceptions. It is possible to detect in recent decisions – with reservations – a certain tendency to greater tolerance towards comparative advertising. The courts seem to be developing – following an important strand in legal writing – a certain tendency to accord to enterprises the right to grapple with the products or services of their competitors on condition that the exercise is guided by an objective and acceptable motive, and that comparative advertising, in regard to its content and form, stays within the limits of what is necessary and appropriate.However, this jurisprudence has not so far managed to provide sufficiently clear, certain and practicable definitions of these permissible exceptions. It is not clear at what point the motive for comparative advertising is considered acceptable (“hinreichender Anlass”) and what “necessary and appropriate” means in this context.9 So long as the law is not more specific and clearly defined, it is advisable to refrain from practising comparative advertising in Germany. There is considerable divergence among national provisions within EEC Member States.
Whereas English law, for instance, is quite tolerant towards comparative advertising, German law – like French and Belgian – can be considered hostile in principle to such activity.

The EEC Directive of 1984 (84/450) on Misleading Advertising, while aiming to harmonise the legal rules and regulations of the Member States relating to this kind of advertising, whether comparative or not, did not lead to a rapprochement between German law and other diverging systems. This was due to the fact that the Federal Government took the view that the German legal provisions were in perfect accord with the demands of the Directive. However that may be, it cannot be denied that the consequences of German law could impede merchants from countries with more liberal regulations in the field of unfair and comparative advertising, who wish to accompany their exports to Germany by the sort of publicity campaigns they are used to practising in their home countries. Hence the question arises whether German law does not infringe Article 30 of the EEC Treaty, insofar as it, in effect, quantitatively limits imports. Interested groups are discussing this problem intensively and expect that the European Court of Justice will soon give an opinion as to whether the German situation, as reflected in the courts’ decisions, does or does not harmonise with the EEC Treaty.
Axel Mittelstaedt (Attorney-at-Law)

Cologne
1 See Baumbach/Hafermehl, Wettbewerbsrecht, 16th ed. 1990, § 1 UWG items 329 ff., especially 330, 365, ff., 430 ff.; also von Gamm, Wettbewerbsrecht, 5th ed., 1987, ch. 22.
2 See Baumbach/Hafermehl, item 331.
3 See Francq, „Le statut de la publicité comparative dans les pays de la CEE. Etude sommaire de droit comparé », in : E
Balate (ed.), Unfair advertising and comparative advertising/Publicité déloyale et publicité comparative, Brussels, 1988 ;
Francq, Die vergleichende Werbung, Gewerblicher Rechtsschutz und Urheberrecht, GRUR Int., 1977, at pages 93 ff.
4 See von Gamm, ch. 22, item 40.
5 See BGH GRUR 1962, 45 « Betonzusatzmittel » ; BGH GRUR 1969, 283 « Schornsteinauskleidung » ; BGH GRUR 1970,
422 « Tauchkühler » ; BGH GRUR 1984, 823 « Charterfluggesellschaften ».
6 See von Gamm, ch. 22, item 35.
7 See Baumbach/Hefermehl, item 368.
8 BGH GRUR 1987, 49 “Cola Test”.
9 See Strothmann, Tatbestandsvoraussetzungen und Unlauterkeitskriterien der kritisierenden vergleichenden Werbung,GRUR 1988, at pages 588 ff.