Optometrist chain Apollo Optik was pleased when the Karlsruhe court confirmed that schemes offering customers rewards for introducing friends were no longer banned in principle. But then there was disappointment.
Topic: Viral Marketing / Customer Referral Advertising
Who: Apollo Optik (optometrist chain)
Where: The Federal Supreme Court, Karlsruhe, Germany (File: I ZR 145/03)
When: 6 July 2006
The optometrist chain Apollo Optik had distributed leaflets to its existing customers, offering them a choice of awards (electric kettles, clinical thermometers, travel accessories, etc., each worth around € 30) for each new customer referred to Apollo who purchased lens glasses of a total value of at least € 100.
The plaintiff attacked the campaign, claiming Apollo was illicitly using laypersons for advertising purposes ("Laienwerbung"). In the past, the Federal Supreme Court hat declared similar campaigns illegal on the basis of the Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb, UWG), stating that such referral advertising would commercialize private relationships. Furthermore, according to the court, laypersons were likely to use dubious methods to obtain the reward, therefore clouding potential customers' judgement.
In the case at hand, the Supreme Court changed its approach to layperson advertising. It expressly gave up the former restrictions, stating that henceforth it would regard layperson advertising as illegal only when additional specific circumstances suggested an act of unfair competition. Pointing out the recent abolition of the Illegal Rewards Act (Zugabenverordnung) and the Sales Discount Act (Rabattgesetz), the Court argues that consumers nowadays do not need the same amount of protection against marketing campaigns as it might have been the case years ago.
However, the court still found against the defendant, stating that the liberalized approach to layperson advertising campaigns did not apply to medical products. In fact, section 7 of the Medical Products Advertising Act (Heilmittelwerbegesetz) expressly forbids the granting of awards in connection with the sale of medical products, which include lens glasses. The court held that this rule must be considered when judging the legality of an advertising campaign and thus found the campaign illegal under sections 3 and 4 of the Unfair Competition Act.
Why this matters:
Even though the Federal Supreme Court declared the individual campaign illegal, its liberalized stance on layperson advertising could clear the way for customer referral campaigns in Germany. The court clearly sees the average consumer as a self-responsible participant in the market, therefore giving up the protective restrictions developed in earlier judgments.