For the first time the European Court of First Instance has been grappling with a dispute over supermarket ‘lowest prices’ claims. In advance of the court’s verdict, the Advocate General has handed down his opinion.
Battle of the discount supermarkets
Topic: Comparative
Where: Lidl and Colruyt
When: 29 March 2006
Where: The European Court of First Instance ("CFI"): Advocate General Tizzano's Opinion
What happened:
The recent case of Lidl v Colruyt tested three of the key criteria of the comparative Advertising Directive (Directive 84/450/EEC as amended) ("the Directive"), namely that any add which compares the products of services of a rival must:
- compare goods or services meeting the same needs or intended for the same purpose (Art 3a(1)(b) of the Directive;
- objectively compare one or more material, relevant, verifiable and representative features of those goods and services, which may include price (Art 3a(1)(c));
- not be misleading (Art 3a(1)(a))
Colruyt is a Belgian supermarket chain with more than 170 stores. Lidl is a competitor of Colruyt in the Belgian market. Colruyt sent its customers a leaflet which read:
"Dear customer, Last year, 2003, you were able once again to make significant savings with Colruyt. On the basis of our average price index for the past year we have calculated that a family spending EUR 100 each week in Colruyt stores saved between EUR 155 and EUR 293 by shopping at Colruyt's instead of a hard discounter or wholesaler (Aldi, Lidl, Makro)."
Colruyt also launched a range of "BASIC" goods, marketed with the following message:
"BASIC: absolutely the lowest prices in Belgium. Even cheaper than the comparable selection of the hard discounters (Aldi, Lidl)."
Lidl felt that these adds contained unfair comparisons and so sued Colruyt in the Belgian court under the Belgian transposition of the Directive. The Belgian court referred a number of questions to the CFI. While the CFI's judgement is still awaited, Advocate General Tizzano has handed down his Opinion, which contains the following conclusions:
1. The requirement in the Directive that an add should compare goods or services meeting the same needs or intended for the same purpose (the so-called "homogeneity" rule) can be met even by an add which compares selections of products rather than just individual products. In other words, it is legitimate within the scope of this condition to compare the price of a "shopping basket" of goods in two different stores (as in this particular case) so long as the products in the basket have the same characteristics and meet the same needs.
2. The condition that a comparison must be verifiable need not require the advertiser to expressly indicate the identity and the price of the products included in the selections that are being compared. However, the advertiser should at least indicate where and how an average consumer can find those elements easily or make it possible for the consumer to ascertain what they are from the context and the circumstances of the case. The Advocate General doubted whether Colruyt had met this condition with its adds.
3. Comparative price level advertising which is based on an extrapolation from selected data and which causes the consumer to believe that the price differences cited apply to all the products sold by the advertiser, irrespective of the type or quality of the goods purchased, may be held to be misleading within the meaning of the Directive. The Advocate General considered, in this case, it was a matter for the Belgian court to evaluate whether a sufficiently significant number of consumers had in fact been or were likely to have been misled.
Why this matters:
Though it mostly happens that way, there is no guarantee that in its verdict the Court will adopt the Advocate General's opinion. Nevertheless that opinion sends a clear message for retailers. It is also a message that has added importance in the UK since the Chancery verdict in the March 2006 O2/3 case in which sued 3 for trade mark infringement over a comparative TV commercial.
Unlike in Belgium, it is not open to UK advertisers to take their competitors to court purely on the basis of an alleged breach of state rules implementing the Directive. However if the aggrieved advertiser's registered trade mark is used, then it is possible there will be a viable claim for trade mark infringement. This was the situation in O2 v 3, although O2.s claims were ultimately rejected.
In the case, Lewison J held that an advertiser using his competitor's registered trade mark in comparative advertising must ensure, if he wants to avoid liability for trade mark infringement, that the advertisement complies with the Comparative Advertising Directive.
In this context, supermarket advertisers often like to argue that their prices are the lowest around. However, this case serves as a warning that an add which gives the impression that the advertiser's products are cheaper across the board, by reference only to a sample of goods, could be considered misleading and, if it refers to competitors by name, infringement their registered trade marks.
Simon Maughan
Solicitor
Osborne Clarke London
Simon.maughan@osborneclarke.com
