In Lidl SNC v Vierzon Distribution, EU appeal judges analysed ads by French supermarket Leclerc. Based on pictured Leclerc and Lidl till receipts for 34 items, Leclerc claimed it was “still the cheapest.” But were the products identical and did it matter if they weren’t? Rupesh Chandrani, Senior Legal Counsel at British Gas, reports.
Who: Lidl SNC v Vierzon Distribution SA (Case 159/09)
Where: Court of Justice of the European Communities (formerly the European Court of Justice) ("CJEU")
When: 18 November 2010
Law stated as at: 1 December 2010
Lidl has once again been involved in a decision that has clarified the criteria set out in the Misleading and Comparative Advertising Directive (Directive 84/450 as amended by Directive 97/55 (“MCAD”)).
Lidl operates a chain of supermarkets in France whilst Vierzon Distribution operates a store that sells everyday consumer goods under the name “Leclerc”. This case related to an advertisement that was placed by Vierzon in September 2006 in a local newspaper which reproduced till receipts listing, by means of general descriptions, 34 products by weight or volume.
The products, mainly foodstuffs, were purchased from the Vierzon store for EUR 46.30 compared to EUR 51.40 which was charged at the Lidl store. The ad also included the slogans “Not everybody can be E. Leclerc! Low prices – And the proof is E. Leclerc is still the cheapest” and “In English they say ‘hard discount’ – in French they say ‘E. Leclerc’”. It is assumed that the ad was put together without consulting an English language copywriter!
Battle commences in March 2007
In March 2007, Lidl brought an action seeking an order that Vierzon pay damages for unfair competition and that extracts from the judgment in its favour should be published in the press and on posters in store. Lidl claimed that the ad infringed the French Consumer Code as it deceived or misled consumers and because Vierzon had only chosen products that made Vierzon’s prices look more favourable.
Lidl also objected that the food products involved were not comparable as their qualitative and quantative differences meant that they did not meet the same needs. The reproduction of the till receipts showing the list of products did not enable consumers to identify the specific characteristics of the products being compared or to understand the price differences.
Vierzon: two products not the same CAN be compared
Vierzon disputed Lidl’s claims. It argued that under the MCAD, two products which are not the same could still be compared as long as they met the same needs or are intended for the same purpose and are sufficiently interchangeable. Vierzon argued that any differences in the products were clear from the till receipts reproduced in its ad. The fact that Vierzon chose the products that were compared in itself was not unlawful and as the items were purchased on the same day any possibility of price manipulation was also ruled out.
In the proceedings, the tribunal de commerce de Bourges asked the CJEU for a preliminary ruling on the following question:
“Is Article 3a of [the MCAD] to be interpreted as meaning that it is unlawful to engage in comparative advertising on the basis of the price of products meeting the same needs or intended for the same purpose, that is to say, products which are sufficiently interchangeable, on the sole ground that, in regard to food products, the extent to which consumers would like to eat those products or, in any case, the pleasure of consuming them, is completely different according to the conditions and the place of production, the ingredients used and the experience of the producer?”
The CJEU's Decision
As was the case in Lidl Belgium GmbH & Co KG v Etablissementen Franz Colruyt NV (Case C-356/04, 19 September 2006), the CJEU interpreted this question in the light most favourable to allowing the comparison.
The CJEU stated that its previous case law and also the recitals to the MCAD sought to achieve a balance between consumer and business interests and that the aim of the MCAD was to stimulate competition between suppliers and encourage legitimate comparative advertising whilst prohibiting practices that distorted competition, were detrimental to competitors and which had an adverse effect on consumer choice.
Referring to its decision in L’Oreal and Others 2009 (Case C- 487/07), the CJEU stated that the criteria in the MCAD must be interpreted in the sense most favourable to permit comparative ads which objectively compare the characteristics of goods/services whilst ensuring that comparative advertising is not used anti-competitively or unfairly in a manner that affects the interests of consumers.
Just because foods vary in ingredients etc doesn’t mean they can't be compared
The Court held that the fact foodstuffs vary as to the extent to which consumers like to eat them and the pleasure to be derived from them according to their place of production and their ingredients does not mean that they cannot meet the requirement in Article 3a(1)(b) that the products meet the same need or are intended for the same purpose and that there was nothing in Article 3a(1)(b) that would prohibit the comparative advertising of foodstuffs. Indeed, any such prohibition would considerably restrict the scope of comparative advertising and rule it out for an important category of consumer goods. The CJEU, however, left it for the referring court to assess whether there was a sufficient degree of interchangeability between the food products subject of the comparison.
With respect to Vierzon’s ad, the CJEU held that the ad could be misleading under Article 3a(1)(b) albeit that the final decision sat with the referring court. The CJEU also held that a national court could find that a price comparison advertisement was misleading if in light of all relevant circumstances, particularly the information contained in or omitted from the ad, the decision to buy by a significant number of the target consumers was made in the mistaken belief that:
• the selection of goods by the advertiser is representative of the general level of his prices compared with those of his competitor such that consumers will make savings of the kind claimed by the ad by regularly buying their everyday consumer goods from the advertiser than the competitor; or
• all of the advertiser’s products are cheaper than those of his competitor.
In addition, the national court might also justifiably hold the advertising contrary to law if for the purposes of a comparison based solely on price, food products were selected which had different features capable of significantly affecting the average consumer’s choice without such differences being apparent from the advertising concerned.
The CJEU also ruled that to satisfy the verifiability condition, the ad should identify the products subject to the comparison sufficiently to enable a consumer to check the accuracy of the prices shown.
Why this matters:
The CJEU decision confirms that in principle the price of foodstuffs can be validly compared under the MCAD provided they meet the criteria set out in the judgement.
In practical terms, the CJEU's judgment would suggest that for food price comparisons to be acceptable they would still have to be made as far as possible on a like for like basis. This could prove problematic for comparisons between value/basic goods compared to the premium/finest products or indeed for private label (supermarket own brand) products vs other supermarkets' own label products or private label products vs well known brands unless the ad specifies the individual and specific differences between the products.
By the same token, comparisons between non-identical products are not necessarily prohibited under the MCAD as long as the products are sufficiently interchangeable i.e. that they meet the same needs or are intended for the same purpose. However, if any aspect of the compared product differs in any way that could "significantly affect" a consumer’s transactional decision to buy or not buy a product then the difference must be apparent from the ad or else it will fall foul of the MCAD.
Does this mark a shift from previous case law?
An interesting question is whether this decision marks a shift from the ruling in Lidl v Colruyt or merely serves to clarify it. Reading the judgment as a whole and the reference to the identification of goods on the basis of the information contained in the advertisement, the decision would suggest that this could be achieved by stating a website address where the information could be readily accessible as per the Lidl v Colruyt decision. However, greater clarity would be helpful for marketers in this regard.
Lastly, a challenge for marketers wishing to use basket comparison ads will be to select a basket of goods that accurately reflects the savings between the goods supplied by the respective retailers. Otherwise, basket comparison ads will be misleading if they misrepresent the typical savings generally obtainable across all store items of a kind that consumers are likely to rely on.
This could well result in the increased use of wording in basket comparison ads clarifying that the savings quoted may not be representative of the savings or price differences for other products sold by the retailer in question. One of the calls for marketing lawyers to make will be whether it is sufficient for this information to sit in a caveat or whether it will need to be flagged in the body copy of the ads. National courts and the UK Advertising Standards Authority will doubtless be asked to consider this very point and develop standards to create greater certainty for marketers and their advisors.
Senior Legal Counsel