In a rare verdict focusing on comparative advertising, the European Court of Justice makes it clear that old, hyper-restrictive, comparison laws cannot be allowed in through the back door.
Topic: Comparative Advertising
Who: Pippig Augenoptik and Hartlauer Handelsgesellschaft
Where: European Court of Justice
When: April 2003
In 1997 the European Union signed off a measure designed to harmonise the rules for comparative advertising across the EU. The "Comparative Advertising Directive" has now long since been implemented across the EU, including Austria. In this case an Austrian dispute over comparative advertising found its way to the European Court of Justice ("ECJ"). Not many comparative advertising cases under the new Directive have come before the ECJ, so this judgment has to be worth checking out.
This was a "David and Goliath" story, with specialist optician Pippig, operating three opticians shops in Linz, pitted against pan Austrian retailer, Hartlauer. Pippig sold spectacles from a wide range of different manufacturers, whilst Hartlauer specialised in little known spectacles brands at low prices.
At the beginning of September 1997, Hartlauer circulated an advertising leaflet throughout Austria. This stated that 52 price comparisons of spectacles carried out over 6 years had shown a total price differential between the prices charged by Hartlauer for spectacles and those of traditional opticians of ATS2047 or ATS3900 on average per pair of spectacles. The leaflet also contained a direct comparison between the price of ATS5785 charged by Pippig for Titanflex Eschenbach spectacles with Zeiss lenses and the price of ATS2000 charged by Hartlauer for spectacles with the same frame but with Optimed lenses.
The same theme continued in Hartlauer's radio and TV advertisements at that time. It was not stated in these ads that the spectacles compared had lenses of different brands. The TV ad showed a Pippig shop front as an example of a "traditional opticians". Pippig had been singled out partly because Hartlauer had conducted a test purchase at a Pippig shop to get the relevant price for the Titanflex Eschenbach spectacles with Zeiss lenses. These were bought at Pippig in July 1997. The purchase had a number of uses.
First of all this enabled Hartlauer to establish the price at which Pippig were offering the spectacles. Secondly, it helped Hartlaur to decide at what price they were going to offer their "equivalent" Titanflex Eschenbach frames with Optimed lenses (since they were not at that stage selling Titanflex Eschenbach frames at all) and thirdly, it enabled them to take product shots for the leaflet which was going to contain the price comparisons. They used photographs of the spectacles bought in Pippig to illustrate both the Pippig price and also the price at which Hartlauer were planning to sell the Titanflex Eschenbach/Optimed spectacles. Again, this was because at that time they were not yet stocking Titanflex Eschenbach frames.
Pippig sued Hartlauer over the leaflet and the TV and radio campaigns. Their grounds were that the advertising was misleading and discrediting.
The case found its way to the ECJ, who in April 2003 handed down judgment on a number of points which arose out of the case.
Here are the points and here are the verdicts of the ECJ:
First off, Pippig wanted to try and take advantage of Austria's strict laws governing misleading statements in advertising as compared with the relatively more relaxed provisions of the EU Comparative Advertising Directive.
Their ingenious lawyers therefore argued that the Comparative Advertising Directive only applied to those parts of the advertising that actually made a specific comparison, with all the other contents subject to potentially stricter local laws.
The ECJ threw this argument out with little hesitation, stating that the EU Comparative Advertising Directive was intended to be an "exhaustive harmonisation of the conditions under which comparative advertising in member states might be lawful". Accordingly, so long as the advertising as the whole was comparative, stricter local laws did not get a look in.
A separate question raised by Pippig was whether the omission of a better known brand name might of itself lead to comparative advertising being misleading and contrary to the directive. Pippig were focusing here on Hartlauer's broadcast ads, which did not state that the spectacles compared had lenses of different brands. This was a material distinction in the submission of Pippig, because Zeiss lenses were generally in a significantly higher price bracket to those from Optimed.
The ECJ's answer to this was that it could not exclude the possibility, in certain cases, of the omission of a well-known brand name from a comparative advertisement being of itself misleading. This might occur where a brand name might significantly affect the buyer's choice. The ECJ shrank, however, from taking a view on the application of this approach to this case. This was for the national court to decide in each case, having regard to all relevant factors and taking into account the "presumed expectations of an average consumer who is reasonably well informed and reasonably observant and circumspect".
The next question raised by Pippig was whether it was fair and within the directive to compare the prices of two products which were available through quite different distribution channels. They were thinking here for example of parallel imports, which Hartlauer often sold. The ECJ took little time to reach a view on this, which was that different distribution channels were not relevant.
Next up was Pippig's query arising out of the sequence in which Hartlauer got to the point of publishing their advertising. They had bought their competitor's product before deciding at what price to sell their own equivalent item.
Wasn't a comparison inevitably going to be unlawful, asked Pippig, if the advertiser had deliberately provoked a price comparison favourable to himself by carrying out a test purchase before determining the price of its own offer?
On this question again, the ECJ pronounced against Pippig, saying that provided all the other requirements of the directive were complied with, the fact that the test purchase of the competitor's product took place before the advertiser decided on its own price was irrelevant.
Still undaunted, Pippig raised yet another question. In fact, they raised two related questions.
First they were concerned that Hartlauer had deliberately chosen the Pippig price for spectacles with Zeiss lenses to compare with Hartlauer's "equivalent" which used much cheaper, Optimed lenses. Surely the requirement in the directive that comparisons must be "objective", Pippig argued, meant that to arbitrarily choose products with a greater price differential was in itself contrary to the directive.
The ECJ's response to this was unequivocal and yet again contrary to the Pippig view. Subject to compliance with all other elements of the directive, quoting a competitor's particular product could not of itself entail the discrediting of a competitor, said the court.
Finally, Pippig queried whether Hartlauer should be allowed to show the front of a Pippig shop. Surely this was not necessary for the purposes of making a fair and non-misleading price comparison, Pippig argued, and therefore for Hartlauer's spokesperson in the TV ad to appear "triumphantly" in front of the Pippig retail outlet was excessive and contrary to a need under the directive to make an objective comparison.
Yet again the ECJ took a different view.
As the Directive explicitly stated that provided it was not derogatory, unfair or confusing, a competitor's trademark could be shown in a comparative advertisement, they could not see any basis on which it could be said that showing the Pippig shop front was contrary to law.
Why this matters:
So after nearly six years of litigation and no doubt considerable legal costs, Pippig have very little to show for their pains. It has to be said that from a British point of view, most if not all of Pippig's submissions to the ECJ look doomed from the start. But this ignores the fact that historically, comparative advertising had been effectively prohibited in Austria until the introduction of the Directive. The seemingly pettifogging points raised here hark back to the previous, very strict Austrian laws, but the ECJ judgment underlines that these days are now long passed and the new, customer information focus in European comparative advertising law is here to stay.