Ryanair recently complained about Lufthansa’s tactics in obtaining “overnight” injunctions banning its flight price comparisons. Foul play or fair cop?
Topic: Comparative advertising
The Interim Injunction System in German Competition Law
Konstantin Ewald and Marcus Sacré of Osborne Clarke Germany
"They creep into courts late at night without telling anybody and get injunctions that are designed to prevent German consumers being made aware of competition in air travel."
(Michael O'Leary, Chief Executive of Ryan Air, The Sunday Times 20 January 2002)
Lufthansa v Ryanair – the endless dispute
Michael O'Leary, founder and Chief Executive of the Irish airline Ryanair, used dramatic words to describe the behaviour of its archrival, Lufthansa, in the court proceedings that have now smouldered for months between the two companies in relation to alleged misleading comparative advertising.
So what is it all about? Lufthansa sued Ryanair in the Cologne regional court over various statements made by Ryanair in their advertising. As a result, Ryanair were issued with a court order prohibiting them from making misleading comparisons with Lufthansa prices.
The advertisements in question compared prices of Lufthansa flights from Frankfurt-am-Main with those of Ryanair flights from “Frankfurt-Hahn.” The airport in Hahn is situated 100km from the airport in Frankfurt from which the Lufthansa planes fly. The judge ruled this form of advertising to be misleading. This was because the advertisement gave the false impression that the two flights being compared were identical and that Ryanair were offering exactly the same flight at a much cheaper price. The judges in Cologne also found a comparison of flights to Glasgow to be misleading. This was because the Lufthansa flights actually land in Glasgow International Airport, rather than Prestwick Airport used by Ryanair. Prestwick Airport is situated quite a distance outside of Glasgow.
The small airport in Hahn is also at the centre of a further debate. This is because Ryanair was also prohibited from describing Hahn Airport as "Frankfurt-Hahn" Airport in its advertisements. The court considered this description to be misleading, because neither in proximity nor in any other respect could Hahn Airport be described as being in the vicinity of Frankfurt-am-Main. Objecting to this, Ryanair took the debate a stage further by arguing that "Frankfurt-Hahn" was the official name of the airport. The decision in this debate is expected in March 2002.
Do injunctive proceedings pave the way for a dirty trick campaign?
Lufthansa attacked the relevant advertising by way of injunction proceedings and Michael O'Leary described this as a "dirty tricks campaign" against Ryanair, preventing Ryanair from advertising their prices. So what are the special characteristics of interim injunctions in German competition law?
Mr O'Leary's agitation is barely comprehensible to German competition lawyers. This is because proceedings such as these are common in Germany. It is the order of the day for German competitors to seek an injunction in order to prevent unfair advertising by rival companies. Indeed, that in the courts of the major German economic centres of Frankfurt, Hamburg, Berlin, Munich and Cologne, a special chamber exists that deals exclusively with questions of competition/advertising law. One available process is the granting of temporary injunctions preventing people from carrying out acts contrary to competition law. The reasons for this are obvious: the prevention of practices contrary to competition law often requires fast action. Many advertising campaigns coincide with particular festive days, bank holidays or clearances. So a ban obtained in ordinary legal proceedings will usually be too late to prevent such campaigns.
Injunctions: the most effective method against infringement of competition law?
Temporary injunctions are therefore not a means of playing "dirty tricks". They relate to the basic principle of offering a claimant the most effective means of preventing the practices of rivals who they believe infringe competition law. The special effectiveness of preliminary injunctions lies firstly in their simplicity and speed and secondly in the way they work. An injunction can be obtained in just a few hours. All that is needed to place an application before the court is evidence substantiating the key elements of German competition law, namely that his trade rival has made misleading assertions in his advertisement, or has otherwise acted unfairly. Such unfair conduct can, for example, lie in illegal copies of someone else’s work, in the exploitation of somebody else’s reputation, or in an illegal comparative advert.
It is also possible for compensation claims to ensue in individual cases where damage is suffered but this is in no way linked to actual injunctive relief.
As a general rule the courts decide immediately whether a breach of competition law has taken place after considering the written submission of the applicant. The defendant has no opportunity to respond to this stage and there are no oral submissions. Ordinarily the president of the presiding chamber will make his decision independently and without the opinion of his colleagues.
This simple procedure is the reason why an injunction can be obtained at such short notice. This is not generally problematic, because all too often the parties are not in dispute about the facts of the case. The points in dispute are purely legal issues, in respect of which the court can make a ruling without hearing the respondent’s arguments. The legal implications of an injunction are considerable: once the respondent has received formal notification of the injunction he must abide by it. In the event that the respondent fails to do so, he faces the threat of a fine of up to €250,000. Persistent breaches of an injunction can even lead to a custodial sentence of up to six months.
So all in all Mr O’Leary’s detailed characterisation of interim injunctions in competition cases appears to be totally correct: it is an intrinsic characteristic of interim injunctions that they are dealt with in a matter of hours and without the respondent's involvement.
The respondent to an application for an injunction is not put at a disadvantage
Mr O’Leary’s attempt to suggest that interim injunctions are unfair is at best debatable. This is because those affected by interim injunctions do not have to accept the decision of the court. As a counter-measure to an interim injunction that has been granted without an oral hearing, the respondent to the application can oppose the decision by seeking the legal remedy of an oral examination before the Court of First Instance. At this hearing the respondent has the opportunity to put forward his arguments as to the spurious nature of the injunction. Also, when a court grants an injunction as its final judgment on the basis of oral representations, the respondent still has the opportunity to appeal.
Against the background of the above mentioned system of interlocutory legal protection in competition law, the stir caused by the debate between Lufthansa and Ryanair seems bizarre. It ultimately deals with an everyday legal action, which is fought out using the usual means available in German competition law. The behaviour exhibited by the parties outside the courtroom, rather than what has been happening in it, has initiated a unique reaction by the press.